<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 11, 1997
REGISTRATION NO. 333-08877
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
PRE-EFFECTIVE AMENDMENT NO. 1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ANCHOR NATIONAL LIFE INSURANCE COMPANY
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
ARIZONA 6311 86-0198983
(State or other jurisdiction Primary Standard Industrial (I.R.S. Employer
of Classification Number) Identification
incorporation or organization) No.)
</TABLE>
1 SUNAMERICA CENTER
LOS ANGELES, CALIFORNIA 90067-6022
(310) 772-6000
(Address, including zip code, and telephone number, including
area code, or registrant's principal executive offices)
SUSAN L. HARRIS, ESQUIRE
ANCHOR NATIONAL LIFE INSURANCE COMPANY
1 SUNAMERICA CENTER
LOS ANGELES, CALIFORNIA 90067-6022
(310) 772-6000
(Name, address, including zip code, and telephone number, including
area code of agent for service)
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<S> <C> <C> <C> <C>
TITLE OF PROPOSED PROPOSED
EACH CLASS OF MAXIMUM MAXIMUM
SECURITIES AMOUNT OFFERING AGGREGATE AMOUNT OF
TO BE TO BE PRICE OFFERING REGISTRATION
REGISTERED REGISTERED PER UNIT PRICE FEE
Fixed Annuity Contract * * $50,000,000 $15,152
</TABLE>
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
shall determine.
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<PAGE>
CROSS REFERENCE SHEET
ANCHOR NATIONAL LIFE INSURANCE COMPANY
CROSS REFERENCE SHEET PURSUANT TO
REGULATION S-K, ITEM 501(B)
<TABLE>
<CAPTION>
FORM S-1 ITEM NO. AND CAPTION HEADING IN PROSPECTUS
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<C> <S> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus...................... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus.......................................... Inside Front Cover
3. Summary of Information, Risk Factors and Ratio of
Earnings to Fixed Charges........................... Front Cover; Profile; Investment Options
4. Use of Proceeds...................................... The Seasons Variable Annuity; Purchasing a Seasons
Variable Annuity; Investment Options; Access to Your
Money
5. Determination of Offering Price...................... Not Applicable
6. Dilution............................................. Not Applicable
7. Selling Security Holders............................. Not Applicable
8. Plan of Distribution................................. Purchasing a Seasons Variable Annuity; Access to Your
Money
9. Description of Securities to be Registered........... The Seasons Variable Annuity; Annuity Income Options;
Investment Options; Expenses
10. Interests of Named Experts and Counsel............... Not Applicable
11. Information with Respect to the Registrant........... Other Information
12. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities...................... Not Applicable
</TABLE>
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
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April , 1997
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PROFILE
This Profile is a summary of some of the more important points you should know
before purchasing the Seasons Variable Annuity. The sections in this Profile
correspond to sections in the prospectus which discuss the topics in more
detail. Please read the prospectus carefully.
THE SEASONS VARIABLE ANNUITY
The Seasons Variable Annuity Contract is a contract between you and Anchor
National Life Insurance Company. It is designed to help you save on a
tax-deferred basis and diversify your investments among asset classes and
managers to meet long-term financial goals, such as retirement funding. Tax
deferral means all your money, including the amount you would otherwise pay in
current income taxes, remains in your contract to generate more earnings. Your
money could grow faster than it would in a comparable taxable investment.
The Seasons Variable Annuity helps you meet these goals by offering four
variable investment STRATEGIES which are managed by five different professional
investment managers. The value of any portion of your contract allocated to the
STRATEGIES will fluctuate up or down based on the performance of the STRATEGIES
you select and you may experience a loss. Five fixed investment options, each
for a different length of time and offering different interest rates that are
guaranteed by Anchor National and a one year DCA account offering a fixed
interest rate guaranteed by Anchor National are also available under the
contract.
The STRATEGIES and fixed investment options are designed to be used in concert
in order to achieve your desired investment goals. You may put money into any of
the STRATEGIES and/or fixed investment options. You may transfer between
STRATEGIES and/or the fixed investment options four times per year without
charge.
Like all annuities, the contract has an Accumulation Phase, and if you choose to
annuitize, an Income Phase. During the Accumulation Phase, you invest money in
your contract. Your earnings are based on the investment performance of the
STRATEGY or STRATEGIES to which your money is allocated and/or the interest rate
earned on the fixed investment option. You may withdraw money from your contract
during the Accumulation Phase. However, as with other tax-deferred investments,
you will pay taxes on earnings and untaxed contributions when you withdraw them.
An IRS tax penalty may apply if you make withdrawals before age 59 1/2. During
the Income Phase, you will receive payments from your annuity. Your payments may
be fixed in dollar amount, vary with investment performance or be a combination
of both, depending on the annuity option you select. Among other factors, the
amount of money you are able to accumulate in your contract during the
Accumulation Phase will determine the amount of your payments during the Income
Phase.
ANNUITY PAYMENT OPTIONS
You can select from one of five annuity payment options:
(1) payments for your lifetime;
(2)payments for your lifetime and your survivor's lifetime;
(3) payments for your lifetime and your survivor's lifetime, but for not
less than 120 months;
(4) payments for your lifetime, but for not less than 120 or 240 months; and
(5) payments for a specified period of 5 to 30 years.
You will also need to decide if you want your payments to fluctuate with
investment performance or remain constant, and the date on which your
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payments will begin. Once you begin receiving payments, you cannot change your
annuity option. If your contract is Non-qualified, payments during the Income
Phase are considered partly a return of your original investment. The "original
investment" part of each payment is not taxable as income. For Qualified
contracts, the entire payment is taxable as income.
PURCHASING A SEASONS VARIABLE ANNUITY
You can buy a contract through your financial representative, who can also help
you complete the proper forms. For Non-Qualified contracts the minimum initial
investment is $5000. For Qualified contracts the minimum initial investment is
$2000. You can add $500 or more to your contract at any time during the
Accumulation Phase.
INVESTMENT OPTIONS
You can put your money into any one or more of the four multi-manager variable
investment STRATEGIES and/or one or more of the six fixed investment options.
The fixed investment options offer fixed rates of interest for specified lengths
of time.
Each STRATEGY has a different investment objective and uses an asset allocation
investment approach, investing in a combination of underlying investment
portfolios which invest in a combination of stocks, bonds and cash in varying
degrees, in order to achieve its investment objective. The four investment
STRATEGIES are:
GROWTH
MODERATE GROWTH
BALANCED GROWTH
CONSERVATIVE GROWTH
Each STRATEGY invests in three underlying investment portfolios. The underlying
investment portfolios are managed by the following five investment managers:
PUTNAM INVESTMENT MANAGEMENT, INC.
T. ROWE PRICE ASSOCIATES, INC.
JANUS CAPITAL CORPORATION
SUNAMERICA ASSET MANAGEMENT CORP.
WELLINGTON MANAGEMENT COMPANY, LLP
EXPENSES
Each year we deduct a $35 ($30 in North Dakota and Washington) contract
administration fee on your contract anniversary. We currently waive this fee if
your contract value is at least $50,000.
We also deduct insurance charges which amount to 1.40% annually of the average
daily value of your contract allocated to the STRATEGIES. The insurance charges
include Mortality and Expense Risk, 1.25% and Distribution Expense, .15%.
There are also investment charges and other expenses if you put money into the
STRATEGIES, which may range from 1.12% to 1.25%. Investment charges may be more
or less than the percentages reflected here.
If you take your money out, we may assess a withdrawal charge which is a
percentage of the Purchase Payment you withdraw. The percentage declines with
each year the Purchase Payment is in the contract as follows:
<TABLE>
<S> <C> <C> <C>
Year 1......... 7% Year 5......... 4%
Year 2......... 6% Year 6......... 3%
Year 3......... 6% Year 7......... 2%
Year 4......... 5% Year 8......... 0%
</TABLE>
After a Purchase Payment has been in your contract for 7 full years, there is no
withdrawal charge when that Purchase Payment is withdrawn.
Additionally, if you take money out of a multi-year fixed investment option
before the term you initially agreed to ends, you may be assessed an adjustment
which could increase or decrease the value of your money.
In some states you may also be assessed a state premium tax of up to 3.5%,
depending upon the state in which you reside.
If you transfer among the STRATEGIES and/or fixed investment options more than
four times per year, you will be charged a $25 dollar transfer fee per transfer
($10 in Pennsylvania and Texas).
The following chart is designed to help you understand the charges in your
contract. The column "Total Annual Charges" shows the total of the $35 contract
administration charge, the 1.40% insurance charges and the investment charges
for each STRATEGY. We converted the contract
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administration charge to a percentage using an assumed contract size of $30,000.
The actual impact of this charge on your contract may differ from this
percentage.
The examples assume that you invested $1,000 in a STRATEGY which earns 5%
annually and that you withdrew your money at the end of a 1 year period and at
the end of a 10 year period. For year 1, the total annual charges are assessed
as well as the withdrawal charge. For year 10, the example reflects the total
annual charges but there is no withdrawal charge. The annual investment-related
expenses reflect the waiver or reimbursement of expenses by the investment
adviser. No premium taxes are assumed. Please see the Fee Tables in the
prospectus for more detailed information regarding the fees and expenses
incurred under the contract.
<TABLE>
<CAPTION>
EXAMPLES
Total Annual Total Annual Total Total
Insurance Investment Total Expenses Expenses
Related Related Annual at end of at end of
STRATEGY Charges Charges Charges 1 YEAR 10 YEARS
<S> <C> <C> <C> <C> <C>
Growth 1.52% 1.25% 2.77% $98 $309
Moderate Growth 1.52% 1.21% 2.73% $97 $305
Balanced Growth 1.52% 1.17% 2.69% $97 $301
Conservative Growth 1.52% 1.12% 2.64% $97 $296
</TABLE>
TAXES
Unlike taxable investments where earnings are taxed in the year they are earned,
taxes on amounts earned in a Non-qualified Contract, one that is established
with after tax dollars, are deferred until they are withdrawn. In a Qualified
Contract, one that is established with before tax dollars, like an IRA, all
amounts are taxable when they are withdrawn. When you begin taking distributions
or withdrawals from your contract, earnings are considered to be taken out first
and will be taxed at your ordinary income tax rate. You may be subject to a 10%
federal tax penalty for distributions or withdrawals before age 59 1/2.
ACCESS TO YOUR MONEY
Withdrawals may be made from your contract in the amount of $1000 or more. You
can take out up to 10% of your total Purchase Payments each year without charge.
Withdrawals in excess of the 10% will be assessed a withdrawal charge as
described above. If you withdraw your entire contract value you will not receive
the benefit of any free withdrawal amount. After a Purchase Payment has been in
your contract for 7 full years, there is no withdrawal charge. Additionally,
withdrawal charges are not assessed when a death benefit is paid. Of course, you
may also have to pay income tax and a 10% IRS tax penalty may apply.
PERFORMANCE
The value of your annuity will fluctuate depending upon the investment
performance of the STRATEGY or STRATEGIES you select. From time to time we may
advertise a STRATEGY'S total return. The total return figures are based on
historical data and are not intended to indicate future performance.
As of the date of the prospectus, the sale of Seasons Variable Annuity had not
begun. Therefore, no performance data is presented here.
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DEATH BENEFIT
If you, or, if there is a joint owner, the younger of the two, should die during
the Accumulation Phase, your Beneficiary will receive a death benefit.
If you die before age 75, the death benefit will be the greater of: (1) the
money you put into the contract less any withdrawals, charges and market value
adjustments, accumulated at 3%; or (2) the current value of your contract.
If you die after age 75, the death benefit will be the greater of: (1) the money
you put into the contract less any withdrawals, charges and market value
adjustments, accumulated at 3% until your 75th birthday plus any subsequent
Purchase Payments and less any withdrawals; or (2) the current value of your
contract.
OTHER INFORMATION
OWNERSHIP: The contract is an allocated fixed and variable group annuity
contract. A group contract is issued to a contractholder, for the benefit of the
participants in the group. You, as an owner of a Seasons Variable Annuity, are a
participant in the group and will receive a certificate evidencing your
ownership. You, as the owner of a certificate, are entitled to all the rights
and privileges of ownership. As used in this Profile and the prospectus, the
term contract refers to your certificate. In some states an individual fixed and
variable annuity contract may be available instead, which is identical to the
group contract described in this Profile and the prospectus except that it is
issued directly to the individual owner.
FREE LOOK: You may cancel your contract within 10 days of receiving it (or
whatever period is required by your state) by mailing it to our Annuity Service
Center. Your contract will be treated as void on the date we receive it and we
will pay you an amount equal to the value of your contract (unless otherwise
required by state law). Its value may be more or less than the money you
initially invested. Thus, the investment risk is borne by you during the free
look period.
SYSTEMATIC WITHDRAWAL PROGRAM: If selected by you, this program allows you to
receive either monthly, quarterly, semi-annual or annual checks during the
Accumulation Phase. Systematic withdrawals may also be electronically wired to
your bank account. Of course, withdrawals during the Accumulation Phase may be
taxable and a 10% IRS tax penalty may apply if you are under age 59 1/2.
DOLLAR COST AVERAGING: If selected by you, this program allows you to invest
gradually into one or more of the STRATEGIES.
PRINCIPAL ADVANTAGE PROGRAM: If selected by you, this program allows you to put
money in a fixed investment option and one or more STRATEGIES and we will
guarantee that the portion allocated to the fixed investment option will grow to
equal your principal investment.
AUTOMATIC PAYMENT PLAN: You can add to your contract directly from your bank
account with as little as $50 per month.
CONFIRMATIONS AND QUARTERLY STATEMENTS: You will receive a confirmation of each
transaction within your contract. On a quarterly basis, you will receive a
complete statement of your transactions over the past quarter and a summary of
your account values.
INQUIRIES:
If you have questions about your contract or need to make changes, call your
financial representative or contact us at:
Anchor National Life Insurance Company
Annuity Service Center
P.O. Box 54299
Los Angeles, California 90054-0299
800/445-SUN2
If money accompanies your correspondence, you should direct it to:
Anchor National Life Insurance Company
P.O. Box 100330
Pasadena, California 91189-0001
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ALLOCATED FIXED AND
VARIABLE GROUP ANNUITY
issued by
VARIABLE ANNUITY
ACCOUNT FIVE
and
ANCHOR NATIONAL LIFE
INSURANCE COMPANY
The annuity contract has 10 investment choices - 6 fixed investment options
which offer interest rates guaranteed by Anchor National for different periods
of time and 4 variable investment STRATEGIES:
GROWTH
MODERATE GROWTH
BALANCED GROWTH
CONSERVATIVE GROWTH
which invest in the underlying portfolios of
SEASONS SERIES TRUST
which is managed by:
PUTNAM INVESTMENT MANAGEMENT, INC.
T. ROWE PRICE ASSOCIATES, INC.
JANUS CAPITAL CORPORATION
SUNAMERICA ASSET MANAGEMENT CORP.
WELLINGTON MANAGEMENT COMPANY, LLP
You can put your money into any one or all of the STRATEGIES and/or fixed
investment options.
Please read this prospectus carefully before investing and keep it for your
future reference. It contains important information you should know about the
Seasons Variable Annuity.
To learn more about the annuity offered by this prospectus, you can obtain a
copy of the Statement of Additional Information dated April , 1997. The
Statement of Additional has been filed with the Securities and Exchange
Commission and is incorporated by reference into this prospectus. The table of
contents of the Statement of Additional Information appears on page of this
prospectus.
For a free copy of the Statement of Additional Information, call us at
800/445-SUN2 or write us at our Annuity Service Center, P.O. Box 54299, Los
Angeles, California 90054-0299.
ANNUITIES INVOLVE RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL, AND ARE NOT A
DEPOSIT OR OBLIGATION OF, OR GUARANTEED OR ENDORSED BY, ANY BANK. THEY ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
Profile
Glossary.......................................................................................................... 2
Fee Tables........................................................................................................ 3
Owner Transaction Expenses............................................................................. 3
Annual Separate Account Expenses....................................................................... 3
Portfolio Expenses..................................................................................... 3
Examples.......................................................................................................... 4
THE SEASONS VARIABLE ANNUITY...................................................................................... 5
ANNUITY INCOME OPTIONS............................................................................................ 5
Options................................................................................................ 6
Allocation of Annuity Payments......................................................................... 6
Transfers During the Income Phase...................................................................... 6
Deferment of Payments.................................................................................. 6
PURCHASING A SEASONS VARIABLE ANNUITY............................................................................. 7
Allocation of Purchase Payments........................................................................ 7
Accumulation Units..................................................................................... 7
Free Look Period....................................................................................... 7
INVESTMENT OPTIONS................................................................................................ 8
Variable Investment Options: The STRATEGIES............................................................ 8
Substitution........................................................................................... 11
Fixed Investment Options............................................................................... 11
Transfers During the Accumulation Phase................................................................ 12
EXPENSES.......................................................................................................... 13
Insurance Charges...................................................................................... 13
Investment Charges..................................................................................... 13
Contract Maintenance Charge............................................................................ 13
Withdrawal Charge...................................................................................... 13
Transfer Fee........................................................................................... 14
Premium Taxes.......................................................................................... 14
Income Taxes........................................................................................... 14
Reduction or Elimination of Certain Charges............................................................ 14
TAXES............................................................................................................. 15
Annuity Contracts in General........................................................................... 15
Tax Treatment of Distributions --
Non-Qualified Contracts................................................................................ 15
Tax Treatment of Distributions --
Qualified Contracts.................................................................................... 15
Diversification........................................................................................ 15
ACCESS TO YOUR MONEY.............................................................................................. 16
Suspension of Payments................................................................................. 16
Minimum Contract Value................................................................................. 16
PERFORMANCE....................................................................................................... 17
DEATH BENEFIT..................................................................................................... 17
Death of the Annuitant................................................................................. 18
OTHER INFORMATION................................................................................................. 18
Anchor National........................................................................................ 18
The Separate Account................................................................................... 18
The General Account.................................................................................... 19
Distribution........................................................................................... 19
Administration......................................................................................... 19
Other Information about Anchor National................................................................ 19
Financials............................................................................................. 23
Appendix A............................................................................................. 52
Appendix B--Premium Taxes.............................................................................. 53
</TABLE>
GLOSSARY OF TERMS
We have capitalized some of the technical terms used in this prospectus. To help
you understand these terms, we have defined them below:
ACCUMULATION PHASE -- The period during which you invest money in your contract.
ACCUMULATION UNITS -- A measurement we use to calculate the value of the
variable portion of your contract during the Accumulation Phase.
ANNUITANT(S) -- The person(s) on whose life(lives) we base annuity payments.
ANNUITY DATE -- The date on which annuity payments are to begin, as selected by
you.
BENEFICIARY(IES) -- The person(s) designated to receive any benefits under the
contract if you or the Annuitant dies.
INCOME PHASE -- The period during which we make annuity payments to you.
NON-QUALIFIED (CONTRACT) -- A contract purchased with after-tax dollars. In
general, these contracts are not under any pension plan, specially sponsored
program or individual retirement account.
PURCHASE PAYMENTS -- The money you give us to buy a contract, as well as any
additional money you give us to invest after you own it.
QUALIFIED (CONTRACT) -- A contract purchased with pre-tax dollars. These
contracts are generally purchased under a pension plan, specially sponsored
program or individual retirement account.
STRATEGY(IES) -- A sub-account of Variable Annuity Account Five which provides
for the variable investment options available under the contract. Each STRATEGY
has its own investment objective and is invested in the underlying investment
portfolios of Seasons Series Trust.
2
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SEASONS VARIABLE ANNUITY FEE TABLES
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OWNER TRANSACTION EXPENSES
Withdrawal Charge as a percentage of Purchase Payments:
<TABLE>
<S> <C> <C> <C>
Year 1... 7% Year 5... 4%
Year 2... 6% Year 6... 3%
Year 3... 6% Year 7... 2%
Year 4... 5% Year 8... 0%
</TABLE>
<TABLE>
<S> <C>
Contract Maintenance Charge........ $35 each year ($30 in North Dakota and
Washington)
Transfer Fee....................... No charge for first 4 transfers each
year; thereafter, the fee is $25 per
transfer ($10 in
Pennsylvania and Texas)
</TABLE>
ANNUAL SEPARATE ACCOUNT EXPENSES
(as a percentage of daily net asset value)
<TABLE>
<S> <C>
Mortality Risk Charge............................... 0.90%
Expense Risk Charge................................. 0.35%
Distribution Expense Charge......................... 0.15%
---
Total Separate Account Expenses............... 1.40%
</TABLE>
The Investment Portfolio Expenses table set forth below identifies the total
investment expenses charged by the underlying investment portfolios of Seasons
Series Trust. Each contractholder within a STRATEGY will incur a portion of
these total investment expenses in relation to the investment by such STRATEGY
in the respective portfolio. The table entitled "Investment Portfolio Expenses
by STRATEGY" which follows the table below identifies the total investment
portfolio expenses by STRATEGY based upon the allocation of contract values
within each STRATEGY to the underlying investment portfolios after the quarterly
rebalancing described on page 11. However, the actual investment portfolio
expenses incurred by contractholders within a STRATEGY will vary depending upon
the daily net asset value of each investment portfolio in which such STRATEGY is
invested.
INVESTMENT PORTFOLIO EXPENSES
(as a percentage of daily net asset value of each investment portfolio after
reimbursement of expenses.)*
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL ANNUAL
FEE EXPENSES EXPENSES
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Stock .85% .36% 1.21%
Asset Allocation: Diversified Growth .85% .36% 1.21%
Multi-Managed Growth .89% .40% 1.29%
Multi-Managed Moderate Growth .85% .36% 1.21%
Multi-Managed Income/Equity .81% .33% 1.14%
Multi-Managed Income .77% .29% 1.06%
- ------------------------------------------------------------------------------------------------------------
* The percentages set forth above are based on estimated amounts for the current fiscal year.
</TABLE>
THE ABOVE INVESTMENT PORTFOLIO EXPENSES WERE PROVIDED BY SEASONS SERIES TRUST.
WE HAVE NOT INDEPENDENTLY VERIFIED THE ACCURACY OF THE INFORMATION.
3
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INVESTMENT PORTFOLIO EXPENSES BY STRATEGY*
(based on the total annual expenses of the underlying investment portfolios
reflected above, after reimbursement of expenses)
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL ANNUAL
FEE EXPENSES EXPENSES
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
STRATEGY
Growth .87% .38% 1.25%
Moderate Growth .85% .36% 1.21%
Balanced Growth .83% .34% 1.17%
Conservative Growth .80% .32% 1.12%
- ------------------------------------------------------------------------------------------------
*The percentages set forth above are based on estimates for the current fiscal year.
</TABLE>
EXAMPLES
You will pay the following expenses on a $1,000 investment in each STRATEGY,
assuming a 5% annual return on assets and:
(a) surrender of the contract at the end of the stated time period;
(b) if the contract is not surrendered or annuitized.
<TABLE>
<CAPTION>
TIME PERIODS
STRATEGY 1 YEAR 3 YEARS
<S> <C> <C>
Growth (a) $98 (a) $146
(b) $28 (b) $ 86
Moderate Growth (a) $97 (a) $144
(b) $27 (b) $ 84
Balanced Growth (a) $97 (a) $143
(b) $27 (b) $ 83
Conservative Growth (a) $97 (a) $142
(b) $27 (b) $ 82
</TABLE>
EXPLANATION OF FEE TABLES AND EXAMPLES
1. The purpose of the Fee Tables is to show you the various expenses you will
incur directly and indirectly by investing in the contract. The example
reflects owner transaction expenses, separate account expenses and
investment portfolio expenses by STRATEGY.
2. For certain investment portfolios in which the STRATEGIES invest, the
adviser, SunAmerica Asset Management Corp., has voluntarily agreed to
waive fees or reimburse certain expenses, if necessary, to keep annual
operating expenses at or below the following percentages of each
investment portfolio's average net assets: Stock and Asset Allocation:
Diversified Growth Portfolios: 1.21%; Multi-Managed Growth: 1.29%;
Multi-Managed Moderate Growth: 1.21%; Multi-Managed Income/Equity: 1.14%,
Multi-Managed Income: 1.06%. The adviser also may voluntarily waive or
reimburse additional amounts to increase an investment portfolios'
investment return. All waivers and/or reimbursements may be terminated at
any time. Furthermore, the adviser may recoup any waivers or
reimbursements within the following two years, provided that the
investment portfolio is able to make such payment and remain in compliance
with the foregoing expense limitations.
3. The Examples assume that no transfer fees were imposed. Premium taxes are
not reflected but may be applicable.
4. THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
AS OF THE DATE OF THIS PROSPECTUS, THE SALE OF SEASONS HAD NOT BEGUN AND THE
STRATEGIES DID NOT HAVE ANY ASSETS. THEREFORE, NO CONDENSED FINANCIAL
INFORMATION IS PRESENTED HERE.
4
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THE SEASONS VARIABLE ANNUITY
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An annuity is a contract between you, the owner, and an insurance company. The
contract provides tax deferral for your earnings, as well as a death benefit and
guaranteed income in the form of annuity payments beginning on a date you
select. Until you decide to begin receiving annuity payments, your annuity is in
the Accumulation Phase. Once you begin receiving annuity payments, your contract
switches to the Income Phase. If you die during the Accumulation Phase, the
insurance company guarantees a death benefit to your Beneficiary. The Seasons
Variable Annuity is issued by Anchor National Life Insurance Company.
During the Accumulation Phase, the value of your annuity benefits from tax
deferral. This means your earnings accumulate on a tax-deferred basis until you
take money out of your contract. The Income Phase occurs when you begin to
receive annuity payments. You select the date on which annuity payments are to
begin.
The contract is called a variable annuity because you can choose among four
variable investment STRATEGIES, which invest in underlying investment portfolios
managed by five investment managers. Depending upon market conditions, you can
make or lose money in any of these STRATEGIES. If you allocate money to the
STRATEGIES, the amount of money you are able to accumulate in your contract
during the Accumulation Phase depends upon the investment performance of the
STRATEGIES you select. The amount of the annuity payments you receive during the
Income Phase from the variable portion of your contract also depends upon the
investment performance of the STRATEGIES you select for the Income Phase.
The contract also offers six fixed investment options. Your money will earn
interest at the rate guaranteed by us for the period of time you agree to leave
your money in the fixed investment option. We currently offer fixed investment
options for periods of one, three, five, seven and ten years and a special one
year DCA fixed account specifically for the Dollar Cost Averaging Program. If
you allocate money to a fixed investment option, the amount of money you are
able to accumulate in your contract during the Accumulation Phase depends upon
the total interest credited to your contract. An adjustment to your contract
will apply to withdrawals or transfers from the multi-year fixed investment
options prior to the end of the selected guarantee period. The amount of annuity
payments you receive during the Income Phase from the fixed portion of your
contract will remain level for the entire Income Phase.
ANNUITY INCOME OPTIONS
- --------------------------------------------------------------------------------
When you switch to the Income Phase, you will receive regular income payments
under the contract. You can choose to have your annuity payments sent to you by
check or electronically wired to your bank. The contract offers 5 annuity
options. Other annuity options may be available in the future.
You select the date on which annuity payments are to begin, which must be the
first day of a month at least two years after the date of your contract. We call
this the Annuity Date. You may change your Annuity Date at least seven days
prior to the date that your payments are to begin. However, annuity payments
must begin by the later of your 90th birthday or ten years after the date your
contract is issued. We call this the Latest Annuity Date. If no Annuity Date is
selected we will begin payments based on the Latest Annuity Date. Certain states
may require that you begin receiving annuity payments prior to this date. If the
Annuity Date is past your 85th birthday, it is possible that the contract would
not be treated as an annuity and you may incur adverse tax consequences.
Unless you are a non-natural owner, you may change the Annuitant at any time
prior to the Annuity Date. You may also designate a second person on whose life
annuity payments are based. If the Annuitant dies before the Annuity Date, you
must notify us and designate a new Annuitant.
If you do not choose an annuity option, annuity payments will be made in
accordance with option 4 (below) for 120 months. If the annuity payments are for
joint lives, then we will make payments in accordance with option 3. If
permitted by state law, we may pay the annuity in one lump sum if your contract
is less than $5,000. Likewise, if your annuity payments would be less than $50 a
month, we have the right to change the frequency of
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your payment to be quarterly, semi-annual or annual so that your annuity
payments are at least $50. Annuity payments will be made to you unless you
designate another person to receive them. In that case, you must notify us in
writing at least 30 days before the Annuity Date. You will remain fully
responsible for any taxes related to annuity payments.
OPTION 1 - LIFE INCOME
Under this option, we will make annuity payments as long as the Annuitant is
alive. Annuity payments stop when the Annuitant dies.
OPTION 2 - JOINT AND SURVIVOR ANNUITY
Under this option, we will make annuity payments as long as the Annuitant and a
designated second person are alive. Upon the death of either person, we will
continue to make annuity payments so long as the survivor is alive. You choose
the amount of the annuity payments to the survivor, which can be equal to 100%,
66.66% or 50% of the full amount. Annuity payments stop upon the death of the
survivor.
OPTION 3 - JOINT AND SURVIVOR LIFE ANNUITY - 120 MONTHLY PAYMENTS GUARANTEED
This option is similar to option 2 above, with the additional guarantee that
payments will be made for at least 120 months. If the Annuitant and survivor die
before all guaranteed payments have been made, the rest will be made to the
Beneficiary.
OPTION 4 - LIFE ANNUITY WITH 120 OR 240 MONTHLY PAYMENTS GUARANTEED
This option is similar to option 1 above, with the additional guarantee that
payments will be made for at least 120 or 240 months, as selected by you. Under
this option, if the Annuitant dies before all guaranteed payments have been
made, the rest will be made to the Beneficiary.
OPTION 5 - INCOME FOR A SPECIFIED PERIOD
Under this option, we will make annuity payments for any period of time from 5
to 30 years, as selected by you. However, the period must be for full 12 month
increments. Under this option, if the Annuitant dies before all guaranteed
payments have been made, the rest will be made to the beneficiary. This option
does not contain an element of mortality risk. Therefore, you will not get the
benefit of the mortality component of the mortality and expense risk charge if
this option is selected.
ALLOCATION OF ANNUITY PAYMENTS
On the Annuity Date, if your money is invested in a fixed investment option(s),
your annuity payments will be fixed in amount. If your money is invested in a
STRATEGY(IES), your annuity payments will vary depending on the investment
performance of the STRATEGY(IES) you select. If you have money in the fixed and
variable investment options, your annuity payments will be based on the
respective allocations. You may not convert between fixed and variable payments
once annuity payments begin.
VARIABLE ANNUITY PAYMENTS
If you choose to have any portion of your annuity payments come from the
STRATEGIES, the dollar amount of your payment will depend upon three things: (1)
the value of your contract in the STRATEGIES on the Annuity Date, (2) the 3.5%
assumed investment rate used in the annuity table for the contract and (3) the
performance of the STRATEGIES you selected. If the actual performance exceeds
the 3.5% assumed rate, your annuity payments will increase. Similarly, if the
actual rate is less than 3.5%, your annuity payments will decrease. The
Statement of Additional Information contains detailed information and sample
calculations.
TRANSFERS DURING THE INCOME PHASE
You may transfer money among the STRATEGIES during the Income Phase. Transfers
are subject to the same limitations as transfers during the Accumulation Phase.
However, you may not transfer money from the fixed account into the STRATEGIES
or from the STRATEGIES into the fixed accounts during the Income Phase.
DEFERMENT OF PAYMENTS
We may defer making fixed payments for up to six months, or less if required by
state law. Interest will be credited to you during the deferral period.
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PURCHASING A SEASONS VARIABLE ANNUITY
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A Purchase Payment is the money you give us to buy the contract, as well as any
additional money you give us to invest in the contract after you own it. You can
purchase a Non-Qualified contract with a minimum initial investment of $5,000
and a Qualified contract with a minimum initial investment of $2,000. The
maximum we accept is $1,000,000 without our prior approval. Payments in amounts
of $500 or more may be added to your contract at any time during the
Accumulation Phase. You can make scheduled subsequent Purchase Payments of $50
or more per month by enrolling in the Automatic Payment Plan.
We may refuse any Purchase Payment. In general, we will not issue a
Non-Qualified contract to anyone who is age 90 or older or a Qualified contract
to anyone who is age 70 1/2 or older.
ALLOCATION OF PURCHASE PAYMENTS
When you purchase a contract, you will allocate your Purchase Payment to one or
more of the STRATEGIES and/or the fixed investment options. You should specify
your investment allocations on the contract application. If you make additional
Purchase Payments, we will allocate them the same way as your first Purchase
Payment unless you tell us otherwise.
Once we receive your Purchase Payment and a complete application at our
principal place of business, we will issue your contract and allocate your first
Purchase Payment within two business days. If we are unable to complete this
process within five business days, we will either send back your money or get
your permission to keep it until we get all the necessary information.
ACCUMULATION UNITS
The value of the variable portion of your contract will go up or down depending
upon the investment performance of the STRATEGY(IES) you select. In order to
keep track of the value of your contract, we use a unit of measure called an
Accumulation Unit which works like a share of a mutual fund. During the Income
Phase, we call them Annuity Units.
An Accumulation Unit value is determined each day that the New York Stock
Exchange ("NYSE") is open. We calculate an Accumulation Unit for each STRATEGY
after the NYSE closes each day. We do this by:
(1) determining the total value of money invested in the particular
STRATEGY;
(2) subtracting from that amount any asset-based charges and any other
charges such as taxes we have deducted; and
(3) dividing this amount by the number of outstanding Accumulation Units.
The value of an Accumulation Unit may go up or down from day to day. When you
make a Purchase Payment, we credit your contract with Accumulation Units. The
number of Accumulation Units credited is determined by dividing the amount of
the Purchase Payment allocated to a STRATEGY by the value of the Accumulation
Unit for that STRATEGY.
Example:
We receive a $25,000 Purchase Payment from you on Wednesday. You want your
money to be invested in the Moderate Growth STRATEGY. We determine that the
value of an Accumulation Unit for the Moderate Growth STRATEGY is $11.10
when the NYSE closes on Wednesday. We then divide $25,000 by $11.10 and
credit your contract on Wednesday night with 2252.252 Accumulation Units for
the Moderate Growth STRATEGY.
FREE LOOK PERIOD
If you change your mind about owning the contract, you can cancel it within 10
days after receiving it (or longer if required by state law) by mailing it back
to our Annuity Service Center. Unless otherwise required by state law, you will
receive back whatever your contract is worth on the day we receive your request.
Its value may be more or less than the money you initially invested. Thus, the
investment risk is borne by you during the free look period.
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INVESTMENT OPTIONS
- --------------------------------------------------------------------------------
The contract offers variable investment options which we call STRATEGIES and
fixed investment options. The contract was designed to meet your varying
investment needs over time, which can be achieved by using the STRATEGIES alone
or in concert with the fixed investment options in order to lower the risk
associated with investing only in a variable investment option.
VARIABLE INVESTMENT OPTIONS: THE STRATEGIES
The contract offers four multi-manager variable investment STRATEGIES, each with
a different investment objective. The STRATEGIES are designed to meet your
investment needs over time and considering factors such as your age, goals and
risk tolerance. However, each STRATEGY is designed to achieve different levels
of growth over time.
Each STRATEGY invests in three underlying investment portfolios of the Seasons
Series Trust. The allocation of money among these investment portfolios will
vary depending on the objective of the STRATEGY.
Seasons Series Trust is managed by SunAmerica Asset Management Corp.
("SAAMCo."), which is affiliated with Anchor National. SAAMCo. has engaged
sub-advisers to provide investment advice for certain investment portfolios.
The underlying investment portfolios of Seasons Series Trust include the Asset
Allocation: Diversified Growth Portfolio, the Stock Portfolio and the
Multi-Managed Growth, Multi-Managed Moderate Growth, Multi-Managed Income/Equity
and Multi-Managed Income Portfolios (the "Multi-Managed Portfolios").
The Asset Allocation: Diversified Growth Portfolio is managed by Putnam
Investment Management, Inc. The Stock Portfolio is managed by T. Rowe Price
Associates, Inc. All of the Multi-Managed Portfolios include the same three
basic investment components: a growth component managed by Janus Capital
Corporation, a balanced component managed by SAAMCo. and a fixed income
component managed by Wellington Management Company, LLP. The Growth STRATEGY and
the Moderate Growth STRATEGY also have an aggressive growth component which is
managed by SAAMCo. The percentage that any one of these components represents in
the Multi-Managed Portfolios varies in accordance with each STRATEGY's
objective.
YOU SHOULD READ THE PROSPECTUS FOR SEASONS SERIES TRUST CAREFULLY BEFORE
INVESTING. THE PROSPECTUS CONTAINS DETAILED INFORMATION ABOUT THE INVESTMENT
PORTFOLIOS AND IS ATTACHED TO THIS PROSPECTUS.
Each STRATEGY uses an asset allocation investment approach to achieve its
objective and allocates your money into underlying investment portfolios which
invest in a combination of stocks, both domestic and international, bonds and
cash. Although the asset mix within each STRATEGY will vary over time, each
STRATEGY has a neutral asset allocation mix, including a cash component in order
to reflect the anticipated cash holdings required to rebalance each STRATEGY
quarterly, as reflected on the following pages. Additionally, after the
quarterly rebalancing described on page 10, the contract value within each
STRATEGY will be allocated to the various underlying investment portfolios in
the percentages identified on the following pages.
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GROWTH
GOAL: Long-term growth of capital, allocating its assets primarily to stocks.
This STRATEGY may be best suited for those with longer periods to invest.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Stocks 80%
Bonds 15%
Cash 5%
</TABLE>
UNDERLYING INVESTMENT
PORTFOLIOS & MANAGERS
ASSET ALLOCATION: DIVERSIFIED GROWTH PORTFOLIO 25%
Managed by Putnam Investment Management, Inc.
STOCK PORTFOLIO 25%
Managed by T. Rowe Price Associates, Inc.
MULTI-MANAGED GROWTH PORTFOLIO 50%
Managed by:
Janus Capital Corporation
SunAmerica Asset Management Corp.
Wellington Management Company, LLP
MODERATE GROWTH
GOAL: Growth of capital through investments in equities, with a secondary
objective of conservation of principal by allocating more of its assets to bonds
than the Growth STRATEGY. This STRATEGY may be best suited for those nearing
retirement years but still earning income.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Stocks 70%
Bonds 25%
Cash 5%
</TABLE>
UNDERLYING INVESTMENT
PORTFOLIOS & MANAGERS
ASSET ALLOCATION: DIVERSIFIED GROWTH PORTFOLIO 25%
Managed by Putnam Investment Management, Inc.
STOCK PORTFOLIO 20%
Managed by T. Rowe Price Associates, Inc.
MULTI-MANAGED MODERATE GROWTH PORTFOLIO 55%
Managed by:
Janus Capital Corporation
SunAmerica Asset Management Corp.
Wellington Management Company, LLP
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BALANCED GROWTH
Goal: Focuses on conservation of principal by investing in a more balanced
weighting of stocks and bonds, with a secondary objective of seeking a high
total return. This STRATEGY may be best suited for those approaching retirement
and with less tolerance for investment risk.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Stocks 55%
Bonds 40%
Cash 5%
</TABLE>
UNDERLYING INVESTMENT
PORTFOLIOS & MANAGERS
ASSET ALLOCATION: DIVERSIFIED GROWTH PORTFOLIO 25%
Managed by Putnam Investment Management, Inc.
STOCK PORTFOLIO 20%
Managed by T. Rowe Price Associates, Inc.
MULTI-MANAGED INCOME/EQUITY PORTFOLIO 55%
Managed by:
Janus Capital Corporation
SunAmerica Asset Management Corp.
Wellington Management Company, LLP
CONSERVATIVE GROWTH
Goal: Capital preservation while maintaining some potential for growth over the
long term. This STRATEGY may be best suited for those with lower investment risk
tolerance.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Stocks 42%
Bonds 53%
Cash 5%
</TABLE>
UNDERLYING INVESTMENT
PORTFOLIOS & MANAGERS
ASSET ALLOCATION: DIVERSIFIED GROWTH PORTFOLIO 25%
Managed by Putnam Investment Management, Inc.
STOCK PORTFOLIO 15%
Managed by T. Rowe Price Associates, Inc.
MULTI-MANAGED INCOME PORTFOLIO 60%
Managed by:
Janus Capital Corporation
SunAmerica Asset Management Corp.
Wellington Management Company, LLP
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STRATEGY REBALANCING
Each STRATEGY is designed to meet its investment objective by allocating a
portion of your money to three different investment portfolios. In order to
maintain the mix of investment portfolios consistent with each STRATEGY's
objective, each STRATEGY within your contract will be rebalanced on the first
business day of each quarter so that it is allocated among the various
investment portfolios according to the percentages set forth on pages 9 and 10.
Additionally, within each Multi-Managed Portfolio, your money will be rebalanced
among the various components. Rebalancing your contract may involve shifting
assets out of better performing investments into an investment with relatively
lower returns.
SUBSTITUTION
If any of the underlying investment portfolios is no longer available, we may be
required to substitute shares of another investment portfolio. We will seek any
required prior approval of the SEC and give you notice before doing this.
FIXED INVESTMENT OPTIONS
The contract also offers six fixed investment options. Anchor National will
guarantee the interest rate earned on money you allocate to any of these fixed
investment options. We currently offer fixed investment options for periods of
one, three, five, seven and ten years, which we call Guarantee Periods.
Additionally, we guarantee the interest rate for money allocated to the one year
DCA fixed account (the "DCA Account") which is available only in conjunction
with the Dollar Cost Averaging Program. Please see the section on the Dollar
Cost Averaging Program on the next page for additional information about,
including limitations on, the availability of the DCA Account.
Interest rates offered for the different Guarantee Periods and the DCA Account
will differ from time to time due to changes in market conditions but will not
be less than 3%. The interest rate offered for a particular Guarantee Period for
new Purchase Payments may differ from the interest rate offered for money
already invested in such account. An interest rate established for a Guarantee
Period or the DCA Account will not change during the term of that period.
You may reallocate money to a fixed investment option (other than the DCA
account) or to any of the STRATEGIES after the end of the Guarantee Period.
However, if you do not give us different instructions within 30 days after the
end of your Guarantee Period, we will keep your money in the fixed account for
the same Guarantee Period you previously selected. You will receive the interest
rate then in effect for that Guarantee Period.
MARKET VALUE ADJUSTMENT
THE FOLLOWING DISCUSSION APPLIES TO MONIES YOU PUT INTO THE THREE, FIVE, SEVEN
AND TEN YEAR FIXED INVESTMENT OPTIONS ONLY AND DOES NOT APPLY TO WITHDRAWALS TO
PAY A DEATH BENEFIT OR CONTRACT FEES AND CHARGES.
If you take your money out of a multi-year fixed investment option (whether by
withdrawal, transfer or annuitization) before the end of the Guarantee Period,
we will make an adjustment to the value of your contract. We call this a Market
Value Adjustment. The Market Value Adjustment reflects the differing interest
rate environments between the time you put your money into the fixed account and
the time you take your money out of the fixed account. The adjustment can
increase or decrease the value of your contract. You may withdraw your money
within 30 days followng the end of a Guarantee Period without incurring a Market
Value Adjustment.
We calculate the Market Value Adjustment by comparing the interest rate you
received on the money you put into the fixed account against the interest rate
we are currently offering to contract owners for the period of time remaining in
the Guarantee Period. If the amount of time remaining is not equal to an
available guarantee period for which we offer a fixed interest rate, the
interest rate will be determined by linear interpolation between interest rates
for the two nearest periods that are available.
Generally, if interest rates have dropped between the time you put your money
into the fixed account and the time you take it out, there will be a positive
adjustment to the value of your contract. Conversely, if interest rates have
increased between the time you put your money into the fixed account and the
time you take it out, there will be a negative adjustment to the value of your
contract.
If the Market Value Adjustment is negative, it will be assessed first against
any remaining money allocated to the fixed account out of which you took your
money and then against the
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amount of money you take out of the fixed account. If the Market Value
Adjustment is positive, it will be added to the amount you take out of the fixed
account.
Appendix A provides more information about how we calculate the Market Value
Adjustment and gives some examples of the impact of the adjustment.
The one year fixed investment option and DCA Account do not impose a market
value adjustment and are not registered under the Securities Act of 1933 and are
not subject to the provisions of the Investment Company Act of 1940.
TRANSFERS DURING THE ACCUMULATION PHASE
Except as provided in the next sentence with respect to the DCA Account, you can
transfer money among the STRATEGIES and the fixed investment options by written
request or by telephone. Although you may transfer money out of the DCA Account,
you may not transfer money into the DCA Account from any STRATEGY or any fixed
investment option. You can make four transfers every year without incurring a
transfer charge. We measure a year from the anniversary of the day we issued
your contract. If you make more than four transfers in a year, there is a $25
transfer fee per transfer ($10 in Pennsylvania and Texas). Additionally,
transfers out of a multi-year fixed investment option may be subject to a market
value adjustment.
The minimum amount you can transfer is $500 or a lesser amount if you transfer
the entire balance from a STRATEGY or a fixed investment option. If any money
will remain in a STRATEGY or fixed investment option after making a transfer, it
must be at least $500. Your request for transfer must clearly state which
STRATEGY(IES) and/or fixed investment option(s) are involved and the amount you
want to transfer. Please see the section below on Dollar Cost Averaging for
specific rules regarding the DCA Account.
We will accept transfers by telephone unless you specify otherwise on your
contract application. We have in place procedures to provide reasonable
assurance that instructions given to us by telephone are genuine. Thus, we
disclaim all liability for any claim, loss or expense from any error. If we fail
to use such procedures, we may be liable for any losses due to unauthorized or
fraudulent instructions.
We reserve the right to modify, suspend or terminate the transfer privileges at
any time.
DOLLAR COST AVERAGING PROGRAM
The Dollar Cost Averaging Program allows you to systematically transfer a set
percentage or amount from any STRATEGY or the one year fixed investment option
(we call these source accounts) to another STRATEGY. You can also select to
transfer the entire value in a STRATEGY or the one year fixed investment option
in a stated number of transfers. Transfers may be monthly or quarterly. You can
change the amount or frequency at any time by notifying us in writing.
When you make either your initial Purchase Payment or a subsequent Purchase
Payment and want to participate in the Dollar Cost Averaging Program with that
money, you may also use the DCA Account as a source account. You cannot transfer
money from a STRATEGY or other fixed investment option into the DCA Account.
When the DCA Account is used, all of your money in the account will be
transferred to the STRATEGY(IES) you select in either monthly or quarterly
transfers (as selected by you) by the end of the one year period for which the
interest rate is guaranteed. Once selected, you can not change the frequency of
transfers under the program. If you want to stop participation in the Dollar
Cost Averaging Program and you are using the DCA Account as your source account,
we will either transfer your money to the STRATEGY (IES) or fixed investment
option(s) you select, or, in the absence of express instructions, we will
transfer your money to the one year fixed investment option which will earn
interest at the rate then being offered for a period of one year.
By allocating amounts on a regular schedule as opposed to allocating the total
amount at one particular time, you may be less susceptible to the impact of
market fluctuations. However, there is no assurance that you will earn a greater
profit. You are still subject to loss in a declining market. Dollar cost
averaging involves continuous investment in securities regardless of fluctuating
price levels. You should consider your financial ability to continue to invest
through periods of low prices.
Transfers under this program are not counted against your four free transfers
per year. We reserve the right to modify, suspend or terminate this program at
any time.
PRINCIPAL ADVANTAGE PROGRAM
The Principal Advantage Program allows you to allocate Purchase Payments to a
fixed investment option (other than the DCA Account) and one or more STRATEGIES
without any market risk to your principal. You decide how much you want
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to invest and when you would like a return of your principal. We will calculate
how much of your Purchase Payment must be allocated to the fixed investment
option to ensure that this money will grow to equal the full amount of your
purchase payment by the end of the selected period. The remaining portion of the
Purchase Payment is then invested in a STRATEGY(IES), where it has the potential
to achieve greater growth.
We reserve the right to modify, suspend or terminate this program at any time.
EXPENSES
- --------------------------------------------------------------------------------
There are charges and other expenses associated with the contract that will
reduce your investment return. These charges and deductions are described below.
INSURANCE CHARGES
Each day, we make a deduction for our insurance charges from amounts allocated
to the STRATEGIES. This is done as part of our calculation of the values of the
Accumulation Units and Annuity Units during the Accumulation Phase and the
Income Phase, respectively. The asset based charges consist of the Mortality and
Expense Risk Charge and the Distribution Expense Charge. There are no asset
based charges deducted from the portion of your contract (if any) allocated to a
fixed investment option.
MORTALITY AND EXPENSE RISK CHARGE
This charge is equal, on an annual basis, to 1.25% of the daily value of the
contract invested in a STRATEGY. This charge is for our obligation to make
annuity payments, to provide a death benefit and for assuming the risk that the
current charges will be insufficient in the future to cover the cost of
administering the contract. Approximately .90% is for mortality risks and .35%
is for expense risks. If the charges under the contract are not sufficient, we
will bear the loss. We will not increase this charge. We may use any profits
from this charge to pay for the costs of distributing the contract.
DISTRIBUTION EXPENSE CHARGE
This charge is equal, on an annual basis, to .15% of the daily value of the
contract invested in a STRATEGY. This charge is for all expenses associated with
the distribution of the contract. These expenses include preparing the contract,
confirmations and statements, providing sales support, and maintaining contract
records. If this charge is not enough to cover the costs of distributing the
contract, we will bear the loss.
INVESTMENT CHARGES
If you have money allocated to the STRATEGIES, there are deductions from and
expenses paid out of the assets of the various underlying investment portfolios.
These investment charges are summarized in the Fee Tables on pages 3 and 4. For
more detailed information, you should refer to the prospectuses for the Seasons
Series Trust.
CONTRACT MAINTENANCE CHARGE
During the Accumulation Phase, every year on the anniversary of the date when
your contract was issued, we deduct $35 ($30 in North Dakota and Washington)
from the value of your contract as a contract maintenance charge. This charge is
for expenses incurred to establish and maintain your contract. This charge
cannot be increased. If you make a complete withdrawal from your contract, the
contract maintenance charge will be deducted prior to the withdrawal. We will
not deduct the contract maintenance charge if, when the deduction is to be made,
the value of your contract is $50,000 or more. We may discontinue this practice
at some point in the future.
WITHDRAWAL CHARGE
During the Accumulation Phase you may make withdrawals from your contract.
However, a withdrawal charge may apply. For purposes of calculating any
applicable withdrawal charge, amounts withdrawn from your contract will come
first from the Free Withdrawal Amount (as described below), then from Purchase
Payments no longer subject to a withdrawal charge which have not previously been
withdrawn, then from Purchase Payments subject to a withdrawal charge which have
not previously been withdrawn and last from earnings. However, for tax purposes,
earnings are considered withdrawn first. You will not receive the benefit of the
Free Withdrawal Amount if you make a complete surrender of your contract.
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Each contract year you may withdraw up to 10% of your total Purchase Payments
which are subject to a withdrawal charge free of any withdrawal charge (the
"Free Withdrawal Amount"). Any portion of a withdrawal in excess of the Free
Withdrawal Amount which is still subject to a withdrawal charge will be assessed
one as described below.
In order to determine the applicable withdrawal charge, we keep track of each
Purchase Payment and assess a charge based on the length of time a Purchase
Payment is in your contract before being withdrawn. After a Purchase Payment has
been in your contract for seven years, no withdrawal charge is assessed against
withdrawals of the Purchase Payment.
The withdrawal charge is assessed as a percentage of the Purchase Payment you
are withdrawing as follows:
<TABLE>
<S> <C> <C> <C>
Year 1......... 7% Year 5......... 4%
Year 2......... 6% Year 6......... 3%
Year 3......... 6% Year 7......... 2%
Year 4......... 5% Year 8......... 0%
</TABLE>
If the withdrawal is for only part of the contract, we will deduct the
withdrawal charge from the remaining value in your contract.
We will not assess any withdrawal charges for withdrawals to pay contract
charges, a death benefit or for annuity payments during the Income Phase.
The withdrawal charge is intended to cover the actual costs of distribution.
However, to the extent that such charge is insufficient, the Company may use any
of its corporate assets to make up any difference.
TRANSFER FEE
You can make four free transfers every year. We measure a year from the day we
issued your contract. If you make more than four transfers a year, we will
deduct a $25 transfer fee per transfer ($10 in Pennsylvania and Texas). The
transfer fee will be deducted from the STRATEGY or fixed investment option from
which the transfer is requested. If the transfer is part of the Dollar Cost
Averaging Program, it will not count against your four free transfers per year.
PREMIUM TAXES
We are responsible for the payment of premium taxes charged by a limited number
of states and will make a deduction from your contract for them. These taxes are
due either when the contract is issued or when annuity payments begin or when
you make a full surrender of the contract. It is our current practice not to
charge you for these taxes until annuity payments begin or when a full surrender
is made. In the future, we may discontinue this practice and assess the tax when
it is due or upon the payment of the death benefit.
Appendix B provides more information about the premium taxes assessed in each
state.
INCOME TAXES
Although we do not currently deduct any income taxes borne under your contract,
we reserve the right to do so in the future.
REDUCTION OR ELIMINATION OF CERTAIN CHARGES
We will reduce or eliminate the amount of certain insurance charges when the
contract is sold to groups of individuals under circumstances which reduce its
sales and administrations expenses. We will determine the eligibility of such
groups by considering the following factors: (1) the size of the group; (2) the
total amount of Purchase Payments we expect to receive from the group; (3) the
nature of the purchase and the persistency we expect in that group; (4) the
purpose of the purchase and whether that purpose makes it likely that expenses
will be reduced; and (5) any other circumstances which we believe to be relevant
in determining whether reduced sales expenses may be expected.
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TAXES
- --------------------------------------------------------------------------------
NOTE: WE HAVE PREPARED THE FOLLOWING INFORMATION ON TAXES AS A GENERAL
DISCUSSION OF THE SUBJECT. IT IS NOT INTENDED AS TAX ADVICE. YOU ARE CAUTIONED
TO SEEK COMPETENT TAX ADVICE ABOUT YOUR OWN CIRCUMSTANCES. WE DO NOT GUARANTEE
THE TAX STATUS OF THE ANNUITY.
ANNUITY CONTRACTS IN GENERAL
The Internal Revenue Code ("IRC") provides for special rules regarding the tax
treatment of annuity contracts. Generally, you will not be taxed on the earnings
on the money held in your annuity contract until you take the money out.
Different rules apply depending on how you take the money out and whether your
contract is Qualified or Non-Qualified.
If you do not purchase your contract under a pension plan, specially sponsored
program or an individual retirement account, your contract is referred to as a
Non-Qualified contract and receives different tax treatment than a Qualified
contract. In general, your cost basis in a Non-Qualified contract is equal to
the Purchase Payments you put into the contract. You have already been taxed on
the cost basis in your contract.
If you purchase your contract under a pension plan, specially sponsored program
or as an individual retirement account, your contract is referred to as a
Qualified contract. Examples of Qualified plans are: Individual Retirement
Annuities, Tax-sheltered Annuities (referred to as 403(b) contracts), H.R. 10
Plans (referred to as Keogh Plans) and pension and profit sharing plans,
including 401(k) plans. Typically you have not paid any tax on the Purchase
Payments used to buy your contract and therefore you have no cost basis in your
contract.
TAX TREATMENT OF DISTRIBUTIONS -- NON-QUALIFIED CONTRACTS
If you make a withdrawal from your contract, the IRC treats such a withdrawal as
first coming from the earnings and then as coming from your Purchase Payments.
For annuity payments, a portion of each payment is considered a return of your
Purchase Payment and will not be taxed. Withdrawn earnings are treated as income
to you and are taxable. The IRC further provides for a 10% tax penalty on any
earnings that are withdrawn other than in conjunction with the following
circumstances: (1) after you reach age 59 1/2; (2) after you die; (3) after you
become disabled (as described in the IRC); (4) in a series of substantially
equal installments made for the life of the taxpayer or for the joint lives of
the taxpayer and his or her Beneficiary; (5) under an immediate annuity; or (6)
which come from Purchase Payments made prior to August 14, 1982.
TAX TREATMENT OF DISTRIBUTIONS -- QUALIFIED CONTRACTS
Generally, you have not paid any taxes on the Purchase Payments used to buy a
Qualified contract or on any earnings and therefore any amount you take out as a
withdrawal or as annuity payments will be taxable income. The IRC further
provides for a 10% tax penalty on any withdrawal or annuitization other than in
conjunction with the following circumstances: (1) after reaching age 59 1/2; (2)
after you die; (3) after you become disabled (as defined in the IRC); (4) in a
series of substantially equal installments made for the life of the taxpayer or
for the joint lives of the taxpayer and his or her Beneficiary; and, except in
the case of an IRA as to the following (5) after you separate from service after
attaining age 55; (6) to the extent such withdrawals do not exceed limitations
set by the IRC for amounts paid during the taxable year for medical care; and
(7) paid to an alternate payee pursuant to a qualified domestic relations order.
The IRC limits the withdrawal of Purchase Payments made by owners from certain
Tax-sheltered Annuities. Withdrawals can only be made when an owner: (1) reaches
age 59 1/2; (2) leaves his or her job; (3) dies; (4) becomes disabled (as
defined in the IRC); or (5) in the case of hardship. In the case of hardship,
the owner can only withdraw Purchase Payments and not any earnings.
DIVERSIFICATION
The IRC imposes certain diversification requirements on the underlying
investments for a variable annuity in order to be treated as a variable annuity
for tax purposes. We believe that the underlying investment portfolios are being
managed so as to comply with these requirements.
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Neither the IRC nor any guidelines issued in conjunction with the IRC provide
guidance regarding when you, because of the degree of control you exercise over
the way your money is invested, and not Anchor National, would be considered the
owner of the shares of the underlying investment portfolios. It is unknown to
what extent the ability to select investments, make transfers among STRATEGIES
or choose from a wide selection of investment options will ultimately impact
this issue. If guidance is provided, generally it would be applied
prospectively. However, if such guidance is not considered a new position, it
may be applied retroactively. Due to the uncertainty is this area, we reserve
the right to modify the contract in an attempt to maintain favorable tax
treatment.
ACCESS TO YOUR MONEY
- --------------------------------------------------------------------------------
Under your contract, money can be accessed in the following ways: (1) by making
a withdrawal either for a part of the value of your contract or for the entire
value of your contract during the Accumulation Phase; (2) by receiving annuity
payments during the Income Phase; and (3) when a death benefit is paid to your
Beneficiary.
Generally, withdrawals are subject to a withdrawal charge, a market value
adjustment if the money withdrawn comes from a multi-year fixed investment
option and, if you withdraw your full contract value, premium taxes and a
contract maintenance charge. (See Section 5 - Expenses for more complete
information.)
If you make a complete withdrawal you will receive the value of your contract,
less any applicable fees, charges and market value adjustments, at the price
calculated following receipt of a complete request to make such a withdrawal at
our Annuity Service Center. Your contract must be submitted as well.
Under most circumstances, partial withdrawals must be for a minimum of $1,000.
We require that the value left in any STRATEGY or fixed investment option be at
least $500 after a withdrawal. Unless you provide us with different
instructions, partial withdrawals will be made pro rata from each STRATEGY and
fixed investment option in which your contract is invested. You must send a
written withdrawal request to us prior to any withdrawal being made.
SYSTEMATIC WITHDRAWAL PROGRAM
This program allows you to receive either monthly, quarterly, semi-annual or
annual checks during the Accumulation Phase. You can also choose to have
systematic withdrawals electronically wired to your bank account. Any
withdrawals you make using this program count against your Free Withdrawal
Amount as described in Section 5 - Expenses. Withdrawals in excess of the Free
Withdrawal Amount may be subject to a withdrawal charge. The minimum amount of
each withdrawal is $250. Withdrawals may be taxable and a 10% IRS tax penalty
may apply if you are under age 59 1/2. There is no charge for participating in
this program.
This program is not available to everyone, so please check with our Annuity
Service Center, which can provide the necessary enrollment forms. We reserve the
right to modify, suspend or terminate this program at any time.
SUSPENSION OF PAYMENTS
We may be required to suspend or postpone the payment of a withdrawal for any
period of time when: (1) the New York Stock Exchange is closed (other than a
customary weekend and holiday closings); (2) trading on the New York Stock
Exchange is restricted; (3) an emergency exists such that disposal of or
determination of the value of shares of the investment portfolios is not
reasonably practicable; (4) the Securities and Exchange Commission, by order, so
permits for the protection of contract owners.
Additionally, we reserve the right to defer payments for a withdrawal from the
fixed account for the period permitted by law but not for more than six months.
MINIMUM CONTRACT VALUE
Where permitted by state law, we may terminate your contract if it is less than
$500 as a result of withdrawals and no Purchase Payments have been made during
the past three years. We will provide you with sixty days written notice and
distribute the contract's remaining value to you.
WITHDRAWAL CHARGES, MARKET VALUE ADJUSTMENTS, INCOME TAXES, TAX PENALTIES AND
CERTAIN RESTRICTIONS MAY APPLY TO ANY WITHDRAWAL YOU MAKE.
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PERFORMANCE
- --------------------------------------------------------------------------------
From time to time we will advertise the performance of the STRATEGIES. Any such
performance results are based on historical earnings and are not intended to
indicate future performance.
For each STRATEGY we will show performance against a comparison index which is
made up of the S&P 500 Index, the Lehman Brothers Corporate/Government Index and
the Lipper Money Market Index. The comparison index will blend the referenced
indices in proportion to the neutral allocation of stocks, bonds and cash within
each STRATEGY as indicated on pages 9 and 10 of this prospectus.
Additionally, we may show performance of each STRATEGY in comparison to various
appropriate indexes and the performance of other similar variable annuity
products with similar objectives as reported by such independent reporting
services as Morningstar, Inc., Lipper Analytical Services, Inc. and Variable
Annuity Reporting Data Service.
Please see the Statement of Additional Information for additional information
regarding the methods used to calculate performance data.
DEATH BENEFIT
- --------------------------------------------------------------------------------
If you should die before beginning the Income Phase of your contract, we will
pay a death benefit to your Beneficiary.
If you should die prior to reaching age 75 or, if there are joint owners, if an
owner should die prior to the youngest owner reaching age 75, the death benefit
will be equal to the greater of:
1. The value of your contract at the time we receive adequate proof of death
and the Beneficiary's election as to how the benefit should be paid; or
2. Total Purchase Payments less any withdrawals, applicable charges, market
value adjustments and taxes, accumulated at 3% from the date your contract
was issued until the date of death, plus any Purchase Payments received,
less any withdrawals, applicable charges, market value adjustments and taxes
made or charged, after the date of death.
If the contract was issued after your 75th birthday or if you should die after
you reach age 75, or, if there are joint owners, if the contract was issued
after both owners' 75th birthday or if an owner dies after the youngest owner
reaches age 75, the death benefit will be the greater of:
1. The value of your contract at the time we receive adequate proof of death
and the Beneficiary's election as to how the death benefit will be paid; or
2. Total Purchase Payments received by us before age 75 (in the case of joint
owners, before the younger owner reaches age 75) less any withdrawals,
applicable charges, market value adjustments and taxes, accumulated at 3%
from the date your contract was issued until your 75th birthday (or, if
there is a joint owner, the 75th birthday of the youngest owner), plus any
subsequent Purchase Payments received, less any withdrawals, applicable
charges, market value adjustments and taxes made or charged, after your 75th
birthday.
The entire death benefit must be paid within 5 years of the date of death unless
the Beneficiary elects to have it payable in the form of an annuity. If the
Beneficiary elects an annuity option, it must be paid over the Beneficiary's
lifetime or for a period not extending beyond the Beneficiary's life expectancy
and payments must begin within one year of your death. If the Beneficiary is the
spouse of the owner, he or she can elect to continue the contract at the then
current value.
The death benefit will be paid out when we receive adequate proof of death and
the Beneficiary's election as to how the death benefit will be paid. If the
Beneficiary does not make a specific election within 60 days of our receipt of
proof of death, the death benefit will be paid in a lump sum.
You may select a Beneficiary to receive the death benefit. You may change the
Beneficiary at anytime before the Income
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Phase begins, unless you previously made an irrevocable Beneficiary designation.
A new Beneficiary designation is not effective until we record the change.
A death benefit is not paid if you should die after beginning the Income Phase
of your contract. In that event, to the extent there are remaining guaranteed
annuity payments, they will be paid to your beneficiary.
DEATH OF THE ANNUITANT
If the Annuitant dies before annuity payments begin, you can name a new
Annuitant. If no Annuitant is named within 30 days, you will become the
Annuitant. However, if the owner is a non-natural person (for example, a
corporation), then the death of the Annuitant will be treated as the death of
the owner, no new Annuitant may be named and the death benefit will be paid.
Your Beneficiary will receive the value of any annuity payments which we are
obligated to make under options 3, 4 and 5 as described in Section 3 - Annuity
Payment Options, if you die before the total annuity payments are made.
OTHER INFORMATION
- --------------------------------------------------------------------------------
ANCHOR NATIONAL
Anchor National is a stock life insurance company domiciled under the laws of
the state of Arizona. Its principal business address is 1 SunAmerica Center, Los
Angeles, California 90067-6022. Anchor National conducts business in the
District of Columbia and in all states except New York. Anchor National is an
indirect wholly owned subsidiary of SunAmerica Inc., a Maryland corporation.
Anchor National and its affiliates, SunAmerica Life Insurance Company, First
SunAmerica Life Insurance Company, CalFarm Life Insurance Company, SunAmerica
Asset Management Corp., Imperial Premium Finance, Inc., Resources Trust Company
and four broker-dealers, offer a full line of financial services, including
fixed and variable annuities, mutual funds, premium finance and trust
administration services.
THE SEPARATE ACCOUNT
Anchor National established a separate account, Variable Annuity Account Five
("Separate Account"), under Arizona law on July 3, 1996. The Separate Account is
registered with the Securities and Exchange Commission as a unit investment
trust under the Investment Company Act of 1940.
There are no pending legal proceedings affecting the Separate Account. Anchor
National and its subsidiaries are engaged in various kinds of routine litigation
which, in management's judgment, are not of material importance to their
respective total assets or material with respect to the Separate Account.
Anchor National owns the assets in the Separate Account. However, the assets in
the Separate Account are not chargeable with liabilities arising out of any
other business Anchor National may conduct. Income, gains and losses (realized
and unrealized) resulting from the assets in the Separate Account are credited
to or charged against the Separate Account.
CUSTODIAN
State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts
02110, serves as the custodian of the assets of the Separate Account. We pay
State Street Bank for services based on a schedule of fees.
STATEMENT OF ADDITIONAL INFORMATION
Additional information concerning the operations of the Separate Account is
contained in a Statement of Additional Information, which is available without
charge upon written request to us at our Annuity Service Center at the address
provided in the Profile preceding this prospectus. The Separate Account has not
yet begun operations and, therefore, no financial statements are available.
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TABLE OF CONTENTS FOR THE
STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Separate Account........................ 3
General Account......................... 3
Performance Date........................ 4
Annuity Payments........................ 4
Annuity Unit Values..................... 5
Taxes................................... 6
Distribution of Contracts............... 9
Financial Statements.................... 10
</TABLE>
THE GENERAL ACCOUNT
If you put your money into a fixed investment option it goes into Anchor
National's general account ("General Account"). The General Account is made up
of all of Anchor National's assets other than assets attributable to a separate
account. All of the assets in the General Account are chargeable with the claims
of any Anchor National contract holder, as well as all creditors. The General
Account is invested in assets permitted by state insurance law.
DISTRIBUTION
The contract is sold through registered representatives of broker-dealers. We
pay commissions to registered representatives for the sale of contracts.
Commissions are not expected to exceed 7.25% of your Purchase Payment. Under
some circumstances we pay a persistency bonus in addition to standard
commissions. Usually the standard commission is lower when we pay a persistency
bonus, which is not anticipated to exceed 1.00% annually.
SunAmerica Capital Services, Inc., 733 Third Avenue, 4th Floor, New York, New
York, 10017, acts as the distributor of the contracts. SunAmerica Capital
Services, Inc. is an affiliate of Anchor National.
ADMINISTRATION
We are responsible for all the administrative servicing of your contract. Please
contact Anchor National's Annuity Service Center at the telephone number and
address provided in the Profile of this prospectus if you have any comment,
question or service request.
We will send out transaction confirmations and quarterly statements. Please
review these documents carefully and notify us of any questions immediately. We
will investigate all questions and, to the extent we have made an error, we will
retroactively adjust your contract provided you have notified us within 30 days
of receiving the transaction confirmation or quarterly statement, as applicable.
All other adjustments will be made as of the time we receive notice of the
error.
OTHER INFORMATION ABOUT ANCHOR NATIONAL
Anchor National is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and in accordance therewith files reports and
other information with the Securities and Exchange Commission ("SEC"). Such
reports and other information filed by the Company can be inspected and copied;
and copies can be obtained at the public reference facilities of the SEC at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, or at the regional offices
in Chicago and New York. The addresses of these regional offices are as follows:
500 West Madison Street, Chicago, Illinois 60661, and 7 World Trade Center, 13th
Floor, New York, New York 10048. Copies of such material also can be obtained by
mail from the Public Reference Section of the SEC at 450 Fifth Street, N.W.,
Washington D.C. 20549, upon payment of the fees prescribed by the rules and
regulations of the SEC at prescribed rates.
Registration statements have been filed with the SEC, Washington, D.C., under
the Securities Act of 1933 as amended, with respect to the contracts offered by
this prospectus. This prospectus does not contain all the information set forth
in the registration statements and the exhibits filed as part of the
registration statements, to all of which reference is hereby made for further
information concerning the Separate Account, Anchor National and its general
account, the investment portfolios and the contract. Statements found in this
prospectus as to the terms of the contracts and other legal instruments are
summaries, and reference is made to such instruments as filed.
PROPERTIES
Anchor National's principal office is leased at 1 SunAmerica Center, Los
Angeles, California, 90067-6022. We also lease office space in Torrance,
California which is utilized for certain
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recordkeeping and data processing functions. Anchor National's broker-dealer and
asset management subsidiaries lease office space in New York, New York.
STATE REGULATION
Anchor National is subject to regulation and supervision by the states in which
it is authorized to transact business. State insurance laws establish
supervisory agencies with broad administrative and supervisory powers relating
to granting and revoking licenses to transact business, regulating marketing and
other trade practices, operating guaranty associations, licensing agents,
approving policy forms, regulating certain premium rates, regulating insurance
holding company systems, establishing reserve requirements, prescribing the form
and content of required financial statements and reports, performing financial
and other examinations, determining the reasonableness and adequacy of statutory
capital and surplus, regulating the type, valuation and amount of investments
permitted, limiting the amount of dividends that can be paid and the size of
transactions that can be consummated without first obtaining regulatory approval
and other related matters.
During the last decade, the insurance regulatory framework has been placed under
increased scrutiny by various states, the federal government and the National
Association of Insurance Commissioners ("NAIC"). Various states have considered
or enacted legislation that changes, and in many cases increases, the states'
authority to regulate insurance companies. Legislation has been introduced from
time to time in Congress that could result in the federal government assuming
some role in the regulation of insurance companies. In recent years, the NAIC
has approved and recommended to the states for adoption and implementation
several regulatory initiatives designed to reduce the risk of insurance company
insolvencies and market conduct violations. These initiatives include investment
reserve requirements, risk-based capital standards and restrictions on an
insurance company's ability to pay dividends to its stockholders. The NAIC is
also currently developing model laws relating to product design and
illustrations for annuity products. Current proposals are still being debated
and we are monitoring developments in this area and the effects any changes
would have on the Company.
SunAmerica Asset Management Corp. is registered with the Securities and Exchange
Commission ("SEC") as a registered investment adviser under the Investment
Advisers Act of 1940. The mutual funds that is markets are subject to regulation
under the Investment Company Act of 1940. SunAmerica Asset Management Corp. and
the mutual funds are subject to regulation and examination by the SEC. In
addition, variable annuities and Anchor National's related separate accounts are
subject to regulation by the SEC under the Securities Act of 1933 and the
Investment Company Act of 1940.
Anchor National's broker-dealer subsidiary is subject to regulation and
supervision by the states in which it transacts business, as well as by the
National Association of Securities Dealers, Inc. ("NASD"). The NASD has broad
administrative and supervisory powers relative to all aspects of business and
may examine the subsidiary's business and accounts at any time.
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DIRECTORS AND EXECUTIVE OFFICERS
Anchor National's directors and executive officers as of January 1, 1997 are
listed below:
<TABLE>
<CAPTION>
YEAR ASSUMED
PRESENT OTHER POSITIONS AND OTHER BUSINESS
NAME AGE PRESENT POSITION POSITION EXPERIENCE WITHIN LAST FIVE YEARS** FROM-TO
- --------------------- --- -------------------------------------- ------------ ------------------------------------- ---------
<C> <C> <S> <C> <C> <C>
Eli Broad* 63 Chairman, CEO and President of Anchor 1994 Cofounded SunAmerica Inc. ("SAI") in
National; 1957
Chairman, CEO and President of SAI 1986
Joseph M. Tumbler* 48 EVP of Anchor National; 1996 President and Chief Executive 1989-1995
Vice Chairman of SAI 1995 Officer, Providian Capital Management
Jay S. Wintrob* 39 EVP of Anchor National; 1991 SVP 1989-1991
Vice Chairman of SAI 1995
Victor E. Akin 32 SVP of Anchor National 1996 VP, SunAmerica Life Companies 1995-1996
Director, SunAmerica Life Companies
Manager, SunAmerica Life Companies 1994-1995
Actuary, Milliman & Robertson
Consultant, Chalke Inc. 1993-1994
1992-1993
1991-1992
James R. Belardi* 39 SVP of Anchor National; 1992 VP and Treasurer 1989-1992
EVP of SAI 1995
Lorin M. Fife* 43 SVP, General Counsel and Asst. 1994 VP and General Counsel-Regulatory 1994-1995
Secretary of Anchor National; Affairs of SAI;
SVP, General Counsel-Regulatory 1995 VP and Associate General Counsel of 1989-1994
Affairs of SAI SAI
N. Scott Gillis 43 SVP and Controller of Anchor National 1994 VP and Controller, SunAmerica Life 1989-1994
Companies
Jana Waring Greer* 45 SVP of Anchor National and SAI; 1991 VP 1981-1991
President of SunAmerica Marketing 1995
Susan L. Harris* 39 SVP and Secretary of Anchor National; 1994 VP, General Counsel-Corporate Affairs 1994-1995
SVP, General Counsel-Corporate Affairs and Secretary of SAI;
and Secretary of SAI 1995 VP, Associate General Counsel and 1989-1994
Secretary of SAI
Peter McMillan, III* 39 EVP and Chief Investment Officer of 1994 SVP of SunAmerica Investments, Inc. 1989-1994
SunAmerica Investments, Inc.
Edwin R. Reoliquio 39 SVP and Chief Actuary of Anchor 1995 VP and Actuary, SunAmerica Life 1989-1994
National Companies
Scott L. Robinson* 50 SVP of Anchor National; 1991 VP and Controller 1986-1991
SVP and Controller of SAI
James W. Rowan 33 SVP of Anchor National and SAI 1996 VP; 1993-1995
Asst. to the Chairman; 1992
SVP, Security Pacific Corp. 1990-1992
</TABLE>
* Also serves as a director CEO = Chief Executive Officer
** Unless otherwise noted, positions EVP = Executive Vice President
with SunAmerica Inc. SVP = Senior Vice President
VP = Vice President
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EXECUTIVE COMPENSATION
All of Anchor National's executive officers are also employees of SunAmerica
Inc. or its affiliates and do not receive direct compensation from Anchor
National. We allocated the time each executive officer spent devoted to his or
her duties as an executive officer of Anchor National to determine the executive
compensation set forth below for the Chief Executive Officer and the other four
highest compensated executive officers, as well as the executive officers as a
group, for services rendered during 1996.
<TABLE>
<CAPTION>
Name of Individual or Number Allocated Cash
in Group Capacities in Which Served Compensation
<S> <C> <C>
Eli Broad Chairman, Chief Executive Officer and
President $ 1,444,146
Joseph M. Tumbler Executive Vice President 834,708
Jay S. Wintrob Executive Vice President 836,327
James R. Belardi Senior Vice President 341,329
Jana Waring Greer Senior Vice President 420,171
All Executive Officers as a
Group (12) 5,056,560
</TABLE>
Security Ownership of Owners and Management
No shares of Anchor National are owned by any executive officer or director.
Anchor National is an indirect wholly owned subsidiary of SunAmerica Inc. The
only officer or director that owns more than 1% of the shares of SunAmerica Inc.
is Mr. Eli Broad, Chairman, Chief Executive Officer and President. At February
28, 1997, Mr. Broad beneficially owned 6,655,176 shares of Common Stock
(approximately 5.8% of the class outstanding) and 9,160,294 shares of Class B
Common Stock (approximately 84.4% of the class outstanding). Of the Common
Stock, 715,872 shares represent restricted shares granted under the Company's
employee stock plans as to which Mr. Broad has no investment power; 75,846
shares are registered in the name of a corporation of which Mr. Broad is a
director and has sole voting and investment power; 4,150,932 shares represent
employee stock options which are or will become exercisable within the next 60
days and as to which he has no voting or investment power; 65,136 shares are
held by a foundation of which Mr. Broad is a director and as to which he has
shared voting and investment power. At February 28, 1997, all directors and
officers as a group beneficially owned 10,344,440 shares of Common Stock
(approximately 9% of the class outstanding) and 9,160,294 shares of Class B
Common Stock (approximately 84.4% of the class outstanding).
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FINANCIALS
Selected Consolidated Financial Data
The following selected consolidated financial information of Anchor National
Life Insurance Company, insofar as it relates to each of the years 1992-1996,
has been derived from audited annual financial statements, including the
consolidated balance sheets at September 30, 1995 and 1996 and the related
consolidated statements of income and cash flow for each of the three years in
the period ended September 30, 1996 and the notes thereto appearing elsewhere
herein. The information for the three months ended December 31, 1995 and 1996
has been derived from unaudited financial information also appearing herein and
which, in the opinion of management, includes all adjustments, consisting only
of normal recurring adjustments, necessary for a fair statement of the results
for the unaudited interim periods.
This information should be read in conjunction with the consolidated financial
statements and notes thereto and Management's Discussion and Analysis of
Financial Condition and Results of Operations, both of which follow this
selected information.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED SEPTEMBER 30, DECEMBER 31,
--------------------------------------------------------------- --------------------------
1992 1993 1994 1995 1996 1995 1996
----------- ----------- ----------- ----------- ----------- ----------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Net investment income................. $ 36,499 $ 48,912 $ 58,996 $ 50,083 $ 56,843 $ 14,617 $ 14,544
Net realized investment losses........ (22,749) (22,247) (33,713) (4,363) (13,355) (12,800) (19,116)
Fee income............................ 97,220 118,247 131,225 135,214 160,931 37,284 44,820
General and administrative expenses... (55,615) (55,142) (52,636) (61,629) (80,048) (16,997) (22,322)
Provision for future guaranty fund
assessments.......................... -- (4,800) -- -- -- -- --
Amortization of deferred acquisition
costs................................ (18,224) (30,825) (44,195) (58,713) (57,520) (13,658) (13,817)
Annual commissions.................... (215) (312) (1,158) (2,658) (4,613) (939) (1,433)
Other income and expenses............. 9,218 9,679 8,801 7,063 7,070 1,768 2,270
----------- ----------- ----------- ----------- ----------- ----------- -------------
PRETAX INCOME......................... 46,134 63,512 67,320 64,997 69,308 9,275 4,946
Income tax expense.................... (15,361) (21,794) (22,705) (25,739) (24,252) (3,449) (1,600)
----------- ----------- ----------- ----------- ----------- ----------- -------------
Income from continuing operations..... 30,773 41,718 44,615 39,258 45,056 5,826 3,346
Net income of subsidiaries sold to
affiliates........................... 1,312 -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -------------
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING FOR INCOME
TAXES................................ 32,085 41,718 44,615 39,258 45,056 5,826 3,346
Cumulative effect of change in
accounting for income taxes.......... -- -- (20,463) -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -------------
NET INCOME............................ $ 32,085 $ 41,718 $ 24,152 $ 39,258 $ 45,056 $ 5,826 $ 3,346
----------- ----------- ----------- ----------- ----------- ----------- -------------
----------- ----------- ----------- ----------- ----------- ----------- -------------
<CAPTION>
AT SEPTEMBER 30, AT DECEMBER 31,
--------------------------------------------------------------- --------------------------
1992 1993 1994 1995 1996 1995 1996
----------- ----------- ----------- ----------- ----------- ----------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
FINANCIAL POSITION
Investments........................... $ 2,126,899 $ 2,093,100 $ 1,632,072 $ 2,114,908 $ 2,329,232 $ 1,964,418 $ 2,703,683
Variable annuity assets............... 3,284,507 4,170,275 4,486,703 5,230,246 6,311,557 5,418,534 6,784,374
Deferred acquisition costs............ 288,264 336,677 416,289 383,069 443,610 379,922 461,637
Other assets.......................... 91,588 71,337 67,062 55,474 120,136 81,466 76,014
----------- ----------- ----------- ----------- ----------- ----------- -------------
TOTAL ASSETS.......................... $ 5,791,258 $ 6,671,389 $ 6,602,126 $ 7,783,697 $ 9,204,535 $ 7,844,340 $ 10,025,708
----------- ----------- ----------- ----------- ----------- ----------- -------------
----------- ----------- ----------- ----------- ----------- ----------- -------------
Reserves for fixed annuity
contracts............................ $ 1,735,565 $ 1,562,136 $ 1,437,488 $ 1,497,052 $ 1,789,962 $ 1,473,964 $ 2,024,873
Reserves for guaranteed investment
contracts............................ -- -- -- 277,095 415,544 277,167 420,871
Variable annuity liabilities.......... 3,284,507 4,170,275 4,486,703 5,230,246 6,311,557 5,418,534 6,784,374
Other reserves, payables and accrued
liabilities.......................... 398,045 495,308 195,134 227,953 96,196 79,466 157,622
Subordinated notes payable to
Parent............................... 15,500 34,432 34,712 35,832 35,832 35,832 35,903
Deferred income taxes................. 35,163 38,145 64,567 73,459 70,189 72,934 71,943
Shareholder's equity.................. 322,478 371,093 383,522 442,060 485,255 486,443 530,122
----------- ----------- ----------- ----------- ----------- ----------- -------------
TOTAL LIABILITIES AND SHAREHOLDER'S
EQUITY............................... $ 5,791,258 $ 6,671,389 $ 6,602,126 $ 7,783,697 $ 9,204,535 $ 7,844,340 $ 10,025,708
----------- ----------- ----------- ----------- ----------- ----------- -------------
----------- ----------- ----------- ----------- ----------- ----------- -------------
</TABLE>
23
<PAGE>
[LOGO]
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Management's discussion and analysis of financial condition and results of
operations of Anchor National Life Insurance Company (the "Company") for the
three years in the period ended September 30, 1996 follows. In connection with,
and because it desires to take advantage of, the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995, the Company cautions readers
regarding certain forward-looking statements contained in the following
discussion and in any other statements made by, or on behalf of, the Company,
whether or not in future filings with the Securities and Exchange Commission
(the "SEC"). Forward-looking statements are statements not based on historical
information and which relate to future operations, strategies, financial
results, or other developments. In particular, statements using verbs such as
"expect," "anticipate," "believe" or words of similar import generally involve
forward-looking statements. Without limiting the foregoing, forward-looking
statements which represent the Company's beliefs concerning future or projected
levels of sales of the Company's products, investment spreads or yields, or the
earnings or profitability of the Company's activities.
Forward-looking statements are necessarily based upon estimates and assumptions
that are inherently subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond the Company's control
and many of which, with respect to future business decisions, are subject to
change. These uncertainties and contingencies can affect actual results and
could cause actual results to differ materially from those expressed in any
forward-looking statements made by, or on behalf of, the Company. Whether or not
actual results differ materially from the forward-looking statements may depend
on numerous foreseeable and unforeseeable events or developments, some of which
may be national in scope, such as general economic conditions and changes in
interest rates, some of which may be related to the insurance industry
generally, such as pricing competition, regulatory developments and industry
consolidation, and others of which may relate to the Company specifically, such
as credit, volatility, and other risks associated with the Company's investment
portfolio, and other factors. Investors are also directed to consider other
risks and uncertainties discussed in documents filed by the Company with the
SEC. The Company disclaims any obligation to update forward-looking information.
RESULTS OF OPERATIONS FOR THE FISCAL YEARS 1994, 1995 AND 1996
INCOME BEFORE CUMULATIVE EFFECTIVE OF CHANGE IN ACCOUNTING FOR INCOME TAXES
totaled $45.1 million in 1996, compared with $39.3 million in 1995 and $44.6
million in 1994. The cumulative effect of the change in accounting for income
taxes resulting from the 1994 implementation of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," amounted to a
nonrecurring non-cash charge of $20.5 million. Accordingly, net income amounted
to $24.1 million in 1994.
PRETAX INCOME totaled $69.3 million in 1996, $65.0 million in 1995, and $67.3
million in 1994. The $4.3 million improvement in 1996 over 1995 primarily
resulted from increased net investment income and significantly increased fee
income partially offset by increased net realized investment losses and
additional general and administrative expenses. The $2.3 million decline in 1995
over 1994 primarily resulted from additional amortization of deferred
acquisition costs, increased general and administrative expenses and decreased
net investment income, partially offset by decreased net realized investment
losses.
NET INVESTMENT INCOME, which is the spread between the income earned on invested
assets and the interest paid on fixed annuities and other interest-bearing
liabilities, totaled $56.8 million in 1996, $50.1 million in 1995 and $59.0
million in 1994. These amounts represent 2.59% on average invested assets
(computed on a daily basis) of $2.19 billion in 1996, 2.95% on average invested
assets of $1.70 billion in 1995 and 3.78% on average invested assets of $1.56
billion in 1994.
Net investment income also includes the effect of income earned on the excess of
average invested assets over average interest-bearing liabilities. This excess
amounted to $142.9 million in 1996, $108.4 million in 1995 and $49.5 million in
1994. The difference between the Company's yield on average invested assets and
the rate paid on average interest-bearing liabilities was 2.25% in 1996, 2.63%
in 1995 and 3.64% in 1994.
Investment income and the related yields on average invested assets totaled
$164.6 million or 7.50% in 1996, compared with $129.5 million or 7.62% in 1995
and $127.8 million or 8.20% in 1994.
Investment income rose during 1996 as a result of higher levels of average
invested assets, partially offset by reduced
24
<PAGE>
[LOGO]
investment yields. Investment yields were lower in 1996 because of a generally
declining interest rate environment since early 1995 and lower contributions
from the Company's investments in partnerships. Partnership income totaled $4.1
million in 1996, $5.1 million in 1995 and $9.5 million in 1994. This income
represents a yield of 10.12% on average investments in partnerships of $40.2
million in 1996, compared with 10.60% on average investments in partnerships of
$48.4 million in 1995 and 23.78% on average investments in partnerships of $39.9
million in 1994. Partnership income is based upon cash distributions received
from limited partnerships, the operations of which the Company does not
significantly influence. Consequently, such income is not predictable and there
can be no assurance that the Company will realize comparable levels of such
income in the future.
The decline in investment yield in 1995 compared with 1994 is primarily due to
lower contributions from the Company's investments in partnerships and a
significant decline from the $3.7 million of yield enhancement recorded in 1994
through the Company's use of dollar roll transactions ("Dollar Rolls"). Although
the Company continues to use Dollar Rolls, their use did not have a significant
impact on investment income in 1995 or 1996.
Total interest expense aggregated $107.8 million in 1996, $79.4 million in 1995
and $68.8 million in 1994. The average rate paid on all interest-bearing
liabilities increased to 5.25% (5.11% on fixed annuity contracts and 5.87% on
guaranteed investment contracts ("GICs")) in 1996, compared with 4.99% (4.90% on
fixed annuity contracts and 6.14% on GICs) in 1995 and 4.56% (4.50% on fixed
annuity contracts) in 1994. Interest-bearing liabilities averaged $2.05 billion
during 1996, compared with $1.59 billion during 1995 and $1.51 billion during
1994.
The increase in the average rates paid on all interest-bearing liabilities
during 1996 primarily resulted from the growth in average reserves for GICs,
which credit at higher rates of interest than fixed annuity contracts. Average
GIC reserves were $340.5 million in 1996 and $60.8 million in 1995. The increase
in average crediting rates in 1995 resulted from higher crediting rates on fixed
annuity contracts as interest rates rose from the low levels experienced in
1994.
The growth in average invested assets since 1994 primarily reflects sales of the
Company's fixed-rate products, consisting of both fixed accounts of variable
annuity products and GICs. Fixed annuity premiums totaled $741.8 million in
1996, compared with $284.4 million in 1995 and $140.7 million in 1994. These
increased premiums resulted from greater inflows into the one-year fixed account
of the Company's Polaris variable annuity product.
GIC premiums totaled $135.0 million in 1996 and $275.0 million in 1995. In 1995,
the Company began to issue GICs, which guarantee the payment of principal and
interest at fixed or variable rates for a term of one year. The Company's GICs
that are purchased by asset management firms either prohibit withdrawals or
permit withdrawals with notice ranging from 90 to 270 days. Contracts that are
purchased by banks or state and local governmental authorities either prohibit
withdrawals or permit scheduled book value withdrawals subject to terms of the
underlying indenture or agreement. In pricing GICs, the Company analyzes cash
flow information and prices accordingly so that it is compensated for possible
withdrawals prior to maturity.
NET REALIZED INVESTMENT LOSSES totaled $13.4 million in 1996, $4.4 million in
1995 and $33.7 million in 1994. Net realized investment losses include
impairment writedowns of $16.0 million in 1996, $4.8 million in 1995 and $14.2
million in 1994. Therefore, net gains from sales of investments totaled $2.6
million in 1996 and $0.4 million in 1995. In 1994, the Company incurred $19.5
million of net losses from sales of investments.
Net gains from sales of investments in 1996 include $4.1 million of net gains
realized on $1.27 billion of sales of bonds and $288.6 million of redemptions of
bonds. Net gains from sales of investments in 1995 include a $4.4 million gain
on sales of real estate, common stock and other invested assets offset by $4.0
million of net losses realized on $1.11 billion of sales of bonds. Net losses
from sales of investments in 1994 include $17.3 million of net losses realized
on $673.6 million of sales of bonds. These bond sales include approximately
$289.3 million of sales of MBSs made primarily to acquire other MBSs that were
then used in Dollar Rolls. Sales of investments are generally made to maximize
total return.
Impairment writedowns in 1996 include $13.4 million of provisions applied to
certain real estate owned in Arizona on December 31, 1995. Prior to that date,
the statutory carrying value of this real estate had been guaranteed by the
Company's ultimate parent, SunAmerica Inc. ("SunAmerica"). On December 31, 1995,
SunAmerica made a $27.4 million capital contribution to the Company through the
Company's direct parent in exchange for the termination of its guaranty with
respect to this real estate. Accordingly, the Company reduced
25
<PAGE>
[LOGO]
the carrying value of this real estate to estimated fair value to reflect the
termination of the guaranty. (SunAmerica's guaranty of the statutory carrying
value of the Company's other real estate owned in Arizona was fully terminated
on December 31, 1996).
Impairment writedowns in 1995 include $2.0 million of additional provisions
applied to defaulted bonds and $1.8 million of additional provisions applied to
certain interest-only strips ("IOs"). IOs, a type of MBS used as an
asset-liability matching tool to hedge against rising interest rates, are
investment grade securities that give the holder the right to receive only the
interest payments on a pool of underlying mortgage loans. At September 30, 1996,
the amortized cost of the IOs held by the Company was $2.6 million and their
fair value was $3.7 million. Impairment writedowns in 1994 of $14.2 million
reflect additional provisions applied to bonds, primarily made in response to
the adverse impact of declining interest rates on certain MBSs.
Impairment writedowns represent 0.73%, 0.28% and 0.91% of average invested
assets in 1996, 1995 and 1994, respectively. Such writedowns are based upon
estimates of the net realizable value of the applicable assets. Actual
realization will be dependent upon future events.
VARIABLE ANNUITY FEES are based on the market value of assets supporting
variable annuity contracts in separate accounts. Such fees totaled $104.0
million in 1996, $84.2 million in 1995 and $79.1 million in 1994. Increases in
variable annuity fees in 1996 and 1995 reflect growth in average variable
annuity assets, principally due to increased market values and the receipt of
variable annuity premiums, partially offset by surrenders. Variable annuity
assets averaged $5.70 billion during 1996, $4.65 billion during 1995 and $4.40
billion during 1994. Variable annuity premiums, which exclude premiums allocated
to the fixed accounts of variable annuity products, totaled $919.8 million in
1996, $577.2 million in 1995 and $769.6 million in 1994. The increase in
premiums in 1996 may be attributed, in part, to a heightened demand for equity
investments, principally as a result of generally improved market performance.
The decline in premiums in 1995 may be attributed, in part, to a heightened
demand for fixed-rate investment options, including the fixed accounts of
variable annuities. The Company has encountered increased competition in the
variable annuity marketplace during recent years and anticipates that the market
will remain highly competitive for the foreseeable future.
NET RETAINED COMMISSIONS are primarily derived from commissions on the sales of
nonproprietary investment products by the Company's broker-dealer subsidiary,
after deducting the substantial portion of such commissions that is passed on to
registered representatives. Net retained commissions totaled $31.5 million in
1996, $24.1 million in 1995 and $20.8 million in 1994. Broker-dealer sales
(mainly sales of general securities, mutual funds, and annuities) totaled $8.75
billion in 1996, $5.67 billion in 1995 and $5.21 billion in 1994. The
significant increases in sales and net retained commissions during 1996 reflect
a greater number of registered representatives and higher average production,
combined with generally favorable market conditions. Increases in net retained
commissions may not be proportionate to increases in sales primarily due to
differences in sales mix.
ASSET MANAGEMENT FEES, which include investment advisory fees and 12b-1
distribution fees, are based on the market value of assets managed in mutual
funds by SunAmerica Asset Management Corp. Such fees totaled $25.4 million on
average assets managed of $2.14 billion in 1996, $26.9 million on average assets
managed of $2.07 billion in 1995 and $31.3 million on average assets managed of
$2.39 billion in 1994. Asset management fees decreased slightly in 1996, despite
a modest increase in average assets managed, principally due to changes in
product mix. The decrease in asset management fees during 1995 principally
resulted from the decline in average assets managed, primarily due to an excess
of redemptions over sales. Redemptions of mutual funds, excluding redemptions of
money market accounts, amounted to $379.9 million in 1996, compared with $426.5
million in 1995 and $561.0 million in 1994. Sales of mutual funds, excluding
sales of money market accounts, amounted to $223.4 million in 1996, compared
with $140.2 million in 1995 and $342.6 million in 1994. Higher mutual fund sales
and lower redemptions in 1996 both reflect the combined effects of additional
advertising, the favorable performance records of certain of the Company's
mutual funds and heightened demand for equity investments, principally as a
result of improved market performance.
SURRENDER CHARGES on fixed and variable annuities totaled $5.2 million in 1996,
$5.9 million in 1995 and $5.0 million in 1994. Surrender charges generally are
assessed on annuity withdrawals at declining rates during the first five to
seven years of the contract. Withdrawal payments, which include surrenders and
lump-sum annuity benefits, totaled $898.0 million in 1996, $908.9 million in
1995 and $723.9 million in 1994. These payments represent 12.4%, 15.1% and
26
<PAGE>
[LOGO]
12.5%, respectively, of average fixed and variable annuity reserves. Withdrawals
include variable annuity payments from the separate accounts totaling $634.1
million in 1996, $646.4 million in 1995 and $459.1 million in 1994. Such
variable annuity surrenders represent 11.2%, 14.0% and 10.5%, respectively, of
average variable annuity liabilities in 1996, 1995 and 1994. Variable annuity
surrender rates increased in 1995 primarily due to surrenders on a closed block
of business, policies coming off surrender charge restrictions and increased
competition in the marketplace. Fixed annuity surrenders have remained
relatively constant, totaling $263.8 million in 1996, $262.4 million in 1995 and
$264.8 million in 1994. Management anticipates that withdrawal rates will remain
relatively stable for the foreseeable future.
GENERAL AND ADMINISTRATIVE EXPENSES totaled $80.0 million in 1996, compared with
$61.6 million in 1995 and $52.6 million in 1994. Expenses in 1996 include
expenses related to a national advertising campaign, as well as additional
administrative expenses related to a growing block of business. Expenses remain
closely controlled through a company-wide cost containment program and represent
approximately 1% of average total assets.
AMORTIZATION OF DEFERRED ACQUISITION COSTS totaled $57.5 million in 1996, $58.7
million in 1995 and $44.2 million in 1994. The decline in amortization for 1996
is due to lower redemptions of mutual funds from the rate experienced in 1995,
partially offset by additional fixed and variable annuity and mutual fund sales
in recent years and the subsequent amortization of related deferred commissions
and other acquisition costs. The increase in amortization in 1995 was primarily
caused by the substantial reduction in net realized capital losses from the
level experienced in 1994.
ANNUAL COMMISSIONS represent renewal commissions paid quarterly in arrears to
maintain the persistency of certain of the Company's variable annuity contracts.
Substantially all of the Company's currently available variable annuity products
allow for an annual commission payment option in return for a lower immediate
commission. Annual commissions totaled $4.6 million in 1996, $2.7 million in
1995 and $1.2 million in 1994. The increase in annual commissions since 1994
reflects increased sales of annuities that offer this commission option. The
Company estimates that during 1996 approximately 35% of the average balances of
its variable annuity products are currently subject to such annual commissions.
Based on current sales, this percentage is expected to increase in future
periods.
INCOME TAX EXPENSE totaled $24.3 million in 1996, $25.7 million in 1995 and
$22.7 million in 1994, representing effective tax rates of 35% in 1996, 40% in
1995 and 34% in 1994. The increase in the effective tax rate in 1995 was due to
a prior year tax settlement. Without such payment, the effective tax rate would
have been 33%.
FINANCIAL CONDITION AND LIQUIDITY AT SEPTEMBER 30, 1996
SHAREHOLDER'S EQUITY increased by $43.2 million to $485.3 million at September
30, 1996 from $442.1 million at September 30, 1995, primarily as a result of the
$45.1 million of net income recorded in 1996 and a $0.2 million reduction of net
unrealized losses on debt and equity securities available for sale charged
directly to shareholder's equity. In addition, the Company received a
contribution of capital of $27.4 million in December 1995 and paid a dividend of
$29.4 million in March 1996.
TOTAL ASSETS increased by $1.42 billion to $9.20 billion at September 30, 1996
from $7.78 billion at September 30, 1995, principally due to a $1.08 billion
increase in the separate accounts for variable annuities and a $214.3 million
increase in invested assets.
INVESTED ASSETS at year end totaled $2.33 billion in 1996, compared with $2.11
billion in 1995. This $214.3 million increase primarily resulted from a $208.2
million increase in amounts receivable from brokers for sales of securities.
The Company manages most of its invested assets internally. The Company's
general investment philosophy is to hold fixed maturity assets for long-term
investment. Thus, it does not have a trading portfolio. Effective December 1,
1995, pursuant to guidelines issued by the Financial Accounting Standards Board,
the Company determined that all of its portfolio of bonds, notes and redeemable
preferred stocks (the "Bond Portfolio") is available to be sold in response to
changes in market interest rates, changes in prepayment risk, the Company's need
for liquidity and other similar factors. Accordingly, the Company no longer
classifies a portion of its Bond Portfolio as held for investment.
THE BOND PORTFOLIO had an aggregate amortized cost that exceeded its fair value
by $13.8 million at September 30, 1996, compared with $3.7 million at September
30, 1995 (including net unrealized losses of $10.8 million on the portion of the
portfolio that was designated as available for sale at
27
<PAGE>
[LOGO]
September 30, 1995). The increase in net unrealized losses on the Bond Portfolio
since September 30, 1995, principally reflects the higher prevailing interest
rates at September 30, 1996 and their corresponding effect on the fair value of
the Bond Portfolio.
All of the Bond Portfolio ($1.99 billion at amortized cost, excluding $9.1
million of redeemable preferred stocks) at September 30, 1996 was rated by
Standard & Poor's Corporation ("S&P"), Moody's Investors Service ("Moody's"),
Duff and Phelps Credit Rating Co. ("DCR"), Fitch Investors Service, L.P.
("Fitch") or under comparable statutory rating guidelines established by the
National Association of Insurance Commissioners ("NAIC") and implemented by
either the NAIC or the Company. At September 30, 1996, approximately $1.83
billion of the Bond Portfolio (at amortized cost) was rated investment grade by
one or more of these agencies or by the Company or the NAIC, pursuant to
applicable NAIC guidelines, including $1.05 billion of U.S. government/agency
securities and MBSs.
At September 30, 1996, the Bond Portfolio included $160.8 million (fair value,
$160.2 million) of bonds not rated investment grade by S&P, Moody's, DCR, Fitch
or the NAIC. Based on their September 30, 1996 amortized cost, these non-
investment-grade bonds accounted for 1.8% of the Company's total assets and 6.9%
of its invested assets.
Non-investment-grade securities generally provide higher yields and involve
greater risks than investment-grade securities because their issuers typically
are more highly leveraged and more vulnerable to adverse economic conditions
than investment-grade issuers. In addition, the trading market for these
securities is usually more limited than for investment-grade securities. The
Company intends that the proportion of its portfolio in such securities not
exceed current levels, but its policies may change from time to time, including
in connection with any possible acquisition. The Company had no material
concentrations of non-investment-grade securities at September 30, 1996.
The table on the following page summarizes the Company's rated bonds by rating
classification as of September 30, 1996.
28
<PAGE>
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RATED BONDS BY RATING CLASSIFICATION
(Dollars in thousands)
<TABLE>
<CAPTION>
ISSUES NOT RATED BY S&P/ MOODY'S/
ISSUES RATED BY S&P/MOODY'S/DCR/FITCH DCR/FITCH, BY NAIC CATEGORY TOTAL
- ------------------------------------------------------- ----------------------------------- -------------------------------------
S&P/(MOODY'S)/ NAIC PERCENT OF
[DCR]/{FITCH} AMORTIZED ESTIMATED CATEGORY AMORTIZED ESTIMATED AMORTIZED INVESTED ESTIMATED
CATEGORY (1) COST FAIR VALUE (2) COST FAIR VALUE COST ASSETS (3) FAIR VALUE
- ------------------------------ ----------- ----------- --------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AAA+ to A-
(Aaa to A3)
[AAA to A-]
{AAA to A-}................. $ 1,345,960 $ 1,333,515 1 $ 125,115 $ 125,046 $ 1,471,075 62.81% $ 1,458,561
BBB+ to BBB-
(Baal to Baa3)
[BBB+ to BBB-]
{BBB+ to BBB-}.............. 226,312 226,191 2 133,773 133,698 360,085 15.38 359,889
BB+ to BB-
(Ba1 to Ba3)
[BB+ to BB-]
{BB+ to BB-}................ 30,023 30,368 3 5,597 5,597 35,620 1.52 35,965
B+ to B-
(B1 to B3)
[B+ to B-]
{B+ to B-}.................. 87,580 90,468 4 17,136 18,089 104,716 4.47 108,557
CCC+ to C
(Caa to C)
[CCC]
{CCC+ to C-}................ 19,847 15,018 5 -- -- 19,847 0.85 15,018
C1 to D
[DD]
{D}......................... -- -- 6 618 618 618 0.03 618
----------- ----------- ----------- ----------- ----------- -----------
Total rated issues $ 1,709,722 $ 1,695,560 $ 282,239 $ 283,048 $ 1,991,961 $ 1,978,608
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
- ------------------------------
(1) S&P and Fitch rate debt securities in rating categories ranging from AAA
(the highest) to D (in payment default). A plus (+) or minus (-) indicates
the debt's relative standing within the rating category. A security rated
BBB- or higher is considered investment grade. Moody's rates debt securities
in rating categories ranging from Aaa (the highest) to C (extremely poor
prospects of ever attaining any real investment standing). The number 1, 2
or 3 (with 1 the highest and 3 the lowest) indicates the debt's relative
standing within the rating category. A security rated Baa3 or higher is
considered investment grade. DCR rates debt securities in rating categories
ranging from AAA (the highest) to DD (in payment default). A plus (+) or
minus (-) indicates the debt's relative standing within the rating category.
A security rated BBB- or higher is considered investment grade. Issues are
categorized based on the highest of the S&P, Moody's, DCR and Fitch ratings
if rated by multiple agencies.
(2) Bonds and short-term promissory instruments are divided into six quality
categories for NAIC rating purposes, ranging from 1 (highest) to 5 (lowest)
for nondefaulted bonds plus one category, 6, for bonds in or near default.
These six categories correspond with the S&P/Moody's/DCR/Fitch rating groups
listed above, with categories 1 and 2 considered investment grade. A
substantial portion of the assets in the NAIC categories were rated by the
Company pursuant to applicable of NAIC rating guidelines.
(3) At amortized cost.
29
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SENIOR SECURED LOANS ("Secured Loans") are included in the Bond Portfolio and
their amortized cost aggregated $200.8 million at September 30, 1996. Secured
Loans are senior to subordinated debt and equity, and are secured by assets of
the issuer. At September 30, 1996, Secured Loans consisted of loans to 52
borrowers spanning 20 industries, with 22% of these assets (at amortized cost)
concentrated in the leisure industry. No other industry concentration
constituted more than 9% of these assets.
While the trading market for Secured Loans is more limited than for publicly
traded corporate debt issues, management believes that participation in these
transactions has enabled the Company to improve its investment yield. Although,
as a result of restrictive financial covenants, Secured Loans involve greater
risk of technical default than do publicly traded investment-grade securities,
management believes that the risk of loss upon default for its Secured Loans is
mitigated by their financial covenants and senior secured positions. The
Company's Secured Loans are rated by S&P, Moody's, DCR, Fitch or by the Company
or the NAIC, pursuant to comparable statutory rating guidelines established by
the NAIC.
MORTGAGE LOANS aggregated $98.3 million at September 30, 1996 and consisted of
17 first mortgage loans with an average loan balance of approximately $5.8
million, collateralized by properties located in 11 states. At September 30,
1996, the Company had no concentrations in any single state or in any single
type of property that amounted to more than 23% of the mortgage loan portfolio.
At September 30, 1996, there were four loans with outstanding balances of $10
million or more, the largest of which had a balance of approximately $21
million, which collectively aggregated approximately 61% of the portfolio. At
September 30, 1996, approximately 33% of the mortgage loan portfolio consisted
of loans with balloon payments due before October 1, 1999. At September 30,
1996, loans delinquent by more than 90 days totaled $1.5 million (1.6% of total
mortgages). There were no loans foreclosed upon and transferred to real estate
in the balance sheet during 1996. At September 30, 1996, mortgage loans having
an aggregate carrying value of $21.3 million had been previously restructured.
Of this amount, $16.5 million was restructured during 1995 and $4.8 million was
restructured during 1992. No mortgage loans were restructured during 1996.
Approximately 62% of the mortgage loans in the portfolio at September 30, 1996
were seasoned loans underwritten to the Company's standards and purchased at or
near par from another financial institution which was downsizing its portfolio.
Such loans generally have higher average interest rates than loans that could be
originated today. The balance of the mortgage loan portfolio has been originated
by the Company under strict underwriting standards. Commercial mortgage loans on
properties such as offices, hotels and shopping centers generally represent a
higher level of risk than do mortgage loans secured by multifamily residences.
This greater risk is due to several factors, including the larger size of such
loans and the effects of general economic conditions on these commercial
properties. However, due to the seasoned nature of the Company's mortgage loans
and its strict underwriting standards, the Company believes that it has reduced
the risk attributable to its mortgage loan portfolio while maintaining
attractive yields.
REAL ESTATE aggregated $39.7 million at September 30, 1996 and consisted of
non-income producing land in the Phoenix, Arizona metropolitan area. Of this
amount, the Company has undertaken to dispose of $28.4 million during the next
year, either to affiliated or nonaffiliated parties, and SunAmerica the ultimate
parent, has guaranteed that the Company will receive its statutory carrying
value of these assets. (This guaranty was terminated on December 31, 1996-See
"Results of Operations for the First Three Months of Fiscal 1997").
OTHER INVESTED ASSETS aggregated $77.9 million at September 30, 1996, including
$45.1 million of investments in limited partnerships and an aggregate of $32.8
million of miscellaneous investments, including policy loans, residuals,
separate account investments, and leveraged leases. The Company's limited
partnership interests, accounted for by using the cost method of accounting,
invest mainly in equity securities.
ASSET-LIABILITY MATCHING is utilized by the Company to minimize the risks of
interest rate fluctuations and disintermediation. The Company believes that its
fixed-rate liabilities should be backed by a portfolio principally composed of
fixed maturities that generate predictable rates of return. The Company does not
have a specific target rate of return. Instead, its rates of return vary over
time depending on the current interest rate environment, the slope of the yield
curve, the spread at which fixed maturities are priced over the yield curve and
general competitive conditions within the industry.
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Its portfolio strategy is designed to achieve adequate risk-adjusted returns
consistent with its investment objectives of effective asset-liability matching,
liquidity and safety.
The Company designs its fixed-rate products and conducts its investment
operations in order to closely match the duration of the assets in its
investment portfolio to its annuity and GIC obligations. The Company seeks to
achieve a predictable spread between what it earns on its assets and what it
pays on its liabilities by investing principally in fixed-rate securities. The
Company's fixed-rate products incorporate surrender charges or other limitations
on when contracts can be surrendered for cash to encourage persistency.
Approximately 63% of the Company's fixed annuity and GIC reserves had surrender
penalties or other restrictions at September 30, 1996.
As part of its asset-liability matching discipline, the Company conducts
detailed computer simulations that model its fixed-maturity assets and
liabilities under commonly used stress-test interest rate scenarios. Based on
the results of these computer simulations, the investment portfolio has been
constructed with a view to maintaining a desired investment spread between the
yield on portfolio assets and the rate paid on its reserves under a variety of
possible future interest rate scenarios. At September 30, 1996 the weighted
average life of the Company's investments was approximately five years and the
duration was approximately three. Weighted average life is the average time to
receipt of all principal, incorporating the effects of scheduled amortization
and expected prepayments, weighted by book value. Duration is a common
option-adjusted measure for the price sensitivity of a fixed-income portfolio to
changes in interest rates. It measures the approximate percentage change in
market value of a portfolio if interest rates change by 100 basis points,
recognizing the changes in portfolio cashflows resulting from embedded options
such as prepayments and bond calls.
As a component of its investment strategy, the Company utilizes interest rate
swap agreements ("Swap Agreements") to match assets more closely to liabilities.
Swap Agreements are agreements to exchange with a counterparty interest rate
payments of differing character (for example, variable-rate payments exchanged
for fixed-rate payments) based on an underlying principal balance (notional
principal) to hedge against interest rate changes. The Company typically
utilizes Swap Agreements to create a hedge that effectively converts
floating-rate assets and liabilities into fixed-rate instruments.
The Company also seeks to provide liquidity from time to time by using reverse
repurchase agreements ("Reverse Repos"), Dollar Rolls and by investing in MBSs.
It also seeks to enhance its spread income by using Reverse Repos and Dollar
Rolls. Reverse Repos involve a sale of securities and an agreement to repurchase
the same securities at a later date at an agreed upon price and are generally
over-collateralized. Dollar Rolls are similar to Reverse Repos except that the
repurchase involves securities that are only substantially the same as the
securities sold and the arrangement is not collateralized, nor is it governed by
a repurchase agreement. MBSs are generally investment-grade securities
collateralized by large pools of mortgage loans. MBSs generally pay principal
and interest monthly. The amount of principal and interest payments may
fluctuate as a result of prepayments of the underlying mortgage loans.
There are risks associated with some of the techniques the Company uses to
provide liquidity, enhance its spread income and match its assets and
liabilities. The primary risk associated with the Company's Dollar Rolls,
Reverse Repos and Swap Agreements is counterparty risk. The Company believes,
however, that the counterparties to its Dollar Rolls, Reverse Repos and Swap
Agreements are financially responsible and that the counterparty risk associated
with those transactions is minimal. Counterparty risk associated with Dollar
Rolls is further mitigated by the Company's participation in an MBS trading
clearinghouse. The sell and buy transactions that are submitted to this
clearinghouse are marked to market on a daily basis and each participant is
required to over-collateralize its net loss position by 30% with either cash,
letters of credit or government securities. In addition to counterparty risk,
Swap Agreements also have interest rate risk. However, the Company's Swap
Agreements typically hedge variable-rate assets or liabilities, and interest
rate fluctuations that adversely affect the net cash received or paid under the
terms of a Swap Agreement would be offset by increased interest income earned on
the variable-rate assets or reduced interest expense paid on the variable-rate
liabilities. The primary risk associated with MBSs is that a changing interest
rate environment might cause prepayment of the underlying obligations at speeds
slower or faster than anticipated at the time of their purchase.
INVESTED ASSETS EVALUATION routinely includes a review by the Company of its
portfolio of debt securities. Management identifies monthly those investments
that require additional monitoring and carefully reviews the carrying value of
such investments at least quarterly to determine whether
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specific investments should be placed on a nonaccrual basis and to determine
declines in value that may be other than temporary. In making these reviews for
bonds, management principally considers the adequacy of collateral (if any),
compliance with contractual covenants, the borrower's recent financial
performance, news reports and other externally generated information concerning
the creditor's affairs. In the case of publicly traded bonds, management also
considers market value quotations, if available. For mortgage loans, management
generally considers information concerning the mortgaged property and, among
other things, factors impacting the current and expected payment status of the
loan and, if available, the current fair value of the underlying collateral.
The carrying values of bonds that are determined to have declines in value that
are other than temporary are reduced to net realizable value and no further
accruals of interest are made. The valuation allowances on mortgage loans are
based on losses expected by management to be realized on transfers of mortgage
loans to real estate, on the disposition and settlement of mortgage loans and on
mortgage loans that management believes may not be collectible in full. Accrual
of interest is suspended when principal and interest payments on mortgage loans
are past due more than 90 days.
DEFAULTED INVESTMENTS, comprising all investments that are in default as to the
payment of principal or interest, totaled $3.1 million at September 30, 1996 (at
amortized cost, with a fair value of $2.9 million) including $1.6 million of
bonds and notes and $1.5 million of mortgage loans. At September 30, 1996,
defaulted investments constituted 0.1% of total invested assets. At September
30, 1995, defaulted investments totaled $5.0 million which constituted 0.2% of
total invested assets.
SOURCES OF LIQUIDITY are readily available to the Company in the form of the
Company's existing portfolio of cash and short-term investments, Reverse Repo
capacity on invested assets and, if required, proceeds from invested asset
sales. At September 30, 1996, approximately $936.8 million of the Company's Bond
Portfolio had an aggregate unrealized gain of $20.1 million, while approximately
$1.06 billion of the Bond Portfolio had an aggregate unrealized loss of $33.9
million. In addition, the Company's investment portfolio currently provides
approximately $21.6 million of monthly cash flow from scheduled principal and
interest payments.
Management is aware that prevailing market interest rates may shift
significantly and has strategies in place to manage either an increase or
decrease in prevailing rates. In a rising interest rate environment, the
Company's average cost of funds would increase over time as it prices its new
and renewing annuities and GICs to maintain a generally competitive market rate.
Management would seek to place new funds in investments that were matched in
duration to, and higher yielding than, the liabilities assumed. The Company
believes that liquidity to fund withdrawals would be available through incoming
cash flow, the sale of short-term or floating-rate instruments or Reverse Repos
on the Company's substantial MBS segment of the Bond Portfolio, thereby avoiding
the sale of fixed-rate assets in an unfavorable bond market.
In a declining rate environment, the Company's cost of funds would decrease over
time, reflecting lower interest crediting rates on its fixed annuities and GICs.
Should increased liquidity be required for withdrawals, the Company believes
that a significant portion of its investments could be sold without adverse
consequences in light of the general strengthening that would be expected in the
bond market.
RESULTS OF OPERATIONS FOR THE FIRST THREE MONTHS OF FISCAL 1997
NET INCOME totaled $3.3 million for the three months ended December 31, 1996
("Fiscal 1997"), compared with $5.8 million for the three months ended December
31, 1995 ("Fiscal 1996").
PRETAX INCOME totaled $4.9 million in Fiscal 1997 and $9.3 million in Fiscal
1996. This $4.4 million decline primarily resulted from increased net realized
investment losses and general and administrative expenses, partially offset by
an increase in fee income.
NET INVESTMENT INCOME totaled $14.5 million in Fiscal 1997 and $14.6 million in
Fiscal 1996. These amounts represent 2.32% on average invested assets (computed
on a daily basis) of $2.50 billion in Fiscal 1997 and 3.00% on average invested
assets of $1.95 billion in Fiscal 1996.
The excess of average invested assets over average interest-bearing liabilities
amounted to $150.5 million in Fiscal 1997 and $131.2 million in Fiscal 1996. The
difference between the Company's yield on average invested assets and the rate
paid on average interest-bearing liabilities was 1.99% in Fiscal 1997 and 2.65%
in Fiscal 1996.
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Investment income and the related yields on average invested assets totaled
$46.7 million or 7.46% in Fiscal 1997, compared with $38.7 million or 7.95% in
Fiscal 1996.
Investment income rose during Fiscal 1997 as a result of higher levels of
average invested assets, partially offset by reduced investment yields.
Investment yields were lower in Fiscal 1997 because of a generally declining
interest rate environment since early 1995 and lower contributions from the
Company's investments in partnerships. Partnership income totaled $0.7 million
in Fiscal 1997 and $1.4 million in Fiscal 1996. This income represents a yield
of 6.71% on related average assets of $44.6 million in Fiscal 1997, compared
with 11.60% on related average assets of $48.7 million in Fiscal 1996.
Partnership income is based upon cash distributions received from limited
partnerships, the operations of which the Company does not significantly
influence. Consequently, such income is not predictable and there can be no
assurance that the Company will realize comparable levels of such income in the
future.
Total interest expense aggregated $32.2 million in Fiscal 1997 and $24.0 million
in Fiscal 1996. The average rate paid on all interest-bearing liabilities was
5.47% (5.34% on fixed annuity contracts and 5.81% on GICs) in Fiscal 1997,
compared with 5.30% (5.10% on fixed annuity contracts and 6.19% on GICs) in
Fiscal 1996. Interest-bearing liabilities averaged $2.35 billion during Fiscal
1997, compared with $1.81 billion during Fiscal 1996.
The increase in the average rates paid on fixed annuity contracts during Fiscal
1997 primarily resulted from the impact of certain promotional one-year interest
rates offered on the Company's Polaris variable annuity product. The decline in
interest paid on GICs reflects the generally declining interest rate environment
and its effect on the variable-rate GIC portfolio.
The growth in average invested assets since 1995 primarily reflects sales of the
Company's fixed-rate products, consisting of both fixed accounts of variable
annuity products and GICs. Since December 31, 1995, fixed annuity premiums have
aggregated $1.04 billion and GIC premiums have totaled $140.0 million. Fixed
annuity premiums totaled $362.8 million in Fiscal 1997, compared with $62.5
million in Fiscal 1996. This increase in premiums resulted primarily from
greater inflows into the one-year fixed account of the Company's Polaris
variable annuity product. The Company has observed that many purchasers of its
variable annuity contracts allocate new premiums to the one-year fixed account
and concurrently sign up for the option to dollar costs average into the
variable fund. Accordingly, the Company anticipates that it will see a large
portion of these premiums transferred into the separate accounts.
GIC premiums totaled $5.0 million in Fiscal 1997. There were no GIC premiums in
Fiscal 1996.
NET REALIZED INVESTMENT LOSSES totaled $19.1 million in Fiscal 1997 and $12.8
million in Fiscal 1996. Net realized investment losses include impairment
writedowns of $16.1 million in Fiscal 1997 and $14.9 million in Fiscal 1996.
Therefore, net losses from sales of investments totaled $3.0 million in Fiscal
1997, compared with net gains of $2.1 million in Fiscal 1996.
Impairment writedowns reflect $15.7 million and $14.9 million of provisions
applied to non-income producing land in Arizona in Fiscal 1997 and Fiscal 1996,
respectively. The statutory carrying value of this land had been guaranteed by
the Company's ultimate Parent, SunAmerica. SunAmerica made capital contributions
of $28.4 million and $27.4 million on December 31, 1996 and 1995, respectively,
to the Company through the Company's direct parent in exchange for the
termination of its guaranty with respect to this land. Accordingly, the Company
reduced the carrying value of this land to estimated fair value to reflect the
termination of the guaranty. SunAmerica's guaranty has been fully terminated.
Impairment writedowns, on an annualized basis, represent 2.51% and 3.06% of
average invested assets in Fiscal 1997 and 1996, respectively. Such writedowns
are based upon estimates of the net realizable value of the applicable assets.
Actual realization will be dependent upon future events.
VARIABLE ANNUITY FEES increased to $30.6 million in Fiscal 1997 from $24.3
million in Fiscal 1996. The increase in variable annuity fees in Fiscal 1997
reflects growth in average variable annuity assets, principally due to increased
market values and the receipt of variable annuity premiums, partially offset by
surrenders. Variable annuity assets averaged $6.60 billion during Fiscal 1997
and $5.29 billion during Fiscal 1996. Variable annuity premiums, which exclude
premiums allocated to the fixed accounts of variable annuity products, have
aggregated $937.1 million since December 31, 1995. Variable annuity premiums
increased to $226.8 million in Fiscal 1997 from $209.5 million in Fiscal 1996.
This increase may be
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attributed, in part, to a heightened demand for equity investments, principally
as a result of generally improved market performance.
NET RETAINED COMMISSIONS totaled $7.8 million in Fiscal 1997 and $6.5 million in
Fiscal 1996. Broker-dealer sales (mainly sales of general securities, mutual
funds and annuities) totaled $2.03 billion in Fiscal 1997 and $1.75 billion in
Fiscal 1996. The significant increases in sales and net retained commissions
during Fiscal 1997 reflect a greater number of registered representatives and
higher average production, combined with generally favorable market conditions.
ASSET MANAGEMENT FEES totaled $6.4 million on average assets managed of $2.21
billion in Fiscal 1997 and $6.5 million on average assets managed of $2.15
billion in Fiscal 1996. Asset management fees decreased slightly in Fiscal 1997,
despite a modest increase in average assets managed, principally due to changes
in product mix. Sales of mutual funds, excluding sales of money market accounts,
have aggregated $249.5 million since December 31, 1995. Mutual fund sales
totaled $62.3 million in Fiscal 1997 and $36.3 million in Fiscal 1996. Higher
mutual funds sales in Fiscal 1997 include $14.3 million of sales from the
Company's "Style Select Series," a product introduced in November 1996. Sales in
Fiscal 1997 also reflect the combined effects of additional advertising,
increased distribution, the favorable performance records of certain of the
Company's mutual funds, and heightened demand for equity investments,
principally as a result of improved market performance. Redemptions of mutual
funds, excluding redemptions of money market accounts, amounted to $103.7
million in Fiscal 1997 and $97.6 million in Fiscal 1996.
SURRENDER CHARGES on fixed and variable annuities totaled $1.4 million in Fiscal
1997 and $1.3 million in Fiscal 1996. Withdrawal payments, which include
surrenders and lump-sum annuity benefits, totaled $238.1 million in Fiscal 1997
and $215.1 million in Fiscal 1996. These payments represent 11.4% and 12.9%,
respectively, of the aggregate of average fixed and variable annuity reserves.
Withdrawals include variable annuity payments from the separate accounts
totaling $176.0 million in Fiscal 1997 and $154.5 million in Fiscal 1996.
Approximately 67% of the Company's fixed annuity and GIC reserves had surrender
penalties or other restrictions at December 31, 1996. Although variable annuity
surrenders have increased, principally as a result of growth in the variable
annuity separate accounts, variable annuity withdrawal rates have declined.
Variable annuity surrenders represent 10.7% and 11.8%, respectively, of average
variable annuity liabilities in Fiscal 1997 and Fiscal 1996. Fixed annuity
surrenders have increased slightly to $62.1 million in Fiscal 1997 from $60.6
million in Fiscal 1996 as the fixed annuity reserves have grown. Management
anticipates that withdrawal rates will remain relatively stable for the
foreseeable future.
GENERAL AND ADMINISTRATIVE EXPENSES totaled $22.3 million in Fiscal 1997,
compared with $17.0 million in Fiscal 1996. Expenses in Fiscal 1997 increased
primarily due to a growing block of business. Expenses remain closely controlled
through a company-wide cost containment program and continue to represent
approximately 1% of average total assets on an annualized basis.
AMORTIZATION OF DEFERRED ACQUISITION COSTS totaled $13.8 million in Fiscal 1997
and $13.7 million in Fiscal 1996 and represent for each period, on an annualized
basis, approximately 14% of the balance of deferred acquisition costs at the
beginning of each period. The slight increase in Fiscal 1997 was primarily due
to additional fixed and variable annuity and mutual fund sales and the
subsequent amortization of related deferred commissions and other acquisition
costs.
ANNUAL COMMISSIONS totaled $1.4 million in Fiscal 1997 and $0.9 million in
Fiscal 1996. The increase in annual commissions reflects increased sales of
annuities that offer this commission option. The Company estimates that
approximately 43% of the average balances of its variable annuity products are
currently subject to such annual commissions. Based on current sales, this
percentage is expected to increase in future periods.
INCOME TAX EXPENSE totaled $1.6 million in Fiscal 1997 and $3.4 million in
Fiscal 1996, representing effective tax rates of 32% and 37%, respectively. The
lower rate in Fiscal 1997 is primarily due to the impact of state taxes in the
prior year.
FINANCIAL CONDITION AND LIQUIDITY AT DECEMBER 31, 1996
SHAREHOLDER'S EQUITY increased by $44.9 million to $530.1 million at December
31, 1996 from $485.3 million at September 30, 1996, primarily as a result of a
$28.4 million capital contribution and $3.3 million of net income recorded in
Fiscal 1997. Shareholder's equity at December 31, 1996 was also favorably
impacted by the recording of a $7.6 million net
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unrealized gain on debt and equity securities available for sale, a $13.1
million improvement over the $5.5 million net unrealized loss recorded at
September 30, 1996.
TOTAL ASSETS increased by $821.2 million to $10.03 billion at December 31, 1996
from $9.20 billion at September 30, 1996, principally due to a $472.8 million
increase in the separate accounts for variable annuities and a $374.5 million
increase in invested assets.
INVESTED ASSETS at December 31, 1996 totaled $2.70 billion, compared with $2.33
billion at September 30, 1996. This $374.5 million increase primarily resulted
from the sales of fixed annuities and a net increase in the amount payable to
brokers for purchases of securities.
THE BOND PORTFOLIO had an aggregate fair value that exceeded its amortized cost
by $17.0 million at December 31, 1996. At September 30, 1996, the amortized cost
of the Bond Portfolio exceeded its fair value by $13.8 million. The net
unrealized gain on the Bond Portfolio since September 30, 1996 principally
reflects the lower relative prevailing interest rates at December 31, 1996 and
their corresponding effect on the fair value of the Bond Portfolio.
All of the Bond Portfolio ($2.26 billion at amortized cost, excluding $6.5
million of redeemable preferred stocks), at December 31, 1996 was rated by S&P,
Moody's, DCR, Fitch or under comparable statutory rating guidelines established
by the NAIC and implemented by either the NAIC or the Company. At December 31,
1996, approximately $2.06 billion of the Bond Portfolio (at amortized cost) was
rated investment grade by one or more of these agencies or by the Company or the
NAIC, pursuant to applicable NAIC guidelines, including $1.13 billion of U.S.
government/agency securities and MBSs.
At December 31, 1996, the Bond Portfolio included $198.9 million (fair value,
$202.8 million) of bonds not rated investment grade by S&P, Moody's, DCR, Fitch
or the NAIC. Based on their December 31, 1996 amortized cost, these non-
investment-grade bonds accounted for 2.0% of the Company's total assets and 7.4%
of invested assets. The Company had no material concentrations of
non-investment-grade securities at December 31, 1996.
SENIOR SECURED LOANS are included in the Bond Portfolio and their amortized cost
aggregated $201.4 million at December 31, 1996. At December 31, 1996, Secured
Loans consisted of loans to 65 borrowers spanning 22 industries, with 12.7% of
these assets (at amortized cost) concentrated in the air transport industry. No
other industry concentration constituted more than 11.7% of these assets.
MORTGAGE LOANS aggregated $120.7 million at December 31, 1996 and consisted of
22 first mortgage loans with an average loan balance of approximately $5.5
million, collateralized by properties located in 13 states. At December 31,
1996, the Company had no concentrations in any single state or in any single
type of property that amounted to more than 24% of the mortgage loan portfolio.
At December 31, 1996, there were four loans with outstanding balances of $10
million or more, the largest of which had a balance of approximately $20.5
million, which collectively aggregated approximately 49% of the portfolio. At
December 31, 1996, approximately 26% of the mortgage loan portfolio consisted of
loans with balloon payments due before January 1, 2000. During Fiscal 1997 and
Fiscal 1996, loans delinquent by more than 90 days, foreclosed loans and
restructured loans have not been significant in relation to the portfolio.
Approximately 49% of the mortgage loans in the portfolio at December 31, 1996
were seasoned loans underwritten to the Company's standards and purchased at or
near par from another financial institution which was downsizing its portfolio.
OTHER INVESTED ASSETS aggregated $77.5 million at December 31, 1996, including
$45.6 million of investments in limited partnerships and an aggregate of $31.9
million of miscellaneous investments, including policy loans, residuals,
separate account investments and leveraged leases. The
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Company's limited partnership interests, accounted for by using the cost method
of accounting, invest mainly in equity securities.
DEFAULTED INVESTMENTS, comprising all investments that are in default as to the
payment of principal or interest, totaled $6.5 million at December 31, 1996 (at
amortized cost, with a fair value of $5.4 million) including $5.0 million of
bonds and notes and $1.5 million of mortgage loans. At December 31, 1996
defaulted investments constituted 0.2% of total invested assets. At September
30, 1996, defaulted investments totaled $3.1 million, which constituted 0.1% of
total invested assets.
SOURCES OF LIQUIDITY are readily available to the Company in the form of the
Company's existing portfolio of cash and short-term investments, Reverse Repo
capacity on invested assets and, if required, proceeds from invested asset
sales. At December 31, 1996, approximately $1.22 billion of the Company's Bond
Portfolio had an aggregate unrealized gain of $38.4 million, while approximately
$1.04 billion of the Bond Portfolio had an aggregate unrealized loss of $21.4
million. In addition, the Company's investment portfolio currently provides
approximately $22.6 million of monthly cash flow from scheduled principal and
interest payments.
INDEPENDENT ACCOUNTANTS
The consolidated financial statements of Anchor National Life Insurance Company
as of September 30, 1996 and 1995 and for each of the three years in the period
ended September 30, 1996 included in this prospectus have been so included in
reliance on the report of Price Waterhouse LLP, independent accountants, given
on the authority of said firm as experts in auditing and accounting.
FINANCIAL STATEMENTS
The consolidated financial statements of Anchor National have been included in
this prospectus. You should consider these financial statements only with
respect to Anchor National's ability to meet its obligations under the fixed
investment options to pay death benefits under the contracts, to assume the
mortality and expense risks under the Contract and any risk resulting from the
withdrawal charge not being adequate to cover the costs of distributing the
contracts. These financial statements provide no information as it relates to
Seasons Series Trust, its investment portfolios or the value of any money
allocated to the STRATEGIES.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholder of
Anchor National Life Insurance Company
In our opinion, the accompanying consolidated balance sheet and the related
consolidated income statement and statement of cash flows present fairly, in all
material respects, the financial position of Anchor National Life Insurance
Company and its subsidiaries at September 30, 1996 and 1995, and the results of
their operations and their cash flows for each of the three years in the period
ended September 30, 1996, in conformity with generally accepted accounting
principles. 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 of these statements in
accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
As discussed in Note 2, the Company adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," in fiscal 1994.
Price Waterhouse LLP
Los Angeles, California
November 8, 1996
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ANCHOR NATIONAL LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1995 1996
--------------- --------------- DECEMBER 31,
1996
---------------
(UNAUDITED)
<S> <C> <C> <C>
Investments:
Cash and short-term investments........................... $ 249,209,000 $ 122,058,000 $ 196,142,000
Bonds, notes and redeemable preferred stocks:
Available for sale, at fair value (amortized cost:
September 1995, $1,500,062,000; September 1996,
$2,001,024,000; December 1996, $2,264,485,000)......... 1,489,213,000 1,987,271,000 2,281,527,000
Held for investment, at amortized cost (fair value:
September 1995, $165,004,000).......................... 157,901,000 -- --
Mortgage loans............................................ 94,260,000 98,284,000 120,680,000
Common stocks, at fair value (cost: September 1995,
$6,576,000; September 1996, $2,911,000; December 1996,
$2,510,000).............................................. 4,097,000 3,970,000 3,842,000
Real estate............................................... 55,798,000 39,724,000 24,000,000
Other invested assets..................................... 64,430,000 77,925,000 77,492,000
--------------- --------------- ---------------
Total investments..................................... 2,114,908,000 2,329,232,000 2,703,683,000
Variable annuity assets..................................... 5,230,246,000 6,311,557,000 6,784,374,000
Receivable from brokers for sales of securities............. -- 52,348,000 --
Accrued investment income................................... 14,192,000 19,675,000 20,404,000
Deferred acquisition costs.................................. 383,069,000 443,610,000 461,637,000
Other assets................................................ 41,282,000 48,113,000 55,610,000
--------------- --------------- ---------------
TOTAL ASSETS.......................................... $ 7,783,697,000 $ 9,204,535,000 $10,025,708,000
--------------- --------------- ---------------
--------------- --------------- ---------------
LIABILITIES AND SHAREHOLDER'S EQUITY
Reserves, payables and accrued liabilities:
Reserves for fixed annuity contracts...................... $ 1,497,052,000 $ 1,789,962,000 $ 2,024,873,000
Reserves for guaranteed investment contracts.............. 277,095,000 415,544,000 420,871,000
Payable to brokers for purchases of securities............ 155,861,000 -- 49,991,000
Income taxes currently payable............................ 15,720,000 21,486,000 23,807,000
Other liabilities......................................... 56,372,000 74,710,000 83,824,000
--------------- --------------- ---------------
Total reserves, payables and accrued liabilities...... 2,002,100,000 2,301,702,000 2,603,366,000
--------------- --------------- ---------------
Variable annuity liabilities................................ 5,230,246,000 6,311,557,000 6,784,374,000
--------------- --------------- ---------------
Subordinated notes payable to Parent........................ 35,832,000 35,832,000 35,903,000
--------------- --------------- ---------------
Deferred income taxes....................................... 73,459,000 70,189,000 71,943,000
--------------- --------------- ---------------
Shareholder's equity:
Common Stock.............................................. 3,511,000 3,511,000 3,511,000
Additional paid-in capital................................ 252,876,000 280,263,000 308,674,000
Retained earnings......................................... 191,346,000 207,002,000 210,348,000
Net unrealized gains (losses) on debt and equity
securities available for sale............................ (5,673,000) (5,521,000) 7,589,000
--------------- --------------- ---------------
Total shareholder's equity............................ 442,060,000 485,255,000 530,122,000
--------------- --------------- ---------------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY............ $ 7,783,697,000 $ 9,204,535,000 $10,025,708,000
--------------- --------------- ---------------
--------------- --------------- ---------------
</TABLE>
See accompanying notes
37
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
CONSOLIDATED INCOME STATEMENT
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED SEPTEMBER 30, DECEMBER 31,
------------------------------------------ ---------------------------
1994 1995 1996 1995 1996
------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Investment income................................. $127,758,000 $129,466,000 $164,631,000 $ 38,653,000 $ 46,712,000
------------ ------------ ------------ ------------ ------------
Interest expense on:
Fixed annuity contracts......................... (66,311,000) (72,975,000) (82,690,000) (18,936,000) (25,191,000)
Guaranteed investment contracts................. -- (3,733,000) (19,974,000) (4,272,000) (6,038,000)
Senior indebtedness............................. (71,000) (227,000) (2,568,000) (195,000) (181,000)
Subordinated notes payable to Parent............ (2,380,000) (2,448,000) (2,556,000) (633,000) (758,000)
------------ ------------ ------------ ------------ ------------
Total interest expense.......................... (68,762,000) (79,383,000) (107,788,000) (24,036,000) (32,168,000)
------------ ------------ ------------ ------------ ------------
NET INVESTMENT INCOME............................. 58,996,000 50,083,000 56,843,000 14,617,000 14,544,000
------------ ------------ ------------ ------------ ------------
NET REALIZED INVESTMENT LOSSES.................... (33,713,000) (4,363,000) (13,355,000) (12,800,000) (19,116,000)
------------ ------------ ------------ ------------ ------------
Fee income:
Variable annuity fees........................... 79,101,000 84,171,000 103,970,000 24,290,000 30,606,000
Net retained commissions........................ 20,822,000 24,108,000 31,548,000 6,491,000 7,796,000
Asset management fees........................... 31,302,000 26,935,000 25,413,000 6,503,000 6,418,000
------------ ------------ ------------ ------------ ------------
TOTAL FEE INCOME.................................. 131,225,000 135,214,000 160,931,000 37,284,000 44,820,000
------------ ------------ ------------ ------------ ------------
Other income and expenses:
Surrender charges............................... 5,034,000 5,889,000 5,184,000 1,261,000 1,350,000
General and administrative expenses............. (52,636,000) (61,629,000) (80,048,000) (16,997,000) (22,322,000)
Amortization of deferred acquisition costs...... (44,195,000) (58,713,000) (57,520,000) (13,658,000) (13,817,000)
Annual commissions.............................. (1,158,000) (2,658,000) (4,613,000) (939,000) (1,433,000)
Other, net...................................... 3,767,000 1,174,000 1,886,000 507,000 920,000
------------ ------------ ------------ ------------ ------------
TOTAL OTHER INCOME AND EXPENSES................... (89,188,000) (115,937,000) (135,111,000) (29,826,000) (35,302,000)
------------ ------------ ------------ ------------ ------------
PRETAX INCOME..................................... 67,320,000 64,997,000 69,308,000 9,275,000 4,946,000
Income tax expense................................ (22,705,000) (25,739,000) (24,252,000) (3,449,000) (1,600,000)
------------ ------------ ------------ ------------ ------------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING FOR INCOME TAXES...................... 44,615,000 39,258,000 45,056,000 5,826,000 3,346,000
Cumulative effect of change in accounting for
income taxes..................................... (20,463,000) -- -- -- --
------------ ------------ ------------ ------------ ------------
NET INCOME........................................ $ 24,152,000 $ 39,258,000 $ 45,056,000 $ 5,826,000 $ 3,346,000
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
</TABLE>
See accompanying notes
38
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
------------------------------------------------------
1994 1995 1996
---------------- ---------------- ----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................ $ 24,152,000 $ 39,258,000 $ 45,056,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Interest credited to:
Fixed annuity contracts........................... 66,311,000 72,975,000 82,690,000
Guaranteed investment contracts................... -- 3,733,000 19,974,000
Net realized investment losses.................... 33,713,000 4,363,000 13,355,000
Accretion of net discounts on investments......... (2,050,000) (6,865,000) (8,976,000)
Amortization of goodwill.......................... 1,169,000 1,168,000 1,169,000
Provision for deferred income taxes............... 19,395,000 (1,489,000) (3,351,000)
Cumulative effect of change in accounting for
income taxes..................................... 20,463,000 -- --
Change in:
Accrued investment income........................... (1,310,000) 3,373,000 (5,483,000)
Deferred acquisition costs.......................... (34,612,000) (7,180,000) (60,941,000)
Other assets........................................ 5,133,000 7,047,000 (8,000,000)
Income taxes currently payable...................... 6,559,000 3,389,000 5,766,000
Other liabilities................................... 46,000 4,063,000 5,474,000
Other, net............................................ 360,000 7,000 (129,000)
---------------- ---------------- ----------------
NET CASH PROVIDED BY OPERATING ACTIVITIES:............ 139,329,000 123,842,000 86,604,000
---------------- ---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Premium receipts on:
Fixed annuity contracts........................... 138,526,000 245,320,000 651,649,000
Guaranteed investment contracts................... -- 275,000,000 134,967,000
Net exchanges to (from) the fixed accounts of
variable annuity contracts......................... (29,286,000) 10,475,000 (236,705,000)
Withdrawal payments on:
Fixed annuity contracts........................... (269,412,000) (237,977,000) (173,489,000)
Guaranteed investment contracts................... -- (1,638,000) (16,492,000)
Claims and annuity payments on fixed annuity
contracts.......................................... (31,146,000) (31,237,000) (31,107,000)
Net receipts from (repayments of) other short-term
financings......................................... (166,685,000) 3,202,000 (119,712,000)
Capital contributions received...................... -- -- 27,387,000
Dividend paid....................................... -- -- (29,400,000)
---------------- ---------------- ----------------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES...... (358,003,000) 263,145,000 207,098,000
---------------- ---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of:
Bonds, notes and redeemable preferred stocks...... (1,197,743,000) (1,556,586,000) (1,937,890,000)
Mortgage loans.................................... (10,666,000) -- (15,000,000)
Other investments, excluding short-term
investments...................................... (26,317,000) (13,028,000) (36,770,000)
Sales of:
Bonds, notes and reedeemable preferred stocks..... 877,068,000 1,026,078,000 1,241,928,000
Real estate....................................... 33,443,000 36,813,000 900,000
Other investments, excluding short-term
investments...................................... 2,353,000 5,130,000 4,937,000
Redemptions and maturities of:
Bonds, notes and redeemable preferred stocks...... 173,763,000 178,688,000 288,969,000
Mortgage loans.................................... 10,087,000 14,403,000 11,324,000
Other investments, excluding short-term
investments...................................... 13,500,000 13,286,000 20,749,000
---------------- ---------------- ----------------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES...... (124,512,000) (295,216,000) (420,853,000)
---------------- ---------------- ----------------
NET INCREASE (DECREASE) IN CASH AND SHORT-TERM
INVESTMENTS.......................................... (343,186,000) 91,771,000 (127,151,000)
CASH AND SHORT-TERM INVESTMENTS AT BEGINNING OF
PERIOD............................................... 500,624,000 157,438,000 249,209,000
---------------- ---------------- ----------------
CASH AND SHORT-TERM INVESTMENTS AT END OF PERIOD...... $ 157,438,000 $ 249,209,000 $ 122,058,000
---------------- ---------------- ----------------
---------------- ---------------- ----------------
Supplemental cash flow information:
Interest paid on indebtedness....................... $ 1,175,000 $ 3,235,000 $ 5,982,000
---------------- ---------------- ----------------
---------------- ---------------- ----------------
Net income taxes paid (recovered)................... $ (3,328,000) $ 23,656,000 $ 22,031,000
---------------- ---------------- ----------------
---------------- ---------------- ----------------
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
-----------------------------------
1995 1996
---------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................ $ 5,826,000 $ 3,346,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Interest credited to:
Fixed annuity contracts........................... 18,936,000 25,191,000
Guaranteed investment contracts................... 4,272,000 6,038,000
Net realized investment losses.................... 12,800,000 19,116,000
Accretion of net discounts on investments......... (1,669,000) (2,615,000)
Amortization of goodwill.......................... 293,000 291,000
Provision for deferred income taxes............... (6,541,000) (5,305,000)
Cumulative effect of change in accounting for
income taxes..................................... -- --
Change in:
Accrued investment income........................... (3,683,000) (729,000)
Deferred acquisition costs.......................... (5,853,000) (28,927,000)
Other assets........................................ (6,902,000) (7,788,000)
Income taxes currently payable...................... 5,749,000 2,321,000
Other liabilities................................... 428,000 3,924,000
Other, net............................................ 85,000 (6,000)
---------------- ----------------
NET CASH PROVIDED BY OPERATING ACTIVITIES:............ 23,741,000 14,857,000
---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Premium receipts on:
Fixed annuity contracts........................... 62,536,000 325,993,000
Guaranteed investment contracts................... -- 5,000,000
Net exchanges to (from) the fixed accounts of
variable annuity contracts......................... (36,865,000) (82,234,000)
Withdrawal payments on:
Fixed annuity contracts........................... (60,577,000) (25,292,000)
Guaranteed investment contracts................... (4,200,000) (5,711,000)
Claims and annuity payments on fixed annuity
contracts.......................................... (7,202,000) (8,741,000)
Net receipts from (repayments of) other short-term
financings......................................... (131,379,000) 10,308,000
Capital contributions received...................... 27,387,000 28,411,000
Dividend paid....................................... -- --
---------------- ----------------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES...... (150,300,000) 247,734,000
---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of:
Bonds, notes and redeemable preferred stocks...... (230,071,000) (1,068,608,000)
Mortgage loans.................................... -- (25,124,000)
Other investments, excluding short-term
investments...................................... (2,698,000) (3,108,000)
Sales of:
Bonds, notes and reedeemable preferred stocks..... 186,979,000 833,249,000
Real estate....................................... -- --
Other investments, excluding short-term
investments...................................... 1,397,000 856,000
Redemptions and maturities of:
Bonds, notes and redeemable preferred stocks...... 44,943,000 67,201,000
Mortgage loans.................................... 1,428,000 2,806,000
Other investments, excluding short-term
investments...................................... 2,658,000 4,221,000
---------------- ----------------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES...... 4,636,000 (188,507,000)
---------------- ----------------
NET INCREASE (DECREASE) IN CASH AND SHORT-TERM
INVESTMENTS.......................................... (121,923,000) 74,084,000
CASH AND SHORT-TERM INVESTMENTS AT BEGINNING OF
PERIOD............................................... 249,209,000 122,058,000
---------------- ----------------
CASH AND SHORT-TERM INVESTMENTS AT END OF PERIOD...... $ 127,286,000 $ 196,142,000
---------------- ----------------
---------------- ----------------
Supplemental cash flow information:
Interest paid on indebtedness....................... $ 661,000 $ 288,000
---------------- ----------------
---------------- ----------------
Net income taxes paid (recovered)................... $ 4,247,000 $ 4,584,000
---------------- ----------------
---------------- ----------------
</TABLE>
See accompanying notes
39
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS
Anchor National Life Insurance Company (the "Company") is a wholly owned
indirect subsidiary of SunAmerica, Inc. (the "Parent"). The Company is an
Arizona-domiciled life insurance company and, on a consolidated basis, conducts
its business through three segments: annuity operations, asset management
operations and broker-dealer operations. Annuity operations include the sale and
administration of fixed and variable annuities and guaranteed investment
contracts. Asset management operations, which include the sale and management of
mutual funds, is conducted by SunAmerica Asset Management Corp. Broker-dealer
operations include the sale of securities and financial services products, and
is conducted by Royal Alliance Associates, Inc.
The operations of the Company are influenced by many factors, including general
economic conditions, monetary and fiscal policies of the federal government, and
policies of state and other regulatory authorities. The level of sales of the
Company's financial products is influenced by many factors, including general
market rates of interest; strength, weakness and volatility of equity markets;
and terms and conditions of competing financial products. The Company is exposed
to the typical risks normally associated with a portfolio of fixed-income
securities, namely interest rate, option, liquidity and credit risks. The
Company controls its exposure to these risks by, among other things, closely
monitoring and matching the duration of its assets and liabilities, monitoring
and limiting prepayment and extension risk in its portfolio, maintaining a large
percentage of its portfolio in highly liquid securities, and engaging in a
disciplined process of underwriting, reviewing and monitoring credit risk. The
Company also is exposed to market risk, as market volatility may result in
reduced fee income in the case of assets managed in mutual funds and held in
separate accounts.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION: The accompanying consolidated financial statements have
been prepared in accordance with generally accepted accounting principles and
include the accounts of the Company and all of its wholly owned subsidiaries.
All significant intercompany accounts and transactions are eliminated in
consolidation. Certain 1995 and 1994 amounts have been reclassified to conform
with the 1996 presentation.
The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of estimates and assumptions that affect
the amounts reported in the financial statements and the accompanying notes.
Actual results could differ from those estimates.
RECENTLY ISSUED ACCOUNTING STANDARDS: Effective October 1, 1993, the Company
adopted the provisions of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes." Accordingly, the cumulative effect of this change
in accounting for income taxes was recorded on October 1, 1993 to increase the
liability for Deferred Income Taxes by $20,463,000.
INVESTMENTS: Cash and short-term investments primarily include cash, commercial
paper, money market investments, repurchase agreements and short-term bank
participations. All such investments are carried at cost plus accrued interest,
which approximates fair value, have maturities of three months or less and are
considered cash equivalents for purposes of reporting cash flows.
Bonds, notes and redeemable preferred stocks available for sale and common
stocks are carried at aggregate fair value and changes in unrealized gains or
losses, net of tax, are credited or charged directly to shareholder's equity.
Bonds, notes and redeemable preferred stocks held for investment (the "Held for
Investment Portfolio") are carried at amortized cost. On December 1, 1995, the
Company reassessed the appropriateness of classifying a portion of its portfolio
of bonds, notes and redeemable preferred stocks as held for investment. This
reassessment was made pursuant to the provisions of "Special Report: A Guide to
Implementation of Statement 115 on Accounting for Certain Investments in Debt
and Equity Securities," issued by the Financial Accounting Standards Board in
November 1995. As a result of its reassessment, the Company reclassified all of
its Held for Investment Portfolio as available for sale. At December 1, 1995,
the amortized cost of the Held for Investment Portfolio aggregated $157,830,000
and its fair value was $166,215,000. Upon reclassification, the resulting net
unrealized gain of $8,385,000 was credited to Net Unrealized Losses on Debt and
Equity Securities Available for Sale in the shareholder's equity section of the
balance sheet.
40
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Bonds, notes and redeemable preferred stocks are reduced to estimated net
realizable value when necessary for declines in value considered to be other
than temporary. Estimates of net realizable value are subjective and actual
realization will be dependent upon future events.
Mortgage loans are carried at amortized unpaid balances, net of provisions for
estimated losses. Real estate is carried at the lower of cost or fair value.
Other invested assets include investments in limited partnerships, which are
accounted for by using the cost method of accounting; separate account
investments; leveraged leases; policy loans, which are carried at unpaid
balances; and collateralized mortgage obligation residuals.
Realized gains and losses on the sale of investments are recognized in
operations at the date of sale and are determined using the specific cost
identification method. Premiums and discounts on investments are amortized to
investment income using the interest method over the contractual lives of the
investments.
DEFERRED ACQUISITION COSTS: Policy acquisition costs are deferred and
amortized, with interest, over the estimated lives of the contracts in relation
to the present value of estimated gross profits, which are composed of net
interest income, net realized investment gains and losses, variable annuity
fees, surrender charges and direct administrative expenses. Costs incurred to
sell mutual funds are also deferred and amortized over the estimated lives of
the funds obtained. Deferred acquisition costs consist of commissions and other
costs that vary with, and are primarily related to, the production or
acquisition of new business.
As debt and equity securities available for sale are carried at aggregate fair
value, an adjustment is made to deferred acquisition costs equal to the change
in amortization that would have been recorded if such securities had been sold
at their stated aggregate fair value and the proceeds reinvested at current
yields. The change in this adjustment, net of tax, is included with the change
in net unrealized gains or losses on debt and equity securities available for
sale that is credited or charged directly to shareholder's equity. Deferred
Acquisition Costs have been increased by $4,200,000 at September 30, 1996, and
by $4,600,000 at September 30, 1995 for this adjustment.
VARIABLE ANNUITY ASSETS AND LIABILITIES: The assets and liabilities resulting
from the receipt of variable annuity premiums are segregated in separate
accounts. The Company receives administrative fees for managing the funds and
other fees for assuming mortality and certain expense risks. Such fees are
included in Variable Annuity Fees in the income statement.
GOODWILL: Goodwill, amounting to $19,478,000 at September 30, 1996, is
amortized by using the straight-line method over periods averaging 25 years and
is included in Other Assets in the balance sheet.
CONTRACTHOLDER RESERVES: Contractholder reserves for fixed annuity contracts
and guaranteed investment contracts are accounted for as investment-type
contracts in accordance with Statement of Financial Accounting Standards No. 97,
"Accounting and Reporting by Insurance Enterprises for Certain Long-Duration
Contracts and for Realized Gains and Losses from the Sale of Investments," and
are recorded at accumulated value (premiums received, plus accrued interest,
less withdrawals and assessed fees).
FEE INCOME: Variable annuity fees and asset management fees are recorded in
income as earned. Net retained commissions are recognized as income on a
trade-date basis.
INCOME TAXES: The Company is included in the consolidated federal income tax
return of the Parent and files as a "life insurance company" under the
provisions of the Internal Revenue Code of 1986. Income taxes have been
calculated as if the Company filed a separate return. Deferred income tax assets
and liabilities are recognized based on the difference between financial
statement carrying amounts and income tax bases of assets and liabilities using
enacted income tax rates and laws.
41
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. INVESTMENTS
The amortized cost and estimated fair value of bonds, notes and redeemable
preferred stocks available for sale and held for investment by major category
follow:
<TABLE>
<CAPTION>
ESTIMATED FAIR
AMORTIZED COST VALUE
---------------- ----------------
<S> <C> <C>
AT SEPTEMBER 30, 1996:
AVAILABLE FOR SALE:
Securities of the United States Government............................................... $ 311,458,000 $ 304,538,000
Mortgage-backed securities............................................................... 747,653,000 741,876,000
Securities of public utilities........................................................... 3,684,000 3,672,000
Corporate bonds and notes ............................................................... 590,071,000 591,148,000
Redeemable preferred stocks.............................................................. 9,064,000 8,664,000
Other debt securities.................................................................... 339,094,000 337,373,000
---------------- ----------------
Total available for sale................................................................. $ 2,001,024,000 $ 1,987,271,000
---------------- ----------------
---------------- ----------------
AT SEPTEMBER 30, 1995:
AVAILABLE FOR SALE:
Securities of the United States Government............................................... $ 59,756,000 $ 60,258,000
Mortgage-backed securities............................................................... 1,121,064,000 1,110,676,000
Securities of public utilities........................................................... 792,000 774,000
Corporate bonds and notes................................................................ 290,924,000 288,883,000
Redeemable preferred stocks.............................................................. 3,945,000 4,937,000
Other debt securities ................................................................... 23,581,000 23,685,000
---------------- ----------------
Total available for sale................................................................. $ 1,500,062,000 $ 1,489,213,000
---------------- ----------------
---------------- ----------------
HELD FOR INVESTMENT:
Securities of the United States Government............................................... $ 10,379,000 $ 10,797,000
Mortgage-backed securities............................................................... 8,378,000 8,378,000
Corporate bonds and notes................................................................ 105,980,000 112,665,000
Other debt securities.................................................................... 33,164,000 33,164,000
---------------- ----------------
Total held for investment................................................................ $ 157,901,000 $ 165,004,000
---------------- ----------------
---------------- ----------------
</TABLE>
The amortized cost and estimated fair value of bonds, notes and redeemable
preferred stocks available for sale by contractual maturity, as of September 30,
1996, follow:
<TABLE>
<CAPTION>
ESTIMATED FAIR
AMORTIZED COST VALUE
---------------- ----------------
<S> <C> <C>
AVAILABLE FOR SALE:
Due in one year or less.................................................................. $ 18,792,000 $ 19,357,000
Due after one year through five years.................................................... 505,564,000 499,163,000
Due after five years through ten years................................................... 378,249,000 378,250,000
Due after ten years...................................................................... 350,766,000 348,625,000
Mortgage-backed securities............................................................... 747,653,000 741,876,000
---------------- ----------------
Total available for sale................................................................. $ 2,001,024,000 $ 1,987,271,000
---------------- ----------------
---------------- ----------------
</TABLE>
Actual maturities of bonds, notes and redeemable preferred stocks will differ
from those shown above due to prepayments and redemptions.
42
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. INVESTMENTS (CONTINUED)
Gross unrealized gains and losses on bonds, notes and redeemable preferred
stocks available for sale and held for investment by major category follow:
<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED
GAINS LOSSES
------------- --------------
<S> <C> <C>
AT SEPTEMBER 30, 1996:
AVAILABLE FOR SALE:
Securities of the United States Government..................................................... $ 284,000 $ (7,204,000)
Mortgage-backed securities..................................................................... 7,734,000 (13,511,000)
Securities of public utilities................................................................. 1,000 (13,000)
Corporate bonds and notes...................................................................... 11,709,000 (10,632,000)
Redeemable preferred stocks.................................................................... 16,000 (416,000)
Other debt securities.......................................................................... 431,000 (2,152,000)
------------- --------------
Total available for sale....................................................................... $ 20,175,000 $ (33,928,000)
------------- --------------
------------- --------------
AT SEPTEMBER 30, 1995:
AVAILABLE FOR SALE:
Securities of the United States Government..................................................... $ 553,000 $ (51,000)
Mortgage-backed securities..................................................................... 12,013,000 (22,401,000)
Securities of public utilities................................................................. -- (18,000)
Corporate bonds and notes...................................................................... 5,344,000 (7,385,000)
Redeemable preferred stocks.................................................................... 992,000 --
Other debt securities.......................................................................... 104,000 --
------------- --------------
Total available for sale....................................................................... $ 19,006,000 $ (29,855,000)
------------- --------------
------------- --------------
HELD FOR INVESTMENT:
Securities of the United States Government..................................................... $ 432,000 $ (14,000)
Corporate bonds and notes...................................................................... 6,685,000 --
------------- --------------
Total held for investment...................................................................... $ 7,117,000 $ (14,000)
------------- --------------
------------- --------------
</TABLE>
At September 30, 1996, gross unrealized gains on equity securities aggregated
$1,368,000 and gross unrealized losses aggregated $309,000. At September 30,
1995, gross unrealized gains on equity securities aggregated $1,082,000 and
gross unrealized losses aggregated $3,561,000.
43
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. INVESTMENTS (CONTINUED)
Gross realized investment gains and losses on sales of all types of investments
are as follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
----------------------------------------------
1996 1995 1994
-------------- -------------- --------------
<S> <C> <C> <C>
BONDS, NOTES AND REDEEMABLE
PREFERRED STOCKS:
Available for sale:
Realized gains ............................................................ $ 14,532,000 $ 15,983,000 $ 12,760,000
Realized losses............................................................ (10,432,000) (21,842,000) (31,066,000)
Held for investment:
Realized gains ............................................................ -- 2,413,000 890,000
Realized losses ........................................................... -- (586,000) (1,913,000)
EQUITIES:
Realized gains............................................................... 511,000 994,000 467,000
Realized losses.............................................................. (3,151,000) (114,000) (303,000)
OTHER INVESTMENTS:
Realized gains .............................................................. 1,135,000 3,561,000 --
Realized losses.............................................................. (1,729,000) (12,000) (358,000)
IMPAIRMENT WRITEDOWNS.......................................................... (14,221,000) (4,760,000) (14,190,000)
-------------- -------------- --------------
Total net realized investment losses........................................... $ (13,355,000) $ (4,363,000) $ (33,713,000)
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
The sources and related amounts of investment income are as follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
----------------------------------------------
1996 1995 1994
-------------- -------------- --------------
<S> <C> <C> <C>
Short-term investments........................................................ $ 10,647,000 $ 8,308,000 $ 4,648,000
Bonds, notes and redeemable preferred stocks.................................. 140,387,000 107,643,000 98,935,000
Mortgage loans................................................................ 8,701,000 7,419,000 12,133,000
Common stocks................................................................. 8,000 3,000 1,000
Real estate................................................................... (196,000) (51,000) 1,379,000
Limited partnerships.......................................................... 4,073,000 5,128,000 9,487,000
Other invested assets......................................................... 1,011,000 1,016,000 1,175,000
-------------- -------------- --------------
Total investment income................................................. $ 164,631,000 $ 129,466,000 $ 127,758,000
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
Expenses incurred to manage the investment portfolio amounted to $1,737,000 for
the year ended September 30, 1996, $1,983,000 for the year ended September 30,
1995, and $1,714,000 for the year ended September 30, 1994 and are included in
General and Administrative Expenses in the income statement.
At September 30, 1996, no investment exceeded 10% of the Company's consolidated
shareholder's equity.
At September 30, 1996, mortgage loans were collateralized by properties located
in 11 states, with loans totaling approximately 21% of the aggregate carrying
value of the portfolio secured by properties located in Colorado, approximately
17% by properties located in New Jersey and approximately 14% by properties
located in California. No more than 12% of the portfolio was secured by
properties in any other single state.
At September 30, 1996, bonds, notes and redeemable preferred stocks included
$160,801,000 (fair value, $160,158,000) of bond and notes not rated investment
grade by either Standard & Poor's Corporation, Moody's Investors Service, Duff
and Phelps Credit Rating Co., Fitch Investor Service, Inc. or under National
Association of Insurance Commissioners' guidelines. The Company had no material
concentrations of non-investment-grade assets at September 30, 1996.
44
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. INVESTMENTS (CONTINUED)
At September 30, 1996, the amortized cost of investments in default as to the
payment of principal or interest was $3,115,000, consisting of $1,580,000 of
non-investment-grade bonds and $1,535,000 of mortgage loans. Such nonperforming
investments had an estimated fair value of $2,935,000.
At September 30, 1996, $6,486,000 of bonds, at amortized cost, were on deposit
with regulatory authorities in accordance with statutory requirements.
The Company has undertaken to dispose of certain real estate investments, having
an aggregate carrying value of $28,410,000, during the next year, to affiliated
or nonaffiliated parties, and the Parent has guaranteed that the Company will
receive its current carrying value for these assets. (This guaranty was
terminated on December 31, 1996. See Note 11--"Subsequent Event").
4. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following estimated fair value disclosures are limited to reasonable
estimates of the fair value of only the Company's financial instruments. The
disclosures do not address the value of the Company's recognized and
unrecognized nonfinancial assets (including its other invested assets, equity
investments and real estate investments) and liabilities or the value of
anticipated future business. The Company does not plan to sell most of its
assets or settle most of its liabilities at these estimated fair values.
The fair value of a financial instrument is the amount at which the instrument
could be exchanged in a current transaction between willing parties, other than
in a forced or liquidation sale. Selling expenses and potential taxes are not
included. The estimated fair value amounts were determined using available
market information, current pricing information and various valuation
methodologies. If quoted market prices were not readily available for a
financial instrument, management determined an estimated fair value.
Accordingly, the estimates may not be indicative of the amounts the financial
instruments could be exchanged for in a current or future market transaction.
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value:
CASH AND SHORT TERM INVESTMENTS: Carrying value is considered to be a
reasonable estimate of fair value.
BONDS, NOTES AND REDEEMABLE PREFERRED STOCKS: Fair value is based principally
on independent pricing services, broker quotes and other independent
information.
MORTGAGE LOANS: Fair values are primarily determined by discounting future cash
flows to the present at current market rates, using expected prepayment rates.
VARIABLE ANNUITY ASSETS: Variable annuity assets are carried at the market
value of the underlying securities.
RECEIVABLE FROM (PAYABLE TO) BROKERS FOR SALES (PURCHASES) OF SECURITIES: Such
obligations represent net transactions of a short-term nature for which the
carrying value is considered a reasonable estimate of fair value.
RESERVES FOR FIXED ANNUITY CONTRACTS: Deferred annuity contracts and single
premium life contracts are assigned a fair value equal to current net surrender
value. Annuitized contracts are valued based on the present value of future cash
flows at current pricing rates.
RESERVES FOR GUARANTEED INVESTMENT CONTRACTS: Fair value is based on the
present value of future cash flows at current pricing rates.
VARIABLE ANNUITY LIABILITIES: Fair values of contracts in the accumulation
phase are based on net surrender values. Fair values of contracts in the payout
phase are based on the present value of future cash flows at assumed investment
rates.
SUBORDINATED NOTES PAYABLE TO PARENT: Fair value is estimated based on the
quoted market prices for similar issues.
45
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
4. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The estimated fair values of the Company's financial instruments at September
30, 1996 and 1995, compared with their respective carrying values, are as
follows:
<TABLE>
<CAPTION>
CARRYING VALUE FAIR VALUE
---------------- ----------------
<S> <C> <C>
1996:
ASSETS:
Cash and short-term investments................................................ $ 122,058,000 $ 122,058,000
Bonds, notes and redeemable preferred stocks................................... 1,987,271,000 1,987,271,000
Mortgage loans................................................................. 98,284,000 102,112,000
Receivable from brokers for sales of securities................................ 52,348,000 52,348,000
Variable annuity assets........................................................ 6,311,557,000 6,311,557,000
LIABILITIES:
Reserves for fixed annuity contracts........................................... 1,789,962,000 1,738,784,000
Reserves for guaranteed investment contracts................................... 415,544,000 416,695,000
Variable annuity liabilities................................................... 6,311,557,000 6,117,508,000
Subordinated notes payable to Parent........................................... 35,832,000 37,339,000
---------------- ----------------
---------------- ----------------
1995:
ASSETS:
Cash and short-term investments................................................ $ 249,209,000 $ 249,209,000
Bonds, notes and redeemable preferred stocks................................... 1,647,114,000 1,654,217,000
Mortgage loans................................................................. 94,260,000 95,598,000
Variable annuity assets........................................................ 5,230,246,000 5,230,246,000
LIABILITIES:
Reserves for fixed annuity contracts........................................... 1,497,052,000 1,473,757,000
Reserves for guaranteed investment contracts................................... 277,095,000 277,095,000
Payable to brokers for purchases of securities................................. 155,861,000 155,861,000
Variable annuity liabilities................................................... 5,230,246,000 5,077,257,000
Subordinated notes payable to Parent........................................... 35,832,000 34,620,000
---------------- ----------------
---------------- ----------------
</TABLE>
5. SUBORDINATED NOTES PAYABLE TO PARENT
Subordinated notes payable to Parent averaged $35,832,000 at a weighted average
interest rate of 8.71% (with rates ranging from 7% to 9%) at September 30, 1996
and require principal payments of $5,272,000 in 1997, $7,500,000 in 1998 and
$23,060,000 in 1999.
6. CONTINGENT LIABILITIES
The Company has entered into two agreements in which it has guaranteed the
liquidity of certain short-term securities of two municipalities by agreeing to
purchase such securities in the event there is no other buyer in the short-term
marketplace. In return the Company receives a fee. These guarantees total up to
$182,600,000. Management does not anticipate any material future losses with
respect to these guarantees.
The Company is involved in various kinds of litigation common to its businesses.
These cases are in various stages of development and, based on reports of
counsel, management believes that provisions made for potential losses are
adequate and any further liabilities and costs will not have a material adverse
impact upon the Company's financial position or results of operations.
7. SHAREHOLDER'S EQUITY
The Company is authorized to issue 4,000 shares of its $1,000 par value Common
Stock. At September 30, 1996, 1995 and 1994, 3,511 shares are outstanding.
46
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. SHAREHOLDER'S EQUITY (CONTINUED)
Changes in shareholder's equity are as follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
----------------------------------------------
1996 1995 1994
-------------- -------------- --------------
<S> <C> <C> <C>
ADDITIONAL PAID-IN CAPITAL:
Beginning balance................................................. $ 252,876,000 $ 252,876,000 $ 252,876,000
Capital contributions received.................................... 27,387,000 -- --
-------------- -------------- --------------
Ending balance.................................................... $ 280,263,000 $ 252,876,000 $ 252,876,000
-------------- -------------- --------------
-------------- -------------- --------------
RETAINED EARNINGS:
Beginning balance................................................. $ 191,346,000 $ 152,088,000 $ 127,936,000
Net income........................................................ 45,056,000 39,258,000 24,152,000
Dividend paid..................................................... (29,400,000) -- --
-------------- -------------- --------------
Ending balance.................................................... $ 207,002,000 $ 191,346,000 $ 152,088,000
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
----------------------------------------------
1996 1995 1994
-------------- -------------- --------------
<S> <C> <C> <C>
NET UNREALIZED LOSSES ON DEBT AND EQUITY SECURITIES AVAILABLE FOR
SALE:
Beginning balance.................................................. $ (5,673,000) $ (24,953,000) $ (13,230,000)
Change in net unrealized gains/losses on debt securities available
for sale.......................................................... (2,904,000) 71,302,000 (69,407,000)
Change in net unrealized gains/losses on equity securities
available for sale................................................ 3,538,000 (1,240,000) (753,000)
Change in adjustment to deferred acquisition costs................. (400,000) (40,400,000) 45,000,000
Tax effects of net changes......................................... (82,000) (10,382,000) 13,437,000
-------------- -------------- --------------
Ending balance..................................................... $ (5,521,000) $ (5,673,000) $ (24,953,000)
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
Dividends that the Company may pay to its shareholder in any year without prior
approval of the Arizona Department of Insurance are limited by statute. The
maximum amount of dividends which can be paid to shareholders of insurance
companies domiciled in the state of Arizona without obtaining the prior approval
of the Insurance Commissioner is limited to the lesser of either 10% of the
preceding year's Statutory Surplus or the preceding year's statutory net gain
from operations. A dividend in the amount of $29,400,000 was paid on March 18,
1996. No dividends were paid in fiscal years 1995 or 1994.
Under statutory accounting principles utilized in filings with insurance
regulatory authorities, the Company's net income for the nine months ended
September 30, 1996 was $21,898,000. The statutory net income for the year ended
December 31, 1995 was $30,673,000 and for the year ended December 31, 1994 was
$35,060,000. The Company's statutory capital and surplus was $282,275,000 at
September 30, 1996, $294,767,000 at December 31, 1995 and $219,577,000 at
December 31, 1994.
47
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. INCOME TAXES
The components of the provisions for federal income taxes on pretax income
consist of the following:
<TABLE>
<CAPTION>
NET REALIZED
INVESTMENT
GAINS (LOSSES) OPERATIONS TOTAL
-------------- ------------- -------------
<S> <C> <C> <C>
1996:
Currently payable...................................................... $ 5,754,000 $ 21,849,000 $ 27,603,000
Deferred............................................................... (10,347,000) 6,996,000 (3,351,000)
-------------- ------------- -------------
Total income tax expense............................................... $ (4,593,000) $ 28,845,000 $ 24,252,000
-------------- ------------- -------------
-------------- ------------- -------------
1995:
Currently payable...................................................... $ 4,248,000 $ 22,980,000 $ 27,228,000
Deferred............................................................... (6,113,000) 4,624,000 (1,489,000)
-------------- ------------- -------------
Total income tax expense............................................... $ (1,865,000) $ 27,604,000 $ 25,739,000
-------------- ------------- -------------
-------------- ------------- -------------
1994:
Currently payable...................................................... $ (6,825,000) $ 10,135,000 $ 3,310,000
Deferred............................................................... (1,320,000) 20,715,000 19,395,000
-------------- ------------- -------------
Total income tax expense............................................... $ (8,145,000) $ 30,850,000 $ 22,705,000
-------------- ------------- -------------
-------------- ------------- -------------
</TABLE>
Income taxes computed at the United States federal income tax rate of 35% and
income taxes provided differ as follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-------------------------------------------
1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
Amount computed at statutory rate....................................... $ 24,258,000 $ 22,749,000 $ 23,562,000
Increases (decreases) resulting from:
Amortization of differences between book and tax bases of net assets
acquired............................................................. 464,000 3,049,000 465,000
State income taxes, net of federal tax benefit........................ 2,070,000 437,000 (662,000)
Dividends-received deduction.......................................... (2,357,000) -- --
Tax credits........................................................... (257,000) (168,000) (612,000)
Other, net............................................................ 74,000 (328,000) (48,000)
------------- ------------- -------------
Total income tax expense................................................ $ 24,252,000 $ 25,739,000 $ 22,705,000
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
For United States federal income tax purposes, certain amounts from life
insurance operations are accumulated in a memorandum policyholders' surplus
account and are taxed only when distributed to shareholders or when such account
exceeds prescribed limits. The accumulated policyholders' surplus was
$14,300,000 at September 30, 1996. The Company does not anticipate any
transactions which would cause any part of this surplus to be taxable.
48
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. INCOME TAXES (CONTINUED)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax reporting purposes. The significant
components of the liability for Deferred Income Taxes are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------------
1996 1995
-------------- --------------
<S> <C> <C>
DEFERRED TAX LIABILITIES:
Investments................................................................ $ 15,036,000 $ 14,181,000
Deferred acquisition costs................................................. 136,747,000 118,544,000
State income taxes......................................................... 1,466,000 1,847,000
-------------- --------------
Total deferred tax liabilities............................................. 153,249,000 134,572,000
-------------- --------------
DEFERRED TAX ASSETS:
Contractholder reserves.................................................... (77,522,000) (55,910,000)
Guaranty fund assessments.................................................. (1,031,000) (1,123,000)
Other assets............................................................... (1,534,000) (1,025,000)
Net unrealized losses on certain debt and equity securities................ (2,973,000) (3,055,000)
-------------- --------------
Total deferred tax assets.................................................. (83,060,000) (61,113,000)
-------------- --------------
Deferred income taxes...................................................... $ 70,189,000 $ 73,459,000
-------------- --------------
-------------- --------------
</TABLE>
9. RELATED PARTY MATTERS
The Company pays commissions to two affiliated companies, SunAmerica Securities,
Inc. and Advantage Capital Corp. These broker-dealers represent a significant
portion of the Company's business, amounting to approximately 15.6%, 14.1% and
14.5% of premiums in 1996, 1995 and 1994, respectively. Commissions paid to
these broker-dealers totaled $16,906,000 in 1996, $9,435,000 in 1995 and
$9,725,000 in 1994.
The Company purchases administrative, investment management, accounting,
marketing and data processing services from SunAmerica Financial, Inc., whose
purpose is to provide services to the SunAmerica companies. Amounts paid for
such services totaled $65,351,000 for the year ended September 30, 1996,
$42,083,000 for the year ended September 30, 1995 and $36,934,000 for the year
ended September 30, 1994. Such amounts are included in General and
Administrative Expenses in the income statement.
On December 31, 1995, the Parent made a $27,387,000 capital contribution to the
Company, through the Company's direct parent, in exchange for the termination of
its guaranty with respect to certain real estate owned in Arizona. Accordingly,
the Company reduced the carrying value of this real estate to estimated fair
value to reflect the termination of the guaranty. On December 31, 1996, the
Parent made a similar capital contribution for $28,410,000 in exchange for the
termination of the remaining guaranty with respect to such real estate.
During the year ended September 30, 1995, the Company sold to the Parent real
estate for cash equal to its carrying value of $29,761,000.
During the year ended September 30, 1996, the Company sold various invested
assets to the Parent, SunAmerica Life Insurance Company and Ford Life Insurance
Company ("Ford") for cash equal to their current market values of $274,000,
$8,968,000 and $38,353,000, respectively. The Company recorded net losses of
$3,000 on such transactions.
During the year ended September 30, 1996, the Company also purchased certain
invested assets from SunAmerica Life Insurance Company and Ford for cash equal
to their current market values of $5,159,000 and $23,220,000, respectively.
49
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. BUSINESS SEGMENTS
Summarized data for the Company's business segments follow:
<TABLE>
<CAPTION>
TOTAL
DEPRECIATION
AND
AMORTIZATION
TOTAL REVENUES EXPENSE PRETAX INCOME TOTAL ASSETS
-------------- ------------- ------------- ----------------
<S> <C> <C> <C> <C>
1996:
Annuity operations.................................. $ 250,645,000 $ 43,974,000 $ 53,827,000 $ 9,092,770,000
Asset management.................................... 29,711,000 18,295,000 2,448,000 74,410,000
Broker-dealer operations............................ 31,851,000 449,000 13,033,000 37,355,000
-------------- ------------- ------------- ----------------
Total............................................... $ 312,207,000 $ 62,718,000 $ 69,308,000 $ 9,204,535,000
-------------- ------------- ------------- ----------------
-------------- ------------- ------------- ----------------
1995:
Annuity operations.................................. $ 205,698,000 $ 38,350,000 $ 55,462,000 $ 7,667,946,000
Asset management.................................... 30,253,000 24,069,000 510,000 86,510,000
Broker-dealer operations............................ 24,366,000 411,000 9,025,000 29,241,000
-------------- ------------- ------------- ----------------
Total............................................... $ 260,317,000 $ 62,830,000 $ 64,997,000 $ 7,783,697,000
-------------- ------------- ------------- ----------------
-------------- ------------- ------------- ----------------
1994:
Annuity operations.................................. $ 171,553,000 $ 26,501,000 $ 52,284,000 $ 6,473,065,000
Asset management.................................... 32,803,000 19,330,000 7,916,000 102,192,000
Broker-dealer operations............................ 20,914,000 408,000 7,120,000 26,869,000
-------------- ------------- ------------- ----------------
Total............................................... $ 225,270,000 $ 46,239,000 $ 67,320,000 $ 6,602,126,000
-------------- ------------- ------------- ----------------
-------------- ------------- ------------- ----------------
</TABLE>
11. SUBSEQUENT EVENT (UNAUDITED)
On December 31, 1996, the Parent made a capital contribution of $28,410,000 to
the Company through the Company's direct parent, in exchange for the termination
of its guaranty with respect to the remainder of the land owned in Arizona.
Accordingly, on December 31, 1996, the Company reduced the carrying value of
this land to estimated fair value to reflect the termination of the guaranty.
50
<PAGE>
APPENDIX A - MARKET VALUE ADJUSTMENT
- --------------------------------------------------------------------------------
The Market Value Adjustment reflects the impact that changing interest rates
have on the value of money invested at a fixed interest rate. The longer the
period of time remaining in the term you initially agreed to leave your money in
the fixed investment option, the greater the impact of the Market Value
Adjustment. The impact of the Market Value Adjustment can be either positive or
negative, and is computed by multiplying the amount withdrawn, transferred or
annuitized by the following factor:
N/12
[(1+I)/ (1+J+0.005*)] -1
where:
I is the Guarantee Rate you are earning on the money invested in
the fixed investment option;
J is the Guarantee Rate then currently available for the period
of time equal to the number of years remaining in the term you initially agreed
to leave your money in the fixed investment option; and
N is the number of full months remaining in the term you
initially agreed to leave your money in the fixed investment option.
* if you live in the state of Pennsylvania this number will be zero.
EXAMPLES OF THE MARKET VALUE ADJUSTMENT
The examples below assume the following:
(1) You made an initial Purchase Payment of $10,000 and allocated it to the
ten year fixed investment option at a Guarantee Rate of 7%;
(2) You make a partial withdrawal of $4,000 when 2 1/2 years (30 months)
remain in the ten year term you initially agreed to leave your money in the
fixed investment option (N=30);
(3) you have not made any other transfers, additional Purchase Payments, or
withdrawals.
No withdrawal charges are reflected in the examples because your Purchase
Payment has been in the contract for more than 7 full years.
NEGATIVE ADJUSTMENT:
Assume that on the date of withdrawal, the Guarantee Rate in effect for a new
investment in the three year (rounded up to the next full year) fixed investment
option is 8%:
The Market Value Adjustment factor is equal to:
N/12
[(1+I)/(1+J+.005)] -1
30/12
[(1.07)/(1.08+.005)] -1
2.5
(0.986175) -1
0.965795-1
- -0.034205
The requested withdrawal amount is multiplied by the Market Value Adjustment
factor to determine the Market Value Adjustment:
$4,000 X (-0.034205)= -$136.82
$136.82 represents the Market Value Adjustment that will be deducted from the
remaining money in the ten year fixed investment option.
POSITIVE ADJUSTMENT:
Assume that on the date of withdrawal, the Guarantee Rate in effect for a new
investment in the three year (rounded up to the next full year) fixed investment
option is 6%:
The Market Value Adjustment factor is equal to:
N/12
[(1+I)/(1+J+.005)] -1
30/12
[(1.07)/(1.06+.005)] -1
2.5
(1.004695) -1
1.011778-1
+0.011778
The requested withdrawal amount is multiplied by the Market Value Adjustment
factor to determine the Market Value Adjustment:
$4,000 X .011778= +47.11
$47.11 represents the Market Value Adjustment that would be added to your
withdrawal.
51
<PAGE>
APPENDIX B - PREMIUM TAXES
- --------------------------------------------------------------------------------
Premium taxes vary according to the state and are subject to change without
notice. In many states, there is no tax at all. Listed below are the tax rates
payable on premiums in effect in those states that assess a premium tax, as of
the date of this prospectus. For current information you should consult your tax
advisor. Additionally, please see Section 5 "Expenses" for additional
information on Premium Taxes.
<TABLE>
<CAPTION>
QUALIFIED NON-QUALIFIED
STATE CONTRACT CONTRACT
- -------------------------------------------------------------------------------------------- ----------- -------------
<S> <C> <C>
California.................................................................................. .50% 2.35%
District of Columbia........................................................................ 2.25% 2.25%
Kansas...................................................................................... 0% 2%
Kentucky.................................................................................... 2% 2%
Maine....................................................................................... 0% 2%
Michigan.................................................................................... .00075% .00075%
Nevada...................................................................................... 0% 3.5%
South Dakota................................................................................ 0% 1.25%
West Virginia............................................................................... 1% 1%
Wyoming..................................................................................... 0% 1%
</TABLE>
52
<PAGE>
Please forward a copy (without charge) of the Statement of Additional
Information concerning SEASONS Variable Annuity Contracts to:
(Please print or type and fill in all information.)
- --------------------------------------------------------------------------------
Name
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
City/State/Zip
- --------------------------------------------------------------------------------
Date: ________________________________ Signed: ________________________________
Return to: Anchor National Life Insurance Company, Annuity Service Center, P.O.
Box 54299, Los Angeles, California 90054-0299.
53
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. Other Expenses of Issuance and Distribution.
Not Applicable
ITEM 14. Indemnification of Directors and Officers.
Not Applicable
ITEM 15. Recent Sales of Unregistered Securities.
Not Applicable
ITEM 16. Exhibits and Financial Statement Schedules.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- --------------------------------------------------------------------------------------
<C> <S>
(1) Form of Underwriting Agreement*
(2) Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession**
(3) (a) Articles of Incorporation*
(b) By-Laws*
(4) (a) Allocated Fixed and Variable Group Annuity Certificate*
(b) Individual Fixed and Variable Annuity Contract*
(c) Participant Enrollment Form*
(d) Deferred Annuity Application*
(5) Opinion of Counsel re: Legality*
(6) Opinion re Discount on Capital Shares**
(7) Opinion re Liquidation Preference**
(8) Opinion re Tax Matters**
(9) Voting Trust Agreement**
(10) Material Contracts**
(11) Statement re Computation of Per Share Earnings**
(12) Statement re Computation of Ratios**
(14) Material Foreign Patents**
(15) Letter re Unaudited Financial Information**
(16) Letter re Change in Certifying Accountant**
(21) Subsidiaries of Registrant*
(23) (a) Consent of Independent Accountants*
(b) Consent of Attorney*
(24) Powers of Attorney (included on signature page)*
(25) Statement of Eligibility of Trustee**
(26) Invitation for Competitive Bids**
(27) Financial Data Schedule
(28) Information Reports Furnished to State Insurance Regulatory Authority**
(29) Other Exhibits**
</TABLE>
FINANCIAL STATEMENTS***
* Herewith
** Not Applicable
II-1
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned registrant, Anchor National Life Insurance Company, hereby
undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement
(or the most recent post-effective amendment hereof)
which, individually or in the aggregate, represents a
fundamental change in the information in the registration
statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof; and
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
II-2
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, the Registrant has caused this
Pre-Effective Amendment to the Registration Statement to be signed on its
behalf, in the City of Los Angeles, and the State of California, on this 10th
day of March, 1997.
ANCHOR NATIONAL LIFE INSURANCE COMPANY
By: /s/ JAY S. WINTROB
----------------------------------------------
Jay S. Wintrob
Executive Vice President
As required by the Securities Act of 1933, this Pre-Effective Amendment to
the Registration Statement has been signed by the following persons in the
capacity and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------ --------------------------------------- ----------------------
<S> <C> <C>
ELI BROAD* President, Chief Executive Officer, &
-------------------------------------- Chairman of Board (Principal Executive
Eli Broad Officer)
SCOTT L. ROBINSON*
-------------------------------------- Senior Vice President & Director
Scott L. Robinson (Principal Financial Officer)
N. SCOTT GILLIS*
-------------------------------------- Senior Vice President & Controller
N. Scott Gillis (Principal Accounting Officer)
LORIN M. FIFE*
-------------------------------------- Director
Lorin M. Fife
JANA W. GREER*
-------------------------------------- Director
Jana W. Greer
/s/ SUSAN L. HARRIS
-------------------------------------- Director March 10, 1997
Susan L. Harris
PETER MCMILLAN*
-------------------------------------- Director
Peter McMillan
JAMES W. ROWAN*
-------------------------------------- Director
James W. Rowan
JAY S. WINTROB*
-------------------------------------- Director
Jay S. Wintrob
*By: /s/ SUSAN L. HARRIS
---------------------------------- Attorney-in-Fact
Susan L. Harris
</TABLE>
March 10, 1997
<PAGE>
POWER-OF-ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints LORIN M. FIFE, SUSAN L. HARRIS AND
CHRISTINE A. NIXON or each of them, as his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, as fully to all
intents as he or she might or could do in person, including specifically, but
without limiting the generality of the foregoing, to (i) take any action to
comply with any rules, regulations or requirements of the Securities and
Exchange Commission under the federal securities laws; (ii) make application for
and secure any exemptions from the federal securities laws; (iii) register
additional annuity contracts under the federal securities laws, if registration
is deemed necessary. The undersigned hereby ratifies and confirms all that said
attorneys-in-fact and agents or any of them, or their substitutes, shall do or
cause to be done by virtue thereof.
As required by the Securities Act of 1933, this Pre-Effective Amendment to
the Registration Statement has been signed by the following persons in the
capacity and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
/s/ JAMES R. BELARDI
- ------------------------------ Director March 10, 1997
James R. Belardi
/s/ JOSEPH M. TUMBLER
- ------------------------------ Director March 10, 1997
Joseph M. Tumbler
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- --------------------------------------------------------------------------------------
<C> <S>
(1) Form of Underwriting Agreement*
(3) (a) Articles of Incorporation*
(b) By-Laws*
(4) (a) Allocated Fixed and Variable Group Annuity Certificate*
(b) Individual Fixed and Variable Annuity Contract*
(c) Participant Enrollment Form*
(d) Deferred Annuity Application*
(5) Opinion of Counsel re: Legality*
(21) Subsidiaries of Registrant*
(23) (a) Consent of Independent Accountants*
(b) Consent of Attorney*
(24) Powers of Attorney*
(included on signature page)
(27) Financial Data Schedule
</TABLE>
<PAGE>
DISTRIBUTION AGREEMENT
THIS AGREEMENT, entered into on this 2nd day of January, 1997, by and
between ANCHOR NATIONAL LIFE INSURANCE COMPANY ("Anchor"), a life insurance
company organized under the laws of the State of Arizona, on behalf of itself
and VARIABLE ANNUITY ACCOUNT FIVE ("Separate Account"), a Separate Account
established by Anchor pursuant to the insurance laws of the State of Arizona,
and SUNAMERICA CAPITAL SERVICES, INC. ("Distributor"), a corporation organized
under the laws of the state of Delaware.
WITNESSETH:
WHEREAS, Anchor proposes to issue to the public certain variable annuity
contracts identified on the contract specification sheet attached hereto as
Attachment A ("Contracts"); and
WHEREAS, Anchor, by resolution adopted on July 3, 1996, established the
Separate Account on its books of account, for the purpose of issuing the
Contracts; and
WHEREAS, the Separate Account is registered with the Securities and
Exchange Commission ("Commission") as a unit investment trust under the
Investment Company Act of 1940 (File No. 811-07727); and
WHEREAS, the Contracts to be issued by Anchor are registered with the
Commission under the Securities Act of 1933 (File Nos. 33-08859 and 33-08877)
for offer and sale to the public, and otherwise are in compliance with all
applicable laws; and
WHEREAS, Distributor, a broker-dealer registered under the Securities
Exchange Act of 1934 and a member of the National Association of Securities
Dealers, Inc., proposes to act as distributor on an agency basis in the
marketing and distribution of said Contracts; and
WHEREAS, Anchor desires to obtain the services of Distributor as
distributor of said Contracts issued by Anchor through the Separate Account;
NOW THEREFORE, in consideration of the foregoing, and of the mutual
covenants and conditions set forth herein, and for other good and valuable
consideration, Anchor, the Separate Account, and Distributor hereby agree as
follows:
1. Distributor will serve as distributor on an agency basis for the
Contracts which will be issued by Anchor through the Separate Account.
2. Distributor, will use its best efforts to provide information and
marketing assistance to licensed insurance agents and broker-dealers on a
continuing basis. However, Distributor shall be responsible for
compliance with the requirements of state broker-dealer
<PAGE>
regulations and the Securities Exchange Act of 1934 as each applies to
Distributor in connection with its duties as distributor of said
Contracts. Moreover, Distributor shall conduct its affairs in accordance
with the Rules of Fair Practice of the National Association of Securities
Dealers, Inc.
3. Subject to the agreement of Anchor, Distributor may enter into
dealer agreements with broker-dealers registered under the Securities
Exchange Act of 1934 and authorized by applicable law to sell variable
annuity contracts issued by Anchor through the Separate Account. Any
such contractual arrangement is expressly made subject to this Agreement,
and Distributor will at all times be responsible to Anchor for purposes
of the federal securities laws for the distribution of Contracts issued
through the Separate Account. Distributor will use its respective best
efforts to provide information and marketing assistance to such broker-
dealers on a continuing basis.
4. WARRANTIES
(a) Anchor represents and warrants to Distributor that:
(i) Registration Statements on Forms N-4 and S-1 for each
of the contracts identified on Attachment A have been filed
with the Commission in the form previously delivered to
Distributor and that copies of any and all amendments
thereto will be forwarded to Distributor at the time that
they are filed with the Commission;
(ii) The Registration Statements and any further amendments
or supplements thereto will, when they become effective,
conform in all material respects to the requirements of the
Securities Act of 1933 and the Investment Company Act of
1940, and the rules and regulations of the Commission under
such Acts, and will not contain an untrue statement of a
material fact or omit to state a material fact required to
be stated therein or necessary to make the statements
therein not misleading; provided, however, that this
representation and warranty shall not apply to any statement
or omission made in reliance upon and in conformity with
information furnished in writing to Anchor by Distributor
expressly for use therein;
(iii) Anchor is validly existing as a stock life
insurance company in good standing under the laws of the
State of Arizona, with power (corporate or other) to own its
properties and conduct its business as described in the
Prospectus, and has been duly qualified for the transaction
of business and is in good standing under the laws of each
other jurisdiction in which it owns or leases properties, or
conducts any business, so as to require such qualification;
-2-
<PAGE>
(iv) The Contracts to be issued through the Separate Account
and offered for sale by Distributor on behalf of Anchor
hereunder have been duly and validly authorized and, when
issued and delivered against payment therefor as provided
herein, will be duly and validly issued and will conform to
the description of such Contracts contained in the
Prospectuses relating thereto;
(v) Those persons who offer and sell the Contracts are to
be appropriately licensed in a manner as to comply with the
state insurance laws;
(vi) The performance of this Agreement and the consummation
of the transactions contemplated by this Agreement will not
result in a breach or violation of any of the terms or
provisions of, or constitute a default under any statute,
any indenture, mortgage, deed of trust, note agreement or
other agreement or instrument to which Anchor is a party or
by which Anchor is bound, Anchor's Charter as a stock life
insurance company or By-laws, or any order, rule or
regulation of any court or governmental agency or body
having jurisdiction over Anchor or any of its properties;
and no consent, approval, authorization or order of any
court or governmental agency or body is required for the
consummation by Anchor of the transactions contemplated by
this Agreement, except such as may be required under the
Securities Exchange Act of 1934 or state insurance or
securities laws in connection with the distribution of the
Contracts by Distributor; and
(vii) There are no material legal or governmental
proceedings pending to which Anchor or the Separate Account
is a party or of which any property of Anchor or the
Separate Account is the subject, other than as set forth in
the Prospectus relating to the Contracts, and other than
litigation incident to the kind of business conducted by
Anchor, if determined adversely to Anchor, would
individually or in the aggregate have a material adverse
effect on the financial position, surplus or operations of
Anchor.
(b) Distributor, jointly and severally, represent and warrant to
Anchor that:
(i) It is a broker-dealer duly registered with the
Commission pursuant to the Securities Exchange Act of 1934
and a member in good standing of the National Association of
Securities Dealers, Inc., and is in compliance with the
securities laws in those states in which it conducts
business as a broker-dealer;
-3-
<PAGE>
(ii) It shall permit the offer and sale of Contracts to the
public only by and through persons who are appropriately
licensed under both the securities laws and state insurance
laws and who are appointed in writing by Anchor to be
authorized insurance agents;
(iii) The performance of this Agreement and the
consummation of the transactions herein contemplated will
not result in a breach or violation of any of the terms or
provisions of or constitute a default under any statute, any
indenture, mortgage, deed of trust, note agreement or other
agreement or instrument to which either Distributor is a
party or by which either Distributor is bound, the
Certificate of Incorporation or By-laws of either
Distributor, or any order, rule or regulation of any court
or governmental agency or body having jurisdiction over
either Distributor or its property; and
(iv) To the extent that any statements or omissions made in
the Registration Statements, or any amendment or supplement
thereto are made in reliance upon and in conformity with
written information furnished to Anchor by Distributor
expressly for use therein, such Registration Statement and
any amendments or supplements thereto will, when they become
effective or are filed with the Commission, as the case may
be, conform in all material respects to the requirements of
the Securities Act of 1933 and the rules and regulations of
the Commission thereunder and will not contain any untrue
statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein not misleading.
5. Distributor shall keep, in a manner and form prescribed or
approved by Anchor and in accordance with Rules 17a-3 and 17a-4 under the
Securities Exchange Act of 1934, correct records and books of account as
required to be maintained by a registered broker-dealer, acting as
distributor, of all transactions entered into on behalf of Anchor and
with respect to its activities under this Agreement for Anchor.
Distributor shall make such records and books of account available for
inspection by the Commission, and Anchor shall have the right to inspect,
make copies of or take possession of such records and books of account at
any time on demand.
6. Subsequent to having been authorized to commence the activities
contemplated herein, Distributor shall utilize the currently effective
Prospectus relating to the subject Contracts in connection with their
marketing and distribution efforts. As to the other types of sales
material, Distributor agree that they will use only sales materials as
have been authorized for use by Anchor and which conform to the
requirements of federal and state
-4-
<PAGE>
laws and regulations, and which have been filed where necessary with the
appropriate regulatory authorities, including the National Association of
Securities Dealers, Inc.
7. Distributor shall not distribute any Prospectus, sales
literature, or any other printed matter or material in the marketing and
distribution of any Contract if, to the knowledge of Distributor, any of
the foregoing misstates the duties, obligation or liabilities of Anchor
or Distributor.
8. Distributor shall bear all expenses of providing services
pursuant to this Agreement including the cost of sales presentations,
mailings, advertising and any other marketing efforts they conduct in
connection with the distribution or sale of the Contracts.
9. Distributor, as distributor of the Contracts, shall not be
entitled to remuneration for its services.
10. Distributor shall ensure that all premium payments collected on
the sale of the Contracts are properly transmitted to Anchor for
immediate allocation to the Separate Account in accordance with the
directions furnished by the purchasers of such Contracts at the time of
purchase.
11. If any purchase payment premiums shall be required to be returned
by Anchor or should Anchor become liable for the return thereof for any
cause other than surrenders or withdrawals by Contract Owners pursuant to
the terms of the Contracts either before or after termination of this
Agreement, Distributor agrees to pay Anchor the amount of remuneration
previously paid over to it by Anchor with respect to such premiums.
12. Distributor makes no representations or warranties regarding the
number of Contracts to be sold by licensed broker-dealers and insurance
agents or the amount to be paid thereunder. Distributor does, however,
represent that it will actively engage in its duties under this Agreement
on a continuous basis while there is an effective registration statement
with the Commission.
13. It is understood and agreed that Distributor may render similar
services or act as a distributor or dealer in the distribution of other
variable contracts.
14. Distributor shall use its best efforts to ensure that the
Contracts will be offered for sale by licensed broker-dealers and
insurance agents on the terms described in the currently effective
Prospectus describing such Contracts.
15. Anchor shall use its best efforts to assure that the Contracts
are continuously registered under the Securities Act of 1933 and, should
it ever be required, under state Blue Sky Laws and to file for approval
under state insurance laws when necessary.
-5-
<PAGE>
16. Anchor reserves the right at any time to suspend or limit the
public offering of the subject Contracts upon one day's written notice to
Distributor.
17. Anchor agrees to advise Distributor immediately of:
(a) any request by the Commission (i) for amendment of the
Registration Statements relating to the Contracts, or (ii) for
additional information;
(b) the issuance by the Commission of any stop order suspending
the effectiveness of either Registration Statement relating to
the Contracts or the initiation of any proceedings for that
purpose; and
(c) the happening of any material event, if known, which makes
untrue any statement made in the Registration Statements relating
to the Contracts or which requires the making of a change therein
in order to make any statement made therein not misleading.
18. Anchor shall furnish to Distributor such information with respect
to the Separate Account and the Contracts in such form and signed by such
of its officers as Distributor may reasonably request; and shall warrant
that the statements therein contained when so signed will be true and
correct.
19. Each of the undersigned parties agrees to notify the other in
writing upon being apprised of the institution of any proceeding,
investigation or hearing involving the offer or sale of the subject
Contracts.
20. This Agreement shall terminate automatically upon its assignment.
This Agreement shall terminate, without the payment of any penalty by
either party:
(a) at the option of Anchor, upon sixty days' advance written
notice to Distributor; or
(b) at the option of Distributor upon 90 days' written notice to
Anchor; or
(c) at the option of Anchor upon institution of formal
proceedings against Distributor by the National Association of
Securities Dealers, Inc. or by the Commission; or
(d) at the option of Anchor, if Distributor or any
representative thereof at any time (i) employs any device,
scheme, or artifice to defraud; makes any untrue statement of a
material fact or omits to state a material fact necessary in
order to make the statements made, in light of the circumstances
under which they were made, not misleading; or engages in any
act, practice, or course of
-6-
<PAGE>
business which operates or would operate as a fraud or deceit
upon any person; (ii) fails to account and pay over promptly to
Anchor money due it according to its records; or (iii) violates
the conditions of this Agreement; or
21. Each notice required by this Agreement may be given by telephone
or telefax and confirmed in writing.
22. Anchor agrees to indemnify Distributor for any liability that it
may incur to a Contract Owner or party-in-interest under a Contract (i)
arising out of any act or omission in the course of, or in connection
with, rendering services under this Agreement, or (ii) arising out of the
purchase, retention or surrender of a contract; provided however that
Anchor will not indemnify Distributor for any such liability that results
from the willful misfeasance, bad faith or gross negligence of such
Distributor, or from the reckless disregard, by such Distributor, of its
duties and obligations arising under this Agreement.
23. This Agreement shall be subject to the laws of the State of
California and construed so as to interpret the Contracts and insurance
contracts written within the business operation of Anchor.
24. This Agreement covers and includes all agreements, verbal and
written, between Anchor and Distributor with regard to the marketing and
distribution of the Contracts, and supersedes and annuls any and all
agreements between the parties with regard to the distribution of the
Contracts; except that this Agreement shall not affect the operation of
previous or future agreements entered into between Anchor and Distributor
unrelated to the sale of the Contracts.
THIS AGREEMENT, along with any Schedules of Remuneration attached hereto
and incorporated herein by reference, may be amended from time to time by the
mutual agreement and consent of the undersigned parties; provided that such
amendment shall not affect the rights of existing Contract Owners, and that such
amendment be in writing and duly executed.
-7-
<PAGE>
IN WITNESS WHEREOF, the undersigned parties have caused this Agreement to
be duly executed and their respective corporate seals to be hereunto affixed and
attested on the date first stated above.
ANCHOR NATIONAL LIFE INSURANCE COMPANY
By: /s/ Jana Waring Greer
----------------------
Jana Waring Greer
Senior Vice President
VARIABLE ANNUITY ACCOUNT FIVE
BY: ANCHOR NATIONAL LIFE INSURANCE COMPANY
By: /s/ Jana Waring Greer
----------------------
Jana Waring Greer
Senior Vice President
SUNAMERICA CAPITAL SERVICES, INC.
By: /s/ J. Steven Neamtz
--------------------
J. Steven Neamtz
President
-8-
<PAGE>
ATTACHMENT A
CONTRACT SPECIFICATION SHEET
The following variable annuity contracts are the subject of the Distribution
Agreement between Anchor National Life Insurance Company and SunAmerica Capital
Services, Inc. dated January 2, 1997, regarding the sale of contracts funded in
Variable Annuity Account Five:
1. Seasons
\\Broad3\sys\DATA\LEGAL\NIXON\SEASONS\DistAgr.doc
<PAGE>
AMENDED AND RESTATED ARTICLES OF INCORPORATION
AND ARTICLES OF REDOMESTICATION
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
We, the undersigned, acting as incorporators for the purpose of
redomesticating Anchor National Life Insurance Company, a California
corporation, which intends to continue its existence, without interruption, as a
corporation organized under the laws of the State of Arizona pursuant to Arizona
Revised Statutes Section 20-231.A, do hereby adopt the following Amended and
Restated Articles of Incorporation and Articles of Redomestication for said
corporation.
ARTICLE I
---------
The name of the corporation shall be Anchor National Life Insurance
Company.
ARTICLE II
----------
The corporation was incorporated in the State of California on April
12, 1965.
ARTICLE III
-----------
The existence of the corporation shall be perpetual.
ARTICLE IV
----------
Upon the approval of these Amended and Restated Articles of
Incorporation and Articles of Redomestication by the necessary regulatory
authorities, Anchor National Life Insurance Company shall be and continue to be
possessed of all privileges, franchises and powers to the same extent as if it
had been originally incorporated under the laws of the State of Arizona; and all
privileges, franchises and powers belonging to said corporation, and all
property, real, personal and mixed, and all debts due on whatever account, all
Certificates of Authority, agent appointments, and all chooses in action, shall
be and the same are hereby ratified, approved, confirmed and assured to Anchor
National Life Insurance Company with like effect and to all intents and purposes
as if it had been originally incorporated under the laws of the State of
Arizona. Said corporation shall be given recognition as a domestic corporation
of the State of Arizona from and after April 12, 1965, and as a domestic insurer
of the State of Arizona from and after December 2, 1966, the dates of its
initial incorporation and authorization to transact insurance business under
<PAGE>
the laws of the State of California, effective the latter of January 1, 1996 or
the date of filing with the Arizona Corporation Commission.
ARTICLE V
---------
The nature of the business to be transacted and the objects and
purposes for which this corporation is organized include the transaction of any
and all lawful business for which insurance corporations may be incorporated
under the laws of the State of Arizona without limitation, and as said laws may
be amended from time to time, and specifically said corporation shall be
authorized to transact life insurance, disability insurance and annuities, as
defined under Arizona Revised Statutes, Section 20-254, 20-253 and 20-254.01
respectively, together with such other kinds of insurance as the corporation may
from time to time be authorized to transact, and to act as a reinsurer of
business for which it is duly authorized. Consistent with the applicable
federal and state requirements, the Company may issue funding agreements and
guaranteed investment contracts as defined under Arizona Revised Statutes,
Section 20-208.
ARTICLE VI
----------
The authorized capital of the corporation shall be $4,000,000, and
shall consist of 4,000 shares of voting common stock with a par value of
$1,000.00 per share. No holders of stock of the corporation shall have any
preferential right to subscription to any shares or securities convertible into
shares of stock of the corporation, nor any right of subscription to any thereof
other than such, if any, as the Board of Directors in its discretion may
determine, and at such price as the Board of Directors in its discretion may
fix; and any shares or convertible securities which the Board of Directors may
determine to offer for subscription to the holders of stock at the time
existing.
Nothing herein contained shall be construed as prohibiting the
corporation from issuing any shares of authorized but unissued common stock for
such consideration as the Board of Directors may determine, provided such
issuance is approved by the shareholders of the corporation by a majority of the
votes entitled to be cast at any annual or special meeting of shareholders
called for that purpose. No such authorized but unissued stock may, however, be
issued to the shareholders of the corporation by way of a stock dividend,
split-up or in any other manner of distribution unless the same ratable stock
dividend, stock split-up or other distribution be declared or made in voting
common stock to the holder of such voting common stock at the time outstanding.
Each holder of common stock shall be entitled to participate share for share in
any cash dividends which may be declared from time to time on the common stock
of the corporation by the Board of Directors and to receive pro rata the net
assets of the corporation on liquidation.
-2-
<PAGE>
ARTICLE VII
-----------
The affairs of the corporation shall be conducted by a Board of
Directors consisting of not less than five (5) nor more than fifteen (15)
directors as fixed by the bylaws, and such officers as said directors may at
any time elect or appoint. No officer or director need be a shareholder of
this corporation. Ten (10) directors shall constitute the initial Board of
Directors. The names and addresses of the persons who are to serve as
directors until the next annual meeting of shareholders or until their
successors are elected and qualified, and of the persons who are to serve as
officers until the next annual meeting of the directors or until their
successors are elected and qualify, are:
BOARD OF DIRECTORS
Eli Broad, Chairman
1 SunAmerica Center, Century City
Los Angeles, California 90067-6022
James Richard Belardi, Director
1 SunAmerica Center, Century City
Los Angeles, California 90067-6022
Lorin Merrill Fife, III, Director
1 SunAmerica Center, Century City
Los Angeles, California 90067-6022
Jana Waring Greer, Director
1 SunAmerica Center, Century City
Los Angeles, California 90067-6022
Susan Louis Harris, Director
1 SunAmerica Center, Century City
Los Angeles, California 90067-6022
Gary Walden Krat, Director
1 SunAmerica Center, Century City
Los Angeles, California 90067-6022
, Director (Vacant)
1 SunAmerica Center, Century City
Los Angeles, California 90067-6022
Peter McMillian, Director
1 SunAmerica Center, Century City
Los Angeles, California 90067-6022
-3-
<PAGE>
Scott Lawrence Robinson, Director
1 SunAmerica Center, Century City
Los Angeles, California 90067-6022
Jay Steven Wintrob, Director
1 SunAmerica Center, Century City
Los Angeles, California 90067-6022
OFFICERS
Victor Edward Akin, Vice President
Eli Broad, President and Chief Executive Officer
James Richard Belardi, Senior Vice President
Lorin Merrill Fife, III, Senior Vice President, General Counsel
and Assistant Secretary
Michael Lee Fowler, Vice President
Nelson Scott Gillis, Vice President and Controller
Jana Waring Greer, Senior Vice President
J. Franklin Grey, Vice President
Susan Louise Harris, Senior Vice President and Secretary
Keith Bernard Jones, Vice President
Gary Walden Krat, Senior Vice President
Michael Lee Lindquist, Vice President
Edward Poli Nolan, Jr., Vice President
Gregory Mark Outcalt, Vice President
Edwin Raquel Reoliquio, Senior Vice President and Actuary
Scott Harris Richland, Vice President and Treasurer
Scott Lawrence Robinson, Senior Vice President
James Warren Rowan, Vice President
Jay Steven Wintrob, Executive Vice President
The directors shall have the power to adopt, amend, alter and repeal
the Bylaws, to manage the corporate affairs and make all rules and regulations
expedient for the management of the affairs of the corporation, to remove any
officer and to fill all vacancies occurring in the Board of Directors and
offices for any cause, and to appoint from their own number an executive
committee and other committees and vest said committees with all the powers
permitted by the Bylaws.
ARTICLE VIII
------------
Subject to the further provisions hereof, the corporation shall
indemnify any and all of its existing and former directors and officers and
their spouses against all expenses incurred by them and each of them, including
but not confined to legal fees, judgments and penalties which may be incurred,
rendered or levied in any legal or administrative action brought against any of
them, for or on account of any action or omission alleged to have been committed
while acting within the scope of employment as a
-4-
<PAGE>
director or officer of the corporation to the fullest extent allowable pursuant
to A.R.S. Section 10-005, et al. as my be amended from time to time. Whenever
any such person has grounds to believe that he may incur any such aforementioned
expense, he shall promptly make a full report of the matter to the President and
the Secretary of the Corporation. Thereafter, the Board of Directors of the
corporation shall, within a reasonable time, determine if such person acted, or
failed to act, in good faith and in a manner he reasonably believed to be in or
not opposed to the best interest of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. If the Board of Directors determines that such person acted, or
failed to act, in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful, then indemnification shall be mandatory and shall be automatically
extended as specified herein, provided, however, that the corporation shall have
the right to refuse indemnification, wholly or partially, in any instance in
which the person to whom indemnification would otherwise have been applicable
shall have unreasonably refused to permit the corporation, at its own expense
and through counsel of its own choosing, to defend him in the action, or shall
have unreasonable refused to cooperate in the defense of such action.
ARTICLE IX
----------
All directors of the corporation shall be elected at the annual
meeting of the shareholders, which shall be held on the third Thursday of March
of each year or such other date and time as may be determined by the Board of
Directors, unless such day falls on a holiday, in which event the regular annual
meeting shall be held on the next succeeding business day.
ARTICLE X
---------
The principal place of business of the corporation shall be located in
the City of Phoenix, Maricopa County, Arizona, but it may have other places of
business and transact business, and its Board of Directors or shareholders may
meet for the transaction of business, at such other place or places within or
without the State of Arizona which its Board of Directors may designate.
ARTICLE XI
----------
The fiscal year of the corporation shall be the calendar year.
-5-
<PAGE>
ARTICLE XII
-----------
In no event shall the corporation incur indebtedness in excess of the
amount authorized by law.
ARTICLE XIII
------------
The shares of the corporation, when issued, shall be non-assessable,
except to the extent required by the Constitution, specifically, but not in
limitation thereof, as provided by Article XIV, Section 11 of the Constitution
of the State of Arizona and the laws of the State of Arizona.
ARTICLE XIV
-----------
The private property of the shareholders, directors and officers of
the corporation shall be forever exempt from debts and obligations of the
corporation.
ARTICLE XV
----------
The Bylaws of the corporation may be repealed, altered amended, or
substitute Bylaws may be adopted, by the directors or the shareholders, in
accordance with the provisions contained in said Bylaws.
ARTICLE XVI
-----------
J. Michael Low of 2999 North 44th Street, Suite 250, Phoenix, Arizona,
85018, having been a bona fide resident of Arizona for at least three (3) years,
is hereby appointed the statutory agent of this corporation in the State of
Arizona, upon whom notices and processes, including service of summons, may be
served, and which, when so served shall have lawful personal service on the
corporation. The Board of Directors may revoke this appointment at any time,
and shall fill the vacancy in such position whenever one exists.
ARTICLE XVII
------------
The names and addresses of the incorporators of the corporation are:
J. Michael Low
Low & Childers, P.C.
2999 North 44th Street, Suite 250
Phoenix, Arizona 85018
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S. David Childers
Low & Childers, P.C.
2999 North 44th Street, Suite 250
Phoenix, Arizona 85018
Steven R. Henry
Low & Childers, P.C.
2999 North 44th Street, Suite 250
Phoenix, Arizona 85018
Carrie M. McDonald
Low & Childers, P.C.
2999 North 44th Street, Suite 250
Phoenix, Arizona 85018
Kathy A. Steadman
Low & Childers, P.C.
2999 North 44th Street, Suite 250
Phoenix, Arizona 85018
All individual incorporators are eighteen (18) years of age or older.
All powers, duties and responsibilities of the incorporators shall
cease at the time of delivery of these Amended and Restated Articles of
Incorporation and Articles of Redomestication to the Arizona Corporation
Commission for filing.
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<PAGE>
IN WITNESS WHEREOF, we hereunto affix our signatures as of the 14th
day of December, 1997.
/s/ J. Michael Low /s/ S. David Childers
- ------------------ ----------------------
J. Michael Low S. David Childers
/s/ Steven R. Henry /s/ Carrie M. McDonald
- ------------------- ----------------------
Steven R. Henry Carrie M. McDonald
/s/ Kathy A. Steadman
- ---------------------
Kathy A. Steadman
Subscribed, sworn to and acknowledged before me this 14th day of
December, 1997.
[unreadable]
---------------------------
Notary Public
My Commission Expires:
8-15-99
- -------
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<PAGE>
APPOINTMENT OF STATUTORY AGENT
I, J. Michael Low, being a resident of the State of Arizona for at
least three (3) years preceding this appointment, do hereby accept appointment
as Statutory Agent for Anchor National Life Insurance Company in accordance with
the Arizona Revised Statutes until appointment of a successor Statutory Agent
and removal.
DATED, this 14th day of December, 1997.
/s/ J. Michael Low
------------------
J. Michael Low, Esq.
Low & Childers, P.C.
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<PAGE>
AMENDED AND RESTATED
BYLAWS
OF
ANCHOR NATIONAL LIFE INSURANCE COMPANY
ARTICLE I.
SHAREHOLDERS.
SECTION 1. ANNUAL MEETINGS. The annual meeting of the
shareholders of the Corporation shall be held on the fourth Thursday in April of
each year or such other dates and times as may be determined. Not less than ten
(10) nor more than fifty (50) days' written or printed notice stating the place,
day and hour of each annual meeting shall be given in the manner provided in
Section 1 of Article IX hereof. The business to be transacted at the annual
meeting shall include the election of directors, consideration and action upon
the reports of officers and directors and any other business within the power of
the corporation. All annual meetings shall be general meetings.
SECTION 2. SPECIAL MEETINGS CALLED BY PRESIDENT OR BOARD OF
DIRECTORS. At any time in the interval between annual meetings, special
meetings of shareholders may be called by the President, the Secretary or by two
(2) or more directors, upon ten (10) days' written or printed notice, stating
the place, day and hour of such meeting and the business proposed to be
transacted thereat. Such notice shall be given in the manner provided in
Section 1 of Article IX. No business shall be transacted at any special meeting
except that named in the notice.
SECTION 3. SPECIAL MEETING CALLED BY SHAREHOLDERS. Upon the
request in writing delivered to the President or Secretary of the Corporation by
the holders of ten percent (10%) or more of all shares outstanding and entitled
to vote, it shall be the duty of the President or Secretary of the Corporation
to call forthwith a special meeting of the shareholders. Such request shall
state the purpose or purposes of such meeting and the matters proposed to be
acted on thereat. The Secretary of the Corporation shall inform such
shareholders of the reasonably estimated cost of preparing and mailing the
notice of the meeting. If upon payment of such costs to the corporation, the
person to whom such request in writing shall have been delivered shall fail to
issue a call for such meeting within ten (10) days after the receipt of such
request and payment of costs, then the shareholders owning ten percent (10%) or
more of the voting shares may do so upon giving fifteen (15) days' notice of the
time, place and object of the meeting in the manner provided in Section 1 of
Article IX.
<PAGE>
SECTION 4. REMOVAL OF DIRECTORS. At any special meeting of the
shareholders called in the manner provided for by this Article, the
shareholders, by a vote of a majority of all shares of stock outstanding and
entitled to vote, may remove any director or the entire Board of Directors from
office and may elect a successor or successors to fill any resulting vacancies
for the remainder of his or their terms.
SECTION 5. VOTING; PROXIES; RECORD DATE. At all meetings of
shareholders any shareholder entitled to vote may vote by proxy. Such proxy
shall be in writing and signed by the shareholder or by his duly authorized
attorney in fact. It shall be dated, but need not be sealed, witnessed or
acknowledged. The board of directors may fix the record date for the
determination of shareholders entitled to vote in the manner provided in
Section 4 of Article IX hereof.
SECTION 6. QUORUM. The presence in person or by proxy of the
persons entitled to vote a majority of the voting shares of any meeting shall
constitute a quorum for the transaction of business. If at any annual or
special meeting of shareholders a quorum shall fail to attend in person or by
proxy, a majority in interest attending in person or by proxy may adjourn the
meeting from time to time, not exceeding thirty (30) days in all, and thereupon
any business may be transacted which might have been transacted at the meeting
originally called had the same been held at the time so called.
SECTION 7. FILING PROXIES. At all meetings of shareholders, the
proxies shall be filed with and be verified by the secretary of the corporation
or, if the meeting shall so decide, by the secretary of the meeting.
SECTION 8. PLACE OF MEETINGS. All meetings of shareholders shall
be held at such place, either within or without the State of Arizona, on such
date and at such time as may be determined from time to time by the Board of
Directors (or the Chairman in the absence of a designation by the Board of
Directors).
SECTION 9. ORDER OF BUSINESS. The order of business at all
meetings of shareholders shall be as determined by the Chairman of the meeting.
SECTION 10. ACTION WITHOUT MEETING. Directors may be elected
without a shareholders' meeting by a consent in writing, setting forth the
action so taken, signed by all persons entitled to vote for the election of
directors; provided, however, that the foregoing shall not limit the power of
directors to fill vacancies in the Board of Directors, and that a director may
be elected to fill a vacancy not filled by the directors by written consent in
the manner provided by the General Corporation Law.
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Any other action, which under any provision of the General Corporation
Law, may be taken at a meeting of the shareholders, may be taken without a
meeting, and without notice except as hereinafter set forth, if a consent in
writing, setting forth the action so taken, is signed by the holders of
outstanding shares having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted.
All written consents shall be filed with the Secretary of the
Corporation. Any shareholder giving a written consent, or the shareholder's
proxyholders, or a transferee of the shares of a personal representative of the
shareholder or their respective proxyholders, may revoke the consent by a
writing receiving by the Corporation prior to the time that written consents of
the number of shares required to authorize the proposed action have been filed
with the Secretary of the Corporation, but may not do so thereafter. Such
revocation is effective upon its receipt by the Secretary of the Corporation.
ARTICLE II.
DIRECTORS.
SECTION 1. POWERS. The Board of Directors shall have the control
and management of the affairs, business and properties of the Corporation. They
shall have and exercise in the name of the Corporation and on behalf of the
Corporation all the rights and privileges legally exercisable by the
Corporation, except as otherwise provided by law, by the Charter or by these
Bylaws. A director need not be a shareholder or a resident of Arizona.
SECTION 2. NUMBER; TERM OF OFFICE; REMOVAL. The number of
directors of the Corporation shall be not less than five (5) nor more than
fifteen (15). The number to be elected at each annual meeting shall be fixed by
resolution of the directors and stated in the notice of the meeting, subject,
however, to approval by the shareholders voting at the meeting. The directors
shall hold office for the term of one year, or until their successors are
elected and qualify. A director may be removed from office as provided in
Section 4 of Article I hereof.
SECTION 3. VACANCIES. If the office of a director becomes vacant,
or if the number of directors is increased, such vacancy may be filled by the
Board by a vote of a majority of directors then in office though not less than a
quorum. The shareholders may, however, at any time during the term of such
director, elect some other person to fill said vacancy and thereupon the
election by the Board shall be superseded and such election by the shareholders
shall be deemed a filling of the vacancy and not a removal and may be made at
any special meeting called for that purpose.
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<PAGE>
SECTION 4. ORGANIZATION MEETINGS; REGULAR MEETINGS. The Board of
Directors shall meet for the election of officers and any other business as soon
as practicable after the adjournment of the annual meeting of the shareholders.
No notice of the organization meeting shall be required if it is held at the
same place and immediately following the annual meeting of the shareholders.
Other regular meetings of the Board of Directors may be held at such intervals
as the Board may from time to time prescribe.
Any action required or permitted to be taken at a meeting of the Board
of Directors or of a committee of the Board may be taken without a meeting, if a
unanimous written consent which sets forth the action is signed by each member
of the Board or committee and filed with the minutes of proceedings of the Board
or committee.
Unless otherwise restricted by the Articles of Incorporation or these
Bylaws, members of the Board of Directors, or any committee designated by the
Board of Directors, may participate in a meeting of the Board of Directors, or
such committee, as the case may be, by means of telephone conference or similar
communications equipment by means of which are persons participating in the
meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
SECTION 5. SPECIAL MEETINGS. Special meetings of the Board may be
called by the President or by a majority of the directors. At least twenty-four
(24) hours' notice shall be given of all special meetings; with the consent of
the majority of the directors, a shorter notice may be given.
SECTION 6. QUORUM. A majority of the Board of Directors shall
constitute a quorum for the transaction of business, but such number may be
decreased and/or increased at any time or from time to time by vote of a
majority of the entire Board to any number not less than two (2) directors or
not less than one-third of the directors, whichever is greater.
SECTION 7. PLACE OF MEETINGS. The Board of Directors shall hold
its meetings at such place, either within or without the State of Arizona, and
at such time as may be determined from time to time by the Board of Directors
(or the Chairman in the absence of a determination by the Board of Directors).
SECTION 8. RULES AND REGULATIONS. The Board of Directors may
adopt such rules and regulations for the conduct of its meetings and the
management of the affairs of the Corporation as the Board may deem proper and
not inconsistent with the laws of the State of Arizona or these Bylaws or the
Charter.
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<PAGE>
SECTION 9. COMPENSATION. The directors, as such, may receive a
stated salary for their services and/or a fixed sum and expenses of attendance
may be allowed for attendance at each regular or special meeting of the Board of
Directors. Such stated salary and/or attendance fee shall be determined by
resolution of the Board unless the shareholders have adopted a resolution
relating thereto, provided that nothing herein contained shall be construed to
preclude a director from serving in any other capacity and receiving
compensation therefor.
SECTION 10. CHAIRMAN OF THE BOARD. The Board of Directors shall
provide for a Chairman of the Board from among its members. So long as there
shall be a person so active, he shall preside at all meetings of the Board and
at all joint meetings of officers and directors. In the absence of the
Chairman, the Vice Chairman, if any, or in his absence, the President, shall
preside at all meetings of the Board and all joint meetings of officers and
directors.
SECTION 11. INVESTMENT COMMITTEE. There shall be an Investment
Committee consisting of the President of the Corporation EX OFFICIO and such
members of the Board of Directors and/or officers and employees as the Board may
by resolution prescribe. No investments or loans (other than policy loans or
annuity contract loans) shall be made unless the same be authorized or approved
by the Board of Directors or the Investment Committee. The Investment Committee
shall maintain minutes of its meetings and shall submit regular reports to the
Board of Directors.
SECTION 12. EXECUTIVE COMMITTEE. The Board of Directors may
appoint from among its members an Executive Committee composed of three (3) or
more directors, and may delegate to such Committee, in the interval between the
meetings of the Board of Directors, any and all of the powers of the Board of
Directors in the management of the business and affairs of the Corporation,
except the power to declare dividends, issue stock, select directors to fill
vacancies in the membership of the Executive Committee or recommend to
shareholders any action requiring shareholders' approval. The members of such
Committee shall constitute a quorum for the transaction of business at any
meeting and the act of a majority of the members present at any meeting at which
the quorum requirement is satisfied shall be the act of the Board of Directors.
In the absence of any member of the Executive Committee necessary to constitute
a quorum, the members thereof present at any meeting, whether or not they
constitute a quorum, may, with telephonic approval of one of the absent members
of the Executive Committee, appoint a member of the Board of Directors to act in
place of such absent member.
SECTION 13. OTHER COMMITTEES. The Board of Directors may appoint
from its own members and, where permitted by law, from the Corporation's
officers and/or employees, such standing, temporary, special or AD HOC
committees as the Board may determine, investing such committees with such
powers, duties
5
<PAGE>
and functions as the Board may prescribe. All such committees shall include the
President, EX OFFICIO.
SECTION 14. ADVISORY BOARD. The Board of Directors may elect an
Advisory Board to serve until the next annual meeting of the Board of Directors
or until their successors are elected and qualify. Such Board shall consist of
a number as determined from time to time by the Board of Directors, and they
shall be advised of the meetings of the Board of Directors and authorized to
attend the meetings and counsel with them, but shall have no vote. The Board of
Directors (and between meeting of the Board of Directors, the Executive
Committee) shall have the authority to increase or decrease the number of
members to the Advisory Board and to elect one or more members to the Advisory
Board to serve until the next meeting of the Board of Directors and until their
successors are elected and qualify, and may provide for the compensation and
other rules and regulations with respect to such Board.
SECTION 15. PROCEDURES; MEETINGS. The Committees shall keep
minutes of their proceedings and shall report the same to the Board of Directors
at the meeting next succeeding, and any action by the Committees shall be
subject to revision and alteration by the Board of Directors, provided that no
rights of third persons shall be affected by any such revision or alteration.
ARTICLE III.
OFFICERS.
SECTION 1. IN GENERAL. The officers of the Corporation shall
consist of a President, one or more Vice Presidents, a Secretary, a Treasurer,
and one or more Assistant Secretaries and Assistant Treasurers, and such other
officers bearing such titles as may be fixed pursuant to these Bylaws. The
President, Vice Presidents, Secretary, and Treasurer shall be chosen by the
Board of Directors and, except those persons holding contracts for fixed terms,
shall hold office only during the pleasure of the Board or until their
successors are chosen and qualify. The President may from time to time appoint
Assistant Vice Presidents, Assistant Secretaries, Assistant Treasurers, and
other officers bearing such titles and exercising such authority as he may from
time to time deem appropriate, and except those persons holding contracts for
fixed terms, those officers appointed by the President shall hold office only
during his pleasure or until their successors are appointed and qualify. Any
two (2) officers, except those of President, Executive Vice President and
Secretary, may be held by the same persons, but no officer shall execute,
acknowledge or verify any instrument in more than one capacity when such
instrument is required to be executed, acknowledged, or verified by any two (2)
or more officers. The Board of Directors or the President may from time
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<PAGE>
to time appoint other agents and employees, with such powers and duties as they
may deem proper.
SECTION 2. PRESIDENT. The President shall be Chief Executive
Officer of the Corporation and shall have the general management of the
Corporation's business in all departments. In the absence of the Chairman of
the Board, the President shall preside at all meetings of the Board of Directors
and shall call to order all meetings of shareholders. The President shall
perform such other duties as the Board of Directors may direct.
SECTION 3. VICE PRESIDENTS. In the absence or disability of the
President, the Vice Presidents, if any, in order of their rank as designated by
the Board of Directors or, if not ranked, the Vice President designated by the
Board of Directors, shall perform all the duties of the President, and when so
acting shall have all the powers of, and be subject to all the restrictions
upon, the President. The Vice Presidents shall have such other powers and
perform such other duties as from time to time may be prescribed for them
respectively by the Board of Directors or the Bylaws.
SECTION 4. TREASURER. Unless there shall be a financial Vice
President designated by the Board of Directors as the chief financial officer of
the Corporation, having general supervision over its finances, the Treasurer
shall be the chief financial officer with such authority. He shall also have
authority to attest to the seal of the Corporation and shall perform such other
duties as may be assigned to him by the Board of Directors.
SECTION 5. SECRETARY OF THE CORPORATION. The Secretary of the
Corporation shall keep the minutes of the meetings of the shareholders and of
the Board of Directors, and shall attend to the giving and serving of all
notices of the Corporation required by law or these Bylaws. The Secretary shall
maintain at all times in the principal office of the Corporation at least one
copy of the Bylaws with all amendments to date, and shall make the same,
together with the minutes of the meetings of the shareholders, the annual
statement of the affairs of the Corporation and any voting trust agreement on
file at the office of the Corporation, available for inspection by any officer,
director, or shareholder during reasonable business hours. The Secretary shall
have authority to attest to the seal of the Corporation and shall perform such
other duties as may be assigned to the Secretary by the Board of Directors.
SECTION 6. OTHER SECRETARIES, ASSISTANT TREASURERS AND ASSISTANT
SECRETARIES. Secretaries other than the Secretary of the Corporation, the
Assistant Treasurers and the Assistant Secretaries shall have authority to
attest to the seal of the Corporation and shall perform such other duties as may
from time to time be assigned to them by the Board of Directors or the
President.
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<PAGE>
SECTION 7. SUBSTITUTES. The Board of Directors may from time to
time in the absence of any one of said officers or, at any other time, designate
any other person or persons on behalf of the Corporation, to sign any contracts,
deeds, notes, or other instruments in the place or stead of any of said
officers, and designate any person to fill any one of said offices, temporarily
or for any particular purpose; and any instruments so signed in accordance with
a resolution of the Board shall be the valid act of this Corporation as fully as
if executed by any regular officer.
ARTICLE IV.
RESIGNATION.
Any director or officer may resign his office at any time. Such
resignation shall be made in writing and shall take effect from the time of its
receipt by the Corporation, unless some time be fixed in the resignation, and
then from that date. The acceptance of a resignation shall not be required to
make it effective.
ARTICLE V.
INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Corporation shall indemnify any and all of its existing and former
directors and officers and their spouses against all expenses incurred by them
and each of them, including but not confined to legal fees, judgments and
penalties which may be incurred, rendered or levied in any legal or
administrative action brought against any of then, for or on account of any
action or omission alleged to have been committed while acting within the scope
of employment as director of officer of the Corporation to the fullest extent
allowable pursuant to the Arizona General Corporation Law as may be amended from
time to time. Whenever any such person has grounds to believe that he may incur
any such aforementioned expense, he shall promptly make a full report of the
matter to the President and the Secretary of the Corporation. Thereafter, the
Board of Directors of the Corporation shall, within a reasonable time, determine
if such person acted, or failed to act, in good faith and in a manner he
reasonably believed to be in or not opposed to the best interest of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. If the Board of Directors
determines that such person acted, or failed to act, in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful, then indemnification shall
be mandatory and shall be automatically extended as specified herein, provided,
however, that the Corporation shall have the right to refuse
8
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indemnification, wholly or partially, in any instance in which the person to
whom indemnification would otherwise have been applicable shall have
unreasonably refused to permit the Corporation, at its own expense and through
counsel of its own choosing, to defend him in the action, or shall have
unreasonably refused to cooperate in the defense of such action.
ARTICLE VI.
FISCAL YEAR.
The fiscal year of the Corporation shall be the calendar year.
ARTICLE VII.
SEAL.
The seal of the Corporation shall be a circular disc inscribed with
the name of the Corporation, "Anchor National Life Insurance Company," and the
word "Incorporated."
ARTICLE VIII.
MISCELLANEOUS PROVISIONS - STOCK.
SECTION 1. ISSUE. All certificates of shares of the Corporation
shall be signed by the manual or facsimile signatures of the President or any
Vice President, and countersigned by the Treasurer or Secretary of the
Corporation and sealed with the seal or facsimile seal of the Corporation. Any
stock certificates bearing the facsimile signatures of the officers above named
shall be manually signed by an authorized representative of the Corporation's
duly constituted transfer agent. If an officer whose signature appears on a
certificate ceases to be an officer before the certificate is issued, it may,
nevertheless, be issued with the same effect as if such officer were still in
office.
SECTION 2. TRANSFERS. No transfers of shares shall be recognized
or binding upon the Corporation until recorded on the transfer books of the
Corporation upon surrender and cancellation of certificates for a like number of
shares. All transfers shall be effected only by the holder of record of such
shares or by his legal representative, or by his attorney thereunto authorized
by power of attorney duly executed. The person in whose name shares shall stand
on the books of the Corporation may be deemed by the Corporation the owner
thereof for all purposes. The Corporation's transfer agent shall maintain a
stock transfer book, shall record therein all stock transfers and shall forward
copies of all transfer sheets at regular prompt intervals to the Corporation's
registrar, if there
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be one, or, if not, then to the Corporation's principal office for transcription
on the stock registry books.
SECTION 3. FORM OF CERTIFICATES; PROCEDURE. The Board of
Directors shall have power and authority to determine the form of stock
certificates (except insofar as prescribed by law), and to make all such rules
and regulations as the Board may deem expedient concerning the issue; transfer
and registration of said certificates, and to appoint one or more transfer
agents and/or registrars to countersign and register the same. The transfer
agent and registrar may be the same party.
SECTION 4. RECORD DATES FOR DIVIDENDS AND SHAREHOLDERS' MEETINGS.
The Board of Directors may fix the time, not exceeding twenty (20) days
preceding the date of any meeting of shareholders, any dividend payment date or
any date for the allotment of rights, during which the books of the Corporation
shall be closed against transfers of stock, or the Board of Directors may fix a
date not exceeding forty (40) days preceding the date of any meeting of
shareholders, any dividend payment date or any date for the allotment of rights,
as a record date for the determination of the shareholders entitled to notice of
and to vote at such meeting, or entitled to receive such dividends or rights, as
the case may be, and only shareholders of record on such date shall be entitled
to notice of and to vote at such meeting or to receive such dividends or rights,
as the case may be. In the case of a meeting of shareholders, the record date
shall be fixed not less than ten (10) days prior to the date of the meeting.
SECTION 5. LOST CERTIFICATES. In case any certificate of shares
is lost, mutilated or destroyed, the Board of Directors may issue a new
certificate in place thereof, upon indemnity to the Corporation against loss and
upon such other terms and conditions as the Board of Directors may deem
advisable.
ARTICLE IX.
NOTICE.
SECTION 1. NOTICE TO SHAREHOLDERS. Whenever by law or these
Bylaws notice is required to be given to any shareholder, such notice may be
given to each shareholder, whether or not such shareholder is entitled to vote,
by leaving the same with him or at his residence or usual place of business, or
by mailing it, postage prepaid, and addressed to him at his address as it
appears on the books of the Corporation. Such leaving or mailing of notice
shall be deemed the time of giving such notice.
SECTION 2. NOTICE TO DIRECTORS AND OFFICERS. Whenever by law of
these Bylaws notice is required to be given to any director or officer, such
notice may be given in any one of
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the following ways: by personal notice to such director or officer; by
telephone communication with such director or officer personally; by wire,
addressed to such director or officer at his then address or at his address as
it appears on the books of the Corporation; or by depositing the same in writing
in the post office or in a letter box in a postage paid, sealed wrapper
addressed to such director or officer at his then address or at his address as
it appears on the books of the Corporation; and the time when such notice shall
be mailed or consigned to a telegraph company for delivery shall be deemed to be
the time of the giving of such notice.
ARTICLE X.
VOTING OF SECURITIES IN OTHER CORPORATIONS.
Any stock or other voting securities in other corporations, which may
from time to time be held by the Corporation, may be represented and voted at
any meeting of shareholders of such other corporation by the President, any Vice
President, or the Treasurer, or by proxy or proxies appointed by the President,
any Vice President, or the Treasurer, or otherwise pursuant to authorization
thereunto given by a resolution of the Board of Directors.
ARTICLE XI.
AMENDMENTS.
These Bylaws may be added to, altered, amended or repealed by a
majority vote of the entire Board of Directors at any regular meeting of the
Board or at any special meeting called for that purpose. Any action of the
Board of Directors in adding to, altering, amending or repealing these Bylaws
shall be reported to the shareholders at the next annual meeting and may be
changed or rescinded by majority vote of all of the stock then outstanding and
entitled to vote, without, however, affecting the validity of any action taken
in the meanwhile in reliance on these Bylaws so added to, altered, amended or
repealed as aforesaid by the Board of Directors. In no event shall the Board of
Directors have any power to amend this Article.
H:\DATA\LEGAL\PUZON\CORP\ANLIC\BYLAWS.DOC
11
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
A STOCK COMPANY LOS ANGELES, CALIFORNIA
CERTIFICATE NUMBER P9999999999
PARTICIPANT JOHN DOE
STATUTORY HOME OFFICE EXECUTIVE OFFICE ANNUITY SERVICE CENTER
2999 NORTH 44TH ST., STE 250 1 SUNAMERICA CENTER P.O. BOX 54299
PHOENIX, AZ 85018 LOS ANGELES, CA LOS ANGELES, CA
90067-6022 90054-0299
ANCHOR NATIONAL LIFE INSURANCE COMPANY ("We", "Us", the "Company", or "Anchor
National") agrees to provide benefits to the Participant under the Group
Contract, in accordance with the provisions set forth in this Certificate and in
consideration of the Participant's Enrollment Form and Purchase Payments We
received.
THIS CERTIFICATE IS EVIDENCE OF COVERAGE UNDER THE GROUP CONTRACT IF A
PARTICIPANT ENROLLMENT FORM IS ATTACHED. THE COVERAGE WILL BEGIN AS OF THE
CERTIFICATE DATE, SHOWN ON THE CERTIFICATE DATA PAGE.
THE VALUE OF AMOUNTS ALLOCATED TO THE SEPARATE ACCOUNT DURING THE ACCUMULATION
AND ANNUITY PERIODS IS NOT GUARANTEED. THE VALUE WILL INCREASE OR DECREASE BASED
UPON THE INVESTMENT EXPERIENCE OF THE INVESTMENTS UNDERLYING THE SUBACCOUNTS YOU
CHOOSE.
THE CASH SURRENDER BENEFIT OF AMOUNTS ALLOCATED TO ANY FIXED-MVA ACCOUNT OPTION
INCREASES OR DECREASES BASED ON THE APPLICATION OF THE MARKET VALUE ADJUSTMENT.
THE UNADJUSTED CASH SURRENDER BENEFIT IS AVAILABLE FOR 30 DAYS AFTER THE END OF
THE GUARANTEED PERIOD. THERE IS NO MARKET VALUE ADJUSTMENT FOR ANY CASH
SURRENDER BENEFIT OF AMOUNTS ALLOCATED TO NON-MVA FIXED ACCOUNT OPTIONS.
TEN DAY RIGHT TO EXAMINE CERTIFICATE - YOU MAY RETURN THIS CERTIFICATE TO OUR
ANNUITY SERVICE CENTER OR TO THE AGENT THROUGH WHOM THE CERTIFICATE WAS
PURCHASED WITHIN 10 DAYS AFTER YOU RECEIVE IT, IF YOU ARE NOT SATISFIED WITH IT.
THE COMPANY WILL REFUND THE CERTIFICATE VALUE ON THE BUSINESS DAY DURING WHICH
THE CERTIFICATE IS RECEIVED. UPON SUCH REFUND, THE CERTIFICATE SHALL BE VOID.
THIS IS A LEGAL DOCUMENT. READ IT CAREFULLY.
/s/ SUSAN L. HARRIS /s/ ELI BROAD
____________________ __________________
Susan L. Harris Eli Broad
Secretary President
ALLOCATED FIXED AND
VARIABLE GROUP ANNUITY CERTIFICATE
Nonparticipating
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TABLE OF CONTENTS
CERTIFICATE DATA PAGE.....................................................PAGE 3
PURCHASE PAYMENT ALLOCATION...............................................PAGE 4
DEFINITIONS...............................................................PAGE 5
PURCHASE PAYMENT PROVISIONS...............................................PAGE 7
Purchase Payments; Deferment of Payments; Suspension of Payments; Substitution
of Investment Portfolios
ACCUMULATION PROVISIONS...................................................PAGE 8
Separate Account Accumulation Value; Number of Accumulation Units; Accumulation
Unit Value (AUV); Fixed Account Accumulation Value; Fixed Account Guarantee
Period Options And Interest Crediting ; Market Value Adjustment
CHARGES AND DEDUCTIONS...................................................PAGE 10
Certificate Administration Charge; Withdrawal Charge; Expense Risk Charge;
Distribution Expense Charge; Mortality Risk Charge
TRANSFER PROVISION.......................................................PAGE 11
Transfers of Accumulation Units and Annuity Units Between Subaccounts; Transfers
of Accumulation Units To and From the Fixed Account
WITHDRAWAL PROVISION.....................................................PAGE 12
Withdrawal Charge
GENERAL PROVISIONS.......................................................PAGE 13
Entire Contract; Change of Annuitant; Death of Annuitant; Misstatement of Age or
Sex; Proof of Age, Sex or Survival; Conformity With State Laws; Changes in Law;
Assignment; Claims of Creditors; Premium Taxes and Other Taxes; Written Notice;
Periodic Reports; Incontestability; Non-Participating
DEATH PROVISIONS.........................................................PAGE 14
Death of Participant Before the Annuity Date; Due Proof of Death; Amount of
Death Benefit; Death of Participant or Annuitant on or After the Annuity Date;
Beneficiary
ANNUITY PROVISIONS.......................................................PAGE 16
Annuity Date; Payments to Participant; Fixed Annuity Payments; Amount of Fixed
Annuity Payments; Amount of Variable Annuity Payments
ANNUITY PAYMENT OPTIONS .................................................PAGE 18
FIXED ANNUITY PAYMENT OPTIONS TABLE......................................PAGE 19
VARIABLE ANNUITY PAYMENT OPTIONS TABLE...................................PAGE 21
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CERTIFICATE DATA PAGE
CERTIFICATE NUMBER: ANNUITY SERVICE CENTER:
P9999999999 P.O. BOX 54299
LOS ANGELES, CA 90054-0299
PARTICIPANT: AGE AT ISSUE:
JOHN DOE 35
ANNUITANT: FIRST PURCHASE PAYMENT:
JOHN DOE $10,000.00
ANNUITY DATE: CERTIFICATE DATE:
JULY 1, 2026 JULY 1, 1996
LATEST ANNUITY DATE: FIXED ACCOUNT -
JULY 1, 2051 Minimum Guarantee Rate: (3.0%)
BENEFICIARY:
As stated in the Participant Enrollment Form
ANNUAL CERTIFICATE ADMINISTRATION CHARGE:
$35.00
SEPARATE ACCOUNT:
VARIABLE ANNUITY ACCOUNT FIVE
FOR INQUIRIES
CALL 1-800-445-SUN2
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PURCHASE PAYMENT ALLOCATION
Subaccounts
-----------
80.00% Growth Strategy
0.00% Moderate Growth Strategy
0.00% Balanced Growth Strategy
0.00% Conservative Growth Strategy
Fixed Account Options
---------------------
Guarantee Initial
Period Interest Rate
------ -------------
20.00% 1 Year Fixed Non-MVA 3.0%
0.00% 1 Year DCA Fixed Non-MVA
0.00% 3 Year Fixed MVA
0.00% 5 Year Fixed MVA
0.00% 7 Year Fixed MVA
0.00% 10 Year Fixed MVA
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DEFINITIONS
Defined in this section are some of the words and phrases used in this
Certificate. These terms are capitalized when used in the Certificate. Other
capitalized terms in the Certificate refer to the captioned paragraph explaining
that particular concept in the Certificate.
ACCUMULATION UNIT
A unit of measurement used to compute the Certificate Value in a Subaccount
prior to the Annuity Date.
AGE
Age as of last birthday.
ANNUITANT
The natural person on whose life the annuity benefits under the Certificate are
based. The Annuitant is as named on the Certificate Data Page. If the
Certificate is in force and the Annuitant is alive on the Annuity Date, We will
begin payments to the Payee.
ANNUITY DATE
The date on which annuity payments to the Payee are to start. The Participant
must specify the Annuity Date, which must be at least two years after the
Certificate Date.
ANNUITY SERVICE CENTER
As specified on the Certificate Data Page.
ANNUITY UNIT
A unit of measurement used to compute annuity payments from the Subaccounts.
AUTOMATIC DOLLAR COST AVERAGING PROGRAM (DCA)
You may authorize the automatic transfer of amounts at regular intervals from a
source account to one or more Subaccounts (other than the source account). The
source account may be either the One Year DCA Fixed Account Option or any of the
Subaccounts. The unit values are determined on the dates of transfers. You may
terminate DCA at any time. However, upon termination, any amounts remaining
in the One Year DCA Fixed Account Option will be transferred to the One Year
Fixed Account Option. We reserve the right to change the terms and conditions of
the DCA program at any time.
BENEFICIARY
The Beneficiary is as designated on the Participant Enrollment Form unless later
changed by the Participant.
CERTIFICATE
The Certificate describes Your interest as a Participant under the group annuity
contract.
CERTIFICATE DATE
The date Your Certificate is issued, as shown on the Certificate Data Page. It
is the date from which Certificate Years and anniversaries are measured.
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CERTIFICATE VALUE
The sum of: (1) Your share of the Subaccounts' Accumulation Unit values and
(2) the value of amounts allocated to the Fixed Account Options.
CERTIFICATE YEAR
A year starting from the Certificate Date in one calendar year and ending on the
day preceding the anniversary of such date in the succeeding calendar years.
CONTRIBUTION YEAR
A year starting from the date of the Purchase Payment in one calendar year and
ending on the day preceding the anniversary of such date in the succeeding
calendar years.
CURRENT INTEREST RATE
The rates of interest declared by Us applicable to allocations of Subsequent
Purchase Payments to the Fixed Account Options. The Current Interest Rate will
not be less than the Minimum Guarantee Rate as shown on the Certificate Data
Page.
FIXED ACCOUNT OPTIONS
The investment options under this Certificate that are credited with a fixed
rate of interest declared by the Company. All Purchase Payments allocated to
the Fixed Account Options become part of the Company's general asset account.
The general asset account contains all the assets of the Company except for the
Separate Account and other segregated asset accounts. The Fixed Account Options
for this Certificate are shown on page 4.
FIXED ANNUITY
A series of periodic annuity payments of predetermined amounts that do not vary
with investment experience. Such payments are made from the Company's general
asset account.
GUARANTEE PERIOD
The period for which either the Initial Interest Rate, the Current Interest Rate
or the Renewal Interest Rate is credited to the amounts allocated to the Fixed
Account Options.
INITIAL INTEREST RATE
The rates of interest credited to the first Purchase Payment as described in the
Accumulation Provisions section. The Initial Interest Rate for this
Certificate's first Purchase Payment is listed on page 4. The Initial Interest
Rate may not be less than the Minimum Guarantee Rate as shown on the Certificate
Data Page.
IRC
The Internal Revenue Code of 1986, as amended, as the same may be amended or
superseded.
NYSE
New York Stock Exchange
PARTICIPANT
The person or entity named in the Certificate who is entitled to exercise all
rights and privileges of ownership under the Certificate.
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PAYEE
The person receiving payment of annuity benefits under this Certificate.
PURCHASE PAYMENTS
Payments in U.S. currency made by or on behalf of the Participant to the Company
for the Certificate.
RENEWAL INTEREST RATE
The rate(s) of interest declared by Us applicable to transfers from the
Subaccounts into any of the Fixed Account Options and to amounts previously
allocated to a Fixed Account Option wherein the Guarantee Period has expired.
The Renewal Interest Rate may not be less than the Minimum Guarantee Rate as
shown on the Certificate Data Page.
SEPARATE ACCOUNT
The segregated asset account named on the Certificate Data Page. The Separate
Account consists of several Subaccounts. The assets of the Separate Account are
not comingled with the general assets and liabilities of the Company. Each
Subaccount is not chargeable with liabilities arising out of any other
Subaccount. The value of amounts allocated to the Subaccounts of the Separate
Account is not guaranteed.
SUBACCOUNT
A variable investment option available under the Certificate, comprising a
division of the Separate Account. The available Subaccounts are shown on page
4.
SUBSEQUENT PURCHASE PAYMENTS
Purchase Payments made subsequent to the first Purchase Payment.
VARIABLE ANNUITY
A series of periodic annuity payments, which vary in amount according to the
investment experience of one or more Subaccounts, as selected by You .
WE, OUR, US, THE COMPANY
Anchor National Life Insurance Company.
YOU, YOUR
The Participant.
PURCHASE PAYMENT PROVISIONS
PURCHASE PAYMENTS
Purchase Payments are flexible. This means that, subject to Company declared
minimums and maximums, You may change the amounts, frequency or timing of
Purchase Payments. Purchase Payments may be allocated to the Fixed Account
Options and one or more Subaccounts in accordance with instructions from You. We
reserve the right to specify the minimum Purchase Payment that may be allocated
to a Subaccount under the Certificate.
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DEFERMENT OF PAYMENTS
We may defer making payments from the Fixed Account Options for up to six (6)
months. Interest, subject to state requirements, will be credited during the
deferral period.
SUSPENSION OF PAYMENTS
We may suspend or postpone any payments from the Subaccounts if any of the
following occur:
(a) the NYSE is closed,
(b) trading on the NYSE is restricted,
(c) an emergency exists such that it is not reasonably practical to dispose of
or determine the value of the assets held in a Subaccount, or
(d) the Securities and Exchange Commission, by order, so permits for the
protection of Participants.
Conditions in (b) and (c) will be decided by or in accordance with rules of the
Securities and Exchange Commission.
SUBSTITUTION OF INVESTMENT PORTFOLIOS
If: (a) the shares of the underlying investment portfolios in which the
Subaccounts invest should no longer be available for investment by the Separate
Account; or (b) if further investment in the shares of an investment portfolio
is no longer appropriate in view of the purpose of the Certificate, then We may
substitute shares of another underlying investment series, for shares already
purchased, or to be purchased in the future by Purchase Payments under the
Certificate. No substitution of securities may take place without prior approval
of the Securities and Exchange Commission and under such requirements as it may
impose.
ACCUMULATION PROVISIONS
SEPARATE ACCOUNT ACCUMULATION VALUE
The Separate Account Accumulation Value under the Certificate shall be the sum
of the values of the Accumulation Units held in the Subaccounts for the
Participant.
NUMBER OF ACCUMULATION UNITS
For each Subaccount, the number of Accumulation Units is the sum of each
Purchase Payment and transfer allocated to the Subaccount, reduced by premium
taxes, if any:
DIVIDED BY
The Accumulation Unit Value for that Subaccount as of the NYSE business day in
which the Purchase Payment or transfer amount is received.
The number of Accumulation Units will be similarly adjusted for withdrawals,
annuitizations, transfers, Certificate Administration Charge and Withdrawal
Charge. Adjustments will be made as of the end of the NYSE business day in
which We receive all requirements for the transaction, as appropriate.
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ACCUMULATION UNIT VALUE (AUV)
The AUV of a Subaccount for any NYSE business day is calculated by subtracting
(2) from (1) and dividing the result by (3) where:
(1) is the total value at the end of the given NYSE business day of the assets
attributable to the Accumulation Units of the Subaccount minus the total
liabilities;
(2) is the cumulative unpaid charge for assumption of Expense Risk,
Distribution Expense and Mortality Risk charges (See CHARGES AND
DEDUCTIONS);
(3) is the number of Accumulation Units outstanding at the end of the given
NYSE business day.
FIXED ACCOUNT ACCUMULATION VALUE
Under a Certificate, the Fixed Account Accumulation Value shall be the sum of
all monies allocated or transferred to the Fixed Account Option(s), reduced by
any applicable premium taxes, plus all interest credited on the Fixed Account
Option(s) during the period that the Certificate has been in effect. This
amount shall be adjusted for withdrawals, annuitizations, transfers, Certificate
Administration Charge and Withdrawal Charge. The Fixed Account Accumulation
Value shall not be less than the minimum values required by law in the state
where this Certificate is issued.
FIXED ACCOUNT GUARANTEE PERIOD OPTIONS AND INTEREST CREDITING
Any amounts allocated to the Fixed Account Options from the first Purchase
Payment will earn interest at the Initial Interest Rate for the Fixed Account
Option(s) selected for the duration of the Guarantee Period.
Subsequent Purchase Payments allocated to the Fixed Account Options will earn
interest at the Current Interest Rate for the Fixed Account Option(s) selected
for the duration of the Guarantee Period.
Transfers to the Fixed Account Options from the Subaccounts and amounts renewed
into the Fixed Account Options will earn interest at the Renewal Interest Rate
for the Fixed Account Option(s) selected for the duration of the Guarantee
Period.
For thirty (30) days following the date of expiration of a Guarantee Period, You
may renew for the same or any other Guarantee Period at the Renewal Interest
Rate or You may transfer all or a portion of the amount to the Subaccounts. If
the Participant does not specify a Guarantee Period at the time of renewal, We
will select the same Guarantee Period as has just expired, crediting the
Certificate with the Renewal Interest Rate in effect on the date of expiration
of the Guarantee Period, so long as such Guarantee Period does not extend beyond
the Annuity Date. If a renewal occurs within one year of the latest Annuity
Date, We will credit interest up to the Annuity Date at the Renewal Interest
Rate for the One Year Fixed Account Option.
If you are participating in the DCA program, Purchase Payments will be allocated
to the One Year DCA Fixed Account Option. Upon termination of the DCA program,
any amounts remaining in the One Year DCA Fixed Account Option will be
transferred to the One Year Fixed Account Option. Such amounts will earn
interest at the Renewal Interest Rate for the One Year Fixed Account Option.
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MARKET VALUE ADJUSTMENT (MVA)
Any payments and values based on a multi-year Fixed Account Option may be
subject to a MVA, the operation of which may result in upward or downward
adjustments in the Certificate Value, if withdrawn, transferred or annuitized
prior to the end of the respective Guarantee Period. The MVA will be calculated
by multiplying the amount withdrawn, transferred or annuitized by the formula
described below:
N/12
{(1 + I)/(1+J+0.0050)} -1
I = The interest rate currently in effect for that Guarantee Period.
J = The Initial Interest Rate available for the Guarantee Period equal to the
number of years (rounded up to an integer) remaining in the current Guarantee
Period at the time of withdrawal, transfer or annuitization. In the
determination of J, if the Company currently does not offer the applicable
Guarantee Period, then the rate will be determined by linear interpolation of
the Initial Interest Rate for the nearest two Guarantee Periods that are
available.
N = The number of full months remaining in the current Guarantee Period at the
time the withdrawal or annuitization request is processed.
If a Withdrawal Charge is applied to a withdrawal, then the MVA will be applied
to the withdrawal amount net of the Withdrawal Charge.
There will be no MVA on withdrawals from the Fixed Account Options in the
following situations: (1) to pay a Death Benefit paid upon death of the
Participant; (2) on amounts withdrawn to pay fees or charges; (3) on amounts
withdrawn from the Fixed Account Option within thirty (30) days after the end of
the Guarantee Period; (4) on annuitizations on the Latest Annuity Date; (5) on
amounts withdrawn from the One Year Fixed Account Option or the One Year DCA
Fixed Account Option .
CHARGES AND DEDUCTIONS
We will deduct the following charges from the Certificate:
CERTIFICATE ADMINISTRATION CHARGE
The charge specified on the Certificate Data Page will be deducted on each
Certificate anniversary that occurs on or prior to the Annuity Date. It will
also be deducted when the Certificate Value is withdrawn in full if withdrawal
is not on the Certificate anniversary. We reserve the right to assess a charge
on a class basis which is less than the charge specified on the Certificate Data
Page.
WITHDRAWAL CHARGE
This charge may be deducted upon withdrawal of the Certificate Value, in whole
or in part. See WITHDRAWAL PROVISIONS.
EXPENSE RISK CHARGE
On an annual basis this charge equals 0.35% of the average daily total net asset
value of Your Purchase Payments allocated to the Subaccounts. This charge is to
compensate Us for assuming the expense risks under the Certificate.
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DISTRIBUTION EXPENSE CHARGE
On an annual basis this charge equals 0.15% of the average daily total net asset
value of Your Purchase Payments allocated to the Subaccounts. This charge is to
compensate Us for all distribution expenses associated with the Certificate.
MORTALITY RISK CHARGE
On an annual basis this charge equals 0.90% of the average daily total net asset
value of Your Purchase Payments allocated to the Subaccounts. This charge is to
compensate Us for assuming the mortality risks under the Certificate.
TRANSFER PROVISION
Prior to the Annuity Date, You may transfer all or part of Your Certificate
Value to any of the Subaccounts or the Fixed Account Options, subject to certain
restrictions. We reserve the right to charge a fee for transfers if the number
of transfers exceeds the limit specified by Us.
TRANSFERS OF ACCUMULATION AND ANNUITY UNITS BETWEEN SUBACCOUNTS
Prior to the Annuity Date, You may transfer all or a portion of Your Certificate
Value from one Subaccount to another Subaccount. A transfer will result in the
purchase of Accumulation Units in a Subaccount and the redemption of
Accumulation Units in the other Subaccount. Transfers will be effected at the
end of the NYSE business day in which We receive Your completed request for the
transfer.
After the Annuity Date, You may transfer all or a portion of Your Certificate
Value from one Subaccount to another Subaccount. A transfer will result in the
purchase of Annuity Units in a Subaccount and the redemption of Annuity Units in
the other Subaccount. Transfers will be effected at the end of the NYSE
business day in which We receive Your completed request for the transfer.
The minimum amount that can be transferred between Subaccounts and the amount
that can remain in the Subaccount are subject to Company limits.
TRANSFERS OF ACCUMULATION UNITS TO AND FROM THE FIXED ACCOUNT
Prior to the Annuity Date, You may transfer all or any part of Your Certificate
Value from the Subaccount(s) to the Fixed Account Options or from the Fixed
Account Options to the Subaccount(s) of the Certificate. However, You may only
transfer to the One Year DCA Fixed Account Option if You are participating in
the DCA program.
After the Annuity Date, transfers into or out of the Fixed Account Options are
not allowed.
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WITHDRAWAL PROVISION
On or before the Annuity Date and while the Participant is living, You may
withdraw all or part of Your Certificate Value under this Certificate by
informing Us at Our Annuity Service Center. For a full withdrawal, this
Certificate must be returned to Our Annuity Service Center.
Without a written notice to the contrary, withdrawals will be deducted from the
Certificate Value in proportion to their allocation among the Fixed Account
Options and the Subaccounts. Withdrawals will be based on values at the end of
the NYSE business day in which the request for withdrawal and the Certificate
(in the case of a full withdrawal), are received at the Annuity Service Center.
Unless the SUSPENSION OF PAYMENTS or DEFERMENT OF PAYMENTS sections are in
effect, payment of withdrawals will be made within seven calendar days.
WITHDRAWAL CHARGE
Each Certificate Year, a Participant may withdraw, free of a Withdrawal Charge,
10% of all Purchase Payments which are still subject to a Withdrawal Charge.
Amounts withdrawn as a free withdrawal do not reduce Purchase Payments for
purposes of calculating future free withdrawals. The Participant will not
receive the benefit of a free withdrawal in a full surrender.
Withdrawals in excess of this free withdrawal amount may be subject to a
Withdrawal Charge. The withdrawal charge applied to any withdrawal will depend
on the age of the Purchase Payment to which the withdrawal is attributed. See
chart below.
For the purpose of determining the Withdrawal Charge, a withdrawal will be
attributed to amounts in the following order: (1) free withdrawal amount
(partial withdrawals only); (2) Purchase Payments which are both no longer
subject to the Withdrawal Charge and are not yet withdrawn; (3) Purchase
Payments subject to a Withdrawal Charge; and (4) other Certificate Value.
Purchase Payments, when withdrawn, are assumed to be withdrawn on a
first-in-first-out (FIFO) basis.
Number of Contribution Years Elapsed Withdrawal Charge as a
Between Contribution Year of Purchase Payment Percentage of Withdrawn
and Contribution Year of Withdrawal Purchase Payment
- --------------------------------------------------------------------------------
1 7%
2 6%
3 6%
4 5%
5 4%
6 3%
7 2%
8+ 0%
The Withdrawal Charge will be assessed against the Subaccounts and the Fixed
Account Options in the same proportion as the remaining Certificate Value is
allocated unless You request that the withdrawal come from a particular Fixed
Account Option or Subaccount. If the remaining Certificate Value is
insufficient to cover the Withdrawal Charge, any remaining balance will be
deducted from the withdrawal amount requested.
12
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GENERAL PROVISIONS
ENTIRE CONTRACT
The entire contract between You and Us consists of the group annuity contract,
the application, the Participant Enrollment Form as completed by You at the time
of purchase, this Certificate and any attached endorsement(s). An agent cannot
change the terms or conditions of this contract. Any change must be in writing
and approved by Us. Only Our President, Secretary, or one of Our
Vice-Presidents can give Our approval.
CHANGE OF ANNUITANT
If the Participant is an individual, the Participant may change the Annuitant at
any time prior to the Annuity Date. To make a change, the Participant must send
a written notice to Us at least 30 days before the Annuity Date. If the
Participant is not an individual, the Participant may not change the Annuitant.
DEATH OF ANNUITANT
If the Participant and Annuitant are different and the Annuitant dies before the
Annuity Date, the Participant becomes the Annuitant until such time as the
Participant elects a new Annuitant. The preceding sentence shall not apply if
the Participant is not an individual.
MISSTATEMENT OF AGE OR SEX
If the Age or sex of any Annuitant has been misstated, future annuity payments
will be adjusted using the correct Age and sex, according to Our rates in effect
on the date that annuity payments were determined. Any overpayment from the
Fixed Account Options, plus interest at the rate of 4% per year, will be
deducted from the next payment(s) due. Any underpayment from the Fixed Account
Options, plus interest at the rate of 4% per year, will be paid in full with the
next payment due. Any overpayment from the Subaccounts will be deducted from
the next payment(s) due. Any underpayment from the Subaccounts will be paid in
full with the next payment due.
PROOF OF AGE, SEX, OR SURVIVAL
The Company may require satisfactory proof of correct Age or sex at any time.
If any payment under this Certificate depends on the Annuitant being alive, the
Company may require satisfactory proof of survival.
CONFORMITY WITH STATE LAWS
The provisions of this Certificate will be interpreted by the laws of the state
in which the enrollment form was signed or such state as is required by law.
Any provision which, on the Certificate Date, is in conflict with the law of
such state is amended to conform to the minimum requirements of such law.
CHANGES IN LAW
If the laws governing this Certificate or the taxation of benefits under the
Certificate change, We reserve the right to amend this Certificate to comply
with these changes.
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ASSIGNMENT
You may assign this Certificate before the Annuity Date, but We will not be
bound by an assignment unless it is received by Us in writing. Your rights and
those of any other person referred to in this Certificate will be subject to the
assignment. Certain assignments may be taxable. We do not assume any
responsibility for the validity or tax consequences of any assignment.
CLAIMS OF CREDITORS
To the extent permitted by law, no right or proceeds payable under this
Certificate will be subject to claims of creditors or legal process.
PREMIUM TAXES AND OTHER TAXES
The Company may deduct from Your Certificate Value any premium tax or other
taxes payable to a state or other government entity, if applicable. Should We
advance any amount so due, We are not waiving any right to collect such amount
at a later date. The Company will deduct any withholding taxes required by
applicable law.
WRITTEN NOTICE
Any notice We send to You will be sent to Your address shown in the Participant
Enrollment Form unless You request otherwise. Any written request or notice to
Us must be sent to Our Annuity Service Center, as specified on the Certificate
Data Page.
PERIODIC REPORTS
At least once during each Certificate Year, We will send You a statement of the
account activity of the Certificate. The statement will include all
transactions which have occurred during the accounting period shown on the
statement. Statements of Your Certificate Value will cease to be provided to
You after the Annuity Date.
INCONTESTABILITY
This Certificate will be incontestable from the Certificate Date.
NONPARTICIPATING
This Certificate does not share in Our surplus.
DEATH PROVISIONS
Notwithstanding any provision of this Certificate to the contrary, all payments
of benefits under this Certificate will be made in a manner that satisfies IRC
Section 72(s), as amended from time to time. If the Certificate is owned by a
trust or other non-individual, We will treat the death of the Annuitant as the
death of the "Primary Annuitant", as defined in IRC Section 72(s)(6), and as the
death of any Participant.
DEATH OF PARTICIPANT BEFORE THE ANNUITY DATE. We will pay a death benefit to
the Beneficiary upon Our receiving: (a) due proof that a Participant died
before the Annuity Date; and (b) an election form selecting the death benefit
option. If no election form is received within 60 days of our receipt of due
proof of death, the death benefit will be paid in accordance with death benefit
option 1 below. The Beneficiary must select one of the following death benefit
options:
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1. Immediately collect the death benefit in a lump sum payment. If a
lump sum payment is elected, payment will be in accordance with any
applicable laws and regulations governing payments and death; or
2. Collect the death benefit in the form of one of the Annuity Payment
Options. The payments must be over the life of the Beneficiary or
over a period not extending beyond the life expectancy of the
Beneficiary. Payments under this death benefit option must commence
within one year after the Participant's death, otherwise, the death
benefit will be paid in accordance with death benefit option 1; or
3. If the Beneficiary is the Participant's spouse, the Beneficiary may
elect to become the Participant and continue the Certificate in force,
however, no death benefit is paid. Upon the new Participant's
subsequent death, the entire interest must be distributed immediately.
In any event, the entire interest in the Certificate will be distributed within
five years from the date of death of the Participant.
DUE PROOF OF DEATH
Due Proof of Death means:
1. a certified copy of a death certificate; Or
2. a certified copy of a decree of a court of competent jurisdiction as
to the finding of death; Or
3. a written statement by a medical doctor who attended the deceased
Participant at the time of death; Or
4. any other proof satisfactory to Us.
AMOUNT OF DEATH BENEFIT
Before You attain age 75 the amount of the death benefit is equal to the greater
of:
1. the Certificate Value at the end of the NYSE business day during which We
receive, at Our Annuity Service Center, due proof of the Participant's
death and an election of the type of payment to be made; Or
2. Purchase Payments less any partial withdrawals, compounded until the date
of death at 3% interest, plus any Purchase Payments and less any
withdrawals recorded after the date of death.
After You attain age 75, the death benefit will be the greater of:
1. the Certificate Value at the end of the NYSE business day during which We
receive, at Our Annuity Service Center, due proof of the Participant's
death and an election of the type of payment to be made; Or
2. Purchase Payments less any partial withdrawals, compounded until the
attainment of age 75 at 3% interest, plus any Purchase Payments and less
any partial withdrawals recorded after the attainment of age 75.
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DEATH OF PARTICIPANT OR ANNUITANT ON OR AFTER THE ANNUITY DATE. If the
Participant or Annuitant dies on or after the Annuity Date and before the entire
interest in the Certificate has been distributed, We will pay the remaining
portion of the interest of the Certificate as under the annuity payment option
being used on the date of death. For further information pertaining to death of
the Annuitant, see ANNUITY PAYMENT OPTIONS.
BENEFICIARY
The Beneficiary is as designated on the Participant Enrollment Form unless later
changed by the Participant. While: (a) the Participant is living and (b)
before the Annuity Date, the Participant may change the Beneficiary by written
notice in a form satisfactory to Us. The change will take effect on the date We
record the notice subject to any payments We have made. If two or more persons
are named: (a) those surviving the Participant will share equally unless
otherwise stated; and (b) the Beneficiaries must elect to receive their
respective portions of the death benefit according to the death benefit options.
If the Annuitant survives the Participant, and there are no surviving
Beneficiaries, the Annuitant will be deemed the Beneficiary. If the Participant
is also the Annuitant and there are no surviving Beneficiaries at the death of
the Participant, the death benefit will be paid to the estate of the Participant
in accordance with death benefit option 1.
ANNUITY PROVISIONS
ANNUITY DATE
The Participant selects an Annuity Date (the date on which annuity payments are
to begin) at the time of application. The Participant may change the Annuity
Date at any time, at least seven days prior to the Annuity Date, by written
notice to the Company at its Annuity Service Center. The Annuity Date must
always be the first day of the calendar month and must be at least two years
after the Certificate Date, but not beyond the later of the Participant's 90th
birthday or ten years after the Certificate Date. If the Participant is a
non-natural person, the latest annuity date is the later of the Annuitant's 90th
birthday or ten years after the Certificate Date. If no Annuity Date is
selected, the Annuity Date will be the latest Annuity Date, as set by the
Company.
PAYMENTS TO PARTICIPANT
Unless You request otherwise, We will make annuity payments to You. If You want
the annuity payments to be made to some other Payee, We will make such payments
subject to receipt of a written request filed at the Annuity Service Center no
later than thirty (30) days before the date of the first annuity payment.
Any such request is subject to the rights of any assignee. No payments
available to or being paid to the Payee while the Annuitant is alive can be
transferred, commuted, anticipated or encumbered.
FIXED ANNUITY PAYMENTS
If a Fixed Annuity payment option has been elected, the proceeds payable under
this Certificate less any applicable premium taxes, shall be applied to the
payment of the Fixed Annuity payment option elected at rates which are at least
equal to the annuity rates based upon the applicable tables in the Certificate.
In no event will the Fixed Annuity payments be changed once they begin.
16
<PAGE>
AMOUNT OF FIXED ANNUITY PAYMENTS
The amount of each Fixed Annuity payment will be determined by applying the
portion of the Certificate Value allocated to Fixed Annuity payments less any
applicable premium taxes to the annuity table applicable to the Fixed Annuity
payment option chosen.
AMOUNT OF VARIABLE ANNUITY PAYMENTS
(a) FIRST VARIABLE ANNUITY PAYMENT: The dollar amount of the first Variable
Annuity payment will be determined by applying the portion of the
Certificate Value allocated to the Subaccount, less any applicable premium
taxes, to the annuity table applicable to the Variable Annuity payment
option chosen. If the Certificate Value is allocated to more than one
Subaccount, the value of Your interest in each Subaccount is applied
separately to the Variable Annuity payment option table to determine the
amount of the first annuity payment attributable to each Subaccount.
(b) NUMBER OF VARIABLE ANNUITY UNITS: The number of Annuity Units for each
applicable Subaccount is the amount of the first annuity payment
attributable to that Subaccount divided by the value of the applicable
Annuity Unit for that Subaccount as of the Annuity Date. The number will
not change as a result of investment experience.
(c) VALUE OF EACH VARIABLE ANNUITY UNIT: The initial value of an Annuity Unit
of each Subaccount was set at $10 when the Subaccounts were established.
The value may increase or decrease from one month to the next. For any
month, the value of an Annuity Unit of a particular Subaccount is the value
of that Annuity Unit as of the last NYSE business day of the preceding
month, multiplied by the Net Investment Factor for that Subaccount for the
last NYSE business day of the current month.
The Net Investment Factor for any Subaccount for a certain month is determined
by dividing (1) by (2) where:
(1) the Accumulation Unit Value of the Subaccount determined as of
the last business day at the end of that month;
(2) the Accumulation Unit value of the Subaccount determined as of
the last business day at the end of the preceding month.
The result is then multiplied by a factor that neutralizes the assumed
investment rate of 3.5%.
(d) SUBSEQUENT VARIABLE ANNUITY PAYMENTS: After the first Variable Annuity
payment, payments will vary in amount according to the investment
performance of the applicable Subaccount(s) to which your Purchase Payments
are allocated. The amount may change from month to month. The amount of
each subsequent payment for each Subaccount is:
The number of Annuity Units for each Subaccount as determined for the first
annuity payment
MULTIPLIED BY
The value of an Annuity Unit for that Subaccount at the end of the month
immediately preceding the month in which payment is due.
We guarantee that the amount of each Variable Annuity payment will not be
affected by variations in expenses or mortality experience.
17
<PAGE>
ANNUITY PAYMENT OPTIONS
During the Annuitant's life, upon written election and the return of this
Certificate to the Company at its Annuity Service Center, the Certificate Value
may be applied to provide one of the following options or any annuity payment
option that is mutually agreeable. After two years from the Certificate Date,
and prior to the Annuity Date, You can choose one of the options described
below. If no option has been elected by the Annuity Date, You will
automatically receive Option 4 below with 120 monthly payments guaranteed.
OPTIONS 1 & 1V - LIFE ANNUITY, LIFETIME MONTHLY PAYMENTS GUARANTEED
Payments payable to a Payee during the lifetime of the Annuitant. No further
payments are payable after the death of the Annuitant.
OPTIONS 2 & 2V - JOINT AND SURVIVOR LIFE ANNUITY
Payments payable to the Payee during the lifetime of the Annuitant and during
the lifetime of a designated second person. No further payments are payable
after the deaths of both the Annuitant and the designated second person.
OPTIONS 3 & 3V - JOINT AND SURVIVOR LIFE ANNUITY - 120 MONTHLY PAYMENTS
GUARANTEED
Payments are payable to the Payee during the lifetime of the Annuitant and
during the lifetime of a designated second person. If, at the death of the
survivor, payments have been made for less than 120 monthly periods, the
remaining guaranteed annuity payments will be continued to the Beneficiary.
OPTIONS 4 & 4V - LIFE ANNUITY WITH 120 OR 240 MONTHLY PAYMENTS GUARANTEED
Payments payable to the Payee during the lifetime of the Annuitant. If, at the
death of the Annuitant, payments have been made for less than the 120 or 240
monthly periods, as selected at the time of annuitization, the remaining
guaranteed annuity payments will be continued to the Beneficiary.
OPTIONS 5 & 5V - FIXED PAYMENTS FOR A SPECIFIED PERIOD CERTAIN
Payments payable to the Payee for any specified period of time for five (5)
years or more, but not exceeding thirty (30) years, as selected at the time of
annuitization. The selection must be made for full twelve month periods. In
the event of death of the Annuitant, any remaining guaranteed annuity payments
will be continued to the Beneficiary.
18
<PAGE>
FIXED ANNUITY PAYMENT OPTIONS TABLE
BASIS OF COMPUTATION
The actuarial basis for the Fixed Annuity Payment Options Table is the 1983a
Annuitant Mortality Table, without projection with a guaranteed interest rate of
3%. The Fixed Annuity Payment Options Table does not include any applicable
premium tax.
OPTIONS 1 & 4 - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
(Monthly installments for ages not shown will be furnished upon request.)
<TABLE>
<CAPTION>
OPTION 1 OPTION 4 OPTION 4
AGE OF LIFE ANNUITY LIFE ANNUITY
PAYEE LIFE ANNUITY (W/120 PAYMENTS GUARANTEED) (W/240 PAYMENTS GUARANTEED)
<S> <C> <C> <C> <C> <C> <C>
MALE FEMALE MALE FEMALE MALE FEMALE
55 4.70 4.25 4.62 4.22 4.39 4.11
56 4.80 4.34 4.72 4.30 4.45 4.17
57 4.91 4.42 4.82 4.38 4.51 4.23
58 5.03 4.52 4.92 4.47 4.58 4.30
59 5.15 4.61 5.03 4.56 4.64 4.37
60 5.28 4.72 5.14 4.66 4.71 4.44
61 5.42 4.83 5.26 4.76 4.78 4.51
62 5.57 4.95 5.39 4.86 4.84 4.58
63 5.74 5.07 5.52 4.98 4.90 4.65
64 5.91 5.21 5.66 5.10 4.96 4.72
65 6.10 5.35 5.81 5.22 5.02 4.79
66 6.29 5.51 5.96 5.36 5.08 4.86
67 6.50 5.67 6.11 5.50 5.13 4.93
68 6.73 5.85 6.28 5.65 5.18 5.00
69 6.97 6.04 6.44 5.80 5.23 5.06
70 7.23 6.25 6.61 5.96 5.27 5.12
71 7.51 6.47 6.78 6.14 5.31 5.18
72 7.80 6.71 6.96 6.31 5.34 5.23
73 8.12 6.97 7.14 6.50 5.37 5.28
74 8.45 7.26 7.32 6.69 5.40 5.32
75 8.82 7.56 7.49 6.89 5.42 5.35
76 9.21 7.90 7.67 7.09 5.44 5.39
77 9.62 8.26 7.84 7.29 5.45 5.41
78 10.07 8.65 8.01 7.49 5.47 5.43
79 10.55 9.07 8.17 7.69 5.48 5.45
80 11.06 9.53 8.33 7.89 5.49 5.47
81 11.61 10.03 8.48 8.08 5.49 5.48
82 12.19 10.57 8.61 8.26 5.50 5.49
83 12.81 11.16 8.74 8.43 5.50 5.49
84 13.46 11.79 8.86 8.59 5.51 5.50
85 14.16 12.48 8.97 8.74 5.51 5.50
</TABLE>
19
<PAGE>
OPTION 2 - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
(MONTHLY INSTALLMENTS FOR AGES NOT SHOWN WILL BE FURNISHED UPON REQUEST.)
JOINT & 100% SURVIVOR LIFE ANNUITY
<TABLE>
<CAPTION>
AGE OF
MALE
PAYEE AGE OF FEMALE PAYEE
----- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
55 60 65 70 75 80 85
55 3.88 4.06 4.23 4.38 4.50 4.58 4.63
60 3.99 4.24 4.49 4.72 4.91 5.06 5.16
65 4.07 4.38 4.72 5.07 5.39 5.65 5.84
70 4.14 4.50 4.93 5.40 5.89 6.34 6.68
75 4.18 4.58 5.08 5.68 6.37 7.07 7.68
80 4.21 4.64 5.19 5.90 6.78 7.77 8.76
85 4.23 4.67 5.26 6.04 7.07 8.36 9.78
</TABLE>
OPTION 3 - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
(MONTHLY INSTALLMENTS FOR AGES NOT SHOWN WILL BE FURNISHED UPON REQUEST)
JOINT AND 100% SURVIVOR LIFE ANNUITY (W/120 PAYMENTS GUARANTEED)
<TABLE>
<CAPTION>
AGE OF
MALE
PAYEE AGE OF FEMALE PAYEE
----- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
55 60 65 70 75 80 85
55 3.87 4.06 4.23 4.37 4.48 4.56 4.60
60 3.98 4.23 4.48 4.71 4.89 5.02 5.09
65 4.07 4.38 4.71 5.05 5.35 5.57 5.71
70 4.13 4.49 4.91 5.36 5.81 6.18 6.42
75 4.17 4.57 5.05 5.62 6.23 6.78 7.17
80 4.20 4.61 5.14 5.79 6.54 7.27 7.82
85 4.21 4.64 5.19 5.89 6.73 7.60 8.30
</TABLE>
OPTION 5 - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
FIXED PAYMENT FOR SPECIFIED PERIOD
<TABLE>
<CAPTION>
NUMBER MONTHLY NUMBER MONTHLY NUMBER MONTHLY NUMBER MONTHLY
OF YEARS PAYMENT OF YEARS PAYMENT OF YEARS PAYMENT OF YEARS PAYMENT
-------- ------- -------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
10 9.61 17 6.23 24 4.84
11 8.86 18 5.96 25 4.71
5 17.91 12 8.24 19 5.73 26 4.59
6 15.14 13 7.71 20 5.51 27 4.47
7 13.16 14 7.26 21 5.32 28 4.37
8 11.68 15 6.87 22 5.15 29 4.27
9 10.53 16 6.53 23 4.99 30 4.18
</TABLE>
20
<PAGE>
VARIABLE ANNUITY PAYMENT OPTIONS TABLE
BASIS OF COMPUTATION
The actuarial basis for the Variable Annuity Payment Options Table is the 1983a
Annuitant Mortality Table, without projection with an effective annual assumed
investment rate of 3.5%. Variable Annuity Payment Options Table does not include
any applicable Premium Tax.
OPTIONS 1V& 4V - TABLE OF MONTHLY INSTALLMENTS PER $1,000
(Monthly installments for ages not shown will be furnished upon request.)
<TABLE>
<CAPTION>
OPTION 1V OPTION 4V OPTION 4V
AGE OF LIFE ANNUITY LIFE ANNUITY
PAYEE LIFE ANNUITY (W/120 PAYMENTS GUARANTEED) (W/240 PAYMENTS GUARANTEED)
<S> <C> <C> <C> <C> <C> <C>
MALE FEMALE MALE FEMALE MALE FEMALE
55 4.99 4.54 4.91 4.51 4.66 4.38
56 5.09 4.62 5.00 4.58 4.72 4.44
57 5.20 4.71 5.10 4.66 4.78 4.51
58 5.32 4.80 5.20 4.75 4.85 4.57
59 5.44 4.90 5.31 4.84 4.91 4.64
60 5.57 5.00 5.42 4.93 4.97 4.70
61 5.71 5.11 5.54 5.03 5.04 4.77
62 5.86 5.23 5.67 5.14 5.10 4.84
63 6.02 5.36 5.80 5.25 5.16 4.91
64 6.20 5.49 5.94 5.37 5.22 4.98
65 6.38 5.64 6.08 5.50 5.28 5.05
66 6.58 5.79 6.23 5.63 5.33 5.12
67 6.79 5.95 6.38 5.77 5.38 5.19
68 7.02 6.13 6.54 5.91 5.43 5.25
69 7.26 6.32 6.71 6.07 5.48 5.32
70 7.52 6.53 6.87 6.23 5.52 5.37
71 7.80 6.75 7.05 6.40 5.55 5.43
72 8.09 6.99 7.22 6.58 5.59 5.48
73 8.41 7.26 7.40 6.76 5.62 5.52
74 8.75 7.54 7.57 6.95 5.64 5.57
75 9.12 7.85 7.75 7.14 5.66 5.60
76 9.51 8.18 7.92 7.34 5.68 5.63
77 9.92 8.54 8.09 7.54 5.70 5.66
78 10.37 8.94 8.26 7.74 5.71 5.68
79 10.85 9.36 8.42 7.94 5.72 5.70
80 11.37 9.82 8.57 8.13 5.73 5.71
81 11.92 10.32 8.71 8.32 5.74 5.72
82 12.50 10.87 8.85 8.50 5.74 5.73
83 13.12 11.46 8.97 8.67 5.75 5.74
84 13.78 12.09 9.09 8.83 5.75 5.74
85 14.47 12.78 9.20 8.97 5.75 5.75
</TABLE>
21
<PAGE>
OPTION 2V - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
(MONTHLY INSTALLMENTS FOR AGES NOT SHOWN WILL BE FURNISHED UPON REQUEST.)
JOINT & 100% SURVIVOR LIFE ANNUITY
<TABLE>
<CAPTION>
AGE OF
MALE
PAYEE AGE OF FEMALE PAYEE
----- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
55 60 65 70 75 80 85
55 4.16 4.34 4.51 4.66 4.78 4.86 4.92
60 4.27 4.51 4.76 4.99 5.19 5.33 5.44
65 4.35 4.66 4.99 5.34 5.66 5.92 6.11
70 4.42 4.78 5.20 5.67 6.16 6.60 6.96
75 4.47 4.86 5.35 5.95 6.63 7.33 7.95
80 4.50 4.92 5.46 6.17 7.04 8.04 9.02
85 4.52 4.95 5.53 6.31 7.34 8.63 10.05
</TABLE>
OPTION 3V - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
(MONTHLY INSTALLMENTS FOR AGES NOT SHOWN WILL BE FURNISHED UPON REQUEST)
JOINT AND 100% SURVIVOR LIFE ANNUITY (W/120 PAYMENTS GUARANTEED)
<TABLE>
<CAPTION>
AGE OF
MALE
PAYEE AGE OF FEMALE PAYEE
----- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
55 60 65 70 75 80 85
55 4.16 4.34 4.51 4.65 4.76 4.84 4.88
60 4.26 4.51 4.75 4.98 5.16 5.29 5.37
65 4.35 4.65 4.98 5.31 5.61 5.84 5.98
70 4.41 4.76 5.17 5.62 6.07 6.44 6.68
75 4.46 4.84 5.32 5.88 6.48 7.03 7.42
80 4.48 4.89 5.41 6.05 6.79 7.52 8.07
85 4.50 4.92 5.46 6.15 6.99 7.85 8.53
</TABLE>
OPTION 5V - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
PAYMENTS FOR A SPECIFIED PERIOD
<TABLE>
<CAPTION>
NUMBER MONTHLY NUMBER MONTHLY NUMBER MONTHLY NUMBER MONTHLY
OF YEARS PAYMENT OF YEARS PAYMENT OF YEARS PAYMENT OF YEARS PAYMENT
-------- ------- -------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
10 9.83 17 6.47 24 5.09
11 9.09 18 6.20 25 4.96
5 18.12 12 8.46 19 5.97 26 4.84
6 15.35 13 7.94 20 5.75 27 4.73
7 13.38 14 7.49 21 5.56 28 4.63
8 11.90 15 7.10 22 5.39 29 4.53
9 10.75 16 6.76 23 5.24 30 4.45
</TABLE>
22
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
A STOCK COMPANY LOS ANGELES, CALIFORNIA
ALLOCATED FIXED AND
VARIABLE GROUP ANNUITY CERTIFICATE
Nonparticipating
23
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
A STOCK COMPANY LOS ANGELES, CALIFORNIA
CONTRACT NUMBER P9999999999
OWNER JOHN DOE
STATUTORY HOME OFFICE
2999 NORTH 44TH ST., STE 250
PHOENIX, AZ 85018
EXECUTIVE OFFICE
1 SUNAMERICA CENTER
LOS ANGELES, CA 90067-6022
ANNUITY SERVICE CENTER
P.O. BOX 54299
LOS ANGELES, CA 90054-0299
ANCHOR NATIONAL LIFE INSURANCE COMPANY ("We", "Us", the "Company", or "Anchor
National") agrees to provide benefits to the Owner in accordance with the
provisions set forth in this Contract and in consideration of the Owner's
application and Purchase Payments We received.
THE VALUE OF AMOUNTS ALLOCATED TO THE SEPARATE ACCOUNT DURING THE ACCUMULATION
AND ANNUITY PERIODS IS NOT GUARANTEED. THE VALUE WILL INCREASE OR DECREASE BASED
UPON THE INVESTMENT EXPERIENCE OF THE INVESTMENTS UNDERLYING THE SUBACCOUNTS YOU
CHOOSE.
THE CASH SURRENDER BENEFIT OF AMOUNTS ALLOCATED TO ANY FIXED-MVA ACCOUNT OPTION
INCREASES OR DECREASES BASED ON THE APPLICATION OF THE MARKET VALUE ADJUSTMENT.
THE UNADJUSTED CASH SURRENDER BENEFIT IS AVAILABLE FOR 30 DAYS AFTER THE END OF
THE GUARANTEED PERIOD. THERE IS NO MARKET VALUE ADJUSTMENT FOR ANY CASH
SURRENDER BENEFIT OF AMOUNTS ALLOCATED TO NON-MVA FIXED ACCOUNT OPTIONS.
TEN DAY RIGHT TO EXAMINE CONTRACT - YOU MAY RETURN THIS CONTRACT TO OUR ANNUITY
SERVICE CENTER OR TO THE AGENT THROUGH WHOM THE CONTRACT WAS PURCHASED WITHIN 10
DAYS AFTER YOU RECEIVE IT, IF YOU ARE NOT SATISFIED WITH IT. THE COMPANY WILL
REFUND THE CONTRACT VALUE ON THE BUSINESS DAY DURING WHICH THE CONTRACT IS
RECEIVED. UPON SUCH REFUND, THE CONTRACT SHALL BE VOID.
THIS IS A LEGAL CONTRACT. READ IT CAREFULLY.
/s/ SUSAN L. HARRIS /s/ ELI BROAD
____________________ ________________
SUSAN L. HARRIS ELI BROAD
Secretary President
INDIVIDUAL FIXED AND
VARIABLE ANNUITY CONTRACT
Nonparticipating
1
<PAGE>
TABLE OF CONTENTS
CONTRACT DATA PAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . .PAGE 3
PURCHASE PAYMENT ALLOCATION. . . . . . . . . . . . . . . . . . . . . . . .PAGE 4
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .PAGE 5
PURCHASE PAYMENT PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . .PAGE 7
Purchase Payments; Deferment of Payments; Suspension of Payments; Substitution
of Investment Portfolios
ACCUMULATION PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . .PAGE 8
Separate Account Accumulation Value; Number of Accumulation Units; Accumulation
Unit Value (AUV); Fixed Account Accumulation Value; Fixed Account Guarantee
Period Options And Interest Crediting ; Market Value Adjustment
CHARGES AND DEDUCTIONS . . . . . . . . . . . . . . . . . . . . . . . . . PAGE 10
Contract Administration Charge; Withdrawal Charge; Expense Risk Charge;
Distribution Expense Charge; Mortality Risk Charge
TRANSFER PROVISION . . . . . . . . . . . . . . . . . . . . . . . . . . . PAGE 11
Transfers of Accumulation Units and Annuity Units Between Subaccounts; Transfers
of Accumulation Units To and From the Fixed Account
WITHDRAWAL PROVISION . . . . . . . . . . . . . . . . . . . . . . . . . . PAGE 12
Withdrawal Charge
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . PAGE 13
Entire Contract; Change of Annuitant; Death of Annuitant; Misstatement of Age or
Sex; Proof of Age, Sex or Survival; Conformity With State Laws; Changes in Law;
Assignment; Claims of Creditors; Premium Taxes and Other Taxes; Written Notice;
Periodic Reports; Incontestability; Non-Participating
DEATH PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . PAGE 14
Death of Owner Before the Annuity Date; Due Proof of Death; Amount of Death
Benefit; Death of Owner or Annuitant on or After the Annuity Date; Beneficiary
ANNUITY PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . PAGE 16
Annuity Date; Payments to Owner; Fixed Annuity Payments; Amount of Fixed Annuity
Payments; Amount of Variable Annuity Payments
ANNUITY PAYMENT OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . PAGE 18
FIXED ANNUITY PAYMENT OPTIONS TABLE. . . . . . . . . . . . . . . . . . . PAGE 19
VARIABLE ANNUITY PAYMENT OPTIONS TABLE . . . . . . . . . . . . . . . . . PAGE 21
2
<PAGE>
CONTRACT DATA PAGE
CONTRACT NUMBER: ANNUITY SERVICE CENTER:
P9999999999 P.O. BOX 54299
LOS ANGELES, CA 90054-0299
OWNER: AGE AT ISSUE:
JOHN DOE 35
ANNUITANT: FIRST PURCHASE PAYMENT:
JOHN DOE $10,000.00
ANNUITY DATE: CONTRACT DATE:
JULY 1, 2026 JULY 1, 1996
LATEST ANNUITY DATE: FIXED ACCOUNT -
JULY 1, 2051 Minimum Guarantee Rate: (3.0%)
BENEFICIARY:
As stated in the application
ANNUAL CONTRACT ADMINISTRATION CHARGE:
$35.00
SEPARATE ACCOUNT:
VARIABLE ANNUITY ACCOUNT FIVE
FOR INQUIRIES
CALL 1-800-445-SUN2
3
<PAGE>
PURCHASE PAYMENT ALLOCATION
SUBACCOUNTS
80.00% Growth Strategy
0.00% Moderate Growth Strategy
0.00% Balanced Growth Strategy
0.00% Conservative Growth Strategy
FIXED ACCOUNT OPTIONS
Guarantee Initial
Period Interest Rate
--------- -------------
20.00% 1 Year Fixed Non-MVA 3.0%
0.00% 1 Year DCA Fixed Non-MVA
0.00% 3 Year Fixed MVA
0.00% 5 Year Fixed MVA
0.00% 7 Year Fixed MVA
0.00% 10 Year Fixed MVA
4
<PAGE>
DEFINITIONS
Defined in this section are some of the words and phrases used in this Contract.
These terms are capitalized when used in the Contract. Other capitalized terms
in the Contract refer to the captioned paragraph explaining that particular
concept in the Contract.
ACCUMULATION UNIT
A unit of measurement used to compute the Contract Value in a Subaccount prior
to the Annuity Date.
AGE
Age as of last birthday.
ANNUITANT
The natural person on whose life the annuity benefits under the Contract are
based. The Annuitant is as named on the Contract Data Page. If the Contract is
in force and the Annuitant is alive on the Annuity Date, We will begin payments
to the Payee.
ANNUITY DATE
The date on which annuity payments to the Payee are to start. The Owner must
specify the Annuity Date, which must be at least two years after the Contract
Date.
ANNUITY SERVICE CENTER
As specified on the Contract Data Page.
ANNUITY UNIT
A unit of measurement used to compute annuity payments from the Subaccount.
AUTOMATIC DOLLAR COST AVERAGING PROGRAM (DCA)
You may authorize the automatic transfer of amounts at regular intervals from a
source account to one or more Subaccounts (other than the source account). The
source account may be either the One Year DCA Fixed Account Option or any of the
Subaccounts. The unit values are determined on the dates of transfers. You may
terminate DCA at any time. However, upon termination, any amounts remaining
in the One Year DCA Fixed Account Option will be transferred to the One Year
Fixed Account Option. We reserve the right to change the terms and conditions of
the DCA program at any time.
BENEFICIARY
The Beneficiary is as designated on the application unless later changed by the
Owner.
CONTRACT DATE
The date Your Contract is issued, as shown on the Contract Data Page. It is the
date from which Contract Years and anniversaries are measured.
CONTRACT VALUE
The sum of: (1) Your share of the Subaccounts' Accumulation Unit values and
(2) the value of amounts allocated to the Fixed Account Options.
5
<PAGE>
CONTRACT YEAR
A year starting from the Contract Date in one calendar year and ending on the
day preceding the anniversary of such date in the succeeding calendar years.
CONTRIBUTION YEAR
A year starting from the date of the Purchase Payment in one calendar year and
ending on the day preceding the anniversary of such date in the succeeding
calendar years.
CURRENT INTEREST RATE
The rates of interest declared by Us applicable to allocations of Subsequent
Purchase Payments to the Fixed Account Options. The Current Interest Rate will
not be less than the Minimum Guarantee Rate as shown on the Contract Data Page.
FIXED ACCOUNT OPTIONS
The investment options under this Contract that are credited with a fixed rate
of interest declared by the Company. All Purchase Payments allocated to the
Fixed Account Options become part of the Company's general asset account. The
general asset account contains all the assets of the Company except for the
Separate Account and other segregated asset accounts. The Fixed Account Options
for this Contract are shown on page 4.
FIXED ANNUITY
A series of periodic annuity payments of predetermined amounts that do not vary
with investment experience. Such payments are made from the Company's general
asset account.
GUARANTEE PERIOD
The period for which either the Initial Interest Rate, the Current Interest Rate
or the Renewal Interest Rate is credited to the amounts allocated to the Fixed
Account Options.
INITIAL INTEREST RATE
The rates of interest credited to the first Purchase Payment as described in the
Accumulation Provisions section. The Initial Interest Rate for this Contract's
first Purchase Payment is listed on page 4. The Initial Interest Rate may not
be less than the Minimum Guarantee Rate as shown on the Contract Data Page.
IRC
The Internal Revenue Code of 1986, as amended, as the same may be amended or
superseded.
NYSE
New York Stock Exchange
OWNER
The person or entity named in the Contract who is entitled to exercise all
rights and privileges of ownership under the Contract.
PAYEE
The person receiving payment of annuity benefits under this Contract.
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PURCHASE PAYMENTS
Payments in U.S. currency made by or on behalf of the Owner to the Company for
the Contract.
RENEWAL INTEREST RATE
The rate(s) of interest declared by Us applicable to transfers from the
Subaccounts into any of the Fixed Account Options and to amounts previously
allocated to a Fixed Account Option wherein the Guarantee Period has expired.
The Renewal Interest Rate may not be less than the Minimum Guarantee Rate as
shown on the Contract Data Page.
SEPARATE ACCOUNT
The segregated asset account named on the Contract Data Page. The Separate
Account consists of several Subaccounts. The assets of the Separate Account are
not comingled with the general assets and liabilities of the Company. Each
Subaccount is not chargeable with liabilities arising out of any other
Subaccount. The value of amounts allocated to the Subaccounts of the Separate
Account is not guaranteed.
SUBACCOUNT
A variable investment option available under the Contract, comprising a division
of the Separate Account. The available Subaccounts are shown on page 4.
SUBSEQUENT PURCHASE PAYMENTS
Purchase Payments made subsequent to the first Purchase Payment.
VARIABLE ANNUITY
A series of periodic annuity payments, which vary in amount according to the
investment experience of one or more Subaccounts, as selected by You .
WE, OUR, US, THE COMPANY
Anchor National Life Insurance Company.
YOU, YOUR
The Owner.
PURCHASE PAYMENT PROVISIONS
PURCHASE PAYMENTS
Purchase Payments are flexible. This means that, subject to Company declared
minimums and maximums, You may change the amounts, frequency or timing of
Purchase Payments. Purchase Payments may be allocated to the Fixed Account
Options and one or more Subaccounts in accordance with instructions from You. We
reserve the right to specify the minimum Purchase Payment that may be allocated
to a Subaccount under the Contract.
DEFERMENT OF PAYMENTS
We may defer making payments from the Fixed Account Options for up to six (6)
months. Interest, subject to state requirements, will be credited during the
deferral period.
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SUSPENSION OF PAYMENTS
We may suspend or postpone any payments from the Subaccounts if any of the
following occur:
(a) the NYSE is closed,
(b) trading on the NYSE is restricted,
(c) an emergency exists such that it is not reasonably practical to dispose of
or determine the value of the assets held in a Subaccount, or
(d) the Securities and Exchange Commission, by order, so permits for the
protection of Owners.
Conditions in (b) and (c) will be decided by or in accordance with rules of the
Securities and Exchange Commission.
SUBSTITUTION OF INVESTMENT PORTFOLIOS
If: (a) the shares of the underlying investment portfolios in which the
Subaccounts invest should no longer be available for investment by the Separate
Account; or (b) if further investment in the shares of an investment portfolio
is no longer appropriate in view of the purpose of the Contract, then We may
substitute shares of another underlying investment series, for shares already
purchased, or to be purchased in the future by Purchase Payments under the
Contract. No substitution of securities may take place without prior approval of
the Securities and Exchange Commission and under such requirements as it may
impose.
ACCUMULATION PROVISIONS
SEPARATE ACCOUNT ACCUMULATION VALUE
The Separate Account Accumulation Value under the Contract shall be the sum of
the values of the Accumulation Units held in the Subaccounts for the Owner.
NUMBER OF ACCUMULATION UNITS
For each Subaccount, the number of Accumulation Units is the sum of each
Purchase Payment and transfer allocated to the Subaccount, reduced by premium
taxes, if any:
DIVIDED BY
The Accumulation Unit Value for that Subaccount as of the NYSE business day in
which the Purchase Payment or transfer amount is received.
The number of Accumulation Units will be similarly adjusted for withdrawals,
annuitizations, transfers, Contract Administration Charge and Withdrawal
Charge. Adjustments will be made as of the end of the NYSE business day in
which We receive all requirements for the transaction, as appropriate.
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ACCUMULATION UNIT VALUE (AUV)
The AUV of a Subaccount for any NYSE business day is calculated by subtracting
(2) from (1) and dividing the result by (3) where:
(1) is the total value at the end of the given NYSE business day of the assets
attributable to the Accumulation Units of the Subaccount minus the total
liabilities;
(2) is the cumulative unpaid charge for assumption of Expense Risk,
Distribution Expense and Mortality Risk charges (See CHARGES AND
DEDUCTIONS);
(3) is the number of Accumulation Units outstanding at the end of the given
NYSE business day.
FIXED ACCOUNT ACCUMULATION VALUE
Under the Contract, the Fixed Account Accumulation Value shall be the sum of all
monies allocated or transferred to the Fixed Account Option(s), reduced by any
applicable premium taxes, plus all interest credited on the Fixed Account
Option(s) during the period that the Contract has been in effect. This amount
shall be adjusted for withdrawals, annuitizations, transfers, Contract
Administration Charge and Withdrawal Charge. The Fixed Account Accumulation
Value shall not be less than the minimum values required by law in the state
where this Contract is issued.
FIXED ACCOUNT GUARANTEE PERIOD OPTIONS AND INTEREST CREDITING
Any amounts allocated to the Fixed Account Options from the first Purchase
Payment will earn interest at the Initial Interest Rate for the Fixed Account
Option(s) selected for the duration of the Guarantee Period.
Subsequent Purchase Payments allocated to the Fixed Account Options will earn
interest at the Current Interest Rate for the Fixed Account Option(s) selected
for the duration of the Guarantee Period.
Transfers to the Fixed Account Options from the Subaccounts and amounts renewed
into the Fixed Account Options will earn interest at the Renewal Interest Rate
for the Fixed Account Option(s) selected for the duration of the Guarantee
Period.
For thirty (30) days following the date of expiration of a Guarantee Period, You
may renew for the same or any other Guarantee Period at the Renewal Interest
Rate or You may transfer all or a portion of the amount to the Subaccounts. If
the Owner does not specify a Guarantee Period at the time of renewal, We will
select the same Guarantee Period as has just expired, crediting the Contract
with the Renewal Interest Rate in effect on the date of expiration of the
Guarantee Period, so long as such Guarantee Period does not extend beyond the
Annuity Date. If a renewal occurs within one year of the latest Annuity Date,
We will credit interest up to the Annuity Date at the Renewal Interest Rate for
the One Year Fixed Account Option.
If You are participating in the DCA program, Purchase Payments will be allocated
to the One Year DCA Fixed Account Option. Upon termination of the DCA program,
any amounts remaining in the One Year DCA Fixed Account Option will be
transferred to the One Year Fixed Account Option. Such amounts will earn
interest at the Renewal Interest Rate for the One Year Fixed Account Option.
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MARKET VALUE ADJUSTMENT (MVA)
Any payments and values based on a multi-year Fixed Account Option may be
subject to a MVA, the operation of which may result in upward or downward
adjustments in the Contract Value, if withdrawn, transferred or annuitized prior
to the end of the respective Guarantee Period. The MVA will be calculated by
multiplying the amount withdrawn, transferred or annuitized by the formula
described below:
N/12
{(1 + I)/(1+J+0.0050)} -1
I = The interest rate currently in effect for that Guarantee Period.
J = The Initial Interest Rate available for the Guarantee Period equal to the
number of years (rounded up to an integer) remaining in the current Guarantee
Period at the time of withdrawal, transfer or annuitization. In the
determination of J, if the Company currently does not offer the applicable
Guarantee Period, then the rate will be determined by linear interpolation of
the Initial Interest Rate for the nearest two Guarantee Periods that are
available.
N = The number of full months remaining in the current Guarantee Period at the
time the withdrawal or annuitization request is processed.
If a Withdrawal Charge is applied to a withdrawal, then the MVA will be applied
to the withdrawal amount net of the Withdrawal Charge.
There will be no MVA on withdrawals from the Fixed Account Options in the
following situations: (1) to pay a Death Benefit paid upon death of the Owner;
(2) on amounts withdrawn to pay fees or charges; (3) on amounts withdrawn
from the Fixed Account Option within thirty (30) days after the end of the
Guarantee Period; (4) on annuitizations on the Latest Annuity Date; (5) on
amounts withdrawn from the One Year Fixed Account Option or the One Year DCA
Fixed Account Option .
CHARGES AND DEDUCTIONS
We will deduct the following charges from the Contract:
CONTRACT ADMINISTRATION CHARGE
The charge specified on the Contract Data Page will be deducted on each Contract
anniversary that occurs on or prior to the Annuity Date. It will also be
deducted when the Contract Value is withdrawn in full if withdrawal is not on
the Contract anniversary. We reserve the right to assess a charge on a class
basis which is less than the charge specified on the Contract Data Page.
WITHDRAWAL CHARGE
This charge may be deducted upon withdrawal of the Contract Value, in whole or
in part. See WITHDRAWAL PROVISIONS.
EXPENSE RISK CHARGE
On an annual basis this charge equals 0.35% of the average daily total net asset
value of Your Purchase Payments allocated to the Subaccounts. This charge is to
compensate Us for assuming the expense risks under the Contract.
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DISTRIBUTION EXPENSE CHARGE
On an annual basis this charge equals 0.15% of the average daily total net asset
value of Your Purchase Payments allocated to the Subaccounts. This charge is to
compensate Us for all distribution expenses associated with the Contract.
MORTALITY RISK CHARGE
On an annual basis this charge equals 0.90% of the average daily total net asset
value of Your Purchase Payments allocated to the Subaccounts. This charge is to
compensate Us for assuming the mortality risks under the Contract.
TRANSFER PROVISION
Prior to the Annuity Date, You may transfer all or part of Your Contract Value
to any of the Subaccounts or the Fixed Account Options, subject to certain
restrictions. We reserve the right to charge a fee for transfers if the number
of transfers exceeds the limit specified by Us.
TRANSFERS OF ACCUMULATION AND ANNUITY UNITS BETWEEN SUBACCOUNTS
Prior to the Annuity Date, You may transfer all or a portion of Your Contract
Value from one Subaccount to another Subaccount. A transfer will result in the
purchase of Accumulation Units in a Subaccount and the redemption of
Accumulation Units in the other Subaccount. Transfers will be effected at the
end of the NYSE business day in which We receive Your completed request for the
transfer.
After the Annuity Date, You may transfer all or a portion of Your Contract Value
from one Subaccount to another Subaccount. A transfer will result in the
purchase of Annuity Units in a Subaccount and the redemption of Annuity Units in
the other Subaccount. Transfers will be effected at the end of the NYSE
business day in which We receive Your completed request for the transfer.
The minimum amount that can be transferred between Subaccounts and the amount
that can remain in the Subaccount are subject to Company limits.
TRANSFERS OF ACCUMULATION UNITS TO AND FROM THE FIXED ACCOUNT
Prior to the Annuity Date, You may transfer all or any part of Your Contract
Value from the Subaccount(s) to the Fixed Account Options or from the Fixed
Account Options to the Subaccount(s) of the Contract. However, You may only
transfer to the One Year DCA Fixed Account Option if You are participating in
the DCA program.
After the Annuity Date, transfers into or out of the Fixed Account Options are
not allowed.
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WITHDRAWAL PROVISION
On or before the Annuity Date and while the Owner is living, You may withdraw
all or part of Your Contract Value under this Contract by informing Us at Our
Annuity Service Center. For a full withdrawal, this Contract must be returned
to Our Annuity Service Center.
Without a written notice to the contrary, withdrawals will be deducted from the
Contract Value in proportion to their allocation among the Fixed Account Options
and the Subaccounts. Withdrawals will be based on values at the end of the NYSE
business day in which the request for withdrawal and the Contract (in the case
of a full withdrawal), are received at the Annuity Service Center. Unless the
SUSPENSION OF PAYMENTS or DEFERMENT OF PAYMENTS sections are in effect, payment
of withdrawals will be made within seven calendar days.
WITHDRAWAL CHARGE
Each Contract Year, the Owner may withdraw, free of a Withdrawal Charge, 10% of
all Purchase Payments which are still subject to a Withdrawal Charge. Amounts
withdrawn as a free withdrawal do not reduce Purchase Payments for purposes of
calculating future free withdrawals. The Owner will not receive the benefit of a
free withdrawal in a full surrender.
Withdrawals in excess of this free withdrawal amount may be subject to a
Withdrawal Charge. The withdrawal charge applied to any withdrawal will depend
on the age of the Purchase Payment to which the withdrawal is attributed. See
chart below.
For the purpose of determining the Withdrawal Charge, a withdrawal will be
attributed to amounts in the following order: (1) free withdrawal amount
(partial withdrawals only); (2) Purchase Payments which are both no longer
subject to the Withdrawal Charge and are not yet withdrawn; (3) Purchase
Payments subject to a Withdrawal Charge; and (4) other Contract Value. Purchase
Payments, when withdrawn, are assumed to be withdrawn on a first-in-first-out
(FIFO) basis.
Number of Contribution Years Elapsed Withdrawal Charge as a
Between Contribution Year of Purchase Payment Percentage of Withdrawn
and Contribution Year of Withdrawal Purchase Payment
- --------------------------------------------------------------------------------
1 7%
2 6%
3 6%
4 5%
5 4%
6 3%
7 2%
8+ 0%
The Withdrawal Charge will be assessed against the Subaccounts and the Fixed
Account Options in the same proportion as the remaining Contract Value is
allocated unless You request that the withdrawal come from a particular Fixed
Account Option or Subaccount. If the remaining Contract Value is insufficient
to cover the Withdrawal Charge, any remaining balance will be deducted from the
withdrawal amount requested.
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GENERAL PROVISIONS
ENTIRE CONTRACT
The entire contract between You and Us consists of the application as completed
by You at the time of purchase, this Contract and any attached endorsement(s).
An agent cannot change the terms or conditions of this Contract. Any change
must be in writing and approved by Us. Only Our President, Secretary, or one of
Our Vice-Presidents can give Our approval.
CHANGE OF ANNUITANT
If the Owner is an individual, the Owner may change the Annuitant at any time
prior to the Annuity Date. To make a change, the Owner must send a written
notice to Us at least 30 days before the Annuity Date. If the Owner is not an
individual, the Owner may not change the Annuitant.
DEATH OF ANNUITANT
If the Owner and Annuitant are different and the Annuitant dies before the
Annuity Date, the Owner becomes the Annuitant until such time as the Owner
elects a new Annuitant. The preceding sentence shall not apply if the Owner is
not an individual.
MISSTATEMENT OF AGE OR SEX
If the Age or sex of any Annuitant has been misstated, future annuity payments
will be adjusted using the correct Age and sex, according to Our rates in effect
on the date that annuity payments were determined. Any overpayment from the
Fixed Account Options, plus interest at the rate of 4% per year, will be
deducted from the next payment(s) due. Any underpayment from the Fixed Account
Options, plus interest at the rate of 4% per year, will be paid in full with the
next payment due. Any overpayment from the Subaccounts will be deducted from
the next payment(s) due. Any underpayment from the Subaccounts will be paid in
full with the next payment due.
PROOF OF AGE, SEX, OR SURVIVAL
The Company may require satisfactory proof of correct Age or sex at any time.
If any payment under this Contract depends on the Annuitant being alive, the
Company may require satisfactory proof of survival.
CONFORMITY WITH STATE LAWS
The provisions of this Contract will be interpreted by the laws of the state in
which the application was signed or such state as is required by law. Any
provision which, on the Contract Date, is in conflict with the law of such state
is amended to conform to the minimum requirements of such law.
CHANGES IN LAW
If the laws governing this Contract or the taxation of benefits under the
Contract change, We reserve the right to amend this Contract to comply with
these changes.
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ASSIGNMENT
You may assign this Contract before the Annuity Date, but We will not be bound
by an assignment unless it is received by Us in writing. Your rights and those
of any other person referred to in this Contract will be subject to the
assignment. Certain assignments may be taxable. We do not assume any
responsibility for the validity or tax consequences of any assignment.
CLAIMS OF CREDITORS
To the extent permitted by law, no right or proceeds payable under this Contract
will be subject to claims of creditors or legal process.
PREMIUM TAXES AND OTHER TAXES
The Company may deduct from Your Contract Value any premium tax or other taxes
payable to a state or other government entity, if applicable. Should We advance
any amount so due, We are not waiving any right to collect such amount at a
later date. The Company will deduct any withholding taxes required by
applicable law.
WRITTEN NOTICE
Any notice We send to You will be sent to Your address shown in the application
unless You request otherwise. Any written request or notice to Us must be sent
to Our Annuity Service Center, as specified on the Contract Data Page.
PERIODIC REPORTS
At least once during each Contract Year, We will send You a statement of the
account activity of the Contract. The statement will include all transactions
which have occurred during the accounting period shown on the statement.
Statements of Your Contract Value will cease to be provided to You after the
Annuity Date.
INCONTESTABILITY
This Contract will be incontestable from the Contract Date.
NONPARTICIPATING
This Contract does not share in Our surplus.
DEATH PROVISIONS
Notwithstanding any provision of this Contract to the contrary, all payments of
benefits under this Contract will be made in a manner that satisfies IRC Section
72(s), as amended from time to time. If the Contract is owned by a trust or
other non-individual, We will treat the death of the Annuitant as the death of
the "Primary Annuitant", as defined in IRC Section 72(s)(6), and as the death of
any Owner.
DEATH OF OWNER BEFORE THE ANNUITY DATE. We will pay a death benefit to the
Beneficiary upon Our receiving: (a) due proof that a Owner died before the
Annuity Date; and (b) an election form selecting the death benefit option. If no
election form is received within 60 days of our receipt of due proof of death,
the death benefit will be paid in accordance with death benefit option 1 below.
The Beneficiary must select one of the following death benefit options:
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1. Immediately collect the death benefit in a lump sum payment.
If a lump sum payment is elected, payment will be in
accordance with any applicable laws and regulations
governing payments and death; or
2. Collect the death benefit in the form of one of the Annuity
Payment Options. The payments must be over the life of the
Beneficiary or over a period not extending beyond the life
expectancy of the Beneficiary. Payments under this death
benefit option must commence within one year after the
Owner's death, otherwise, the death benefit will be paid in
accordance with death benefit option 1; or
3. If the Beneficiary is the Owner's spouse, the Beneficiary
may elect to become the Owner and continue the Contract in
force, however, no death benefit is paid. Upon the new
Owner's subsequent death, the entire interest must be
distributed immediately.
In any event, the entire interest in the Contract will be distributed within
five years from the date of death of the Owner.
DUE PROOF OF DEATH
Due Proof of Death means:
1. a certified copy of a death certificate; Or
2. a certified copy of a decree of a court of competent jurisdiction
as to the finding of death; Or
3. a written statement by a medical doctor who attended the deceased
Owner at the time of death; Or
4. any other proof satisfactory to Us.
AMOUNT OF DEATH BENEFIT
Before You attain age 75 the amount of the death benefit is equal to the greater
of:
1. the Contract Value at the end of the NYSE business day during which We
receive, at Our Annuity Service Center, due proof of the Owner's death and
an election of the type of payment to be made; Or
2. Purchase Payments less any partial withdrawals, compounded until the date
of death at 3% interest, plus any Purchase Payments and less any
withdrawals recorded after the date of death.
After You attain age 75, the death benefit will be the greater of:
1. the Contract Value at the end of the NYSE business day during which We
receive, at Our Annuity Service Center, due proof of the Owner's death and
an election of the type of payment to be made; Or
2. Purchase Payments less any partial withdrawals, compounded until the
attainment of age 75 at 3% interest, plus any Purchase Payments and less
any partial withdrawals recorded after the attainment of age 75.
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DEATH OF OWNER OR ANNUITANT ON OR AFTER THE ANNUITY DATE.
If the Owner or Annuitant dies on or after the Annuity Date and before the
entire interest in the Contract has been distributed, We will pay the remaining
portion of the interest of the Contract as under the annuity payment option
being used on the date of death. For further information pertaining to death of
the Annuitant, see ANNUITY PAYMENT OPTIONS.
BENEFICIARY
The Beneficiary is as designated on the application unless later changed by the
Owner. While: (a) the Owner is living and (b) before the Annuity Date, the
Owner may change the Beneficiary by written notice in a form satisfactory to Us.
The change will take effect on the date We record the notice subject to any
payments We have made. If two or more persons are named: (a) those surviving
the Owner will share equally unless otherwise stated; and (b) the Beneficiaries
must elect to receive their respective portions of the death benefit according
to the death benefit options. If the Annuitant survives the Owner, and there
are no surviving Beneficiaries, the Annuitant will be deemed the Beneficiary. If
the Owner is also the Annuitant and there are no surviving Beneficiaries at the
death of the Owner, the death benefit will be paid to the estate of the Owner in
accordance with death benefit option 1.
ANNUITY PROVISIONS
ANNUITY DATE
The Owner selects an Annuity Date (the date on which annuity payments are to
begin) at the time of application. The Owner may change the Annuity Date at any
time, at least seven days prior to the Annuity Date, by written notice to the
Company at its Annuity Service Center. The Annuity Date must always be the
first day of the calendar month and must be at least two years after the
Contract Date, but not beyond the later of the Owner's 90th birthday or ten
years after the Contract Date. If the Owner is a non-natural person, the latest
annuity date is the later of the Annuitant's 90th birthday or ten years after
the Contract Date. If no Annuity Date is selected, the Annuity Date will be the
latest Annuity Date, as set by the Company.
PAYMENTS TO OWNER
Unless You request otherwise, We will make annuity payments to You. If You want
the annuity payments to be made to some other Payee, We will make such payments
subject to receipt of a written request filed at the Annuity Service Center no
later than thirty (30) days before the date of the first annuity payment.
Any such request is subject to the rights of any assignee. No payments
available to or being paid to the Payee while the Annuitant is alive can be
transferred, commuted, anticipated or encumbered.
FIXED ANNUITY PAYMENTS
If a Fixed Annuity payment option has been elected, the proceeds payable under
this Contract less any applicable premium taxes, shall be applied to the payment
of the Fixed Annuity payment option elected at rates which are at least equal
to the annuity rates based upon the applicable tables in the Contract. In no
event will the Fixed Annuity payments be changed once they begin.
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AMOUNT OF FIXED ANNUITY PAYMENTS
The amount of each Fixed Annuity payment will be determined by applying the
portion of the Contract Value allocated to Fixed Annuity payments less any
applicable premium taxes to the annuity table applicable to the Fixed Annuity
payment option chosen.
AMOUNT OF VARIABLE ANNUITY PAYMENTS
(a) FIRST VARIABLE ANNUITY PAYMENT: The dollar amount of the first Variable
Annuity payment will be determined by applying the portion of the Contract
Value allocated to the Subaccount, less any applicable premium taxes, to
the annuity table applicable to the Variable Annuity payment option chosen.
If the Contract Value is allocated to more than one Subaccount, the value
of Your interest in each Subaccount is applied separately to the Variable
Annuity payment option table to determine the amount of the first annuity
payment attributable to each Subaccount.
(b) NUMBER OF VARIABLE ANNUITY UNITS: The number of Annuity Units for each
applicable Subaccount is the amount of the first annuity payment
attributable to that Subaccount divided by the value of the applicable
Annuity Unit for that Subaccount as of the Annuity Date. The number will
not change as a result of investment experience.
(c) VALUE OF EACH VARIABLE ANNUITY UNIT: The initial value of an Annuity Unit
of each Subaccount was set at $10 when the Subaccounts were established.
The value may increase or decrease from one month to the next. For any
month, the value of an Annuity Unit of a particular Subaccount is the value
of that Annuity Unit as of the last NYSE business day of the preceding
month, multiplied by the Net Investment Factor for that Subaccount for the
last NYSE business day of the current month.
The Net Investment Factor for any Subaccount for a certain month is determined
by dividing (1) by (2) where:
(1) the Accumulation Unit Value of the Subaccount determined as of
the last business day at the end of that month;
(2) the Accumulation Unit value of the Subaccount determined as of
the last business day at the end of the preceding month.
The result is then multiplied by a factor that neutralizes the assumed
investment rate of 3.5%.
(d) SUBSEQUENT VARIABLE ANNUITY PAYMENTS: After the first Variable Annuity
payment, payments will vary in amount according to the investment
performance of the applicable Subaccount(s) to which your Purchase Payments
are allocated. The amount may change from month to month. The amount of
each subsequent payment for each Subaccount is:
The number of Annuity Units for each Subaccount as determined for the first
annuity payment
MULTIPLIED BY
The value of an Annuity Unit for that Subaccount at the end of the month
immediately preceding the month in which payment is due.
We guarantee that the amount of each Variable Annuity payment will not be
affected by variations in expenses or mortality experience.
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ANNUITY PAYMENT OPTIONS
During the Annuitant's life, upon written election and the return of this
Contract to the Company at its Annuity Service Center, the Contract Value may be
applied to provide one of the following options or any annuity payment option
that is mutually agreeable. After two years from the Contract Date, and prior
to the Annuity Date, You can choose one of the options described below. If no
option has been elected by the Annuity Date, You will automatically receive
Option 4 below with 120 monthly payments guaranteed.
OPTIONS 1 & 1V - LIFE ANNUITY, LIFETIME MONTHLY PAYMENTS GUARANTEED
Payments payable to a Payee during the lifetime of the Annuitant. No further
payments are payable after the death of the Annuitant.
OPTIONS 2 & 2V - JOINT AND SURVIVOR LIFE ANNUITY
Payments payable to the Payee during the lifetime of the Annuitant and during
the lifetime of a designated second person. No further payments are payable
after the deaths of both the Annuitant and the designated second person.
OPTIONS 3 & 3V - JOINT AND SURVIVOR LIFE ANNUITY - 120 MONTHLY PAYMENTS
GUARANTEED
Payments are payable to the Payee during the lifetime of the Annuitant and
during the lifetime of a designated second person. If, at the death of the
survivor, payments have been made for less than 120 monthly periods, the
remaining guaranteed annuity payments will be continued to the Beneficiary.
OPTIONS 4 & 4V - LIFE ANNUITY WITH 120 OR 240 MONTHLY PAYMENTS GUARANTEED
Payments payable to the Payee during the lifetime of the Annuitant. If, at the
death of the Annuitant, payments have been made for less than the 120 or 240
monthly periods, as selected at the time of annuitization, the remaining
guaranteed annuity payments will be continued to the Beneficiary.
OPTIONS 5 & 5V - FIXED PAYMENTS FOR A SPECIFIED PERIOD CERTAIN
Payments payable to the Payee for any specified period of time for five (5)
years or more, but not exceeding thirty (30) years, as selected at the time of
annuitization. The selection must be made for full twelve month periods. In
the event of death of the Annuitant, any remaining guaranteed annuity payments
will be continued to the Beneficiary.
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FIXED ANNUITY PAYMENT OPTIONS TABLE
BASIS OF COMPUTATION
The actuarial basis for the Fixed Annuity Payment Options Table is the 1983a
Annuitant Mortality Table, without projection with a guaranteed interest rate of
3%. The Fixed Annuity Payment Options Table does not include any applicable
premium tax.
OPTIONS 1 & 4 - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
(Monthly installments for ages not shown will be furnished upon request.)
OPTION 1 OPTION 4 OPTION 4
AGE OF LIFE ANNUITY LIFE ANNUITY
PAYEE LIFE ANNUITY (W/120 PAYMENTS GUARANTEED) (W/240 PAYMENTS GUARANTEED)
MALE FEMALE MALE FEMALE MALE FEMALE
55 4.70 4.25 4.62 4.22 4.39 4.11
56 4.80 4.34 4.72 4.30 4.45 4.17
57 4.91 4.42 4.82 4.38 4.51 4.23
58 5.03 4.52 4.92 4.47 4.58 4.30
59 5.15 4.61 5.03 4.56 4.64 4.37
60 5.28 4.72 5.14 4.66 4.71 4.44
61 5.42 4.83 5.26 4.76 4.78 4.51
62 5.57 4.95 5.39 4.86 4.84 4.58
63 5.74 5.07 5.52 4.98 4.90 4.65
64 5.91 5.21 5.66 5.10 4.96 4.72
65 6.10 5.35 5.81 5.22 5.02 4.79
66 6.29 5.51 5.96 5.36 5.08 4.86
67 6.50 5.67 6.11 5.50 5.13 4.93
68 6.73 5.85 6.28 5.65 5.18 5.00
69 6.97 6.04 6.44 5.80 5.23 5.06
70 7.23 6.25 6.61 5.96 5.27 5.12
71 7.51 6.47 6.78 6.14 5.31 5.18
72 7.80 6.71 6.96 6.31 5.34 5.23
73 8.12 6.97 7.14 6.50 5.37 5.28
74 8.45 7.26 7.32 6.69 5.40 5.32
75 8.82 7.56 7.49 6.89 5.42 5.35
76 9.21 7.90 7.67 7.09 5.44 5.39
77 9.62 8.26 7.84 7.29 5.45 5.41
78 10.07 8.65 8.01 7.49 5.47 5.43
79 10.55 9.07 8.17 7.69 5.48 5.45
80 11.06 9.53 8.33 7.89 5.49 5.47
81 11.61 10.03 8.48 8.08 5.49 5.48
82 12.19 10.57 8.61 8.26 5.50 5.49
83 12.81 11.16 8.74 8.43 5.50 5.49
84 13.46 11.79 8.86 8.59 5.51 5.50
85 14.16 12.48 8.97 8.74 5.51 5.50
19
<PAGE>
OPTION 2 - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
(MONTHLY INSTALLMENTS FOR AGES NOT SHOWN WILL BE FURNISHED UPON REQUEST.)
JOINT & 100% SURVIVOR LIFE ANNUITY
AGE OF
MALE
PAYEE AGE OF FEMALE PAYEE
- ----- -------------------
55 60 65 70 75 80 85
55 3.88 4.06 4.23 4.38 4.50 4.58 4.63
60 3.99 4.24 4.49 4.72 4.91 5.06 5.16
65 4.07 4.38 4.72 5.07 5.39 5.65 5.84
70 4.14 4.50 4.93 5.40 5.89 6.34 6.68
75 4.18 4.58 5.08 5.68 6.37 7.07 7.68
80 4.21 4.64 5.19 5.90 6.78 7.77 8.76
85 4.23 4.67 5.26 6.04 7.07 8.36 9.78
OPTION 3 - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
(MONTHLY INSTALLMENTS FOR AGES NOT SHOWN WILL BE FURNISHED UPON REQUEST)
JOINT AND 100% SURVIVOR LIFE ANNUITY (W/120 PAYMENTS GUARANTEED)
AGE OF
MALE
PAYEE AGE OF FEMALE PAYEE
- ----- -------------------
55 60 65 70 75 80 85
55 3.87 4.06 4.23 4.37 4.48 4.56 4.60
60 3.98 4.23 4.48 4.71 4.89 5.02 5.09
65 4.07 4.38 4.71 5.05 5.35 5.57 5.71
70 4.13 4.49 4.91 5.36 5.81 6.18 6.42
75 4.17 4.57 5.05 5.62 6.23 6.78 7.17
80 4.20 4.61 5.14 5.79 6.54 7.27 7.82
85 4.21 4.64 5.19 5.89 6.73 7.60 8.30
OPTION 5 - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
FIXED PAYMENT FOR SPECIFIED PERIOD
NUMBER MONTHLY NUMBER MONTHLY NUMBER MONTHLY NUMBER MONTHLY
OF YEARS PAYMENT OF YEARS PAYMENT OF YEARS PAYMENT OF YEARS PAYMENT
- -------- ------- -------- ------- -------- ------- -------- -------
10 9.61 17 6.23 24 4.84
11 8.86 18 5.96 25 4.71
5 17.91 12 8.24 19 5.73 26 4.59
6 15.14 13 7.71 20 5.51 27 4.47
7 13.16 14 7.26 21 5.32 28 4.37
8 11.68 15 6.87 22 5.15 29 4.27
9 10.53 16 6.53 23 4.99 30 4.18
20
<PAGE>
VARIABLE ANNUITY PAYMENT OPTIONS TABLE
BASIS OF COMPUTATION
The actuarial basis for the Variable Annuity Payment Options Table is the 1983a
Annuitant Mortality Table, without projection with an effective annual assumed
investment rate of 3.5%. Variable Annuity Payment Options Table does not include
any applicable Premium Tax.
OPTIONS 1V& 4V - TABLE OF MONTHLY INSTALLMENTS PER $1,000
(Monthly installments for ages not shown will be furnished upon request.)
OPTION 1V OPTION 4V OPTION 4V
AGE OF LIFE ANNUITY LIFE ANNUITY
PAYEE LIFE ANNUITY (W/120 PAYMENTS GUARANTEED) (W/240 PAYMENTS GUARANTEED)
MALE FEMALE MALE FEMALE MALE FEMALE
---- ------ ---- ------ ---- ------
55 4.99 4.54 4.91 4.51 4.66 4.38
56 5.09 4.62 5.00 4.58 4.72 4.44
57 5.20 4.71 5.10 4.66 4.78 4.51
58 5.32 4.80 5.20 4.75 4.85 4.57
59 5.44 4.90 5.31 4.84 4.91 4.64
60 5.57 5.00 5.42 4.93 4.97 4.70
61 5.71 5.11 5.54 5.03 5.04 4.77
62 5.86 5.23 5.67 5.14 5.10 4.84
63 6.02 5.36 5.80 5.25 5.16 4.91
64 6.20 5.49 5.94 5.37 5.22 4.98
65 6.38 5.64 6.08 5.50 5.28 5.05
66 6.58 5.79 6.23 5.63 5.33 5.12
67 6.79 5.95 6.38 5.77 5.38 5.19
68 7.02 6.13 6.54 5.91 5.43 5.25
69 7.26 6.32 6.71 6.07 5.48 5.32
70 7.52 6.53 6.87 6.23 5.52 5.37
71 7.80 6.75 7.05 6.40 5.55 5.43
72 8.09 6.99 7.22 6.58 5.59 5.48
73 8.41 7.26 7.40 6.76 5.62 5.52
74 8.75 7.54 7.57 6.95 5.64 5.57
75 9.12 7.85 7.75 7.14 5.66 5.60
76 9.51 8.18 7.92 7.34 5.68 5.63
77 9.92 8.54 8.09 7.54 5.70 5.66
78 10.37 8.94 8.26 7.74 5.71 5.68
79 10.85 9.36 8.42 7.94 5.72 5.70
80 11.37 9.82 8.57 8.13 5.73 5.71
81 11.92 10.32 8.71 8.32 5.74 5.72
82 12.50 10.87 8.85 8.50 5.74 5.73
83 13.12 11.46 8.97 8.67 5.75 5.74
84 13.78 12.09 9.09 8.83 5.75 5.74
85 14.47 12.78 9.20 8.97 5.75 5.75
21
<PAGE>
OPTION 2V - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
(MONTHLY INSTALLMENTS FOR AGES NOT SHOWN WILL BE FURNISHED UPON REQUEST.)
JOINT & 100% SURVIVOR LIFE ANNUITY
AGE OF
MALE
PAYEE AGE OF FEMALE PAYEE
- ----- -------------------
55 60 65 70 75 80 85
55 4.16 4.34 4.51 4.66 4.78 4.86 4.92
60 4.27 4.51 4.76 4.99 5.19 5.33 5.44
65 4.35 4.66 4.99 5.34 5.66 5.92 6.11
70 4.42 4.78 5.20 5.67 6.16 6.60 6.96
75 4.47 4.86 5.35 5.95 6.63 7.33 7.95
80 4.50 4.92 5.46 6.17 7.04 8.04 9.02
85 4.52 4.95 5.53 6.31 7.34 8.63 10.05
OPTION 3V - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
(MONTHLY INSTALLMENTS FOR AGES NOT SHOWN WILL BE FURNISHED UPON REQUEST)
JOINT AND 100% SURVIVOR LIFE ANNUITY (W/120 PAYMENTS GUARANTEED)
AGE OF
MALE
PAYEE AGE OF FEMALE PAYEE
- ----- -------------------
55 60 65 70 75 80 85
55 4.16 4.34 4.51 4.65 4.76 4.84 4.88
60 4.26 4.51 4.75 4.98 5.16 5.29 5.37
65 4.35 4.65 4.98 5.31 5.61 5.84 5.98
70 4.41 4.76 5.17 5.62 6.07 6.44 6.68
75 4.46 4.84 5.32 5.88 6.48 7.03 7.42
80 4.48 4.89 5.41 6.05 6.79 7.52 8.07
85 4.50 4.92 5.46 6.15 6.99 7.85 8.53
OPTION 5V - TABLE OF MONTHLY INSTALLMENTS PER $1,000.
PAYMENTS FOR A SPECIFIED PERIOD
NUMBER MONTHLY NUMBER MONTHLY NUMBER MONTHLY NUMBER MONTHLY
OF YEARS PAYMENT OF YEARS PAYMENT OF YEARS PAYMENT OF YEARS PAYMENT
- -------- ------- -------- ------- -------- ------- -------- -------
10 9.83 17 6.47 24 5.09
11 9.09 18 6.20 25 4.96
5 18.12 12 8.46 19 5.97 26 4.84
6 15.35 13 7.94 20 5.75 27 4.73
7 13.38 14 7.49 21 5.56 28 4.63
8 11.90 15 7.10 22 5.39 29 4.53
9 10.75 16 6.76 23 5.24 30 4.45
22
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE COMPANY
A STOCK COMPANY LOS ANGELES, CALIFORNIA
INDIVIDUAL FIXED AND
VARIABLE ANNUITY CONTRACT
Nonparticipating
23
<PAGE>
<TABLE>
<CAPTION>
<S><C>
Anchor National Life New Business Documents New Business Documents
Insurance Company with checks: without checks: [Anchor National Logo]
1 Sun America Center P. O. Box 100330 P. O. Box 54299
Los Angeles, CA 90067-6022 Pasadena, CA 91189-0001 Los Angeles, CA 90054-0299
____________________________________________________________________________________________________________________________________
PARTICIPANT ENROLLMENT FORM
DO NOT USE HIGHLIGHTER. Please print or type.
A. PARTICIPANT / /Mr. / /Mrs. / /Ms. / /Miss / /Dr. / /Sr. / /Jr.
___________________________________________________________________________________________________
LAST NAME/CUSTODIAN/TRUST/PLAN NAME FIRST NAME MIDDLE INITIAL
___________________________________________________________________________________________________
STREET ADDRESS CITY STATE ZIP CODE
MO_________DAY_______YR_____ / /M_____/ /F____ __________________________ (____)______________
DATE OF BIRTH SEX SOC. SEC. OR TAX ID NUMBER TELEPHONE NUMBER
JOINT ___________________________________________________________________________________________________
PARTICIPANT LAST NAME FIRST NAME MIDDLE INITIAL
(If applicable, must be MO_________DAY_______YR.____ / /M_____/ /F___ ________________________________________________
spouse of Participant) DATE OF BIRTH SEX SOCIAL SECURITY OR TAX ID NUMBER
B. ANNUITANT / /Mr. / /Mrs. / /Ms. / /Miss / /Dr./ /Sr./ /Jr.
(Complete only if ___________________________________________________________________________________________________
different from Participant) LAST NAME FIRST NAME MIDDLE INITIAL
___________________________________________________________________________________________________
STREET ADDRESS CITY STATE ZIP CODE
MO____DAY___YR.____ / /M_____/ /_____F____ __________________________ (____)______________
DATE OF BIRTH SEX SOC. SEC. OR TAX ID NUMBER TELEPHONE NUMBER
C. BENEFICIARY PRIMARY/CONTINGENT
___________________________________________________________________________________________________
LAST NAME FIRST NAME MIDDLE INITIAL CIRCLE ONE
PRIMARY/CONTINGENT
___________________________________________________________________________________________________
LAST NAME FIRST NAME MIDDLE INITIAL CIRCLE ONE
D. TYPE OF / / NONQUALIFIED. If nonqualified, is this a 1035 Exchange? / / YES / / NO
CONTRACT Is this a Transfer of Assets (funds to be transferred from a mutual
fund, CD, etc.)? / / YES / / NO
If either of the above is yes, please complete a "Request for Transfer or
1035 Exchange" (G-2500NB).
/ / QUALIFIED, as indicated below. Is this a direct transfer? / / YES / / NO
If yes, please complete a "Request for Transfer or 1035 Exchange" (form G-2500NB).
An appropriate retirement plan/prototype must be established for purposes of qualified monies
/ /SEP / / 403(b) / / Terminal funding_/ / 457 plan_/ / 401 retirement plan_
/ / IRA Tax Year__________ / / IRA rollover/ / IRA transfer/ /Other_________________
PLEASE SPECIFY
E. ANNUITY DATE MO.____ DAY____ YR.____ Date annuity payments begin. (Must be at least 2 years after the
ANNUITY DATE Contract Date. Maximum age is the later of the Participant Age 90 or
10 years after Certificate Date. NOTE: If left blank that date will
default to maximum for nonqualified and to 70 1/2 for qualified
contracts.)
F. PURCHASE / / INITIAL PAYMENT: $_____________________
PAYMENT(S) Minimum initial payment is [$5,000] for nonqualified contracts; [$2,000] for qualified
contracts.
Payments may be wired or mailed. Make check payable to Anchor National Life Insurance
Company.
/ / AUTOMATIC PAYMENTS: $_____________________
To establish automatic bank drafts for future payments, include a completed "Automatic
Payment Authorization" form (G-2233POS), and a voided check and the initial payment for
the policy.
G. SPECIAL / / SYSTEMATIC WITHDRAWAL: Check the box at left and include a "Systematic Withdrawal
FEATURES Application" form (V-5550SW).
/ / AUTOMATIC DOLLAR COST AVERAGING: Check the box at left and include a completed "Dollar Cost
Averaging Application" form (V-5551DCA).
/ / PRINCIPAL ADVANTAGE: Check the box at left. In section H, indicate the fixed account desired
and specify other allocations as percentages.
<PAGE>
- ------------------------------------------------------------------------------------------------------------------------------------
PARTICIPANT ENROLLMENT FORM ANG-504 (8/96) SIDE 2
- ------------------------------------------------------------------------------------------------------------------------------------
H. INVESTMENT __________ Variable Investment Options___________ ___________ Fixed Account Options ___________
INSTRUCTIONS ________ Subaccounts ________
(Allocations must be _____% Growth Strategy ____% 1 yr. ____% 1 yr. DCA
expressed in whole _____% Moderate Growth Strategy ____% 3 yr. ____% 5 yr.
percentages and _____% Balanced Growth Strategy ____% 7 yr. ____% 10 yr.
total allocations _____% Conservative Growth Strategy
must equal 100%)
I. TELEPHONE Do you wish to authorize telephone TRANSFERS, subject to the conditions set forth below?/ / YES / / NO
TRANSFERS (If no election is indicated the Company will default to YES for transfers.)
AUTHORIZATION If indicated above, I authorize the Company to accept telephone instructions for transfers in any amount among
subaccounts from anyone providing proper identification subject to restrictions and limitations contained in the
certificate and related prospectus, if any. I understand that I bear the risk of loss in the event of a
telephone instruction not authorized by me. The Company will not be responsible for any losses resulting from
unauthorized transactions if it follows reasonable procedures designed to verify the identity of the caller and
therefore, the Company will record telephone conversations containing transaction instructions, request personal
identification information before acting upon telephone instructions and send written confirmation statements of
transactions to the address of record.
J. SPECIAL
INSTRUCTIONS _____________________________________________________________________________________________________________
K. STATEMENT OF This Contract / / WILL / / WILL NOT replace in whole or in part an existing life insurance or annuity contract.
PARTICIPANT (If this will replace an existing policy, please indicate name of issuing company and contract number below.)
_______________________________________________________ ______________________________________________
COMPANY NAME CONTRACT NUMBER
I hereby represent my answers to the above questions to be correct and true to the best of my knowledge and belief
and agree that this Application Form shall be a part of any Contract issued by the Company. I VERIFY MY
UNDERSTANDING THAT THE VALUE OF PURCHASE PAYMENTS DIRECTED INTO THE VARIABLE INVESTMENT OPTIONS ARE VARIABLE AND
NOT GUARANTEED AS TO DOLLAR AMOUNT. I UNDERSTAND THAT THE VALUE OF PURCHASE PAYMENTS DIRECTED INTO THE MULTI-YEAR
FIXED ACCOUNT OPTIONS, IF PREMATURELY WITHDRAWN, MAY BE SUBJECT TO A MARKET VALUE ADJUSTMENT, WHICH MAY RESULT IN
UPWARD AND DOWNWARD ADJUSTMENTS IN THE VALUE OF SUCH AMOUNTS. I ACKNOWLEDGE RECEIPT OF THE CURRENT PROSPECTUSES
FOR SEASONS VARIABLE ANNUITY, SEASONS SERIES TRUST, VARIABLE INSURANCE PRODUCTS FUND AND VARIABLE INSURANCE
PRODUCTS FUND II. I HAVE READ THEM CAREFULLY AND UNDERSTAND THEIR CONTENTS.
Signed at ______________________________________________________ _________________________________________
CITY STATE DATE
______________________________________________________ _________________________________________
PARTICIPANT'S SIGNATURE REGISTERED REPRESENTATIVE'S SIGNATURE
______________________________________________________
JOINT PARTICIPANT'S SIGNATURE(IF APPLICABLE)
L. LICENSED / Will this Contract replace in whole or in part any existing life insurance or annuity contract? / / YES / / NO
REGISTERED ___________________________________________________________________________ ______________________________
REPRESENTATIVE REPRESENTATIVE'S LAST NAME FIRST NAME MIDDLE INITIAL SOC. SEC. NUMBER
INFORMATION _____________________________________________________________________________ ______________________________
REPRESENTATIVE'S STREET ADDRESS CITY STATE ZIP CODE
_______________________________________________________________________________ _____________________________
BROKER/DEALER FIRM NAME REPRESENTATIVE'S TELEPHONE NO. LICENSED AGENT ID NUMBER
FRAUD WARNING: ANY PERSON WHO, WITH INTENT TO DEFRAUD OR KNOWING THAT HE IS FACILITATING A FRAUD AGAINST AN
INSURER, SUBMITS AN APPLICATION OR FILES A CLAIM CONTAINING A FALSE OR DECEPTIVE STATEMENT MAY BE GUILTY OF
INSURANCE FRAUD.
OFFICE USE ONLY BOX
ANA-505 (8/96)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S><C>
Anchor National Life New Business Documents New Business Documents
Insurance Company with checks: without checks: [LOGO]
1 Sun America Center P. O. Box 100330 P. O. Box 54299
Los Angeles, CA 90067-6022 Pasadena, CA 91189-0001 Los Angeles, CA 90054-0299
____________________________________________________________________________________________________________________________________
DEFERRED ANNUITY APPLICATION
DO NOT USE HIGHLIGHTER. Please print or type.
A. OWNER / /Mr. / /Mrs. / /Ms. / /Miss / /Dr. / /Sr. / /Jr.
___________________________________________________________________________________________________
LAST NAME/CUSTODIAN/TRUST/PLAN NAME FIRST NAME MIDDLE INITIAL
___________________________________________________________________________________________________
STREET ADDRESS CITY STATE ZIP CODE
MO_________DAY_______YR_____ / /M_____/ /F____ __________________________ (____)______________
DATE OF BIRTH SEX SOC. SEC. OR TAX ID NUMBER TELEPHONE NUMBER
JOINT
OWNER ___________________________________________________________________________________________________
(If any, must be LAST NAME FIRST NAME MIDDLE INITIAL
spouse of Owner)
MO_________DAY_______YR____ / /M_____/ /F___ ________________________________________________
DATE OF BIRTH SEX SOCIAL SECURITY OR TAX ID NUMBER
B. ANNUITANT / /Mr. / /Mrs. / /Ms. / /Miss / /Dr. / /Sr. / /Jr.
(Complete only if ___________________________________________________________________________________________________
different from Owner) LAST NAME FIRST NAME MIDDLE INITIAL
___________________________________________________________________________________________________
STREET ADDRESS CITY STATE ZIP CODE
MO____DAY___YR.____ / /M_____/ /F____ __________________________ (____)______________
DATE OF BIRTH SEX SOC. SEC. OR TAX ID NUMBER TELEPHONE NUMBER
C. BENEFICIARY PRIMARY/CONTINGENT
___________________________________________________________________________________________________
LAST NAME FIRST NAME MIDDLE INITIAL CIRCLE ONE
PRIMARY/CONTINGENT
___________________________________________________________________________________________________
LAST NAME FIRST NAME MIDDLE INITIAL CIRCLE ONE
D. TYPE OF / / NONQUALIFIED. If nonqualified, is this a 1035 Exchange? / / YES / / NO
CONTRACT
Is this a Transfer of Assets (funds to be transferred from a mutual
fund, CD, etc.)? / / YES / / NO
If either of the above is yes, please complete a "Request for Transfer or
1035 Exchange" (G-2500NB).
/ / QUALIFIED, as indicated below. Is this a direct transfer? / / YES / / NO
If yes, please complete a "Request for Transfer or 1035 Exchange" (form G-2500NB).
An appropriate retirement plan/prototype must be established for purposes of qualified monies
/ /SEP / / 403(b) / / Terminal funding / / 457 plan / / 401 retirement plan
/ / IRA Tax Year__________ / / IRA rollover / / IRA transfer / /Other_______________
PLEASE SPECIFY
E. ANNUITY DATE MO.____ DAY____ YR.____ Date annuity payments begin. (Must be at least 2 years after the
ANNUITY DATE Contract Date. Maximum age is the later of the Owner's Age 90 or
10 years after Contract Date. NOTE: If left blank that date will
default to maximum for nonqualified and to 70 1/2 for qualified
contracts.)
F. PURCHASE / / INITIAL PAYMENT: $_____________________
PAYMENT(S) Minimum initial payment is [$5,000] for nonqualified contracts; [$2,000] for qualified
contracts. Payments may be wired or mailed. Make check payable to Anchor National Life
Insurance Company.
/ / AUTOMATIC PAYMENTS: $_____________________
To establish automatic bank drafts for future payments, include a completed "Automatic
Payment Authorization" form (G-2233POS), and a voided check and the initial payment
for the policy.
G. SPECIAL / / SYSTEMATIC WITHDRAWAL: Check the box at left and include a "Systematic Withdrawal
FEATURES Application" form (V-5550SW).
/ / AUTOMATIC DOLLAR COST AVERAGING: Check the box at left and include a completed "Dollar Cost
Averaging Application" form (V-5551DCA).
/ / PRINCIPAL ADVANTAGE: Check the box at left. In section H, indicate the fixed account desired
and specify other allocations as percentages.
<PAGE>
- ----------------------------------------------------------------------------------------------------------------------------------
DEFERRED ANNUITY APPLICATION ANA-505 (8/96) SIDE 2
- ----------------------------------------------------------------------------------------------------------------------------------
H. INVESTMENT __________ Variable Investment Options___________ ___________ Fixed Account Options ___________
INSTRUCTIONS ________ Subaccounts ________
(Allocations must be _____% Growth Strategy ____% 1 yr. ____% 1 yr. DCA
expressed in whole _____% Moderate Growth Strategy ____% 3 yr. ____% 5 yr.
percentages and _____% Balanced Growth Strategy ____% 7 yr. ____% 10 yr.
total allocations _____% Conservative Growth Strategy
must equal 100%)
I. TELEPHONE Do you wish to authorize telephone TRANSFERS, subject to the conditions set forth below? / / YES / / NO
TRANSFERS (If no election is indicated the Company will default to YES for transfers.)
AUTHORIZATION If indicated above, I authorize the Company to accept telephone instructions for transfers in any amount among
subaccounts from anyone providing proper identification subject to restrictions and limitations contained in the
contract and related prospectus, if any. I understand that I bear the risk of loss in the event of a telephone
instruction not authorized by me. The Company will not be responsible for any losses resulting from unauthorized
transactions if it follows reasonable procedures designed to verify the identity of the caller and therefore, the
Company will record telephone conversations containing transaction instructions, request personal identification
information before acting upon telephone instructions and send written confirmation statements of transactions to
the address of record.
J. SPECIAL
INSTRUCTIONS _____________________________________________________________________________________________________________
K. STATEMENT OF This Contract / / WILL / / WILL NOT replace in whole or in part an existing life insurance or annuity contract.
OWNER (If this will replace an existing policy, please indicate name of issuing company and contract number below.)
__________________________________ ____________________________________________________________________
COMPANY NAME CONTRACT NUMBER
I hereby represent my answers to the above questions to be correct and true to the best of my knowledge and
belief and agree that this Application Form shall be a part of any Contract issued by the Company. I verify my
understanding that the value of purchase payments directed into the variable investment options are variable and
not guaranteed as to dollar amount. I understand that the value of purchase payments directed into the multi-year
fixed account options, if prematurely withdrawn, may be subject to a market value adjustment, which may result in
upward and downward adjustments in the value of such amounts. I acknowledge receipt of the current prospectuses
for Seasons Variable Annuity, Seasons Series Trust, Variable Insurance Products Fund and Variable Insurance
Products Fund II. I have read them carefully and understand their contents.
Signed at ______________________________________________________ _________________________________________
CITY STATE DATE
______________________________________________________ _________________________________________
OWNER'S SIGNATURE REGISTERED REPRESENTATIVE'S SIGNATURE
______________________________________________________
JOINT OWNER'S SIGNATURE(IF APPLICABLE)
L. LICENSED / Will this Contract replace in whole or in part any existing life insurance or annuity contract? / / YES / / NO
REGISTERED ___________________________________________________________________________ ______________________________
REPRESENTATIVE REPRESENTATIVE'S LAST NAME FIRST NAME MIDDLE INITIAL SOC. SEC. NUMBER
INFORMATION ___________________________________________________________________________ ______________________________
REPRESENTATIVE'S STREET ADDRESS CITY STATE ZIP CODE
___________________________________ _____________________________________ ______________________________
BROKER/DEALER FIRM NAME REPRESENTATIVE'S TELEPHONE NO. LICENSED AGENT ID NUMBER
FRAUD WARNING: ANY PERSON WHO, WITH INTENT TO DEFRAUD OR KNOWING THAT HE IS FACILITATING A FRAUD AGAINST AN
INSURER, SUBMITS AN APPLICATION OR FILES A CLAIM CONTAINING A FALSE OR DECEPTIVE STATEMENT MAY BE GUILTY OF
INSURANCE FRAUD.
_________________________________________________________________________________________________________________
OFFICE USE ONLY BOX
_________________________________________________________________________________________________________________
</TABLE>
<PAGE>
Anchor National Life
Insurance Company
1 SunAmerica Center
Los Angeles, CA 90067-6022
310.772.6000
Mailing Address ANCHOR NATIONAL LOGO
P.O. Box 54197 A SunAmerica Company
Los Angeles, CA 90054-0197
VIA EDGAR
- ---------
January 15, 1997
Anchor National Life Insurance Company
1 SunAmerica Center
Los Angeles, CA 90067
Ladies and Gentlemen:
Referring to the Registration Statement on Form S-1 filed July 25, 1996 (the
"Registration Statement") by Anchor National Life Insurance Company ("Anchor
National") with the Securities and Exchange Commission, under the Securities
Act of 1933, as amended, I am of the opinion that:
1) Anchor National is a duly organized and existing stock life
insurance company under the laws of the State of Arizona; and
2) the annuity contracts being registered by the Registration
Statement will, upon sale thereof, be legally issued, fully paid and
nonassessable, and, to the extent that they are construed to
constitute debt securities, will be binding obligations of Anchor
National, except as enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting the rights of
creditors generally.
I am licensed to practice law only in the State of California, and the foregoing
opinions are limited to the laws of the State of California, the general
corporate law of the State of Arizona and federal law. I hereby consent to the
filing of this opinion with the Securities and Exchange Commission in connection
with the Registration Statement.
Very truly yours,
/s/ Susan L. Harris
Susan L. Harris
<PAGE>
EXHIBIT (14)
SunAmerica Inc. (a Maryland corporation) owns 100% of SunAmerica Funding Corp.
(a Delaware corporation); SunAmerica Financial, Inc. (a Georgia corporation);
Resources Trust Company (a Colorado corporation); SunAmerica Life Insurance
Company (an Arizona corporation); Imperial Premium Finance, Inc. (a Delaware
corporation); IPF Funding Corp. (a Delaware corporation); SA Investment Group,
Inc. (a California corporation); SunAmerica Capital Trust I (a Delaware business
trust); SunAmerica Capital Trust II (a Delaware business trust); SunAmerica
Capital Trust III (a Delaware business trust); SunAmerica Capital Trust IV (a
Delaware business trust); SunAmerica Capital Trust V (a Delaware business
trust); SunAmerica Capital Trust VI (a Delaware business trust); SunAmerica
Affordable Housing Finance Corp. (a Delaware corporation); Stanford Ranch, Inc.
(a Delaware corporation), which owns 100% of Stanford Ranch, Inc. (a California
corporation). In addition, SunAmerica Inc. owns 80% of AMSUN Realty Holdings (a
California corporation); and 33% of New California Life Holdings, Inc. (a
Delaware corporation) which owns 100% of Aurora National Life Assurance Company
(a California corporation).
SunAmerica Financial, Inc. owns 100% of SunAmerica Marketing, Inc. (a Maryland
corporation); SunAmerica Advertising, Inc. (a Georgia corporation); SunAmerica
Investments, Inc. (a Delaware corporation) which owns 100% of Accelerated
Capital Corp. (a Florida corporation; 1401 Sepulveda Corp. (a California
corporation); SunAmerica Louisiana Properties, Inc. (a California corporation);
SunAmerica Real Estate and Office Administration, Inc. (a Delaware corporation);
SunAmerica Affordable Housing Partners, Inc. (a California corporation); SUN-
PLA, Inc. (a California corporation); Hampden I & II Corp. (a California
corporation); Sunport Holdings, Inc. (a California corporation) which owns 100%
of Sunport Property Co. (a Florida corporation); Sun Chino Property, Inc. (a
California corporation); SunAmerica Mortgages, Inc. (a Delaware corporation);
Sun Princeton II, Inc. (a California corporation) which owns 100% of Sun
Princeton I (a California corporation); Advantage Capital Corporation (a New
York
<PAGE>
corporation); SunAmerica Planning, Inc. (a Maryland corporation); SunAmerica
Company (Cayman), Ltd., a Cayman Islands corporation; Sun Mexico Holdings, Inc.
(a Delaware corporation) which owns 100% of Sun Cancun I, Inc. (a Delaware
corporation), Sun Cancun II, Inc. (a Delaware corporation), Sun Ixtapa I, Inc.
(a Delaware corporation) and Sun Ixtapa II, Inc. (a Delaware corporation); Sun
Hechs, Inc. (a California corporation); and SunAmerica Travel Services, Inc. (a
California corporation); SAI Investment Adviser, Inc. (a Delaware corporation);
Sun GP Corp. (a California corporation), and 70% of Home Systems Partners (a
California limited partnership) which owns 100% of Extraneous Holdings Corp. (a
Delaware corporation). SunAmerica Planning, Inc. owns 100% of SunAmerica
Securities, Inc. (a Delaware corporation) which owns 100% of Anchor Insurance
Services, Inc. (a Hawaii corporation).
SunAmerica Life Insurance Company owns 100% of First SunAmerica Life Insurance
Company (a New York corporation); SunAmerica National Life Insurance Company (an
Arizona corporation); Anchor National Life Insurance Company (a California
corporation) which owns 100% of Anchor Pathway Fund, Anchor Series Trust,
SunAmerica Series Trust (all Massachusetts business trusts); UG Corporation (a
Georgia corporation); Export Leasing FSC, Inc. (a U.S. Virgin Islands
corporation); SunAmerica Virginia Properties, Inc. (a California corporation);
SAL Investment Group (a California corporation); CalFarm Life Insurance Company
(a California corporation); and Saamsun Holding Corporation (a Delaware
corporation). Saamsun Holding Corporation owns 100% of SAM Holdings Corporation
(a California corporation) which owns 100% of SunAmerica Asset Management Corp.
(a Delaware corporation), Anchor Investment Adviser, Incorporated (a Maryland
corporation), SunAmerica Capital Services, Inc. (a Delaware corporation);
SunAmerica Fund Services, Inc. (a Delaware corporation), ANF Property Holdings,
Inc. (a California corporation), Capitol Life Mortgage Corp. (a Delaware
corporation) and Sun Royal Holdings Corporation (a California corporation). Sun
Royal Holdings Corporation and Anchor Insurance Services, Inc. each owns 50% of
Royal Alliance Associates, Inc. (a Delaware corporation). In addition,
SunAmerica Life Insurance Company owns 80% of SunAmerica
<PAGE>
Realty Partners (a California corporation) and 33% of New California Life
Holdings, Inc. (a Delaware corporation) which owns 100% of Aurora National Life
Assurance Company (a California corporation) and Premier Life Insurance Company
(a Pennsylvania corporation); and 88.75% of Sun Quorum L.L.C. (a Delaware
limited liability company).
Imperial Premium Finance, Inc. (Delaware) owns 100% of Imperial Premium Finance,
Inc. (a California corporation); Imperial Premium Funding, Inc. (a Delaware
corporation); and SunAmerica Financial Resources, Inc. (a Delaware corporation).
Updated As of 12/31/96
<PAGE>
EXHIBIT 23(A)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated November 8, 1996 relating
to the consolidated financial statements of Anchor National Life Insurance
Company, which appears in such Prospectus. We also consent to the reference to
us under the heading "Independent Accountants" in such Prospectus.
PRICE WATERHOUSE LLP
Los Angeles, California
March 7, 1997
<PAGE>
Anchor National Life
Insurance Company
1 SunAmerica Center
Los Angeles, CA 90067-6022
310.772.6000
Mailing Address ANCHOR NATIONAL LOGO
P.O. Box 54197 A SunAmerica Company
Los Angeles, CA 90054-0197
VIA EDGAR
- ---------
January 15, 1997
Anchor National Life Insurance Company
1 SunAmerica Center
Los Angeles, CA 90067
Ladies and Gentlemen:
Referring to the Registration Statement on Form S-1 filed July 25, 1996 (the
"Registration Statement") by Anchor National Life Insurance Company ("Anchor
National") with the Securities and Exchange Commission, under the Securities
Act of 1933, as amended, I am of the opinion that:
1) Anchor National is a duly organized and existing stock life
insurance company under the laws of the State of Arizona; and
2) the annuity contracts being registered by the Registration
Statement will, upon sale thereof, be legally issued, fully paid and
nonassessable, and, to the extent that they are construed to
constitute debt securities, will be binding obligations of Anchor
National, except as enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting the rights of
creditors generally.
I am licensed to practice law only in the State of California, and the foregoing
opinions are limited to the laws of the State of California, the general
corporate law of the State of Arizona and federal law. I hereby consent to the
filing of this opinion with the Securities and Exchange Commission in connection
with the Registration Statement.
Very truly yours,
/s/ Susan L. Harris
Susan L. Harris
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANICAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND INCOME STATEMENT OF ANCHOR NATIONAL LIFE INSURANCE COMPANY'S FORM 10-Q
FOR THE THREE MONTHS ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> DEC-31-1996
<DEBT-HELD-FOR-SALE> 2,281,527,000
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 3,842,000
<MORTGAGE> 120,680,000
<REAL-ESTATE> 24,000,000
<TOTAL-INVEST> 2,703,683,000
<CASH> 196,142,000
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 461,637,000
<TOTAL-ASSETS> 10,025,708,000
<POLICY-LOSSES> 2,445,744,000
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 35,903,000
0
0
<COMMON> 3,511,000
<OTHER-SE> 526,611,000
<TOTAL-LIABILITY-AND-EQUITY> 10,025,708,000
0
<INVESTMENT-INCOME> 45,773,000
<INVESTMENT-GAINS> (19,116,000)
<OTHER-INCOME> 44,820,000
<BENEFITS> 31,229,000
<UNDERWRITING-AMORTIZATION> 13,817,000
<UNDERWRITING-OTHER> (837,000)
<INCOME-PRETAX> 4,946,000
<INCOME-TAX> 1,600,000
<INCOME-CONTINUING> 3,346,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,346,000
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
