<PAGE> 1
As filed with the Securities and Exchange Commission on September 25, 2000
File No. 333-78583
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Amendment No.3
to
FORM S-1
Registration Statement Under
the Securities Act of 1933
SAGE LIFE ASSURANCE OF AMERICA, INC.
(Exact name of registrant as specified in its charter)
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Delaware 51-0258372
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
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63
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(Primary Standard Industrial Classification Code Number)
300 Atlantic Street
Suite 302
Stamford, CT 06901
(203) 602-6500
(Address, including zip code, and telephone
number, including area code, of registrant's principal
executive offices)
James F. Bronsdon
300 Atlantic Street
Stamford, CT 06901
(Name and Address of Agent for Service of Process)
Copy to:
Stephen E. Roth
Sutherland Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2415
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(Name, address, including zip code, and telephone number, including area
code, of agent for service)
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of the registration statement.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box: [X]
CALCULATION OF REGISTRATION FEE
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Title of Amount Proposed Proposed Amount Of
Each Class To Be Maximum Maximum Registration
of Securities Registered Offering Aggregate Fee
To Be Price Per Offering
Registered Unit Price
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Modified Single Payment
Combination Fixed and Variable * * $36,331,000 $10,100**
Life Insurance Contracts
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* The proposed maximum aggregate offering price is estimated solely for
determining the registration fee. The amount to be registered and the proposed
maximum offering price per unit are not applicable since the securities are not
issued in predetermined amounts or units.
** Paid with initial filing and Amendment No. 1.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this registration statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), shall
determine.
<PAGE> 3
CROSS REFERENCE SHEET
Pursuant to Regulation S-K, Item 501(b)
ITEM OF FORM S-1
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PROSPECTUS CAPTION
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1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus......................Outside Front Cover
2. Inside Front and Outside Back Cover
Pages of Prospectus.........................................Summary; Table of Contents
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges..........................Outside Front Cover;
Profile; What are my
Investment Options?
4. Use of Proceeds.............................................Additional Information
About Sage Life Assurance of
America, Inc.
5. Determination of Offering Price.............................Not Applicable
6. Dilution....................................................Not Applicable
7. Selling Security Holders....................................Not Applicable
8. Plan of Distribution........................................What Other Information
Should I Know?
9. Description of Securities to be Registered..................Description, Profile, What
are the Contracts? What are
my Income Payment Options?
What are my Investment
Options? What are the
Expenses Under a Contract?
What Other Information
Should I Know?
10. Interests of Named Experts and Counsel......................N/A
11. Information with Respect to the Registrant..................What Other Information
Should I Know? What are my
Investment Options?
Additional information
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about Sage Life Assurance
of America, Inc.
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.................................................Item 14 of Part II
</TABLE>
<PAGE> 5
PROSPECTUS SUPPLEMENT
DATED OCTOBER 2, 2000
SUPPLEMENT TO THE PROSPECTUS
DATED MAY 1, 2000 FOR
MODIFIED SINGLE PAYMENT COMBINATION FIXED AND
VARIABLE LIFE INSURANCE CONTRACTS
ISSUED BY
THE SAGE VARIABLE LIFE ACCOUNT A AND
SAGE LIFE ASSURANCE OF AMERICA, INC.
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YOU SHOULD KEEP THIS SUPPLEMENT WITH YOUR PROSPECTUS.
Since May 1, 2000, we have expanded your investment options. You now
may invest in two new Funds of the Sage Life Investment Trust ---- the
Nasdaq-100 Index(R) Fund(1) and All-Cap Growth Fund. In addition, we have
updated some of the financial information contained in your prospectus.
We drafted the descriptions of these Funds along with the updated
financial information as replacements or supplements to certain information
contained in the Prospectus, and in some cases, provided references to where
you should insert these descriptions.
* * *
As noted earlier, you now may invest in Sage Life Investment Trust's
Nasdaq-100 Index(R) Fund and All-Cap Growth Fund. We discuss the investment
objectives, advisers, and annual expenses of these Funds below.
The investment objective of Sage Life Investment Trust's Nasdaq-100
Index(R) Fund is to provide investment returns that correspond to the
performance of the Nasdaq-100 Index(R) before the deduction of Fund expenses.
The Nasdaq-100 Index(R) is a modified capitalization-weighted index composed of
100 of the largest non-financial domestic and international companies listed on
the National Market tier of the Nasdaq Stock Market.
The investment objective of Sage Life Investment Trust All-Cap Growth
Fund is long-term capital appreciation by investing primarily in a diversified
portfolio of common stocks.
--------
(1) The Nasdaq-100(R), Nasdaq-100 Index(R), and Nasdaq(R) are trade or service
marks of The Nasdaq Stock Market, Inc. (which with its affiliates are the
Corporations), and are licensed for use by Sage Advisors, Inc. The product has
not been passed on by the Corporations as to its legality or suitability. The
product is not issued, endorsed, sold, or promoted by the Corporations. THE
CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITIES WITH RESPECT TO THE
PRODUCT.
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As with the other Funds of the Sage Life Investment Trust, Sage
Advisors, Inc. is the investment manager to the Nasdaq-100 Index(R) Fund and
the All-Cap Growth Fund. State Street Global Advisors subadvises the
Nasdaq-100 Index(R) Fund, while Eagle Asset Management, Inc. subadvises the
Nasdaq-100 Index(R) Fund All-Cap Growth Fund.
We list the expenses of the Nasdaq-100 Index(R) Fund and the All-Cap
Growth Fund below.
FUND ANNUAL EXPENSES (as a percentage of average daily net assets of a
Fund)
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MANAGEMENT OTHER EXPENSES TOTAL EXPENSES TOTAL EXPENSES
FEES (AFTER (AFTER FEE (BEFORE FEE WAIVERS
(AFTER FEE REIMBURSEMENT, WAIVERS AND AND
WAIVER, AS REIMBURSEMENTS, REIMBURSEMENTS,
FUND AS APPLICABLE) APPLICABLE) AS APPLICABLE) AS APPLICABLE)
---- -------------- ----------- --------------- --------------
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SAGE LIFE INVESTMENT TRUST:
Nasdaq-100 Index(R) Fund........................ 0.80 0.05 0.85 0.90
All-Cap Growth Fund............................. 0.99 0.11 1.10 1.21
</TABLE>
Please note that the expenses of Sage Life Investment Trust's
Nasdaq-100 Index(R) Fund and All-Cap Growth Fund are based on the estimated
expenses that those Funds expect to incur in their initial fiscal year. Without
fee waivers and expense reimbursements, total expenses for the Nasdaq-100
Index(R) Fund during 2000 would be estimated to be 0.90% and total expenses for
the All-Cap Growth Fund during 2000 would be estimated to be 1.21%. In
addition, a Rule 12b-1 Plan has been adopted by each Fund, pursuant to which up
to 0.25% may be deducted from Fund assets. No payments will be made under the
Plan prior to May 1, 2001.
Under "What Other Information Should I Know" on page 38, please
replace the information under "Experts" with the following:
The financial statements of Sage Life Assurance of America,
Inc. at December 31, 1999 and 1998, and for each of the three years in
the period ended December 31, 1999 appearing in this Prospectus have
been audited by Ernst & Young LLP, independent auditors, as set forth
in their reports thereon appearing elsewhere herein, and are included
in reliance upon such reports given upon the authority of such firm as
experts in accounting and auditing. The financial statements of Sage
Life Assurance of America, Inc. for the six months ended June 30, 2000
and 1999 have not been audited.
In addition, on page 40, please replace the second paragraph under
"Financial Statements" with the following:
We included the audited financial statements for Sage Life as
of December 31, 1999 and 1998 and for each of the three years in the
period ended December 31, 1999, and unaudited financial information as
of June 30, 2000 and for the six month periods ended June 30, 2000 and
1999 in this Prospectus. You should consider these financial
statements only as bearing on the ability of Sage Life to meet its
obligations under the Contracts. You should not consider them as
bearing on the investment performance of the assets held in the
Variable Account.
* * *
2
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Under Part II, Additional Information, we have updated the financial
and other information contained in this section, including our financial
statements. These updates help insure that you have the most current
information about us. Please replace Part II in its entirety with the
information below.
* * *
HISTORY AND BUSINESS
OWNERSHIP. Sage Life was incorporated under the laws of the state of
Delaware in 1981. The Company is authorized to write general life insurance and
fixed and variable annuity contracts in all states except New York, and also is
licensed to conduct variable life insurance business in all but five states.
Fidelity Mutual Life Insurance Company, a Pennsylvania insurer,
sponsored the Company's formation in 1981 under the name of Fidelity Standard
Life Insurance Company ("Fidelity Life"). Security First Life Insurance Company
("Security First") of Los Angeles, California acquired Fidelity Life in
December 1984. In January 1997, Sage Insurance Group Inc. ("Sage Insurance
Group") (formerly Finplan Investment Corp.), a Delaware corporation and a
wholly owned indirect subsidiary of Sage Group Limited ("Sage Group"), a South
African corporation and the Company's ultimate parent, acquired Fidelity Life.
The Company changed to its present name in September 1997. In December 1998,
Sage Insurance Group formed a new company, Sage Life Holdings of America, Inc.
("Sage Life Holdings"), to act as the new immediate parent of the Company. The
transaction is discussed more fully in the section below entitled "Holding
Company Structure and Background."
PRIOR BUSINESS OPERATIONS. As a Security First subsidiary, the Company
specialized in the marketing of annuities qualifying under Section 403(b) of
the Code. Under an assumption reinsurance agreement, Fidelity Life's annuity
business was irrevocably transferred to Security First in January 1997 except
for a small number of contracts. During 1998, Security First assumption
reinsured all of the remaining annuity business of Fidelity Life. Security
First is now a subsidiary of The Metropolitan Life Insurance Company.
HOLDING COMPANY STRUCTURE AND BACKGROUND. We are an indirect, wholly
owned subsidiary of Sage Insurance Group, which is a holding company for us and
affiliated entities conducting life and annuity insurance business in the
United States. We also are an indirect, wholly-owned subsidiary of Sage Group
Limited ("Sage Group"), a corporation quoted on the Johannesburg Stock
Exchange. Sage Group is a holding company with a thirty-year history of
extensive operating experience in mutual funds, life assurance and investment
management. Sage Group has directly and indirectly engaged in insurance
marketing activities in the United States since 1977 through its financial
interests in Independent Financial Marketing Group Inc., a financial planning
and bank insurance marketing company. Sage Group sold its interest in
Independent Financial Marketing Group in March 1996 to the Liberty Financial
Companies of Boston.
On December 1, 1998, Sage Group entered into a letter of intent with
Swiss Re Life & Health America Inc. ("Swiss Re"). Swiss Re is an indirect
subsidiary of Swiss Reinsurance Company, Switzerland, one of the world's
largest reinsurance groups. This agreement encompassed two transactions: (1)
that Sage Life would enter into a reinsurance agreement with Swiss Re or its
affiliate, Life Reassurance Corporation of America ("LRCA"); and (2) that Swiss
Re or LRCA would make an investment in Sage Life Holdings, our immediate
parent. The reinsurance agreement with LRCA was entered into on June 8, 2000.
As to the investment in Sage Life Holdings, on December 31, 1998, LRCA did
invest $12.5 million in non-voting, non-redeemable, cumulative preferred stock
of Sage Life Holdings, which at that point became our immediate parent and a
wholly-owned subsidiary of Sage Insurance Group. We anticipate that, during the
third quarter of 2000, LRCA will exchange part of its
3
<PAGE> 8
preferred stock for a voting interest of not more than 9.9% in Sage Life
Holdings with a retroactive effective date of April 1999. The arrangements
contemplated by the agreement may be subject to regulatory approval.
The Company is licensed to write business in all states, except New
York. However, the Company has formed a subsidiary company, Sage Life Assurance
Company of New York ("Sage Life New York"), that will be licensed to write
business in New York. It is anticipated that Sage Life New York will begin
operations at the beginning of 2001.
SELECTED FINANCIAL DATA. We cannot compare our historical financial
results for the calendar year 1996 and all prior years, to the results for the
years 1997, 1998, 1999, and 2000 due to the substantial change in our business
operations. We effectively disposed of all in-force business existing as of
December 31, 1996 and, therefore, on January 1, 1997, had no insurance
liabilities under any of our policies other than the small number of policies
that were not 100% assumption reinsured to our former parent company. We
subsequently novated these insurance liabilities during 1998. Effectively,
therefore, since January 1997, we became comparable to a new company that had
not yet begun its business activities.
We present the following selected financial data as of June 30, 2000,
June 30, 1999, December 31, 1999, 1998, and 1997 and for the periods then
ended, taken from our financial statements. The interim data for June 30, 2000
and 1999 is unaudited; the calendar year numbers have been audited. Please read
the information below along with the financial statements, including related
notes thereto, and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" we included elsewhere in this Prospectus.
4
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SELECTED FINANCIAL DATA
(IN THOUSANDS)
SIX MONTHS SIX MONTHS
ENDED ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2000 1999 1999 1998 1997
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INCOME STATEMENT DATA:
Revenues:
Net investment income $ 588 $ 646 $ 1,290 $ 1,244 $ 989
Administrative service fees 25 16 38 - -
Annuity charges and fees 1 - 1 - -
Total revenues 614 662 1,329 1,244 989
Benefits and Expenses:
Salaries and benefits expenses 1,066 617 972 742 497
Development expenses 998 1,502 3,828 - -
Insurance expenses and taxes 706 274 721 522 518
Amortization expenses 117 117 235 549 326
Total benefits and expenses 2,887 2,511 5,756 1,813 1,341
Loss before cumulative effect
adjustment (2,273) (1,849) (4,427) (569) (352)
Cumulative effect adjustment - - (4,269) - -
Net loss $ (2,273) $ (1,849) $ (8,696) $ (569) $ (352)
BALANCE SHEET DATA:
Total Assets $ 33,788 $ 31,452 $ 31,737 $ 36,542 $ 36,689
Total Liabilities $ 2,751 $ 110 $ 234 $ 70 $ 3,486
Stockholder's Equity $ 31,031 $ 31,031 $ 31,503 $ 36,472 $ 33,203
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS INTRODUCTION. The following discussion highlights the
significant factors that influence our operations. Please read this discussion
along with our financial statements and the related notes included in this
Prospectus.
HISTORY AND BUSINESS OVERVIEW. Sage Insurance Group acquired the
Company on December 31, 1996, and since that date, we have totally reengineered
our products, systems, and administration. (Before the acquisition of the
Company, all new business production and marketing ended in October 1996.) All
of our current senior management are experienced in the insurance industry
(either in the United States or in South Africa). We recruited most of them
since January 1997. Our ongoing business strategy is to focus on the
development, underwriting, and marketing of variable insurance products. Our
obligations under these contracts are supported by (1) variable accounts --
determined by the value of investments held in separate accounts, and (2) fixed
accounts -- backed by investments held in separate accounts. We may not use the
assets of these separate accounts that equal the reserves and other liabilities
supporting the contracts to which they relate, to pay any of our other
obligations or creditors. During February 1999, we began to market, on a
limited basis, our new variable insurance products. During the first half of
2000, our initial marketing focus has been to distribute the contracts through
banks and third-
5
<PAGE> 10
party marketing organizations working closely with banks. We anticipate that,
over the long-term, our distribution channels will expand to include financial
planners, regional broker-dealers, and wirehouses.
RESULTS OF OPERATIONS. The Company has had a substantial increase in
its premium volume during the first six months of 2000. Premiums received for
the six months ended June 30, 2000 and 1999 were $2.2 million and $.1 million,
respectively. A large percentage of the premiums were received during the last
week of June as the Company continues to expand its distribution network. For
the six months ended June 30, 2000 and 1999, the Company reported net losses of
$2.3 million and $6.1 million, respectively. Net losses for the three years
ending December 31, 1999, 1998, and 1997 were $8.7 million, $0.6 million, and
$0.4 million, respectively. The large increase in losses for 2000 and 1999 is
due to the adoption of Statement of Position 98-5, "Reporting on the Costs of
Start-Up Activities" (SOP 98-5). SOP 98-5 required the Company to charge to
expense all start-up costs incurred, as well as write-off any unamortized
capitalized development costs on January 1, 1999. The development costs
incurred during the first six months of 2000 and 1999 were $1.0 million and
$1.5 million, respectively, and, during the year ended December 31, 1999, were
$3.8 million. In addition, the January 1, 1999 write-off of unamortized
capitalized development costs increased losses by $4.3 million.
As the Company continued in the development phase, revenues continued
to be derived primarily from investment income earned on Company investments.
Net investment income earned during each of the six months ended June 2000 and
1999 was consistently $0.6 million. For the years ended 1999, 1998, and 1997,
net investment income was $1.3 million, $1.2 million and $1.0 million,
respectively. The Company's investments consist entirely of U.S. Government
securities and highly rated corporate bonds. Investment yields of 5.0%, 5.4%,
5.1% and 4.9% were earned in 2000, 1999, 1998, and 1997, respectively. Six
months ending June 2000 earned a yield of 5.0% compared to 5.4% for six months
ending June 1999. The Company's other sources of income are administrative
service fees and Contract charges and fees. Administrative service fees are
asset-based charges that the Company receives on Contract Owner funds invested
with various investment fund managers. Contract charges and fees are both
asset-based fees and flat annual per-Contract fees charged to each Owner. As
the Company broadens its distribution of products during 2000, these Contract
charges and fees are anticipated to become a major source of revenue. The
Contract charges and fees earned to date have been minimal as there have been a
limited number of Contracts issued by the Company. Administrative service fees
earned on funds invested in the Sage Life Investment Trust were $25,000 and
$15,517 during the six months ended June 30, 2000 and 1999, respectively, and
$37,671 for the year ended December 31, 1999. The Company did not earn any
administrative service fees in 1998 or 1997. Due to the relatively small number
and value of contracts outstanding through June 30, 2000, the Company has not
recognized any significant policy charges and fees.
With the adoption of SOP 98-5, the Company's primary expenses during
2000 and 1999 are those non-recurring expenses incurred in the development of
products and systems. Expenses incurred for development costs for the six
months ended June 2000 and 1999 were $1.0 million and $1.5 million,
respectively. Prior to 1999, these expenses were capitalized and amortized over
fifteen years. As these expenses are no longer amortized, amortization expenses
decreased to $0.1 million during the six months ended June 2000, to $0.5 during
the six months ended June 1999 and to $0.2 million for the year ended December
1999 from $0.5 million in 1998. The amortization expenses for 2000 and 1999
relate entirely to the goodwill associated with the purchase of the Company.
Salaries and benefits expenses for the six months ended June 2000 and 1999 were
$1.1 million and $0.6 million, respectively. For the years ended December 1999,
1998, and 1997, salaries and benefits expenses were $1.0 million, $0.7 million
and $0.5, respectively. The increase in salaries and benefits is attributable
to an increase in full time employees from 8 to 33 over the period from
December 31, 1997 to June 30, 2000. General and administrative expenses were
$0.7 million, $0.7 million, $0.5 million and $0.5 million for the six months
ended June
6
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2000 and years ended December 1999, 1998, and 1997, respectively. General and
administrative expenses increased to $0.7 million at June 30, 2000 from $0.3
million at June 30, 1999. These overhead expenses include rent, professional
fees, office expenses and statutory filing fees.
The Company has no federal income tax expenses for the six months
ended June 2000 nor for each of the three years ended December 31, 1999. The
Company has a net operating loss carryforward of approximately $13.0 million at
June 30, 2000.
LIQUIDITY AND CAPITAL RESOURCES. Since the beginning of 1997, we have
needed money primarily to develop our insurance products and related
infrastructure, and to fund our daily operations. We have met our cash needs
through interest income and capital contributions from Sage Insurance Group.
During the remainder of 2000, we expect our cash needs to
substantially increase due to our expanded underwriting and marketing
activities. We still anticipate that we will be unable to meet all of our
liquidity requirements during the year without capital contributions from Sage
Insurance Group. In addition, although not required to do so, the Company
believes that Sage Insurance Group will continue to provide capital to the
Company for our non-recurring costs associated with new products and business
development during the year. In addition, as discussed previously, LRCA, an
indirect subsidiary of Swiss Reinsurance Company, has made an equity investment
in our parent company that has provided an additional source of funds to us for
new business expenses.
Our future marketing efforts could be hampered in the unlikely event
that Sage Insurance Group, Swiss Re, LRCA and/or their affiliates are unwilling
to commit additional funding.
It is anticipated that during the latter part of 2000, the Company
will be capitalizing its subsidiary company, Sage Life New York. Prior to
capitalizing Sage Life New York, the Company will receive a capital
contribution from Sage Insurance Group of $4 million. The Company will then
transfer $14 million of securities to this newly formed company. This
transaction will decrease the available working capital of the Company and
increase our potential need for additional working capital.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
At December 31, 1999, the Company held in its general account
$16,179,750 of fixed maturity investments that are sensitive to changes in
interest rates. These securities are held in support of the Company's target
solvency surplus. The Company has a conservative investment philosophy, with
all investments being investment grade securities, government agency or U.S.
government securities.
The primary equity market risk to the Company comes from the nature of
the variable annuity and variable life products to be sold. Various fees and
charges earned by the Company are substantially derived as a percentage of the
market value of the assets under management. In a market decline, this income
would be reduced. This could be further compounded by customer withdrawals, net
of any applicable surrender charges, partially offset by transfers to the fixed
investment option. It also is not clear what the impact of a prolonged downturn
in the equity markets would have on ongoing sales. Customer's perceptions of a
downturn in equity markets coupled with rising interest rates could move them
into financial products other than variable insurance products. The Company's
products could potentially remain attractive to consumers in relation to other
long-term savings vehicles even after such a decline.
7
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SEGMENT INFORMATION.
We currently plan to conduct our business as a single segment, and
anticipate that this segment will eventually include all of the following
products:
- Combination fixed and variable deferred annuities;
- Combination fixed and variable immediate annuities; and
- Combination fixed and variable life insurance products.
REINSURANCE.
As discussed above in Holding Company Structure and Background, we
have entered into a coinsurance reinsurance arrangement with LRCA, pursuant to
which LRCA will reinsure a significant portion of our liabilities under our
variable insurance contracts with a retroactive effective date of February 1,
1999. This arrangement will provide additional capacity for growth of our
variable insurance business.
In addition, we have entered into a reinsurance arrangement that
reinsures certain mortality risks associated with the guaranteed minimum death
benefit and accidental death benefit features of the Contracts. We intend to
use only highly rated reinsurance companies to reinsure these risks.
Reinsurance does not relieve us from our obligations to Owners. We
remain primarily liable to our Owners to the extent that any reinsurer does not
meet its obligations under the reinsurance agreements.
RESERVES.
The insurance laws and regulations under which we operate obligate us
to carry on our books, as liabilities, actuarially determined reserves to meet
our obligations on outstanding Contracts. We base our reserves involving life
contingencies on mortality tables in general use in the United States. Where
applicable, we compute our reserves to equal amounts which, together with
interest on such reserves computed annually at certain assumed rates, will be
sufficient to meet our Contract obligations at their maturities or in the event
of the Owner's death. In the financial statements included in this Prospectus,
all reserves have been determined in accordance with generally accepted
accounting principles. At June 30, 2000 and December 31, 1999 we held $2.0
million and $0.1 million, respectively, of reserves for The Sage Variable
Annuity Account A. There were no reserves for The Sage Variable Life Account A,
because as of June 30, 2000, we had not begun to market this product. As
previously noted, all of Fidelity Life's existing annuity business has been
irrevocably transferred to Security First, resulting in no remaining contract
obligations at December 31, 1998.
INVESTMENTS.
Our General Account cash and invested assets of $24.6 million, $24.1
million, $25.5 million and $25.3 million at June 30, 2000 and December 31,
1999, 1998, and 1997, respectively, was invested entirely in investment grade
securities and money market funds. It is our stated policy to refrain from
investing in securities having speculative characteristics. Our entire
portfolio is classified as available-for sale, and is reported at fair value,
with resulting unrealized gains or losses included as a separate component of
stockholder's equity.
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DIVIDEND RESTRICTIONS.
We are subject to state regulatory restrictions that limit the maximum
amount of dividends payable. Subject to certain net income carryforward
provisions described below, we must obtain approval of the Insurance
Commissioner of the State of Delaware to pay, in any 12-month period,
"extraordinary" dividends which are defined as those in excess of the greater
of 10% of surplus in regard to shareholders as of the prior year-end and
statutory net income less realized capital gains for such prior year. We may
pay dividends only out of unassigned surplus. In addition, we must provide
notice to the Insurance Commissioner of the State of Delaware of all dividends
and other distributions to shareholders within five business days after
declaration and at least ten days prior to payment. At December 31, 1999 we
could not pay a dividend to Sage Life Holdings without prior approval from
state regulatory authorities as we currently do not have earned surplus, and we
did not pay a dividend to Sage Life Holdings.
COMPETITION.
We are engaged in a business that is highly competitive due to the
large number of stock and mutual life insurance companies as well as other
entities marketing insurance products comparable to our products. There are
approximately 1,600 stock, mutual, and other types of insurers in the life
insurance business in the United States, a substantial number of which are
significantly larger than we are. We are unique in that we are one of the few
life insurers confining its activities to the marketing of separate account
variable insurance products.
TRANSACTIONS WITH SAGE INSURANCE GROUP, INC.
In 1997, the Company entered into a Cost Sharing Agreement with Sage
Insurance Group, the parent of Sage Life Holdings, to share the personnel
costs, office rent and equipment costs. These costs are allocated between the
companies based upon the estimated time worked, square footage of space
utilized and upon monitored usage of the equipment, respectively. Pursuant to
this agreement, the Company had income of $0.7 million, $0.9 million and $0.2
million from Sage Insurance Group for the six months ended June 2000 and years
ended December 31, 1999 and 1998, respectively. The Company incurred an expense
to Sage Insurance Group of $0.1 million for the period ended December 31, 1997,
but since then (and through June 30, 2000) has not incurred any expenses to
Sage Insurance Group under the agreement. At December 31, 1999 the amount due
from Sage Insurance Group relating to this agreement was $0.6 million. There
was no amount due at December 31, 1998. In addition, Sage Insurance Group
provides funds to the Company to meet various operating expenses. As these
amounts are paid back to Sage Insurance Group at the end of each quarter, no
amounts remained payable at June 30, 2000, December 31, 1999 and 1998.
All non-recurring development costs of the Company are paid by Sage
Insurance Group or its parent, Sage Group Limited, and treated as capital
contributions. The cumulative amount of development costs paid for by
affiliated companies at June 30, 2000, December 31, 1999, 1998, and 1997 were
$8.1 million, $7.1 million, $3.3 million and $1.5 million, respectively.
EMPLOYEES.
Due to our business strategy of outsourcing our primary administrative
and investment functions to organizations that specialize in these areas, the
number of full time personnel we employ is limited. The Company had 33, 27, 14
and 8 full time employees at June 30, 2000, December 31, 1999, 1998, and 1997,
respectively.
9
<PAGE> 14
STATE REGULATION.
We are subject to the laws of the State of Delaware governing
insurance companies and to the regulations of the Delaware Department of
Insurance (the "Insurance Department"). We file a detailed financial statement
in the prescribed form (the "Statement") with the Insurance Department each
year covering our operations for the preceding year and our financial condition
as of the end of that year. Regulation by the Insurance Department means that
the Insurance Department may examine us and our books and records to determine,
among other things, whether contract liabilities and reserves as we state them
are correct. The Insurance Department, under the auspices of the National
Association of Insurance Commissioners ("NAIC"), will periodically conduct a
full examination of our operations.
In addition, we are subject to regulation under the insurance laws of
all jurisdictions in which we operate. The laws of the various jurisdictions
establish supervisory agencies with broad administrative powers with respect to
various matters, including licensing to transact business, overseeing trade
practices, licensing agents, approving contract forms, establishing reserve
requirements, fixing maximum interest rates on life insurance contract loans
and minimum rates for accumulation of surrender values, prescribing the form
and content of required financial statements and regulating the type and
amounts of investments permitted. We must file the Statement with supervisory
agencies in each of the jurisdictions in which we do business, and our
operations and accounts are subject to examination by these agencies at regular
intervals.
The NAIC has adopted several regulatory initiatives designed to
improve the surveillance and financial analysis regarding the solvency of
insurance companies in general. These initiatives include the development and
implementation of a risk-based capital formula for determining adequate levels
of capital and surplus. Insurance companies are required to calculate their
risk-based capital in accordance with this formula and to include the results
in their Statements. We anticipate that these standards will have no
significant effect upon us.
Further, many states regulate affiliated groups of insurers like us
and our affiliates, under insurance holding company legislation. Under such
laws, inter-company transfers of assets and dividend payments from insurance
subsidiaries may be subject to prior notice or approval, depending on the size
of the transfers and payments in relation to the financial positions of the
companies involved.
Under insurance guaranty fund laws in most states, insurers doing
business therein can be assessed (up to prescribed limits) for contract owner
losses incurred when other insurance companies have become insolvent. Most of
these laws provide that an assessment may be excused or deferred if it would
threaten an insurer's own financial strength.
Although the federal government ordinarily does not directly regulate
the business of insurance, federal initiatives often have an impact on the
business in a variety of ways. Our insurance products are subject to various
federal securities laws and regulations. In addition, current and proposed
federal measures that may significantly affect the insurance business include:
- regulation of insurance company solvency,
- employee benefit regulation,
- tax law changes affecting the taxation of insurance
companies, and
10
<PAGE> 15
- tax treatment of insurance products and its impact on the
relative desirability of various personal investment
vehicles.
DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<S> <C> <C>
Ronald S. Scowby(1) Director, 1/97 to present; Chairman, President and Chief Executive
Age 61 Chairman, 2/98 to present Officer, 1/2000 to present, Sheldon Scowby
Associates, Inc.; Chairman and Trustee, Sage
Life Investment Trust, 7/98 to present;
Director, Sage Life Assurance Company of New
York, 5/98 to present; Deputy Chairman 2/98 to
present, President, 1/97 to 2/98, Director,
1/97 to present, Sage Insurance Group Inc.;
Director, Sage Advisors, Inc., 1/98 to 12/99;
President, Chief Executive Officer, Sage Life
Assurance of America Inc., 1/97-2/98;
Director, Sage Distributors, Inc., 1/98 to
12/99; Director, President, Chief Executive
Officer, Sage Management Services (USA), Inc.,
6/96 to 12/99; Owner, Sheldon Scowby Resources
7/95-6/96.
Robin I. Marsden(2) Director, 1/97 to present; President President and Chief Executive Officer, Sage
Age 34 and Chief Executive Officer, 2/98 Life Assurance Company of New York, 4/2000 to
to present present; Director and President, Sage Life
(Bermuda) Ltd., 1/2000 to present; President
and Trustee, Sage Life Investment Trust, 7/98
to present; Director, Sage Life Assurance
Company of New York, 5/98 to present;
Director, President, Sage Advisors, Inc., 1/98
to present; Director, Sage Distributors, Inc.,
1/98 to present; Director, 1/97 to present,
President and Chief Executive Officer, 2/98 to
present, Sage Insurance Group, Inc.; Chief
Investment Officer, Sage Life Holdings, Ltd.,
11/94 to 1/98; and Executive-Strategic
Developments, Sage Group Ltd., 11/94 to 1/98.
H. Louis Shill(3) Director, 1/97 to present Director, Sage Life Assurance Company of New
Age 69 York, 5/98 to present; Chairman, Sage Life
Assurance of America, Inc., 1/97 to 2/98;
Chairman, Sage Insurance Group,
</TABLE>
11
<PAGE> 16
<TABLE>
<S> <C> <C>
Inc., 1/97 to present; Founder, Chairman, Sage
Group Limited, 1965 to present.
Paul C. Meyer(4) Director, 1/97 to present Director, Sage Life Assurance Company of New
Age 47 York, 5/98 to present; Partner, Clifford,
Chance, Rogers & Wells LLP, 1986 to present.
Richard D. Starr(5) Director, 1/97 to present Chairman and Director, ABN Amro Financial
Age 56 Services, Inc., 7/00 to present; Director, Sage
Life Assurance Company of New York, 5/98 to
present; President, First Interstate Securities,
1/95 to 12/95; Chairman & Chief Executive
Officer, Financial Institutions Group, Inc.,
10/78 to present.
Mitchell R. Katcher(2) Director, 12/97 to present; Senior Senior Executive Vice President, Chief
Age 47 Executive Vice President, Chief Financial Financial Officer and Chief Actuary, Sage Life
Officer, Chief Actuary 5/97 to present Assurance Company of New York, 4/2000 to
present; Director, Chief Financial Officer and
Chief Actuary, Sage Life (Bermuda), Ltd.,
1/2000 to present; Vice President, Sage Life
Investment Trust, 7/98 to present; Director,
Sage Life Assurance Company of New York, 5/98
to present; Director, Treasurer, Sage Advisors,
Inc., 1/98 to present; Director, Sage
Distributors, Inc., 1/98 to present; Treasurer,
7/97 to present, Senior Executive Vice
President, 12/97 to present, Sage Insurance
Group, Inc.; Executive Vice President, Golden
American Life Insurance Company, 7/93-2/97.
Meyer Feldberg(6) Director, 1/2000 to present Dean/Professor, Columbia University Graduate
Age 58 School of Business, 7/89 to present; Director,
1/2000 to present, Sage Life Assurance Company
of New York and Sage Insurance Group, Inc.
John A. Benning(7) Director, 4/2000 to present Director, 4/2000 to present, Sage Life
Age 66 Assurance Company of New York; Treasurer and
General Counsel, Liberty Hospitality Company,
1/2000 to present; Senior Vice President and
</TABLE>
12
<PAGE> 17
<TABLE>
<S> <C>
General Counsel, Liberty Financial Companies,
1986 to 1999.
</TABLE>
----------------
(1) Mr. Scowby's principal business address is 200 Broad Street, Suite 2337,
Stamford, CT 06901
(2) The principal business address of these persons is 300 Atlantic Street,
Stamford, CT 06901.
(3) Mr. Shill's principal business address is Sage Centre, 10 Fraser Street,
Johannesburg, South Africa 2000.
(4) Mr. Meyer's principal business address is 200 Park Avenue, New York, NY
10166.
(5) Mr. Starr's principal business address is 22507 SE 47th Place, Issaquah,
WA 98029.
(6) Dr. Feldberg's principal business address is Columbia University Graduate
School of Business, Uris Hall, Room 101, 3022 Broadway, New York, NY
10027.
(7) Mr. Benning's principal business address is 23rd Floor, 600 Atlantic
Street, Boston, MA 02210
COMPENSATION
Our executive officers also serve as officers of our parent and of
certain affiliated companies. Cost allocations have been made to us as to the
time these individuals devoted to their duties with us. No allocation was made
during 1997 nor was any made for 1998 for the services of Mr. Shill. No
allocation was made during 1997 for the services of Mr. Marsden.
The following table includes compensation paid by us for services
rendered in all capacities for the years indicated for the Chief Executive
Officer and the other Executive Officers compensated more than $100,000 for the
year ended December 31, 1999.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------------------------
ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
--------------------------- ---- ------- ------ ------------
<S> <C> <C> <C> <C>
Ronald S. Scowby.................................. 1997 $337,500 $100,000
Chairman(1) 1998 $350,000 $100,000 $22,097
1999 $350,000 $100,000 $100,000
Robin I. Marsden.................................. 1998 $275,000 $100,000 $20,956
President and Chief Executive Officer(1) 1999 $322,500 $150,000
Mitchell R. Katcher............................... 1997 $114,583 $265,000
Senior Executive Vice President, 1998 $250,000 $125,000 $19,037
Chief Financial Officer 1999 $268,750 $150,000
and Chief Actuary(1)
</TABLE>
----------------
(1) All salaries and bonuses are paid by Sage Insurance Group.
We pay outside directors $12,000 and $2,000 per meeting attended. Dr. Feldberg
is paid $30,000 and $8,000 per meeting attended. For meetings attended in the
year ended December 31, 1999, we paid each outside director $20,000. Dr.
Feldberg attended no meetings in 1999; we paid his 2000 retainer in 1999. All
directors' compensation includes compensation for services on any board of
directors for any company affiliated with the Company. We do not compensate
directors who are officers or employees of ours or our affiliates for serving
on the Board. Directors do not receive retirement benefits.
13
<PAGE> 18
Sage Life Assurance of America, Inc.
Financial Statements
For the periods ended June 30, 2000 and 1999 and
years ended December 31, 1999 and 1998
CONTENTS
Report of Independent Auditors...................................15
Financial Statements
Balance Sheets...................................................16
Statements of Operations.........................................17
Statements of Stockholder's Equity...............................18
Statements of Cash Flows.........................................19
Notes to Financial Statements....................................20
14
<PAGE> 19
Report of Independent Auditors
Board of Directors
Sage Life Assurance of America, Inc.
We have audited the accompanying balance sheets of Sage Life Assurance of
America, Inc. as of December 31, 1999 and 1998, and the related statements of
operations, stockholder's equity and cash flows for each of the three years in
the period ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Sage Life Assurance of
America, Inc. as at December 31, 1999 and 1998, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States.
/s/ Ernst & Young LLP
---------------------
Ernst & Young LLP
February 24, 2000
Stamford, Connecticut
15
<PAGE> 20
Sage Life Assurance of America, Inc.
Balance Sheets
<TABLE>
<CAPTION>
JUNE 30
2000 DECEMBER 31
(UNAUDITED) 1999 1998
------------- ------------ ------------
<S> <C> <C> <C>
ASSETS
Investments:
Fixed maturities available for sale, at fair
value (amortized cost: 2000-$15,144,562,
1999-$17,296,410 and 1998-$12,967,022) $ 14,116,103 $16,179,750 $12,992,917
Short-term investments 9,940,685 5,972,494 10,975,402
------------- ------------ ------------
Total investments 24,056,788 22,152,244 23,968,319
Cash and cash equivalents 579,703 1,979,985 1,531,165
Accrued investment income 206,739 226,234 203,425
Receivable from affiliates 473,489 671,270 --
Deferred income taxes 349,688 376,461 --
Goodwill 6,110,912 6,228,146 6,565,134
Development costs -- -- 4,269,488
Other assets 8,528 9,231 5,000
Separate account assets 2,002,048 93,009 -
------------- ------------ ------------
Total assets $ 33,787,895 $31,736,580 $36,542,531
============= ============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Accrued expenses $ 174,661 $ 140,426 $ 61,670
Deferred income taxes 580,395 -- 8,804
Separate account liabilities 2,002,048 93,009 --
------------- ------------ ------------
Total liabilities 2,757,104 233,435 70,474
Stockholder's equity:
Common stock, $2,500 par value, 1,000 shares
authorized, issued and outstanding 2,500,000 2,500,000 2,500,000
Additional paid-in capital 41,099,519 39,351,096 34,875,727
Retained deficit (11,889,944) (9,617,174) (920,760)
Accumulated other comprehensive (loss) income (678,784) (730,777) 17,090
------------- ------------ ------------
Total stockholder's equity 31,030,791 31,503,145 36,472,057
------------- ------------ -----------
Total liabilities and stockholder's equity $ 33,787,895 $31,736,580 $36,542,531
============= ============ ============
</TABLE>
See accompanying notes to financial statements.
16
<PAGE> 21
Sage Life Assurance of America, Inc.
Statements of Operations
<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30 YEAR ENDED DECEMBER 31
2000 1999 1999 1998 1997
----------------- ----------------- ----------------- --------------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES
Investment income $ 588,179 $ 646,840 $ 1,290,196 $1,243,522 $ 989,494
Administrative service fees 25,000 15,517 37,671 -- --
Policy charges and fees 1,346 134 861 -- --
----------------- ----------------- ----------------- --------------- --------------
Total revenues 614,525 662,491 1,328,728 1,243,522 989,494
EXPENSES
Salaries and benefits expenses 1,065,668 617,514 972,052 741,979 497,426
Development expenses 998,423 1,502,953 3,827,887 -- --
Amortization expense 117,234 117,234 234,468 548,818 325,406
General and administrative
expenses 705,970 273,845 721,247 521,699 518,448
----------------- ----------------- ----------------- --------------- --------------
Total expenses 2,887,295 2,511,546 5,755,654 1,812,496 1,341,280
Loss before cumulative effect
adjustment (2,272,770) (1,849,055) (4,426,926) (568,974) (351,786)
Cumulative effect adjustment
for change in accounting for
development costs -- (4,269,488) (4,269,488) -- --
----------------- ----------------- ----------------- --------------- --------------
Net loss $(2,272,770) $(6,118,543) $(8,696,414) $ (568,974) $ (351,786)
================= ================= ================= =============== ==============
</TABLE>
See accompanying notes to financial statements.
17
<PAGE> 22
Sage Life Assurance of America, Inc.
Statements of Stockholder's Equity
<TABLE>
<CAPTION>
COMMON ADDITIONAL PAID
STOCK IN CAPITAL RETAINED DEFICIT
---------------- ------------------ ------------------
<S> <C> <C> <C>
Balance at January 1, 1997 $ 2,500,000 $ 15,505,508
Net loss $ (351,786)
Change in unrealized gain on
investments, net of taxes -- -- --
Comprehensive loss -- -- --
Additional capital contributions -- 15,500,000 --
---------------- ------------------ ------------------
Balance at January 1, 1998 2,500,000 31,005,508 (351,786)
Net loss
Change in unrealized gain on investments,
net of taxes -- -- (568,974)
Comprehensive loss -- -- --
Additional capital contributions -- 3,870,219 --
---------------- ------------------ ------------------
Balance at December 31, 1998 2,500,000 34,875,727 (920,760)
Net loss
Change in unrealized loss on investments,
net of taxes -- -- (8,696,414)
Comprehensive loss -- -- --
Purchase price adjustment -- (102,518) --
Additional capital contributions -- 4,577,887 --
---------------- ------------------ ------------------
Balance at December 31, 1999 2,500,000 39,351,096 (9,617,174)
---------------- ------------------ ------------------
Net loss (2,272,770)
Change in unrealized loss on investments,
net of taxes
Comprehensive loss
Additional capital contributions 1,748,423
---------------- ------------------ ------------------
Balance at June 30, 2000 (unaudited) $ 2,500,000 $ 41,099,519 $ (11,889,944)
================ ================== ==================
</TABLE>
<TABLE>
<CAPTION>
ACCUMULATED OTHER
COMPREHENSIVE (LOSS)
INCOME TOTAL
---------------------- --------------------
<S> <C> <C>
Balance at January 1, 1997 $ 18,005,508
Net loss (351,786)
Change in unrealized gain on
investments, net of taxes $ 48,706 48,706
--------------------
Comprehensive loss (303,080)
Additional capital contributions -- 15,500,000
---------------------- --------------------
Balance at January 1, 1998 48,706 33,202,428
Net loss (568,974)
Change in unrealized gain on investments,
net of taxes (31,616) (31,616)
--------------------
Comprehensive loss (600,590)
Additional capital contributions 3,870,219
---------------------- --------------------
Balance at December 31, 1998 17,090 36,472,057
Net loss (8,696,414)
Change in unrealized loss on investments,
net of taxes (747,867) (747,867)
--------------------
Comprehensive loss (9,444,281)
Purchase price adjustment (102,518)
Additional capital contributions 4,577,887
---------------------- --------------------
Balance at December 31, 1999 (730,777) 31,503,145
---------------------- --------------------
Net loss (2,272,770)
Change in unrealized loss on investments,
net of taxes 51,993 51,993
--------------------
Comprehensive loss (2,220,777)
Additional capital contributions 1,748,423
---------------------- --------------------
Balance at June 30, 2000 (unaudited) $ (678,784) $ 31,030,791
====================== ====================
</TABLE>
See accompanying notes to financial statements.
18
<PAGE> 23
Sage Life Assurance of America, Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS YEAR ENDED
ENDED ENDED DECEMBER 31
JUNE 30 JUNE 30 -------------
2000 1999 1999
--------------- --------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss $(2,272,770) $(6,118,543) $(8,696,414)
Adjustments to reconcile net loss to net cash (used in) provided by
operating activities:
Amortization expense 117,234 117,234 234,468
Deferred income taxes 26,784 -- --
Cumulative effect adjustment for change in accounting for development
costs -- 4,269,488 4,269,488
Changes in:
Accrued investment income 19,495 (2,744) (22,809)
Receivable from affiliates 197,781 (15,517) (671,270)
Other assets 692 (256,314) (4,231)
Other liabilities 580,395 -- --
Accrued expenses 34,235 (23,886) 78,756
--------------- --------------- -------------
Net cash used in operating activities (1,296,154) (2,030,282) (4,812,012)
INVESTING ACTIVITIES
Purchase of fixed maturity securities -- (3,947,436) (4,319,964)
Proceeds from sales, maturities and repayments of fixed maturity securities 51,993 75,212 --
Net sales of short-term investments (1,904,544) 3,240,532 5,002,909
--------------- --------------- -------------
Net cash provided by investing activities (1,852,551) (631,692) 682,945
FINANCING ACTIVITIES
Development costs paid by parent 998,423 1,502,953 3,827,887
Capital contribution from the parent 750,000 -- 750,000
--------------- --------------- -------------
Net cash provided by financing activities 1,748,423 1,502,953 4,577,887
--------------- --------------- -------------
Increase in cash and cash equivalents (1,400,282) (1,159,021) 448,820
Cash and cash equivalents at beginning of year 1,979,985 1,531,165 1,531,165
--------------- --------------- -------------
Cash and cash equivalents at end of year $ 579,703 $ 372,144 $1,979,985
=============== =============== =============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------
1998 1997
-------------- -----------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $(568,974) $(351,786)
Adjustments to reconcile net loss to net cash (used in) provided by
operating activities:
Amortization expense 548,818 325,406
Deferred income taxes -- --
Cumulative effect adjustment for change in accounting for development
costs -- --
Changes in:
Accrued investment income (145,386) (29,638)
Receivable from affiliates (128,425) 128,425
Other assets 6,443 (11,443)
Other liabilities -- --
-------------- -----------------
Accrued expenses (118,772) 116,216
-------------- -----------------
Net cash used in operating activities (406,296) 177,180
INVESTING ACTIVITIES
Purchase of fixed maturity securities (10,295,783) --
Proceeds from sales, maturities and repayments of fixed maturity securities 849,153 42,941
Net sales of short-term investments 10,555,486 (15,507,987)
-------------- -----------------
Net cash provided by investing activities 1,108,856 (15,465,046)
FINANCING ACTIVITIES
Development costs paid by parent -- --
Capital contribution from the parent 600,000 15,500,000
-------------- -----------------
Net cash provided by financing activities 600,000 15,500,000
-------------- -----------------
Increase in cash and cash equivalents 1,302,560 212,134
Cash and cash equivalents at beginning of year 228,605 16,471
-------------- -----------------
Cash and cash equivalents at end of year $ 1,531,165 $ 228,605
============== =================
</TABLE>
See accompanying notes to financial statements.
19
<PAGE> 24
Sage Life Assurance of America, Inc.
Notes to Financial Statements
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND OPERATION
Sage Life Assurance of America, Inc. (the "Company") is a wholly-owned
subsidiary of Sage Life Holdings of America, Inc. ("SLHA"), which is a
wholly-owned indirect subsidiary of Sage Group Limited, a South African
company.
DESCRIPTION OF BUSINESS
Sage Life Assurance of America, Inc. (the "Company"), which is domiciled in
Delaware, is a wholly-owned subsidiary of Sage Life Holdings of America, Inc.,
which is a wholly-owned indirect subsidiary of Sage Group Limited (Sage Group),
a South African company.
The Company is in the process of developing and preparing to market variable
annuity and variable life insurance products. The sale of these products began
on a limited basis in the first quarter of 1999. The Company has mutually
agreed to enter into a coinsurance reinsurance arrangement with Swiss Re Life &
Health America (Swiss Re), pursuant to which Swiss Re will reinsure a
significant portion of the liabilities under the variable insurance contracts.
BASIS OF PRESENTATION
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with a maturity
of three months or less from the date of purchase to be cash equivalents. Cash
and cash equivalents are carried at cost, which approximates fair value.
INVESTMENTS
The Company has classified all of its fixed maturity investments as
available-for-sale. Those investments are carried at fair value and changes in
unrealized gains and losses are reported as a component of stockholder's
equity, net of applicable deferred income taxes. Fair values are determined by
quoted market prices.
Short-term investments are carried at cost, which approximates fair value.
Realized gains and losses on disposal of investments are determined by the
specific identification method and are included in revenues.
20
<PAGE> 25
Sage Life Assurance of America, Inc.
Notes to Financial Statements (continued)
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SEPARATE ACCOUNTS
The separate account assets and liabilities reported in the accompanying
balance sheet represent funds that are separately administered, principally for
the benefit of certain policyholders who bear the investment risk. The separate
account assets and liabilities, as reported as of December 31, 1999, are
carried at fair value, based on quoted market prices. Revenues and expenses
related to the separate account assets and liabilities, to the extent of
benefits paid or provided to the separate account policyholders, are excluded
from the amounts reported in the accompanying statements of operations.
POLICY LIABILITIES
The Company has no policy liabilities in its General Account at December 31,
1999 and 1998. All policy liabilities are in the Separate Account and are
comprised of all payments received plus credited interest, less accumulated
policyholder charges, assessments and withdrawals related to annuities of a
nonguaranteed return nature.
GOODWILL
Goodwill represents the excess of the fair value of assets exchanged over the
net assets acquired. Goodwill is being amortized on a straight-line basis over
thirty years. The carrying value of goodwill is regularly reviewed for
indications of impairment in value, which, in the view of management, is other
than temporary. Accumulated amortization at December 31, 1999 and December 31,
1998 was $703,403 and $468,935, respectively.
DEVELOPMENT COSTS
Pursuant to the adoption of Statement of Position 98-5, "Reporting on the Costs
of Start-Up Activities", (SOP 98-5), the Company is required to charge to
expense all start-up costs incurred. In addition, the Company was required to
write-off any unamortized capitalized development costs on January 1, 1999.
Development costs incurred for the year ended December 31, 1999 charged to
expense were $3,827,887. The one time write-off of the unamortized capitalized
development costs was $4,269,488.
ESTIMATES
The preparation of financial statements in accordance with generally accepted
accounting principles requires that management makes estimates and assumptions
that affect the reported amount of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
21
<PAGE> 26
Sage Life Assurance of America, Inc.
Notes to Financial Statements (continued)
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
Income taxes are accounted for using the liability method. Using this method,
deferred tax assets and liabilities are determined based on differences between
the financial reporting and tax basis of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse.
RECLASSIFICATIONS
Certain reclassifications have been made to prior year's financial statement
amounts to conform to the 1999 presentation.
2. INVESTMENTS
Investments in fixed maturity securities as of December 31 consist of the
following:
<TABLE>
<CAPTION>
GROSS GROSS UNREALIZED FAIR
AMORTIZED COST UNREALIZED GAINS LOSSES VALUE
------------------- ----------------- ------------------ --------------------
<S> <C> <C> <C> <C>
1999
U.S. Government Obligations $ 9,260,132 $ 12,577 $ 641,663 $ 8,631,046
Corporate Obligations 8,036,278 -- 487,574 7,548,704
------------------- ----------------- ------------------ --------------------
$ 17,296,410 $ 12,577 $ 1,129,237 $ 16,179,750
=================== ================= ================== ====================
1998
U.S. Government Obligations $ 9,356,479 $ 89,549 $ 54,974 $ 9,391,054
Corporate Obligations 3,610,543 4,282 12,962 3,601,863
=================== ================= ================== ====================
$ 12,967,022 $ 93,831 $ 67,936 $ 12,992,917
=================== ================= ================== ====================
</TABLE>
The amortized cost and fair value of fixed maturity securities by contractual
maturity at December 31, 1999 are summarized below. Actual maturities will
differ from contractual maturities because certain borrowers have the right to
call or prepay obligations.
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
------------------- ---------------------
<S> <C> <C>
Due in one year or less $ 2,550,942 $ 2,563,519
Due after one year through five years 5,129,073 4,896,658
Due after five years through ten years 9,616,395 8,719,573
------------------- ---------------------
Total $ 17,296,410 $ 16,179,750
=================== =====================
</TABLE>
22
<PAGE> 27
Sage Life Assurance of America, Inc.
Notes to Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
Investment income by major category of investment for the years ended December
31, 1999, 1998 and 1997 is summarized as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------------ ------------------ ------------------
<S> <C> <C> <C>
Bonds $ 907,068 $ 261,781 $255,778
Short-term investments 438,951 787,873 720,556
Cash and cash equivalents 22,416 239,700 49,035
------------------ ------------------ ------------------
Total investment income 1,368,435 1,289,354 1,025,369
Investment expenses 78,239 45,832 35,875
------------------
------------------ ------------------
Net investment income $ 1,290,196 $ 1,243,522 $989,494
================== ================== ==================
</TABLE>
At December 31, 1999 and 1998, investment securities with an amortized cost of
$6,602,056 and $6,678,745, respectively, and a fair value of $5,960,476 and
$6,623,770, respectively, are held by trustees in various amounts in accordance
with the statutory requirements of certain states in which the Company is
licensed to conduct business.
3. INCOME TAXES
The Company files a separate life insurance company Federal income tax return
and will continue to do so through the year 2001. Beginning in the year 2002,
the Company will be included in the consolidated Federal income tax return of
Sage Holdings (U.S.A.), Inc. and its subsidiaries.
The provision for income taxes varies from the amount which would be computed
using the federal statutory income tax rate as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------------- ------------------ ------------------
<S> <C> <C> <C>
Pre-tax loss $(8,696,414) $ (568,974) $ (351,786)
Application of the federal statutory tax rate - 34% (2,956,781) (193,451) (119,607)
Change in valuation allowance 2,907,523 193,451 119,532
Other 49,258 -- (75)
------------------- ------------------ ------------------
Total income tax provision $ -- $ -- $ --
=================== ================== ==================
</TABLE>
23
<PAGE> 28
Sage Life Assurance of America, Inc.
Notes to Financial Statements (continued)
3. INCOME TAXES (CONTINUED)
Significant components of the Company's deferred tax assets and liabilities as
of December 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
1999 1998
--------------------- ---------------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 3,501,308 $ 1,967,528
Unrealized loss on depreciation of investments 376,461 --
--------------------- ---------------------
Total deferred tax assets 3,877,769 1,967,528
Deferred tax liabilities:
Unrealized gain on appreciation of investments -- (8,804)
Amortization of goodwill and development costs (261,185) (1,634,928)
Other (19,617) (19,617)
--------------------- ---------------------
Total deferred tax liabilities (280,802) (1,663,349)
Valuation allowance for deferred tax assets (3,220,506) (312,983)
--------------------- ---------------------
Net deferred tax asset (liability) $ 376,461 $ (8,804)
===================== =====================
</TABLE>
Based upon the lack of historical operating results and the uncertainty of
operating earnings in the future, management has determined that it is not more
likely than not that the deferred tax assets will be fully recognized.
Accordingly, a valuation allowance has been recorded.
The Company has a separate company net operating loss carryforward of
approximately $10.3 million as of December 31, 1999, of which $4.7 million
expires in the year 2019, $3.7 million which expires in 2018 and $1.9 million
which expires in the year 2012.
4. RETAINED DEFICIT AND DIVIDEND RESTRICTIONS
Statutory-basis net (loss) income and surplus of the Company are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
--------------------- --------------------- ----------------------
<S> <C> <C> <C>
Net (loss) income $ (389,023) $ 27,002 $ 51,133
Surplus 23,473,747 23,109,097 25,017,752
</TABLE>
The Company is subject to state regulatory restrictions that limit the maximum
amount of dividends payable. Subject to certain net income carryforward
provisions as described below, the Company must obtain approval of the
Insurance Commissioner of the State of Delaware in order to pay, in any
12-month period, "extraordinary" dividends which are defined as those in excess
of the greater of 10% of surplus as regards policyholders as of the prior
year-end and statutory net income less realized capital gains for such prior
year. Dividends may be paid by the Company only out of earned surplus. In
addition, the Company must provide notice to the Insurance Commissioner of the
State of Delaware of all dividends and other distributions to stockholders
within five business days after declaration and at least ten days prior to
payment. At December 31, 1999, the Company could not pay a dividend to SLHA
without prior approval from state regulatory authorities as the Company
currently does not have earned surplus.
24
<PAGE> 29
Sage Life Assurance of America, Inc.
Notes to Financial Statements (continued)
5. RELATED PARTY TRANSACTIONS
In 1997, the Company entered into a Cost Sharing Agreement with Sage Insurance
Group, Inc. (SIGI), the parent of SLHA, to share the personnel costs, office
rent and equipment costs. These costs are allocated between the companies based
upon the estimated time worked, square footage of space utilized and upon
monitored usage of the equipment, respectively. Pursuant to this agreement, the
Company has received $903,757 and $151,348 from SIGI for the years ended
December 31, 1999 and 1998, respectively. The Company paid SIGI $76,048 for the
year ended December 31, 1997. At December 31, 1999 the amount due from SIGI
relating to this agreement was $594,432. There was no amount due at December
31, 1998. In addition, SIGI provides funds to the Company to meet various
operating expenses. As these amounts are paid back to SIGI at the end of each
quarter, no amounts remained payable at December 31, 1999 and 1998.
All non-recurring development costs of the Company are paid by SIGI or its
parent, Sage Group Limited, and treated as capital contributions. The amount of
development costs paid for by affiliated companies at December 31, 1999, 1998,
and 1997 were $7,098,106, $3,270,219, and $1,504,558, respectively.
6. INTERIM FINANCIAL STATEMENTS
The financial information presented as of June 30, 2000 and for the six month
periods ending June 30, 2000 and 1999 have not been audited.
25
<PAGE> 30
The prospectus dated and filed May 1, 2000 is incorporated herein by reference.
<PAGE> 31
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
Securities and Exchange Commission
Registration Fees (Approximate) $ 10,100
Printing and engraving $ 37,500
Accounting fees and expenses $ 15,000
Legal fees and expenses $ 42,000
Miscellaneous $ 10,000
--------
Total Expenses (Approximate) $114,600
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Sage Life's Articles of Incorporation provide that a director of the
Company shall not be personally liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director, except that (i) for
any breach of the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which would involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law, or (iv) for any transaction from which the
director derived any personal benefit. Notwithstanding the foregoing, the
Articles provide that if the Delaware General Corporation Law is amended to
authorize further limitations of the liability of a director or a corporation,
then a director of the Company, in addition to circumstances in which a director
is not personally liable as set forth in the preceding sentence, shall be held
free from liability to the fullest extent permitted by the Delaware General
Corporation Law as amended.
Sage Life's Bylaws provide that the Company shall indemnify its officers,
directors, employees and agents to the extent permitted by the General
Corporation Law of Delaware.
Further, Section 145 of Delaware General Corporation Law provides that a
corporation shall have power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit, or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit, or proceeding if he acted 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. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not
<PAGE> 32
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had a reasonable cause to believe that his
conduct was not unlawful.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Not applicable.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) Exhibits
1. Form of Distribution Agreement with Sage Distributors, Inc. and
Form of Selling Agreement.(1)
3. (i) Articles of Incorporation of the Company.(2)
(ii) By-Laws of the Company.(2)
4. (a) Form of Individual Contract. (Form MSPVL1-9906)(3)
(b) Form of Individual Contract with Interest Account. (Form
MSPVL1-9906-VT)(3)
(c) Form of Individual Contract with Market Value Adjustment with
Floor. (Form MSPVL1-9906-OR)(3)
(d) Form of Individual Contract without Market Value Adjustment. (Form
MSPVL1-9906-WA)(3)
(e) Form of Group Contract. (Form MSPVL1-MGC-9906)(3)
(f) Form of Group Certificate. (Form MSPVL1-C-9906)(3)
(g) Form of Individual Certificate of Insurance Coverage. (Form
MSPVL-CIC-9811)(3)
<PAGE> 33
(h) Form of Group Certificate of Insurance Coverage. (Form
MSPVL-C-9811)(3)
(i) Form of Individual Temporary Insurance Certificate. (Form
TIA-MSPVL-9806)(3)
(j) Form of Group Temporary Insurance Certificate. (Form
TIA-MSPVL-C-9806)(3)
(k) Form of Individual Accelerated Death Benefit Rider. (Form
MSPVL-ACCDB-9801)(3)
(l) Form of Group Accelerated Death Benefit Rider. (Form
MSPVL-ACCDB-9801)(3)
(m) Form of Individual Accidental Death Benefit Rider. (Form
MSPVL-ADB-9801)(3)
(n) Form of Group Accidental Death Benefit Rider. (Form
MSPVL-C-ADB-9801)(3)
(o) Form of Individual Waiver of Surrender Charge Rider. (Form
MSPVL-WSC-9801)(3)
(p) Form of Group Waiver of Surrender Charge Rider. (Form
MSPVL-WSC-9801)(3)
(q) Form of Individual Contract Application- Part I. (Form
AP-MSPVL-9806)(3)
(r) Form of Individual Contract Application- Part II. (Form AP
II-MSPVL-9806)(3)
(s) Form of Group Certificate Application- Part I. (Form AP
MPVL-C-9806)(3)
(t) Form of Group Certificate Application- Part II. (Form AP
II-MSPVL-C-9806)(3)
5. Opinion and Consent of James F. Bronsdon.*
10. (a) Form of Participation Agreement with AIM Variable Insurance Funds,
Inc.(1)
(b) Form of Participation Agreement with The Alger American Fund.(1)
(c) Form of Participation Agreement with Liberty Variable Investment
Trust.(4)
(d) Form of Participation Agreement with MFS(R) Variable Insurance
Trust.(SM)(1)
(e) Form of Participation Agreement with Morgan Stanley Universal
Funds, Inc.(4)
(f) Form of Participation Agreement with Oppenheimer Variable Account
Funds.(4)
(g) Form of Participation Agreement with Sage Life Investment
Trust.(1)
(h) Form of Participation Agreement with SteinRoe Variable Investment
Trust.(4)
<PAGE> 34
(i) Form of Participation Agreement with T. Rowe Price Equity Series,
Inc.(4)
(j) Form of Services Agreement with Financial Administration Services,
Inc.(4)
(k) Service Agreement with PMSI.(4)
23. (a) Consent of Sutherland Asbill & P. Brennan LLP.*
(b) Consent of Ernst & Young LLP.*
(c) Opinion and Consent of John P. O'Shaughnessy, Actuary*
24. (a) Power of Attorney for Ronald S. Scowby.(4)
(b) Power of Attorney for H. Louis Shill.(5)
(c) Power of Attorney for Mitchell R. Katcher.(5)
(d) Power of Attorney for Paul C. Meyer.(6)
(e) Power of Attorney for Richard D. Starr.(6)
(f) Power of Attorney for Robin I. Marsden.(7)
(g) Power of Attorney for Paul C. Meyer, Ronald S. Scowby, Richard D.
Starr, H. Louis Shill and Meyer Feldberg.(8)
(h) Power of Attorney for John A. Benning.(9)
27. Not Applicable
(B) Financial Statement Schedules - Not Applicable.
----------------
(1)/ This exhibit was previously filed in Pre-Effective Amendment No. 1 to the
Registration Statement on Form N-4 (File No. 333-43329) dated December 31, 1998,
and is incorporated herein by reference.
(2)/ This exhibit was previously filed in the Registration Statement on Form N-4
dated December 24, 1997 (File No. 333-43329), and is incorporated herein by
reference.
(3)/ This exhibit was previously filed in Pre-Effective Amendment No. 1 to the
Registration Statement on Form S-6 dated September 21, 1999 (File No.
333-78581), and is incorporated herein by reference.
<PAGE> 35
(4)/ This exhibit was previously filed in Pre-Effective Amendment No. 2 to the
Registration Statement on Form N-4 (File No. 333-43329) dated January 28, 1999,
and is incorporated herein by reference.
(5)/ This exhibit was previously filed in Pre-Effective Amendment No. 2 to the
Registration Statement filed on Form N-4 (File No. 333-44751) dated February 10,
1999, and is incorporated herein by reference.
(6)/ This exhibit was previously filed in the Registration Statement filed on
Form S-6 (File No. 333-78581) dated May 17, 1999, and is incorporated herein by
reference.
(7)/ This exhibit was previously filed in Post-Effective Amendment No. 1 to the
Registration Statement filed on Form N-4 (File No. 333-43329) dated February 26,
1999, and is incorporated herein by reference.
(8)/ This exhibit was previously filed in Post-Effective Amendment No. 3 to the
Registration Statement filed on Form N-4 (File No. 333-43329), dated February
29, 2000, and is incorporated herein by reference.
(9)/ This exhibit was previously filed in the Registration Statement on Form S-1
(File No. 333-45148), dated September 1, 2000, and is incorporated herein by
reference.
* Filed herewith.
ITEM 17. UNDERTAKINGS
The undersigned registrant 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 thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the registration statement;
and
(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;
<PAGE> 36
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such 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.
(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.
<PAGE> 37
As required by the Securities Act of 1933, the registrant has caused this
Amendment No. 3 to Registration Statement to be signed on its behalf, in the
City of Stamford, in the State of Connecticut, on this 18th day of September,
2000.
By: Sage Life Assurance of America, Inc.
(Registrant)
Attest: By: /s/ Robin I. Marsden
------------------------------------
Robin I. Marsden
/s/ James F. Bronsdon Director, President,
----------------------- Chief Executive Officer
<PAGE> 38
As required by the Securities Act of 1933, this Amendment No. 3 to
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Ronald S. Scowby* Chairman September 18, 2000
-----------------------------
Ronald S. Scowby
/s/ H. Louis Shill* Director September 18, 2000
-----------------------------
H. Louis Shill
/s/ Paul C. Meyer* Director September 18, 2000
-----------------------------
Paul C. Meyer
/s/ Richard D. Starr* Director September 18, 2000
-----------------------------
Richard D. Starr
/s/ Mitchell R. Katcher Director, Senior Executive Vice President, September 18, 2000
----------------------------- Chief Financial Officer, Chief Actuary
Mitchell R. Katcher
/s/ Meyer Feldberg* Director September 18, 2000
-----------------------------
Meyer Feldberg
/s/ John A. Benning* Director September 18, 2000
-----------------------------
John A. Benning
</TABLE>
* By: /s/ Mitchell R. Katcher
-----------------------
Mitchell R. Katcher
As Attorney-In-Fact pursuant to a Power of Attorney as dated below.
<TABLE>
<CAPTION>
Director Date
-------- ----
<S> <C>
Meyer Feldberg February 28, 2000
Ronald S. Scowby February 24, 2000
H. Louis Shill February 25, 2000
Paul C. Meyer February 23, 2000
Richard D. Starr February 25, 2000
John A. Benning July 31, 2000
</TABLE>
<PAGE> 39
EXHIBIT LIST
Exhibit 5 Opinion and Consent of James F. Bronsdon
Exhibit 23(a) Consent of Sutherland Asbill & Brennan LLP
Exhibit 23(b) Consent of Ernst & Young LLP
Exhibit 24 Opinion and Consent of John P. O'Shaughnessy, Actuary
