VARIABLE ACCOUNT A AMERICAN INTL LIFE ASSUR CO OF NEW YORK
485BPOS, 1996-05-02
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<PAGE>


          AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 2,1996
                                                             FILE NO. 33-39170
                                                                     811-4865
                          SECURITIES AND EXCHANGE COMMISSION
                                Washington, D.C. 20549

                                       FORM N-4

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
    Pre-Effective Amendment No.                       [ ]
                                -------
    Post - Effective Amendment No.  7                 [X]
                                   ----

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
    Amendment No.                                          [X]
                  -----
                          (Check appropriate box or boxes.)

                                  VARIABLE ACCOUNT A
                                 --------------------
                              (Exact Name of Registrant)

              American International Life Assurance Company of New York
              ---------------------------------------------------------
                                 (Name of Depositor)

                      80 Pine Street, New York, New York  10005
                      -----------------------------------------
          (Address of Depositor's Principal Executive Offices)   (Zip Code)

           Depositor's Telephone Number, including Area Code (212) 770-7000
                                                         --------------

                                 Robert Liguori, Esq.
                              AIG Life Insurance Company
                                   One Alico Plaza
                              Wilmington, Delaware 19899
                       (Name and Address of Agent for Service)

                                      Copies to:
         Michael Berenson, Esq.            and   Florence Davis, Esq.
         Jorden Burt Berenson & Johnson          American International
         Suite 400 East                          Group, Inc.
         1025 Thomas Jefferson Street, N.W.      70 Pine Street
         Washington, D.C. 20007-0805             New York, New York 10270

Approximate Date of Proposed Public Offering:  As soon as practicable after the
effective date of this filing.

It is proposed that this filing will become effective (check appropriate box)
      X   immediately upon filing pursuant to paragraph (b) of Rule 485
    -----
          on             pursuant to paragraph (b) of Rule 485
    -----    ----------
          60 days after filing pursuant to paragraph (a)(i) of Rule 485
    -----
          on                      pursuant to paragraph (a)(i) of Rule 485
    -----    -------------------
          75 days after filing pursuant to paragraph (a)(ii)
    -----
          on                       pursuant to paragraph (a)(ii) of rule 485.
    -----    --------------------


If appropriate, check the following box:
          this post-effective amendment designates a new effective date for a
    -----
previously filed post-effective amendment.

Registrant has declared that it registered an indefinite number or amount of
securities in accordance with Rule 24f-2 under the Investment Company Act of
1940.  Registrant filed a Rule 24f-2 notice for its most recent fiscal year on
February 28, 1996.

<PAGE>

                                CROSS REFERENCE SHEET
                                (REQUIRED BY RULE 495)

ITEM NO.       LOCATION
                                        PART A

Item 1.       Cover Page.....................................   Cover Page
Item 2.       Definitions....................................   Definitions
Item 3.       Synopsis.......................................   Highlights
Item 4.       Condensed Financial Information................   Not Applicable
Item 5.       General Description of Registrant,
              Depositor, and Portfolio Companies.............   The Variable
                                                                Account; The
                                                                Company;
                                                                Alliance
                                                                Variable
                                                                Products Series
                                                                Fund, Inc.
Item 6.       Deductions and Expenses........................   Charges and
                                                                Deductions
Item 7.       General Description of Variable
              Annuity Contracts..............................   Purchasing a
                                                                Contract;
                                                                Rights
                                                                under the
                                                                Contracts
Item 8.       Annuity Period.................................   Annuity Period
Item 9.       Death Benefit..................................   Death Benefit
Item 10.      Purchases and Contract Value...................   Rights under
                                                                the Contracts;
                                                                Purchasing
                                                                a Contract
Item 11.      Redemptions....................................   Withdrawals
Item 12.      Taxes..........................................   Taxes
Item 13.      Legal Proceedings..............................   Not Applicable
Item 14.      Table of Contents of the Statement of
              Additional Information.........................   Table of
                                                                Contents of
                                                                the Statement
                                                                of Additional
                                                                Information

<PAGE>

                                        PART B


Item 15.      Cover Page....................................    Cover Page
Item 16.      Table of Contents.............................    Table of
                                                                Contents
Item 17.      General Information and History...............    General
                                                                Information
Item 18.      Services......................................    Services
Item 19.      Purchase of Securities Being Offered..........    Purchasing
                                                                a Contract;
                                                                Charges and
                                                                Deductions
                                                                (Part A)
Item 20.      Underwriters..................................    General
                                                                Information/
                                                                Distributor
Item 21.      Calculation of Performance Data...............    Calculation of
                                                                Performance
                                                                Related
                                                                Information
Item 22.      Annuity Payments..............................    Annuity
                                                                Provisions
Item 23.      Financial Statements..........................    Financial
                                                                Statements


                                        PART C


    Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement.

<PAGE>
   

                                   PROSPECTUS
                                      FOR
 
                              INDIVIDUAL AND GROUP
                      SINGLE PREMIUM AND FLEXIBLE PREMIUM
                                    DEFERRED
                           VARIABLE ANNUITY CONTRACTS
 
                                   ISSUED BY
 
                               VARIABLE ACCOUNT A
 
                                      AND
 
                 AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY
                                  OF NEW YORK
                                 80 PINE STREET
                            NEW YORK, NEW YORK 10005
 
    This  Prospectus sets forth the information  a prospective investor ought to
know before investing.
 
    The  Individual  Deferred  Variable   Annuity  Contracts  (the   "Individual
Contracts")  and Group  Deferred Variable Annuity  Contracts ("Group Contracts")
(collectively,  the  "Contracts")  described  in  this  Prospectus  provide  for
accumulation  of Contract  Values and payment  of monthly  annuity payments. The
Contracts may be used in retirement plans  which do not qualify for federal  tax
advantages  ("Non-Qualified Contracts")  or in connection  with retirement plans
which may qualify as Individual  Retirement Annuities ("IRA") under Section  408
of  the Internal Revenue Code of 1986, as amended (the "Code") or Section 403(b)
of the Code ("403(b) Plans"). The Contracts will not be available in  connection
with  retirement plans designed by American International Life Assurance Company
of New  York  (the "Company")  which  qualify  for the  federal  tax  advantages
available  under Sections 401 and  457 of the Code.  Purchasers intending to use
the Contracts in connection with an IRA or 403(b) Plan should seek competent tax
advice.
 
    Premiums  allocated  among  the  Subaccounts  of  Variable  Account  A  (the
"Variable  Account") will  be invested in  shares of  Alliance Variable Products
Series  Fund,  Inc.  (the   "Fund").  The  Fund   has  made  available   sixteen
Portfolios:   Money Market Portfolio;  Short-Term Multi-Market Portfolio; Growth
Portfolio;  Growth   and  Income   Portfolio;  International   Portfolio;   U.S.
Government/High  Grade  Securities Portfolio;  North American  Government Income
Portfolio; Global Dollar Government Portfolio; Utility Income Portfolio;  Global
Bond  Portfolio; Premier Growth Portfolio;  Total Return Portfolio; Conservative
Investors  Portfolio;  Growth   Investors  Portfolio;  Worldwide   Privatization
Portfolio;  and Technology  Portfolio. (See  "Alliance Variable  Products Series
Fund, Inc. on Page   .)
 
    Additional information  about  the Contracts  and  the Variable  Account  is
contained  in the "Statement of Additional  Information" which is available upon
request at no charge by calling or writing American International Life Assurance
Company of New York; Attention: Variable Products, One Alico Plaza,  Wilmington,
Delaware 19801, 1-800-340-2765 or call the service office at 1-800-255-8402. The
Statement  of Additional Information dated May 1,  1996, has been filed with the
Securities and Exchange Commission and is hereby incorporated by reference.  The
Table  of Contents for the  Statement of Additional Information  can be found on
page   of this Prospectus.
 
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.
 
    PLEASE READ  THIS  PROSPECTUS  CAREFULLY  AND  RETAIN  IT  FOR  YOUR  FUTURE
REFERENCE.
 
    THE CONTRACTS OFFERED BY THIS PROSPECTUS ARE NOT AVAILABLE IN ALL STATES.
 
                                                 Date of Prospectus: May 1, 1996
    
<PAGE>
                                 TABLE CONTENTS
 
   
<TABLE>
<CAPTION>
                                                                                                                PAGE
                                                                                                                -----
<S>                                                                                                          <C>
Definitions................................................................................................           3
Highlights.................................................................................................           4
Summary of Expenses........................................................................................           6
Condensed Financial Information............................................................................           8
  Calculation of Performance Data..........................................................................           9
The Company................................................................................................          11
The Variable Account.......................................................................................          12
The Fund...................................................................................................          12
The Contract
  Parties to the Contract..................................................................................          15
  How to Purchase a Contract...............................................................................          16
  Discount Purchase Programs...............................................................................          16
  Distributor..............................................................................................          16
  Administration of the Contracts..........................................................................          16
  Premium and Allocation to Your Investment Options........................................................          17
  Right to Examine Contract Period.........................................................................          17
  Unit Value and Contract Value............................................................................          18
  Transfers................................................................................................          18
  Dollar Cost Averaging....................................................................................          18
  Asset Rebalancing Option.................................................................................          19
Charges and Deductions.....................................................................................          20
Annuity Benefits...........................................................................................          22
Death Benefit..............................................................................................          23
Distributions Under the Contract...........................................................................          24
Taxes......................................................................................................          27
Table of Contents of the Statement of Additional Information...............................................          31
Appendix -- General Account Option.........................................................................         A-1
  Guaranteed Account.......................................................................................         A-1
  Guarantee Periods........................................................................................         A-1
  Market Value Adjustment..................................................................................         A-2
</TABLE>
    

                                       2
<PAGE>
   
                                  DEFINITIONS
 
ACCUMULATION  UNIT  --  An accounting  unit  of  measure used  to  calculate the
Contract Value prior to the Annuity Date.
 
ADMINISTRATIVE OFFICE -- The Annuity Service Office of the Company: c/o Delaware
Valley Financial Services,  Inc., 300  Berwyn Park,  P.O. Box  3031, Berwyn,  PA
19312-0031.
 
ANNUITANT  -- The person designated by the Owner upon whose continuation of life
any annuity payment involving life contingencies depends.
 
ANNUITY DATE -- The date on which annuity payments are to commence.
 
ANNUITY OPTION --  An arrangement under  which annuity payments  are made  under
this Contract.
 
ANNUITY UNIT -- An accounting unit of measure used to calculate annuity payments
after the Annuity Date.
 
CONTRACT ANNIVERSARY -- An anniversary of the Effective Date of the Contract.
 
CONTRACT  VALUE --  The dollar  value as  of any  Valuation Date  of all amounts
accumulated under this Contract.
 
CONTRACT YEAR -- Each period of twelve (12) months commencing with the Effective
Date.
 
EFFECTIVE DATE -- The date on which the first Contract Year begins.
 
GUARANTEED ACCOUNT -- A  part of our General  Account, which earns a  Guaranteed
Rate of interest.
 
MARKET  VALUE ADJUSTMENT -- An  adjustment applied as a  result of a transfer or
surrender of an  amount allocated to  the Guaranteed Account  which occurs on  a
date prior to the end of an applicable Guarantee Period.
 
OWNER  -- The person named in the Contract Schedule, unless changed, and who has
all rights under the Contract.
 
PREMIUM -- Purchase payments for the Contract are referred to as Premium.
 
PREMIUM YEAR --  Any period of  twelve (12)  months commencing with  the date  a
Premium  payment is made and  ending on the same  date in each succeeding twelve
(12) month period thereafter.
 
SURRENDER CHARGE  --  Contingent  deferred  sales charges  are  referred  to  as
Surrender Charges.
 
VALUATION  DATE -- Each day that We and the New York Stock Exchange are open for
trading.
 
VALUATION PERIOD -- The  period between the close  of business on any  Valuation
Date and the close of business for the next succeeding Valuation Date.
 
WE, OUR, US -- American International Life Assurance Company of New York.
 
YOU, YOUR -- The Owner of this Contract.
 
    
                                       3
<PAGE>
   

                                   HIGHLIGHTS
 
    This  Prospectus  describes  the  Individual  Contracts  or  Group Contracts
(collectively, the "Contracts") and a segregated investment account of  American
International  Life Assurance Company of New  York (the "Company") which account
has been designated Variable Account  A (the "Variable Account"). The  Contracts
are  designed to assist in financial  planning by providing for the accumulation
of capital on a tax-deferred basis for retirement and other long-term  purposes,
and  providing  for the  payment  of monthly  annuity  income. Contracts  may be
purchased by  qualified retirement  plans  or with  the  intent to  qualify  for
special   Federal  income  tax  treatment  ("Qualified  Contracts"),  or  as  an
Individual Retirement Annuity ("IRA").  The Contract may  also be purchased  for
retirement  plans, deferred compensation  plans and other  purposes which do not
qualify  for  such   special  Federal  income   tax  treatment   ("Non-Qualified
Contracts"). (See "Taxes" on page   .)
 
    A  Contract  is  purchased with  a  minimum  initial premium  of  $5,000 for
Non-qualified Contracts and  $2,000 for a  Qualified Contract. If  you choose  a
flexible  premium Contract, additional premium is permitted at any time, subject
to certain limitations. (See "Premium and Allocation to Your Investment Options"
on page    .) You, as the  Owner of the Contract,  may allocate your premium  so
that it accumulates on a variable basis, a fixed basis or a combination of both.
 
    Premium  allocated among  the Subaccounts  of the  Variable Account  will be
invested in shares of one or more  of the underlying portfolios of the  Alliance
Variable  Products  Series Fund,  Inc. (the  "Fund"), and  will accumulate  on a
variable basis.  There  are currently  16  Subaccounts, each  of  which  invests
exclusively  in  one  of  the  following  Portfolios:  Money  Market; Short-Term
Multi-Market; Growth;  Growth and  Income; International;  U.S.  Government/High
Grade  Securities; North  American Government Income;  Global Dollar Government;
Utility  Income;  Global  Bond;  Premier  Growth;  Total  Return;   Conservative
Investors;  Growth  Investors;  Worldwide  Privatization;  and  Technology. (See
"Alliance Variable Products Series Fund, Inc. on Page   .) Your value in any one
of these Subaccounts will  vary according to the  investment performance of  the
underlying  portfolio chosen by you. You bear the entire investment risk for all
premium allocated to the Variable Account.
 
    The Company  does  not  deduct  Sales Charges  from  any  premium  received.
However, the Contracts provide for a Surrender Charge (contingent deferred sales
charge)  that may  be assessed in  the event that  an Owner surrenders  all or a
portion of the Contract Value within  seven contract years following payment  of
any  premium. The maximum Surrender Charge is  6% of premium to which the charge
is applicable for flexible  premium contracts and 6%  of the Contract Value  for
single  premium contracts. (See "Summary  of Expenses" on page    , and "Charges
and Deductions -- Deduction for Surrender Charge"  on page   .) Withdrawals  and
Surrenders  from  the  Guaranteed  Account  may be  subject  to  a  Market Value
Adjustment (See "Market Value Adjustment," Appendix    , page   .)
 
    A penalty free  withdrawal is  available. Generally, there  is no  Surrender
Charge  imposed on the greater  of the Contract Value  less premiums paid or the
portion of the withdrawal that does not exceed 10% of premium otherwise  subject
to the Surrender Charge. (See "Withdrawals" on page   .)
 
    Surrenders and Withdrawals may be taxable and subject to a penalty tax. (See
"Taxes" beginning on page   .)
 
    The Company deducts daily a Mortality and Expense Risk Charge which is equal
on an annual basis to 1.25% of the average daily net asset value of the Variable
Account. There are no Mortality and Expense Risk Charges deducted for amounts in
the  Guaranteed Account. (See "Charges and Deductions -- Deduction for Mortality
and Expense Risk Charge" on page   .)
 
    The Company deducts  daily an  Administrative Charge  which is  equal on  an
annual  basis to  0.15% of  the average  daily net  asset value  of the Variable
Account. The Administrative Charge is not assessed to the Guaranteed Account. In
addition, the  Company  deducts from  the  Contract Value,  an  annual  Contract
Maintenance Fee which is $30 per year. The Contract Maintenance Fee is waived if
the  Contract Value  is greater than  $50,000 on  the date of  the charge. These
Charges are designed to
 
                                       4
<PAGE>
reimburse the Company for administrative expenses relating to maintenance of the
Contract and the Variable Account. (See "Charges and Deductions -- Deduction for
Administrative Charge and Contract Maintenance Fee" on page   .)
 
    There are deductions and expenses paid out  of the assets of the Fund  which
are described in the accompanying Prospectus for the Fund.
 
    The  Owner  may return  the Contract  within  ten (10)  days (the  "Right to
Examine Contract Period") after it is received by returning it to the  Company's
Administrative Office. The return of the Contract by mail will be effective when
the  postmark is affixed  to a properly addressed  and postage prepaid envelope.
The Company will refund the Contract Value.  In the case of Contracts issued  in
connection  with an IRA the Company will  refund the greater of the Premium less
any withdrawals, or the Contract Value. However, if the laws of a state  require
that  the Company refund, during the Right to Examine Contract Period, an amount
equal to the premium paid less any withdrawals, the Company will refund such  an
amount.
 
                                   FEE TABLE
 
OWNER TRANSACTION EXPENSES
 
<TABLE>
<CAPTION>
                                                    ALL
                                                    SUBACCOUNTS
                                                    -----
<S>                                                 <C>
Sales Load Imposed on Purchases...................  None
</TABLE>
 
        Surrender Charge (as a percentage of amount surrendered):
 
<TABLE>
<CAPTION>
      SINGLE PREMIUM CONTRACTS             FLEXIBLE PREMIUM CONTRACTS
- ------------------------------------  -------------------------------------
<S>                                   <C>                                    <C>
Contract Year 1                       Premium Year 1                                   6%
Contract Year 2                       Premium Year 2                                   6%
Contract Year 3                       Premium Year 3                                   5%
Contract Year 4                       Premium Year 4                                   5%
Contract Year 5                       Premium Year 5                                   4%
Contract Year 6                       Premium Year 6                                   3%
Contract Year 7                       Premium Year 7                                   2%
Contract Year 8 and thereafter        Premium Year 8 and thereafter                  None
 
Exchange Fee:
  First 12 Per Contract Year...............................................          None
  Thereafter...............................................................            $10
 
Annual Contract Fee........................................................           $30
 
Separate Account Expenses
(as a percentage of average account value)
  Mortality and Expense Risk Fees..........................................          1.25%
  Account Fees and Expenses................................................          0.15%
Total Separate Account Annual Expenses.....................................          1.40%
</TABLE>
 
                                       5
<PAGE>
                              SUMMARY OF EXPENSES
 
ANNUAL FUND EXPENSES NET OF ANY EXPENSE REIMBURSEMENTS*
 
<TABLE>
<CAPTION>
                                                                                                                 TOTAL
                                                                                                    OTHER      PORTFOLIO
PORTFOLIO                                                                       MANAGEMENT FEE    EXPENSES     EXPENSES
- ------------------------------------------------------------------------------  ---------------  -----------  -----------
<S>                                                                             <C>              <C>          <C>
Alliance Money Market.........................................................          0.38%          0.57%        0.95%
Alliance Short-Term Multi-Market..............................................          0.20           0.75         0.95
Alliance Growth...............................................................          0.43           0.52         0.95
Alliance Growth and Income....................................................          0.63           0.16         0.79
Alliance International........................................................          0.00           0.95         0.95
Alliance U.S. Government/High Grade Securities................................          0.00           0.95         0.95
Alliance North American Government Income.....................................          0.00           0.95         0.95
Alliance Global Dollar Government.............................................          0.00           0.95         0.95
Alliance Utility Income.......................................................          0.00           0.95         0.95
Alliance Global Bond..........................................................          0.00           0.95         0.95
Alliance Premier Growth.......................................................          0.76           0.19         0.95
Alliance Total Return.........................................................          0.00           0.95         0.95
Alliance Conservative Investors...............................................          0.00           0.95         0.95
Alliance Growth Investors.....................................................          0.00           0.95         0.95
Alliance Worldwide Privatization..............................................          0.00           0.95         0.95
Alliance Technology...........................................................          0.00           0.95         0.95
</TABLE>
 
    The  purpose  of  the  table set  forth  above  is to  assist  the  Owner in
understanding the various costs and expenses that an Owner will bear directly or
indirectly. The table reflects expenses of  the Variable Account as well as  the
Fund. (See "Charges and Deductions" on page   of this Prospectus and "Management
of the Fund" in the Fund Prospectus.)
 
    No deduction will be made for any premium or other taxes levied by any State
unless imposed by the State where you reside. Premium taxes currently imposed on
the  Contracts by various  states range from  0% to 3.5%  of premiums paid. (See
"Charges and Deductions -- Deduction for Premium and Other State Taxes" on  page
  .)
 
    "Other  Expenses" are  based upon  the expenses  outlined under  the section
entitled "Management of the Fund" in the Fund Prospectus.
- ------------------------
    *Expense  information  for  the  Money  Market  Portfolio,  Premier   Growth
Portfolio,  U.S.  Government/  High  Grade  Securities  Portfolio,  Total Return
Portfolio, International  Portfolio,  Growth and  Income  Portfolio,  Short-Term
Multi-Market  Portfolio and Global Bond Portfolio  have been restated to reflect
current fees. The expenses listed in  the table for the Money Market  Portfolio,
Premier  Growth  Portfolio, Growth  and  Income Portfolio,  U.S. Government/High
Grade Securities  Portfolio, Total  Return Portfolio,  International  Portfolio,
Short-Term   Multi-Market  Portfolio,  Global  Bond  Portfolio,  North  American
Government Income Portfolio, Global Dollar Government Portfolio, Utility  Income
Portfolio,  Conservative Investors Portfolio, Growth Investors Portfolio, Growth
Portfolio, Worldwide Privatization Portfolio and Technology Portfolio are net of
voluntary expense  reimbursements,  which  are  not  required  to  be  continued
indefinitely;  however, the Advisor intends  to continue such reimbursements for
the foreseeable future. The expenses of the following Portfolios, before expense
reimbursements, would be: Money Market Portfolio: Management Fees -- .50%, Other
Expenses -- .57% and Total Portfolio Operating Expenses -- 1.07%; Premier Growth
Portfolio: Management Fees -- 1.00%, Other Expenses -- .19% and Total  Portfolio
Operating  Expenses --  1.19%; Growth and  Income Portfolio:  Management Fees --
 .63%, Other Expenses  -- .16% and  Total Portfolio Operating  Expenses --  .79%;
U.S.  Government/High Grade Securities Portfolio: Management Fees -- .60%, Other
Expenses -- .98% and Total Portfolio  Operating Expenses -- 1.58%; Total  Return
Portfolio:  Management Fees -- .63%, Other Expenses -- 3.86% and Total Portfolio
Operating Expenses -- 4.49%; International Portfolio: Management Fees --  1.00%.
Other  Expenses  --  1.99%  and Total  Portfolio  Operating  Expenses  -- 2.99%;
Short-Term Multi-Market Portfolio:  Management Fees --  .55%, Other Expenses  --
 .75%  and Total  Portfolio Operating Expenses  -- 1.30%;  Global Bond Portfolio:
Management Fees -- .65%, Other Expenses  -- 1.12% and Total Portfolio  Operating
 
                                       6
<PAGE>
Expenses  -- 1.77%; North American  Government Income Portfolio: Management Fees
- -- .65%,  Other Expenses  -- 1.92%  and Total  Portfolio Operating  Expenses  --
2.57%;  Global  Dollar  Government  Portfolio: Management  Fees  --  .75%, Other
Expenses --  4.07% and  Total  Portfolio Operating  Expenses --  4.82%;  Utility
Income  Portfolio: Management  Fees -- .75%,  Other Expenses --  3.04% and Total
Portfolio  Operating  Expenses  --  3.79%;  Worldwide  Privatization  Portfolio:
Management  Fees -- 1.00%, Other Expenses -- 3.17% and Total Portfolio Operating
Expenses -- 4.17%;  Conservative Investors Portfolio:  Management Fees --  .75%,
Other  Expenses -- 3.50% and Total Portfolio Operating Expenses -- 4.25%; Growth
Investors Portfolio: Management Fees -- .75%, Other Expenses -- 5.42% and  Total
Portfolio  Operating  Expenses --  6.17%; Growth  Portfolio: Management  Fees --
 .75%, Other Expenses --  .52% and Total Portfolio  Operating Expenses --  1.27%.
The   estimated   expenses   of  the   Technology   Portfolios   before  expense
reimbursements would be:  Technology Portfolio: Management  Fees -- 1.0%,  Other
Expenses  -- 1.55% and Total Operating Expenses -- 2.55%. THE EXAMPLE SHOULD NOT
BE CONSIDERED REPRESENTATIVE OF FUTURE EXPENSES: ACTUAL EXPENSES MAY BE  GREATER
OR LESS THAN THOSE SHOWN.
 
EXPENSES ON A HYPOTHETICAL $1,000 POLICY, ASSUMING 5% GROWTH:
<TABLE>
<CAPTION>
                                                                                                IF YOU SURRENDER
                                                                               --------------------------------------------------
PORTFOLIO                                                                        1 YEAR       3 YEARS      5 YEARS     10 YEARS
- -----------------------------------------------------------------------------  -----------  -----------  -----------  -----------
<S>                                                                            <C>          <C>          <C>          <C>
Alliance Money Market........................................................   $      80    $     124    $     169    $     275
Alliance Short Term Multi-Market.............................................          80          124          169          275
Alliance Growth..............................................................          80          124          169          275
Alliance Growth and Income...................................................          78          109          162          258
Alliance International.......................................................          80          124          169          275
Alliance U.S. Gov't/High Grade Securities....................................          80          124          169          275
Alliance North American Gov't Income.........................................          80          124          169          275
Alliance Global Dollar Government............................................          80          124          169          275
Alliance Utility Income......................................................          80          124          169          275
Alliance Global Bond.........................................................          80          124          169          275
Alliance Premier Growth......................................................          80          124          169          275
Alliance Total Return........................................................          80          124          169          275
Alliance Conservative Investors..............................................          80          124          169          275
Alliance Growth Investors....................................................          80          124          169          275
Alliance Worldwide Privatization.............................................          80          124          169          275
Alliance Technology..........................................................          80          124          169          275
 
<CAPTION>
 
                                                                                              IF YOU ANNUITIZE OR
                                                                                            IF YOU DO NOT SURRENDER
                                                                               --------------------------------------------------
PORTFOLIO                                                                        1 YEAR       3 YEARS      5 YEARS     10 YEARS
- -----------------------------------------------------------------------------  -----------  -----------  -----------  -----------
<S>                                                                            <C>          <C>          <C>          <C>
Alliance Money Market........................................................   $      24    $      75    $     129    $     275
Alliance Short Term Multi-Market.............................................          24           75          129          275
Alliance Growth..............................................................          24           75          129          275
Alliance Growth and Income...................................................          23           70          120          258
Alliance International.......................................................          24           75          129          275
Alliance U.S. Gov't/High Grade Securities....................................          24           75          129          275
Alliance North American Gov't Income.........................................          24           75          129          275
Alliance Global Dollar Government............................................          24           75          129          275
Alliance Utility Income......................................................          24           75          129          275
Alliance Global Bond.........................................................          24           75          129          275
Alliance Premier Growth......................................................          24           75          129          275
Alliance Total Return........................................................          24           75          129          275
Alliance Conservative Investors..............................................          24           75          129          275
Alliance Growth Investors....................................................          24           75          129          275
Alliance Worldwide Privatization.............................................          24           75          129          275
Alliance Technology..........................................................          24           75          129          275
</TABLE>
 
                                       7
<PAGE>
    THE  EXAMPLE SHOULD  NOT BE  CONSIDERED A  REPRESENTATION OF  PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
 
                                       8
<PAGE>
                        CONDENSED FINANCIAL INFORMATION
                           ACCUMULATION UNIT VALUES*
 
<TABLE>
<CAPTION>
                                                              1995            1994          1993         1992
                                                         ---------------  -------------  -----------  ----------
<S>                                                      <C>              <C>            <C>          <C>
ALLIANCE MONEY MARKET
  Accumulation Unit Value
    Beginning of Period................................            10.27          10.07        10.00         N/A
    End of Period......................................            10.64          10.27        10.07         N/A
  Accum Units o/s @ end of period......................       551,555.84     206,034.73     1,590.74         N/A
ALLIANCE SHORT-TERM MULTI-MARKET
  Accumulation Unit Value
    Beginning of Period................................             9.51          10.31         9.79       10.00
    End of Period......................................            10.03           9.51        10.31        9.79
  Accum Units o/s @ end of period......................        81,425.05      15,915.04     6,843.27    8,369.93
ALLIANCE GROWTH
  Accumulation Unit Value
    Beginning of Period................................            10.48          11.13        10.00       10.00
    End of Period......................................            13.99          10.48        11.13       10.00
  Accum Units o/s @ end of period......................       777,108.88      56,104.84    35,271.53    2,081.43
ALLIANCE GROWTH & INCOME
  Accumulation Unit Value
    Beginning of Period................................            11.57          11.76        10.66       10.00
    End of Period......................................            15.62          11.57        11.76       10.66
  Accum Units o/s @ end of period......................       502,667.80     179,245.69    37,573.04    7,731.36
ALLIANCE INTERNATIONAL
  Accumulation Unit Value
    Beginning of Period................................            11.27          10.69        10.00         N/A
    End of Period......................................            12.22          11.27        10.69         N/A
  Accum Units o/s @ end of period......................       228,254.81     122,616.95    22,441.08         N/A
ALLIANCE U.S. GOVERNMENT/ HIGH GRADE
  Accumulation Unit Value
    Beginning of Period................................             9.66          10.17        10.00         N/A
    End of Period......................................            11.38           9.66        10.17         N/A
  Accum Units o/s @ end of period......................       390,483.21      75,881.31     7,608.84         N/A
ALLIANCE NORTH AMERICAN GOVERNMENT INCOME
  Accumulation Unit Value
    Beginning of Period................................             8.71          10.00          N/A         N/A
    End of Period......................................            10.55           8.71          N/A         N/A
  Accum Units o/s @ end of period......................        95,031.46      89,164.68          N/A         N/A
ALLIANCE GLOBAL DOLLAR GOVERNMENT
  Accumulation Unit Value
    Beginning of Period................................             9.73          10.00          N/A         N/A
    End of Period......................................            11.81           9.73          N/A         N/A
  Accum Units o/s @ end of period......................        16,171.63       5,958.18          N/A         N/A
</TABLE>
 
                                       9
<PAGE>
<TABLE>
<CAPTION>
                                                              1995            1994          1993         1992
                                                         ---------------  -------------  -----------  ----------
<S>                                                      <C>              <C>            <C>          <C>
ALLIANCE UTILITY INCOME
  Accumulation Unit Value
    Beginning of Period................................             9.71          10.00          N/A         N/A
    End of Period......................................            11.64           9.71          N/A         N/A
  Accum Units o/s @ end of period......................       103,042.86      13,690.19          N/A         N/A
ALLIANCE GLOBAL BOND
  Accumulation Unit Value
    Beginning of Period................................             9.94          10.61        10.00         N/A
    End of Period......................................            12.24           9.94        10.61         N/A
  Accum Units o/s @ end of period......................        76,604.28      27,806.30     5,589.55         N/A
ALLIANCE PREMIER GROWTH
  Accumulation Unit Value
    Beginning of Period................................            10.66          10.00          N/A         N/A
    End of Period......................................            15.25          10.66          N/A         N/A
  Accum Units o/s @ end of period......................       420,662.68     108,111.20          N/A         N/A
ALLIANCE TOTAL RETURN
  Accumulation Unit Value
    Beginning of Period................................             9.75          10.00          N/A         N/A
    End of Period......................................            11.90           9.75          N/A         N/A
  Accum Units o/s @ end of period......................       121,094.82       4,871.12          N/A         N/A
ALLIANCE CONSERVATIVE INVESTORS
  Accumulation Unit Value
    Beginning of Period................................            10.03          10.00          N/A         N/A
    End of Period......................................            11.59          10.03          N/A         N/A
  Accum Units o/s @ end of period......................       164,400.64       6,977.55          N/A         N/A
ALLIANCE GROWTH INVESTORS
  Accumulation Unit Value
    Beginning of Period................................             9.83          10.00          N/A         N/A
    End of Period......................................            11.70           9.83          N/A         N/A
  Accum Units o/s @ end of period......................        62,762.43       3,185.25          N/A         N/A
ALLIANCE WORLDWIDE PRIVATIZATION
  Accumulation Unit Value
    Beginning of Period................................            10.05          10.00          N/A         N/A
    End of Period......................................            11.01          10.05          N/A         N/A
  Accum Units o/s @ end of period......................        62,769.30       6,357.69          N/A         N/A
ALLIANCE TECHNOLOGY
  Accumulation Unit Value
    Beginning of Period................................              N/A            N/A          N/A         N/A
    End of Period......................................              N/A            N/A          N/A         N/A
  Accum Units o/s @ end of period......................              N/A            N/A          N/A         N/A
</TABLE>
 
    *Funds were first invested in the Portfolios as listed below:
 
<TABLE>
<S>                                               <C>
Premier Growth Portfolio                            December 7, 1992
Growth & Income Portfolio                             April 17, 1992
Short-Term Multi-Market Portfolio                      June 25, 1992
Global Bond Portfolio                                   May 10, 1993
Money Market Portfolio                                  May 13, 1993
International Portfolio                                 June 1, 1993
U.S. Government/High Grade Securities Portfolio        June 14, 1993
</TABLE>
 
                                       10
<PAGE>
<TABLE>
<S>                                               <C>
North American Government Income Portfolio            April 11, 1994
Global Dollar Government Portfolio                    April 20, 1994
Utility Income Portfolio                              April 20, 1994
Conservative Investors Portfolio                     August 24, 1994
Growth Investors Portfolio                           August 16, 1994
Growth Portfolio                                     August 16, 1994
Total Return Portfolio                               August 26, 1994
Worldwide Privatization Portfolio                    August 16, 1994
Technology Portfolio                                January 10, 1996
</TABLE>
 
CALCULATION OF PERFORMANCE DATA
 
    The Company may, from  time to time,  advertise certain performance  related
information  concerning one or more of the Subaccounts, including information as
to total return and yield. Performance  information about a Subaccount is  based
on  the Subaccount's past performance only and  is not intended as an indication
of future performance.
 
    When the Company advertises the average annual total return of a Subaccount,
it will usually be calculated  for one, five, and ten  year periods or, where  a
Subaccount  has been in existence for a period less than one, five or ten years,
for such lesser period. Average annual total return is measured by comparing the
value of the investment in a Subaccount at the beginning of the relevant  period
to  the value of the investment at the end of the period (assuming the deduction
of any Surrender Charge which would be  payable if the account were redeemed  at
the  end of the  period) and calculating  the average annual  compounded rate of
return necessary  to produce  the value  of the  investment at  the end  of  the
period.  The Company  may simultaneously  present returns  that do  not assume a
surrender and, therefore, do not deduct the Surrender Charge.
 
    When the Company advertises the yield of a Subaccount it will be  calculated
based  upon a given 30-day  period. The yield is  determined by dividing the net
investment income earned per Accumulation Unit during the period by the value of
an Accumulation Unit on the last day of the period.
 
    When the Company advertises the  performance of the Money Market  Subaccount
it  may  advertise in  addition  to the  total return  either  the yield  or the
effective yield. The yield of the  Money Market Subaccount refers to the  income
generated  by  an investment  in that  Subaccount over  a seven-day  period. The
income is  then  annualized  (i.e.,  the  amount  of  income  generated  by  the
investment  during that week is assumed to be generated each week over a 52-week
period and is shown as a percentage  of the investment). The effective yield  is
calculated  similarly but when annualized the  income earned by an investment in
the Money Market  Subaccount is assumed  to be reinvested.  The effective  yield
will be slightly higher than the yield because of the compounding effect of this
assumed reinvestment during a 52-week period.
 
    Total  return  at the  Variable  Account level  is  reduced by  all contract
charges:  sales  charges,   mortality  and   expense  risk   charges,  and   the
administrative  charges, and is therefore lower than  the total return at a Fund
level, which has no comparable charges.  Likewise, yield and effective yield  at
the Variable Account level take into account all recurring charges (except sales
charges),  and are therefore lower than the  yield and effective yield at a Fund
level, which has no comparable charges. Performance information for a Subaccount
may be  compared to:  (i)  the Standard  & Poor's  500  Stock Index,  Dow  Jones
Industrial  Average,  Donoghue  Money  Market  Institutional  Averages,  indices
measuring corporate bond and  government security prices  as prepared by  Lehman
Brothers,  Inc. and Salomon Brothers or other indices measuring performance of a
pertinent group  of securities  so  that investors  may compare  a  Subaccount's
results  with those  of a  group of securities  widely regarded  by investors as
representative of the securities markets in general; (ii) other variable annuity
separate accounts  or other  investment products  tracked by  Lipper  Analytical
Services,  a widely used independent research  firm which ranks mutual funds and
other investment companies  by overall performance,  investment objectives,  and
assets,  or  tracked  by  other ratings  services,  companies,  publications, or
persons who  rank separate  accounts  or other  investment products  on  overall
performance or other
 
                                       11
<PAGE>
criteria;  (iii) the Consumer Price Index  (measure for inflation) to assess the
real rate of  return from an  investment in  the Contract; and  (iv) indices  or
averages  of alternative financial products  available to prospective investors,
including the Bank Rate Monitor which  monitors average returns of various  bank
instruments.
 
FINANCIAL DATA
 
    Financial Statements of the Company and the Variable Account may be found in
the Statement of Additional Information.
 
                                  THE COMPANY
 
    American International Life Assurance Company of New York (the "Company") is
a  stock life insurance company which was  organized under the laws of the State
of New York in  1962. The Company  provides a full range  of life insurance  and
annuity plans. The Company is a subsidiary of American International Group, Inc.
which  serves as the  holding company for  a number of  companies engaged in the
international insurance  business,  both  in  life  and  general,  in  over  130
countries and jurisdictions around the world.
 
    The   Company  may  from  time-to-time   publish  in  advertisements,  sales
literature and reports to Owners, the ratings and other information assigned  to
it by one or more independent organizations such as A. M. Best Company, Moody's,
and  Standard & Poor's. The  purpose of the ratings  is to reflect the financial
strength  and/or  claims-paying  ability  of  the  Company  and  should  not  be
considered  as  bearing  on the  investment  performance  of asset  held  in the
separate account. Each year the A. M. Best Company reviews the financial  status
of thousands of insurers, culminating in the assignment of Best's Ratings. These
ratings  reflect A. M. Best's current opinion of the relative financial strength
and operating performance of an insurance company in comparison to the norms  of
the  life/health insurance industry.  In addition, the  claims-paying ability of
the Company as measured by Standard & Poor's Insurance Ratings Services, and the
financial strength of the Company as measured by Moody's Investors Services, may
be referred to  in advertisements,  sales literature  or in  reports to  Owners.
These  ratings are their opinions of  an operating insurance company's financial
capacity to meet  the obligations  of its  life insurance  policies and  annuity
contracts  in accordance  with their  terms. In regard  to their  ratings of the
Company, these  ratings are  explicitly  based on  the  existence of  a  Support
Agreement,  dated as of  December 31, 1991,  between the Company  and its parent
American International Group, Inc. ("AIG"), pursuant to which AIG has agreed  to
cause  the Company to maintain  a positive net worth  and to provide the Company
with funds on a timely basis sufficient to meet the Company's obligations to its
policyholders. The  Support Agreement  is  not, however,  a direct  or  indirect
guarantee  by  AIG  to  any  person  of the  payment  of  any  of  the Company's
indebtedness, liabilities  or other  obligations (including  obligations to  the
Company's policyholders).
 
    The ratings are not recommendations to purchase the Company's life insurance
or  annuity products, or to hold or sell  these products, and the ratings do not
comment on the suitability of such products for a particular investor. There can
be no assurance that any  rating will remain in effect  for any given period  of
time  or that any rating  will not be lowered or  withdrawn entirely by a rating
organization if, in such organization's judgment, future circumstances  relating
to  the Support Agreement, such as a lowering of AIG's long-term debt rating, so
warrant. The ratings do not reflect  the investment performance of the  Variable
Account  or the  degree of  risk associated with  an investment  in the Variable
Account.
 
                                       12
<PAGE>
                              THE VARIABLE ACCOUNT
 
    American International Life Assurance Company of New York (the "Company") is
a stock life insurance company which was  organized under the laws of the  State
of  New York in  1962. The Company provides  a full range  of life insurance and
annuity plans.  The Company  is a  subsidiary of  American International  Group,
Inc.,  which serves as the holding company  for a number of companies engaged in
the international insurance  business, both  in life  and general,  in over  130
countries and jurisdictions around the world.
 
    The  Company owns the  assets in the Variable  Account and obligations under
the Contract are general  corporate obligations. The  Variable Account and  each
Subaccount,  however,  are separate  from the  Company's other  assets including
those of the General Account and from any other separate accounts. The assets of
the Variable Account, equal to the reserves and other contract liabilities  with
respect to the Variable Account, are not chargeable with liabilities arising out
of  any other business  the Company may  conduct. Investment income,  as well as
both realized  and unrealized  gains  and losses  are,  in accordance  with  the
Contracts, credited to or charged against the Variable Account without regard to
income,  gains or losses arising out of any  other business of the Company. As a
result, the investment performance of  each Subaccount and the Variable  Account
is entirely independent of the investment performance of the General Account and
of any other separate account maintained by the Company.
 
    The  Variable Account is  divided into Subaccounts, with  the assets of each
Subaccount invested in  shares of one  portfolio of the  Fund. The Company  may,
from time to time, add additional portfolios of the Fund, and, when appropriate,
additional  mutual funds to  act as the  funding vehicles for  the Contracts. If
deemed to be in  the best interests  of persons having  voting rights under  the
Contract, the Variable Account may be operated as a management company under the
Investment  Company Act of 1940, may be deregistered under such Act in the event
such registration is no  longer required, or  may be combined  with one or  more
other  separate accounts. The Company may offer other variable annuity contracts
which  also  invest  in  Variable  Account   A,  and  are  described  in   other
prospectuses.
 
                                    THE FUND
 
    Alliance  Variable Products Series Fund, Inc.,  (the "Fund") will act as the
funding vehicle  for  the Contracts  offered  hereby.  The Fund  is  managed  by
Alliance  Capital Management  L.P., (the "Investment  Manager"). The  Fund is an
open-end, diversified management investment company,  which is intended to  meet
differing  investment  objectives. The  Fund  has made  available  the following
Portfolios: Money Market;  Short-Term Multi-Market; Growth;  Growth and  Income;
International;   U.S.  Government/High  Grade  Securities;  Global  Bond;  North
American Government Income;  Global Dollar Government;  Utility Income;  Premier
Growth,  Conservative  Investors;  Growth  Investors;  Total  Return;  Worldwide
Privatization; and Technology. The  Investment Manager has  entered into a  sub-
advisory  agreement  with  AIG  Global Investors,  Inc.  (the  "Sub-Adviser"), a
subsidiary of  American  International  Group,  Inc. and  an  affiliate  of  the
Company,  to provide investment advice for  the Global Bond Portfolio. A summary
of investment objectives for each portfolio  is contained in the description  of
the  Fund below. More detailed information including the investment advisory fee
of each portfolio and other  charges assessed by the Fund,  may be found in  the
current  Prospectus  for  the Fund  which  contains  a discussion  of  the risks
involved in investing in the Fund. The Prospectus for the Fund is included  with
this Prospectus. Please read both Prospectuses carefully before investing.
 
    The investment objectives of the portfolios are as follows:
 
MONEY MARKET PORTFOLIO
 
    This  portfolio  seeks safety  of  principal, maintenance  of  liquidity and
maximum current income by investing in a broadly diversified portfolio of  money
market securities.
 
                                       13
<PAGE>
SHORT-TERM MULTI-MARKET PORTFOLIO
 
    This  portfolio seeks the  highest level of  current income, consistent with
what the Investment  Manager considers  to be  prudent investment  risk that  is
available  from  a portfolio  of high-quality  debt securities  having remaining
maturities of not more than three years.
 
GROWTH PORTFOLIO
 
    This portfolio  seeks  growth of  capital  rather than  current  income.  In
pursuing  its investment objective, the  Growth Portfolio will employ aggressive
investment policies. Since investments will  be made based upon their  potential
for  capital appreciation, current income will be incidental to the objective of
capital growth. Because of the risks  involved in any investment, the  selection
of  securities on  the basis of  their appreciation  possibilities cannot ensure
against possible loss in value. Moreover,  to the extent the portfolio seeks  to
achieve  its objective through such aggressive  investment policies, the risk of
loss increases.  The portfolio  is therefore  not intended  for investors  whose
principal objective is assured income or preservation of capital.
 
GROWTH AND INCOME PORTFOLIO
 
    This  portfolio seeks to balance the objectives of reasonable current income
and reasonable opportunities for  appreciation through investments primarily  in
dividend-paying common stocks of good quality.
 
INTERNATIONAL PORTFOLIO
 
    This  portfolio seeks to obtain a total  return on its assets from long-term
growth of  capital and  from income  principally through  a broad  portfolio  of
marketable  securities  of established  non-United  States companies  (or United
States companies having  their principal  activities and  interests outside  the
United  States), companies participating in foreign economies with prospects for
growth, and foreign government securities.
 
NORTH AMERICAN GOVERNMENT INCOME PORTFOLIO
 
    This portfolio seeks the  highest level of  current income, consistent  with
what the adviser considers to be prudent investment risk, that is available from
a  portfolio of debt securities  issued or guaranteed by  the governments of the
United States,  Canada  and  Mexico,  their  political  subdivisions  (including
Canadian  Provinces but  excluding the States  of the  United States), agencies,
instrumentalities or authorities.  The portfolio  seeks high  current yields  by
investing  in  government  securities  denominated in  local  currency  and U.S.
Dollars. Normally, the portfolio expects to maintain at least 25% of its  assets
in securities denominated in the U.S. Dollar.
 
GLOBAL DOLLAR GOVERNMENT PORTFOLIO
 
    This  portfolio  seeks  a high  level  of current  income  through investing
substantially all of  its assets in  U.S. and non-U.S.  fixed income  securities
denominated  only in U.S. Dollars. As a secondary objective, the portfolio seeks
capital appreciation.  Substantially  all  of the  portfolio's  assets  will  be
invested  in high  yield, high risk  securities that are  low-rated (i.e., below
investment grade), or of comparable quality and unrated, and that are considered
to be predominately speculative as regards the issuer's capacity to pay interest
and repay principal.
 
UTILITY INCOME PORTFOLIO
 
    This portfolio seeks  current income and  capital appreciation by  investing
primarily  in  the  equity  and  fixed-income  securities  of  companies  in the
"utilities industry."  The portfolio's  investment  objective and  policies  are
designed  to take advantage of the characteristics and historical performance of
securities of utilities companies. The utilities industry consists of  companies
engaged  in  the manufacture,  production, generation,  provision, transmission,
sale and distribution of gas, electric energy, and communications equipment  and
services,  and in  the provision of  other utility or  utility-related goods and
services.
 
                                       14
<PAGE>
U.S. GOVERNMENT/HIGH GRADE SECURITIES PORTFOLIO
 
    This portfolio  seeks  a  high  level  of  current  income  consistent  with
preservation  of  capital  by  investing  principally  in  a  portfolio  of U.S.
Government Securities, and other high grade debt securities.
 
GLOBAL BOND PORTFOLIO
 
    This portfolio  seeks  to  provide  the  highest  level  of  current  income
consistent  with what the Fund's Adviser  and Sub-Adviser consider to be prudent
investment risk  that  is available  from  a multi-currency  portfolio  of  high
quality debt securities of varying maturities.
 
PREMIER GROWTH PORTFOLIO
 
    This  portfolio  seeks  growth of  capital  rather than  current  income. In
pursuing its  investment objective,  the Premier  Growth Portfolio  will  employ
aggressive  investment policies. Since  investments will be  made based on their
potential for capital  appreciation, current  income will be  incidental to  the
objective  of capital growth. The portfolio  is not intended for investors whose
principal objective is assured income or preservation of capital.
 
TOTAL RETURN PORTFOLIO
 
    This portfolio  seeks to  achieve a  high return  through a  combination  of
current  income and capital appreciation by investing in a diversified portfolio
of common  and preferred  stocks,  senior corporate  debt securities,  and  U.S.
Government and Agency obligations, bonds and senior debt securities.
 
CONSERVATIVE INVESTORS PORTFOLIO
 
    This  portfolio seeks the highest  total return without, in  the view of the
Fund's Adviser, undue  risk to principal  by investing in  a diversified mix  of
publicly traded equity and fixed-income securities.
 
GROWTH INVESTORS PORTFOLIO
 
    This  portfolio  seeks the  highest total  return  consistent with  what the
Fund's Adviser considers to be reasonable risk by investing in a diversified mix
of publicly traded equity and fixed-income securities.
 
WORLDWIDE PRIVATIZATION PORTFOLIO
 
    This portfolio seeks long-term capital appreciation by investing principally
in equity  securities  issued  by  enterprises  that  are  undergoing,  or  have
undergone,  privatization. The balance of  the investment portfolio will include
equity securities of  companies that are  believed by the  Fund's Adviser to  be
beneficiaries of the privatization process.
 
TECHNOLOGY PORTFOLIO
 
    This  portfolio  seeks growth  of  capital through  investment  in companies
expected to  benefit  from  advances in  technology.  The  Technology  portfolio
invests  principally in a diversified portfolio of securities of companies which
use technology extensively  in the development  of new or  improved products  or
processes.
 
    THERE IS NO ASSURANCE THAT ANY OF THESE PORTFOLIOS WILL ACHIEVE THEIR STATED
OBJECTIVES.
 
VOTING RIGHTS
 
    As  previously stated,  all of  the assets  held in  the Subaccounts  of the
Variable Account will be invested in shares of a corresponding portfolio of  the
Fund.  Based on the Company's  view of present applicable  law, we will vote the
portfolio shares held  in the Variable  Account at meetings  of shareholders  in
accordance  with instructions received  from Owners having  a voting interest in
the portfolio. However, if the  1940 Act or its  regulations are amended, or  if
our  interpretation of present  law changes to  permit us to  vote the portfolio
shares in our own right, we may elect to do so.
 
    Prior to  the  Annuity Date,  the  Owner holds  a  voting interest  in  each
portfolio in which there is value in the corresponding Subaccount. The number of
portfolio shares which are attributable to the
 
                                       15
<PAGE>
Owner  is  determined  by  dividing  the  corresponding  value  in  a particular
Subaccount by the net asset  value of one portfolio  share. The number of  votes
which  an Owner will  have a right to  cast will be determined  as of the record
date established by each portfolio.
 
    We will  solicit  voting  instructions  by mail  prior  to  the  shareholder
meetings.  An Owner having a voting interest  in a Subaccount will be sent proxy
material, reports and other materials as  provided by the Fund, relating to  the
appropriate  portfolios.  The  Company  will  vote  shares  in  accordance  with
instructions received from the Owner having  a voting interest. At the  meeting,
the  Company will vote shares for which  it has received no instructions and any
shares not attributable to Owners in the same proportion as it votes shares  for
which it has received instructions from Owners.
 
    The  voting rights relate only to  amounts invested in the Variable Account.
There are no  voting rights with  respect to funds  allocated to the  Guaranteed
Account.
 
    Shares  of the Fund may be sold  only to separate accounts of life insurance
companies. The shares  of the  Fund will  be sold  to separate  accounts of  the
Company  and its affiliate, AIG  Life Insurance Company, as  well as to separate
accounts of other affiliated  or unaffiliated life  insurance companies to  fund
variable   annuity  contracts  and  variable  life  insurance  policies.  It  is
conceivable that, in  the future, it  may be disadvantageous  for variable  life
insurance  separate accounts and variable annuity separate accounts to invest in
the Fund simultaneously.  Although neither  the Company nor  the Fund  currently
foresees  any such disadvantages, either to variable life insurance policyowners
or to variable annuity Owners, the Fund's Board of Directors will monitor events
in order to identify  any material irreconcilable  conflicts which may  possibly
arise and to determine what action, if any, should be taken in response thereto.
If a material irreconcilable conflict were to occur, the Fund will take whatever
steps   it  deems  necessary,  at  its  expense,  to  remedy  or  eliminate  the
irreconcilable material conflict. If such a conflict were to occur, one or  more
insurance  company separate accounts might withdraw its investments in the Fund.
This might force the Fund to sell securities at disadvantageous prices.
 
SUBSTITUTION OF SHARES
 
    If the shares  of the  Fund (or  any portfolio  within the  Fund) should  no
longer  be  available for  investment  by the  Variable  Account or  if,  in the
judgment of  the  Company,  further  investment in  such  shares  should  become
inappropriate  in  view  of  the  purpose  of  the  Contracts,  the  Company may
substitute shares of another mutual fund (or portfolio within the fund) for Fund
shares already purchased or to be  purchased in the future under the  Contracts.
No substitution of securities may take place without any required prior approval
of  the Securities and Exchange Commission and under such requirements as it may
impose.
 
                                  THE CONTRACT
 
    The Contract described in  this Prospectus is  a deferred variable  annuity.
Single  premium Contracts do not permit the payment of additional premiums after
the Contract Date. Flexible premium  Contracts permit the payment of  additional
Premiums at any time.
 
PARTIES TO THE CONTRACT
 
    OWNER
 
    As the purchaser of the Contract, You may exercise all rights and privileges
provided  in the Contract, subject to any  rights that You, as Owner, may convey
to an irrevocable beneficiary. As Owner, You will also be the Annuitant,  unless
You name in writing some other person as Annuitant.
 
    ANNUITANT
 
    The  Annuitant  is the  person who  receives annuity  payments and  upon the
continuance of whose life  these payments are based.  You may designate  someone
other  than yourself as Annuitant.  If the Annuitant is  a person other than the
Owner, and  the Annuitant  dies before  the Annuity  Date, You  will become  the
Annuitant unless you designate someone else as the new Annuitant.
 
                                       16
    

<PAGE>
   

    BENEFICIARY
 
    The  Beneficiary You  designate will receive  the death proceeds  if You die
prior to the Annuity Date. If no  Beneficiary is living at that time, the  death
proceeds  are payable to  Your estate. If  the Annuitant dies  after the Annuity
Date, the Beneficiary will  receive any remaining  guaranteed payments under  an
Annuity  Option.  If  no  Beneficiary  is living  at  that  time,  the remaining
guaranteed payments are payable to Your estate.
 
    CHANGE OF ANNUITANT AND BENEFICIARY
 
    Prior to the Annuity Date, You  may change the Annuitant and Beneficiary  by
making  a written request  to Our Administrative Office.  After the Annuity Date
only a change of  Beneficiary may be  made. Once We  have accepted Your  written
request,  any change will become  effective on the date  You signed it. However,
any change will be subject to any payment or other action taken by Us before  We
record  the change. If the Owner is  not a natural person, under current Federal
tax law, the Contract may be subject to unintended and adverse tax consequences.
For possible tax considerations of these changes, see FEDERAL TAX MATTERS,  page
  .
 
HOW TO PURCHASE A CONTRACT
 
    At  the time of application, the Owner must pay at least the minimum Premium
required and provide instructions regarding the allocation of the Premium  among
the Subaccounts. Acceptance of the Premium and form of application is subject to
Our  requirements  and  We reserve  the  right  to reject  any  Premium.  If the
application and Premium are accepted in  the form received, the Premium will  be
credited  and  allocated to  the  Subaccounts within  two  business days  of its
receipt. The date the Premium is credited to the Contract is the Effective Date.
 
    If within  five days  of the  receipt of  the initial  Premium We  have  not
received  sufficient information to issue a Contract, You will be contacted. The
reason for the delay will be explained to You. If You consent We will retain the
Premium until the necessary requirements  are fulfilled. Otherwise, the  Premium
will be immediately refunded to You.
 
DISCOUNT PURCHASE PROGRAMS
 
    Purchases  made by officers, directors and  employees of either the Company,
an affiliate of the Company or any individual, firm or company that has executed
the necessary agreements  to sell  the Contracts and  members of  each of  their
immediate  families will not be subject  to the Surrender Charge. Such purchases
include retirement  accounts  and  must be  for  accounts  in the  name  of  the
individual or qualifying family member.
 
DISTRIBUTOR
 
    AIG Equity Sales Corp. ("AESC"), 80 Pine Street, New York, New York, acts as
the  distributor of the Contracts. AESC is a wholly-owned subsidiary of AIG, and
an affiliate of the Company.  Commissions not to exceed  7% of Premiums will  be
paid  to entities which sell  the Contract. Additional payments  may be made for
other services not directly related to  the sale of the Contract, including  the
recruitment  and training of personnel, production of promotional literature and
similar services.
 
    Under the Glass-Steagall  Act and other  laws, certain banking  institutions
may  be prohibited from distributing variable  annuity contracts. If a bank were
to be prohibited from performing  certain agency or administrative services  and
receiving  fees from AESC, Owners who purchased Contracts through the bank would
be permitted to retain their Contracts  and alternate means for servicing  those
Owners  would be sought. It  is not expected, however,  that Owners would suffer
any loss of services  or adverse financial  consequences as a  result of any  of
these occurrences.
 
ADMINISTRATION OF THE CONTRACTS
 
    While  the Company has primary responsibility  for all administration of the
Contracts and the  Variable Account, it  has retained the  services of  Delaware
Valley Financial Services, Inc. ("DVFS")
 
                                       17
<PAGE>
pursuant  to an  administrative agreement. Such  administrative services include
issuance of the Contracts and maintenance of Owners' records. DVFS serves as the
administrator to various insurance companies offering variable contracts.
 
PREMIUM AND ALLOCATION TO YOUR INVESTMENT OPTIONS
 
    The initial Premium must be at least $5,000 for Non-Qualified Contracts  and
$2,000 for a Contract purchased in connection with an IRA or 403(b) Plan. If you
chose  a Flexible Premium Contract, You  may make additional payments of Premium
prior to the Annuity  Date, in amounts  of at least $1000.  There is no  maximum
limit  on the  additional Premiums You  may pay  or on the  numbers of payments;
however, the Company reserves the right  to reject any Premium on any  Contract.
You specify at the time of issue or subsequently how the remaining amount, known
as Additional Premium will be allocated.
 
    Except  for any Contract issued as an  IRA, the initial Premium is allocated
among the Subaccounts and Guaranteed Account on the Effective Date. For IRAs the
initial Premium will be allocated to  the Money Market Subaccount until the  end
of  the Right to  Examine Contract Period,  after which Your  value in the Money
Market Subaccount will then be reallocated among the Subaccounts and  Guaranteed
Account  in accordance with Your allocation instructions. (See "Right to Examine
Contract Period" on Page   , and "Individual Retirement Annuities" on page   .)
 
    Your allocation instructions  will specify what  percentage of Your  initial
Premium  is to  be credited  to each Subaccount  and to  the Guaranteed Account.
Allocation instructions must be expressed in whole percentages of not less  than
10%.  Allocations for additional Premium  will be made on  the same basis as the
initial Premium  unless  We receive  a  written notice  with  new  instructions.
Additional  Premium will be credited to the  Contract Value and allocated at the
close of the first Valuation  Date on or after  which the Additional Premium  is
received at Our Administrative Office.
 
    ALL   PREMIUM  TO  QUALIFIED  CONTRACTS  MUST  COMPLY  WITH  THE  APPLICABLE
PROVISIONS IN THE CODE  AND THE APPLICABLE PROVISIONS  OF YOUR RETIREMENT  PLAN.
ADDITIONAL  PREMIUM COMMINGLED IN AN IRA WITH A ROLLOVER CONTRIBUTION FROM OTHER
RETIREMENT PLANS MAY  RESULT IN  UNFAVORABLE TAX CONSEQUENCES.  YOU SHOULD  SEEK
LEGAL  COUNSEL AND TAX ADVICE REGARDING THE SUITABILITY OF THE CONTRACT FOR YOUR
SITUATION. (SEE "FEDERAL TAX MATTERS" ON PAGE   .)
 
RIGHT TO EXAMINE CONTRACT PERIOD
 
    The Contract provides a 10 day  Right to Examine Contract Period giving  You
the  opportunity  to cancel  the  Contract. You  must  return the  Contract with
written notice to Us. If We receive the Contract and Your written notice  within
10  days after  it is  received by You,  the Contract  will be  voided. With the
exception of Contracts issued in connection  with an IRA, in those states  whose
laws  do not require that We assume the  risk of market loss during the Right to
Examine Contract Period, should You decide  to cancel Your Contract, the  amount
to  be returned to  You will be  the Contract Value  (on the day  We receive the
Contract) plus any charges deducted for  State Taxes, without imposition of  the
Surrender  Charge.  The amount  returned to  you may  be more  or less  than the
initial Premium. (See "Charges and Deductions" on page   .) For Contracts issued
in those states that require we return the  premium, we will do so. In the  case
of  Contracts issued  in connection  with an  IRA, the  Company will  refund the
greater of the Premium, less any withdrawals, or the Contract Value.
 
    State laws governing the  duration of the Right  to Examine Contract  Period
may vary from state to state. We will comply with the laws of the state in which
the  Owner  resides  at the  time  the  Contract is  applied  for.  Federal laws
governing IRAs require a  minimum seven day right  of revocation. We provide  10
days  from the date the Contract is received by you. (See "Individual Retirement
Annuities" on page   .)
 
                                       18
    
<PAGE>
   
UNIT VALUE AND CONTRACT VALUE
 
    After  the  deduction of  certain changes  and  expenses, amounts  which You
allocate  to  a  Subaccount  of  the  Variable  Account  are  used  to  purchase
Accumulation Units in that Subaccount, not shares of the Portfolio in which that
Subaccount  invest:  The  number  of Accumulation  Units  you  purchase  will be
determined by dividing the amount allocated to each Subaccount by the Unit Value
of the  Subaccount  for  the  Valuation  Period  during  which  the  amount  was
allocated.
 
    The  Unit Value for each  Subaccount will vary from  one Valuation Period to
the next,  based on  the investment  experience of  the Portfolio  in which  the
Subaccount  invests  and  the deduction  of  certain charges  and  expenses. The
Statement of  Additional  Information contains  a  detailed explanation  of  how
Accumulation Units are valued.
 
    Your  value in  any given Subaccount  is determined by  multiplying the Unit
Value for the Subaccount by the number  of Units You own. Your value within  the
Variable  Account is the  sum of your  values in all  the Subaccounts. The total
value of your Contract, known  as the Contract Value,  equals your Value in  the
Variable Account plus Your value in the Guaranteed Account.
 
TRANSFERS
 
    Prior  to the Annuity Date, You may make Transfers among the Subaccounts and
into and out of the Guaranteed Account subject to certain rules.
 
    At the present time there is no  limit on the number of transfers which  can
be  made among the  Subaccounts and the  Guaranteed Account in  any one Contract
Year. We reserve the right to limit  the number of transfers to 12 per  Contract
Year. There are no fees for the first 12 transfers in any one Contract Year. For
each transfer in excess of 12 within one Contract Year, We impose a transfer fee
of  $10.  A transfer  fee,  if any,  is  deducted from  the  amount transferred.
Transfers of Contract Value in the Guaranteed Account may be subject to a Market
Value Adjustment. (See Appendix    , "Guaranteed Account Transfers," page   .)
 
    Transfers may be made by written request or by telephone as described in the
Contract or  specifically  authorized in  writing.  The Company  will  undertake
reasonable procedures to confirm that instructions communicated by telephone are
genuine.  All calls will be recorded. All transfers will be confirmed in writing
to the Owner.  The Company  is not  liable for any  loss, cost,  or expense  for
action  on telephone instructions which are believed to be genuine in accordance
with these procedures.
 
    After the Annuity Date, the Owner may transfer the Contract Value  allocated
to the Variable Account among the Subaccounts. However, the Company reserves the
right  to refuse any more  than one transfer per month.  The transfer fee is the
same as before the  Annuity Date. This  transfer fee, if  any, will be  deducted
from the next annuity payment after the transfer. If following the transfer, the
Annuity  Units  remaining in  the Subaccount  would  generate a  monthly annuity
payment of less than $100,  the Company will transfer  the entire amount in  the
Subaccount.
 
    Once  the transfer  is effected,  the Company  will recompute  the number of
Annuity Units  for  each  Subaccount.  The number  of  Annuity  Units  for  each
Subaccount  will remain the same for the  remainder of the payment period unless
the Owner requests another change.
 
    The minimum amount which may be transferred at any one time is the lesser of
$1,000 or  the  value of  the  Subaccount or  Guarantee  Period from  which  the
transfer  is made.  However, the minimum  amount for transfers  under our Dollar
Cost Averaging program is $100 per Subaccount. (See "Dollar Cost Averaging") For
additional limitations regarding  transfers out of  the Guaranteed Account,  see
"The Guaranteed Account" in the Appendix, page   .)
 
DOLLAR COST AVERAGING
 
    The  Company currently offers  an option under which  Owners may dollar cost
average their allocations in the  Subaccounts under the contract by  authorizing
the  Company  to  make  periodic  allocations of  Contract  Value  from  any one
Subaccount to one or more of the  other Subaccounts. Dollar cost averaging is  a
systematic  method of  investing in  which securities  are purchased  at regular
 
                                      18A
<PAGE>
intervals in  fixed dollar  amounts so  that  the cost  of the  securities  gets
averaged  over time  and possibly  over various  market cycles.  The option will
result in the allocation of Contract Value to one or more Subaccounts, and these
amounts will be credited  at the Accumulation  Unit value as of  the end of  the
Valuation  Dates  on  which  the exchanges  are  effected.  Amounts periodically
transferred under this option are not included in the 12 transfers per  Contract
Year  discussed under "Transfers"  on page    . Since  the value of Accumulation
Units will  vary, the  amounts allocated  to  a Subaccount  will result  in  the
crediting  of a greater number of units  when the Accumulation Unit value is low
and a  lesser  number  of  units  when the  Accumulation  Unit  value  is  high.
Similarly,  the amounts exchanged from a Subaccount will result in a debiting of
a greater number of units when  the Subaccount's Accumulation Unit value is  low
and  a lesser number of  units when the Accumulation  Unit value is high. Dollar
cost averaging does not guarantee profits, nor does it assure that an Owner will
not have losses.
 
    A Dollar Cost Averaging  Request form is  available from the  Administrative
Office  upon request.  On the  form, the  Owner must  designate whether Contract
Value is to  be exchanged  on the  basis of a  specific dollar  amount, a  fixed
period  or earnings only,  the Subaccount or  Subaccounts to and  from which the
transfers will be made, the desired frequency of the transfers, which may be  on
a monthly, quarterly, semiannual, or annual basis, and the length of time during
which  the transfers  shall continue  or the total  amount to  be exchanged over
time. The Owner may specify that such transfers be made on any day of any  month
with the exception of the 29th, 30th or 31st of a month.
 
    To  elect the Dollar Cost Averaging  Option, the Owner's Contract Value must
be at least  $12,000 ($2,000 for  a Contract  funding a Qualified  Plan), and  a
Dollar  Cost Averaging Request in  proper form must be  received by the Company.
The Dollar Cost Averaging Request form will not be considered complete until the
Contract Value is at least the required amount. An Owner may not have in  effect
at the same time Dollar Cost Averaging and Asset Rebalancing Options.
 
    The  Dollar Cost  Averaging Option  may be canceled  at any  time by written
request or if the  Accumulation Unit value  is less than  $5,000, or such  lower
amount as the Company may determine.
 
ASSET REBALANCING OPTION
 
    The  Company currently offers an option under which Owners may authorize the
Company to  automatically exchange  Contract Value  each quarter  to maintain  a
particular percentage allocation among the Subaccounts as selected by the Owner.
The Contract Value allocated to each Subaccount will grow or decline in value at
different   rates  during  the  quarter,  and  Asset  Rebalancing  automatically
reallocates the Contract Value in the Subaccounts each quarter to the allocation
selected by the Owner. Asset Rebalancing is intended to exchange Contract  Value
from  those Subaccounts that  have increased in value  to those Subaccounts that
have declined in value. Over  time, this method of  investing may help an  Owner
buy  low  and  sell  high,although  there can  be  no  assurance  of  this. This
investment method does not guarantee profits,  nor does it assure that an  Owner
will not have losses.
 
    To  elect the Asset  Rebalancing Option, the Contract  Value in the Contract
must be at least $12,000 ($2,000 for a Contract funding a Qualified Plan) and an
Asset Rebalancing Request  in proper form  must be received  by the Company.  An
Owner  may not have in  effect at the same time  Dollar Cost Averaging and Asset
Rebalancing Options.  An  Asset  Rebalancing  Request  form  is  available  upon
request. On the form, the Owner must indicate the applicable Subaccounts and the
percentage of Contract Value which should be allocated to each of the applicable
Subaccounts  each  quarter  under the  Asset  Rebalancing Option.  If  the Asset
Rebalancing Option is elected, all  Contract Value allocated to the  Subaccounts
must be included in the Asset Rebalancing Option.
 
    This  option will result in the transfer of Contract Value to one or more of
the Subaccounts on the date specified by the Owner or, if no date is  specified,
on  the date of the Company's receipt of the Asset Rebalancing Request in proper
form and on each  quarterly anniversary of the  applicable date thereafter.  The
amounts  transferred will be credited  to the Accumulation Unit  Value as of the
end of  the  Valuation  Dates  on which  the  transfers  are  effected.  Amounts
periodically  transferred under this option are not included in the 12 transfers
per Contract Year discussed under "Transfers" on page   .
 
                                       19
    
<PAGE>
   

    An Owner may instruct the  Company at any time  to terminate this option  by
written  request. Once terminated, this Option  may not be reselected during the
same Contract Year.
 
                             CHARGES AND DEDUCTIONS
 
    Various charges and deductions are made from Premium, the Contract Value and
the Variable Account. These charges and deductions are as follows:
 
DEDUCTION FOR PREMIUM AND OTHER STATE TAXES
 
    We do not deduct premium taxes unless assessed by the state of residence  of
the  Owner. Any premium  or other taxes  levied by any  governmental entity with
respect to  the Contracts  will  be charged  at  Our discretion  against  either
Premium  or Contract Value. Premium taxes currently imposed by certain states on
the Contracts range  typically from  0% to 3.5%  of premiums  paid. Some  states
assess  premium taxes  at the  time Premium  is received;  others assess premium
taxes at the time of annuitization.  Premium taxes are subject to being  changed
or  amended by  state legislatures,  administrative interpretations  or judicial
acts.
 
    The Company will also deduct from any amount payable under the Contracts any
income taxes  a governmental  authority requires  the Company  to withhold  with
respect to that amount.
 
DEDUCTION FOR MORTALITY AND EXPENSE RISK CHARGE
 
    The  Company deducts for each Valuation  Period a Mortality and Expense Risk
Charge which is equal on an annual basis to 1.25% of the average daily net asset
value of the Variable Account. The mortality risks assumed by the Company  arise
from  its contractual obligation to make annuity payments after the Annuity Date
for the life of the Annuitant, to waive the Surrender Charge in the event of the
death of the Owner prior to the  Annuity Date and to provide the death  benefit.
The  expense risk assumed by the Company  is that the costs of administering the
Contracts and  the  Variable  Account  will  exceed  the  amount  received  from
Administrative and Contract Maintenance Charges.
 
    If the Mortality and Expense Risk Charge is insufficient to cover the actual
costs, the loss will be borne by the Company. Conversely, if the amount deducted
proves  more than  sufficient, the  excess will  be profit  to the  Company. The
Mortality and Expense  Risk Charge is  guaranteed by the  Company and cannot  be
increased.  The  Mortality  and  Expense  Risk  Charge  is  deducted  during the
Accumulation Period and after the Annuity Date.
 
    The Company currently  offers annuity payment  options that are  based on  a
life  contingency. (See  "Annuity Period --  Annuity Options"  on page    .) The
Company in its  discretion may offer  additional payment options  which are  not
based  on a life contingency. If this should occur and if a Owner should elect a
payment option not based on a  life contingency, the Mortality and Expense  Risk
Charge  is still deducted but the Owner receives no benefit from that portion of
the charge attributable to mortality risk.
 
DEDUCTION FOR ACCIDENTAL DEATH BENEFIT
 
    If the Owner has elected the  Accidental Death Benefit, the Company  deducts
for each Valuation Period, an Accidental Death Benefit Charge equal on an annual
basis to 0.10% of the average daily net asset value in the Variable Account.
 
DEDUCTION FOR SURRENDER (DEFERRED SALES) CHARGES
 
    In  the event that an  Owner makes a withdrawal  from or surrenders Contract
Value in  excess  of the  Free  Withdrawal Amount,  a  Surrender Charge  may  be
imposed.  The Free Withdrawal Amount  for a single premium  Contract is equal to
10% of the Contract  Value at the  time of the  withdrawal. The Free  Withdrawal
Amount  for a flexible premium Contract is  equal to the greater of the Contract
Value less premiums paid or the portion  of the withdrawal that does not  exceed
10%  of the total Premium otherwise subject  to the Surrender Charge paid to the
time of withdrawal, less any prior withdrawals. In the case of flexible  premium
Contracts,   the  Surrender   Charge  applies   only  to   Premium  received  by
 
                                       20
<PAGE>
the Company within six (6) years of the date of the withdrawal and will vary  in
amount  depending upon  the time  which has elapsed  since the  date Premium was
received. In  calculating the  Surrender  Charge, Premium  is allocated  to  the
amount surrendered on a first-in, first out basis. In the case of single premium
Contracts, the Surrender Charge will vary in amount depending upon the number of
Contract  Years that a Contract has been in effect. The amount of any withdrawal
which exceeds  the Free  Withdrawal  Amount will  be  subject to  the  following
charges:
 
<TABLE>
<CAPTION>
                                                                                 APPLICABLE
                                                                                  SURRENDER
      SINGLE PREMIUM CONTRACTS             FLEXIBLE PREMIUM CONTRACTS         CHARGE PERCENTAGE
- ------------------------------------  -------------------------------------  -------------------
<S>                                   <C>                                    <C>
Contract Year 1                       Premium Year 1                                     6%
Contract Year 2                       Premium Year 2                                     6%
Contract Year 3                       Premium Year 3                                     5%
Contract Year 4                       Premium Year 4                                     5%
Contract Year 5                       Premium Year 5                                     4%
Contract Year 6                       Premium Year 6                                     3%
Contract Year 7                       Premium Year 7                                     2%
Contract Year 8 and thereafter        Premium Year 8 and thereafter                    None
</TABLE>
 
    No  Surrender Charge  is imposed  against: (1)  Transfers of  Contract Value
under  Dollar  Cost  Averaging,  Asset  Rebalancing,  or  Systematic  Withdrawal
options; (2) Contract Value upon Annuitization; (3) a Death Benefit.
 
    The  Surrender  Charge is  intended to  reimburse  the Company  for expenses
incurred which are related  to Contract sales. The  Company does not expect  the
proceeds  from  the Surrender  Charge to  cover all  distribution costs.  To the
extent such charge is insufficient to cover all distribution costs, the  Company
may  use any of its corporate assets, including potential profit which may arise
from the Mortality and Expense Risk Charge, to make up any difference.
 
    Certain restrictions  on  surrenders  are imposed  on  Contracts  issued  in
connection  with retirement  plans which  qualify under  Code Section  403(b) (a
"403(b) Plan"). (See "Taxes -- 403(b) Plans" on page   .)
 
DEDUCTION FOR ADMINISTRATIVE CHARGES
 
    The Company deducts for each Valuation Period a daily Administrative  Charge
which  is equal on an annual basis to  .15% of the average daily net asset value
of  the  Variable  Account.  This  charge  is  intended  to  reimburse  Us   for
administrative  expenses, both during the  accumulation period and following the
Annuity Date. We do not expect to recover an amount in excess of our accumulated
expenses through the deduction of the Administrative Charge.
 
DEDUCTION FOR CONTRACT MAINTENANCE CHARGE
 
    The Company also deducts  an annual Contract Maintenance  Charge of $30  per
year,  from  the  Contract  Value on  each  Contract  Anniversary.  The Contract
Maintenance Fee is waived if the Contract  Value is greater than $50,000 on  the
date  of deduction of  the charge. These  charges are designed  to reimburse the
Company for the  costs it incurs  relating to maintenance  of the Contract,  the
Variable Account, and the Guaranteed Account. If the Contract is surrendered, we
will  deduct the Contract Maintenance Charge at the time of surrender, pro-rata,
for the current Contract Year. The  deduction will be made proportionally  based
on  your value in each Subaccount and  the Guaranteed Account. After the Annuity
Date, the Contract Maintenance Charge is deducted on a pro-rata basis from  each
annuity  income payment and is guaranteed to remain at the same amount as at the
Annuity Date. This charge is not expected to result in a profit to the Company.
 
DEDUCTION FOR INCOME TAXES
 
    The Company deducts from the Contract Value and/or the Variable Account  any
Federal  income taxes resulting from the  operation of the Variable Account. The
Company does not currently anticipate incurring any Federal income taxes.
 
                                       21
<PAGE>
OTHER EXPENSES
 
    There are deductions from and  expenses paid out of  the assets of the  Fund
which are described in the accompanying Prospectus for the Fund.
 
GROUP AND GROUP SPONSORED ARRANGEMENTS
 
    In   certain  instances,  we  may  reduce   the  Surrender  Charge  and  the
Administrative Charge or change the minimum premium requirements for the sale of
Contracts to certain groups, including those in which a trustee or an  employer,
for  example, purchases  Contracts covering  a group  of individuals  on a group
basis.
 
    Our costs for sales, administration,  and mortality generally vary with  the
size  and stability of the group among  other factors. We take all these factors
into account when reducing charges. To  qualify for reduced charges, a group  or
similar  arrangement must meet certain  requirements, including our requirements
for size and number of years in existence. Group or group sponsored arrangements
that have been set  up solely to  buy Contracts or that  have been in  existence
less than six months will not qualify for reduced charges.
 
    We  will  make any  reductions  according to  our  rules in  effect  when an
application or enrollment form for a  Contract is approved. We may change  these
rules from time to time. Any variation in the Surrender Charge or Administrative
Charge  will reflect differences in  costs or services and  will not be unfairly
discriminatory.
 
                                ANNUITY BENEFITS
 
ANNUITIZATION
 
    Annuitization is an  election you  make to apply  the Contract  Value to  an
Annuity  Option in order to  provide a series of  annuity payments. The date the
Annuity Option becomes effective is the Annuity Date.
 
ANNUITY DATE
 
    The latest  Annuity  Date  is: (a)  the  first  day of  the  calendar  month
following  the later of the Annuitant's 90th  birthday; or (b) such earlier date
as may be set by applicable law.
 
    The Owner may designate an  earlier date or may  change the Annuity Date  by
making  a written request  at least thirty  (30) days prior  to the Annuity Date
being changed. However, any Annuity Date must be no later than the date  defined
above; and, the first day of a calendar month.
 
    Without  the approval of the Company, the new Annuity Date cannot be earlier
than one year after  the Effective Date. In  addition, for Qualified  Contracts,
certain provisions of your retirement plan or the Code may further restrict your
choice of an Annuity Date. (See "Federal Tax Matters," page   ).
 
ANNUITY OPTIONS
 
    The Owner may choose annuity payments which are fixed, or which are based on
the  Variable Account, or a combination of the two. The Owner may, upon at least
30 days prior  written notice  to us,  at any time  prior to  the Annuity  Date,
select  or change an Annuity Option. If  the Owner elects annuity payments which
are based on the Variable Account, the amount of the payments will be  variable.
The  amount  of  the annuity  payment  based on  the  value of  a  Subaccount is
determined through  a  calculation  described in  the  Statement  of  Additional
Information,  under the caption "Annuity Provisions". The Owner may not transfer
Contract Values between the  Guaranteed Account and  the Variable Account  after
the  Annuity Date,  but may,  subject to  certain conditions,  transfer Contract
Values from one  Subaccount to  another Subaccount. (See  "Transfer of  Contract
Values" on page   .)
 
    If  the  Owner has  not made  any  annuity payment  option selection  at the
Annuity Date, the  Contract Value  will be applied  to purchase  Option 2  fixed
basis  annuity  payments  and  Option  2  variable  basis  annuity  payments, in
proportion to the  amount of Contract  Value in the  Guaranteed Account and  the
Variable Account, respectively.
 
                                       22
<PAGE>
    The annuity payment options are:
 
    OPTION  1:  LIFE INCOME.  The  Company will make annuity payments during the
lifetime of the Annuitant.
 
    OPTION 2:  LIFE INCOME  WITH 10 YEARS OF  PAYMENTS GUARANTEED.  The  Company
will  make monthly annuity payments during the lifetime of the Annuitant. If, at
the death of  the Annuitant, payments  have been  made for less  than 10  years,
payments   will  be  continued  during  the  remainder  of  the  period  to  the
Beneficiary.
 
    OPTION 3:  JOINT AND  LAST SURVIVOR INCOME.   The Company will make  annuity
payments for as long as either the Annuitant or a Contingent Annuitant is alive.
In the event that the Contract is issued in connection with an IRA, the payments
in  this Option  will be  made only to  the Owner  as Annuitant  and the Owner's
spouse.
 
    The annuity payment  options are more  fully explained in  the Statement  of
Additional Information. The Company may also offer additional options at its own
discretion.
 
ANNUITY PAYMENTS
 
    If  the  Contract Value  applied  to annuity  payment  options is  less than
$2,000, the Company reserves the right to pay  the amount in a lump sum in  lieu
of  annuity  payments. The  Company makes  all  other annuity  payments monthly.
However, if  the total  monthly annuity  payment  would be  less than  $100  the
Company reserves the right to make payments semi-annually or annually.
 
    If  fixed annuity payments are selected, the amount of each fixed payment is
determined by multiplying the Contract Value allocated to purchase fixed annuity
payments by the factor shown in the annuity table specified in the Contract  for
the option selected, divided by 1,000.
 
    If  variable annuity payments are selected, the Annuitant receives the value
of a fixed  number of  Annuity Units  each month.  The actual  dollar amount  of
variable  annuity payments is dependent upon: (i) the Contract Value at the time
of annuitization; (ii) the  annuity table specified in  the Contract; (iii)  the
Annuity  Option  selected; (iv)  the  investment performance  of  the Subaccount
selected; and (v) the pro-rata portion of the Contract Maintenance charge.
 
    The annuity  tables contained  in the  Contract are  based on  a 5%  assumed
investment  rate. If  the actual net  investment rate exceeds  5%, payments will
increase. Conversely,  if the  actual rate  is less  than 5%,  variable  annuity
payments will decrease.
 
                                 DEATH BENEFIT
 
PRIOR TO THE ANNUITY DATE
 
    In  the event of  Your death prior to  the Annuity Date,  a death benefit is
payable to the Beneficiary. The value of the death benefit will be determined as
of the date We receive proof of death  in a form acceptable to Us. If there  has
been  a  change of  Owner,  the death  benefit  will equal  the  Contract Value.
Otherwise, We will pay the death benefit equal to the greatest of: (a) the total
of all Premium, reduced proportionately  by withdrawals and surrenders; (b)  the
Contract  Value; (c) the greatest of the  Contract Value at the seventh Contract
Anniversary if attained  prior to  Owner's attained age  76 or  at the  Contract
Anniversary  every seven  years thereafter, plus  any Premium paid  and less any
surrenders subsequent to that Contract Anniversary.
 
    The Beneficiary  may elect  the death  benefit to  be paid  as follows:  (a)
payment  of the entire death  benefit within 5 years of  the date of the Owner's
death; or  (b) payment  over the  lifetime of  the designated  Beneficiary  with
distribution  beginning within 1 year of the date  of death of the Owner; or (c)
if the designated Beneficiary is Your  spouse, he/she can continue the  contract
in his/her own name.
 
    If no payment option is elected, a single sum settlement will be made at the
end of the sixty (60) day period following receipt of proof of death.
 
                                       23
<PAGE>
AFTER THE ANNUITY DATE
 
    If  the Owner is a person other than the Annuitant, and if the Owner's death
occurs on or after the Annuity Date, no death benefit will be payable under this
contract, except that any guaranteed payments remaining unpaid will continue  to
be  paid to the Annuitant pursuant to the Annuity Option in force at the date of
the Owner's death.
 
ACCIDENTAL DEATH BENEFIT
 
    If an Accidental Death  Benefit has been elected,  the cost of this  benefit
will be equal on an annual basis to 0.10% of the average daily net assets in the
Variable Account.
 
    The Accidental Death Benefit, if any, is equal to the lesser of the Contract
Value as of the date the death benefit is determined or $250,000. The Accidental
Death  Benefit is payable if the death of  the primary Owner occurs prior to the
Contract Anniversary next following his 75th birthday as a result of an  Injury.
The  death must also  occur before the Annuity  Date and within  365 days of the
date of the accident  which caused the Injury.  The Accidental Death Benefit  is
paid to the Beneficiary.
 
    The  Accidental Death Benefit  will not be  paid for any  death caused by or
resulting (in whole or in part) from the following:
 
    (a) suicide  or  attempted  suicide  while  sane  or  insane;  intentionally
       self-inflicted injuries;
 
    (b)  sickness, disease or  bacterial infection of  any kind, except pyogenic
       infections which occur as a result  of an injury or bacterial  infections
       which result from the accidental ingestion of contaminated substances;
 
    (c) hernia;
 
    (d)  injury sustained as  a consequence of riding  in, including boarding or
       alighting from, any vehicle or  device used for aerial navigation  except
       if   the  Owner  is  a  passenger   on  any  aircraft  licensed  for  the
       transportation of passengers;
 
    (e) declared or undeclared war or any act thereof; or
 
    (f) service in the military, naval or air service of any country.
 
DEATH OF THE ANNUITANT
 
    If the Annuitant is a person other than the Owner, and if the Annuitant dies
before the Annuity Date, a  new Annuitant may be named  by the Owner. If no  new
Annuitant  is  named within  sixty  (60) days  of Our  receipt  of proof  of the
Annuitant's death, the Owner will be  deemed the new Annuitant. If an  Annuitant
dies  after  the  Annuity Date,  the  remaining  payments, if  any,  will  be as
specified  in  the  Annuity  Option  elected.  We  will  require  proof  of  the
Annuitant's  death.  Death benefits,  if  any, will  be  paid to  the designated
Beneficiary at least as rapidly as under the method of distribution in effect at
the Annuitant's death.
 
                        DISTRIBUTIONS UNDER THE CONTRACT
 
WITHDRAWALS
 
    The Owner  may withdraw  Contract  Values prior  to  the Annuity  Date.  Any
withdrawal is subject to the following conditions:
 
    (a) the Company must receive a written request;
 
    (b) the amount requested must be at least $500;
 
    (c) any applicable Surrender Charge will be deducted;
 
    (d)  the Contract Value will  be reduced by the  sum of the amount requested
       plus the amount of any applicable Surrender Charge;
 
                                       24
<PAGE>
    (e) the Company will deduct the  amount requested plus any Surrender  Charge
       from  each Subaccount  of the  Variable Account  and from  the Guaranteed
       Account either as specified or in the proportion that each Subaccount and
       the Guaranteed Account bears to the Contract Value; and
 
    We reserve the right  to consider any withdrawal  request that would  reduce
the  Value of the Accumulation  Account to less than $2,000  to be a request for
Surrender. In  this event,  the Surrender  Value will  be paid  to You  and  the
Contract will terminate.
 
    Each  withdrawal is subject to Federal  income taxes on the taxable portion.
Unless otherwise directed  by You, We  must withhold federal  income taxes  from
each  withdrawal. In addition, a 10% penalty  tax may be assessed on withdrawals
if You are  under age  59 1/2. This  includes withdrawals  under the  Systematic
Withdrawal program (described below) and withdrawals You may make to pay fees to
Your investment advisor, if any.
 
SYSTEMATIC WITHDRAWAL
 
    The  systematic  withdrawal  program  involves  making  regularly  scheduled
withdrawals from Your value in the  Contract. In order to initiate the  program,
your  total Contract Value must  be at least $24,000.  The program allows You to
prearrange the withdrawal  of a  specified dollar amount  of at  least $200  per
withdrawal,  on a monthly  or quarterly payment  basis. A maximum  of 10% of the
Contract Value may be  withdrawn in a Contract  Year. Surrender Charges are  not
imposed  on withdrawals under this program.  If you elect this program Surrender
Charges will be  imposed on any  withdrawal, other than  withdrawals made  under
Your  systematic withdrawal program, when the withdrawal is from Premium paid in
the last six years.  You may not elect  this program if you  have taken a  prior
withdrawal  during the same  Contract Year. (See  "Withdrawals" on page    , and
"Surrender Charges" on page   .)
 
    Systematic withdrawals will  begin on  the first  scheduled withdrawal  date
selected  by You  following the  date We  process Your  request. If  the day You
designate is not a Valuation Date, the withdrawal will be made on the  following
Valuation  Date. In the event  that Your value in  a specified Subaccount or the
Guaranteed Account is not sufficient to  deduct a withdrawal or if Your  request
for  systematic withdrawal does not specify the Guaranteed Account or from which
Subaccounts withdrawals  are  to  be  deducted,  withdrawals  will  be  deducted
proportionally  based  on  Your  value in  each  Subaccount  and  the Guaranteed
Account.
 
    All parties to the Contract are cautioned  that the rights of any person  to
implement  the systematic  withdrawal program  under Qualified  Contracts may be
subject to the terms  and conditions of the  retirement plan, regardless of  the
terms  and conditions of the Qualified Contract issued in connection with such a
retirement plan. (See "Federal Tax Matters" on page   .)
 
    The systematic withdrawal  program may be  canceled at any  time by  written
request  or automatically by Us should the  Contract Value fall below $1,000. In
the event the systematic withdrawal program is canceled, the Owner may not elect
to participate in such program until the next Contract Anniversary.
 
    An Owner  may change  once per  Contract  Year the  amount or  frequency  of
withdrawals on a systematic basis.
 
    The  Free Withdrawal  Amount (see "Charges  and Deductions  -- Deduction for
Surrender Charge" on  page    )  is not available  while an  Owner is  receiving
systematic  withdrawals. An Owner will be entitled to the free withdrawal amount
on and after  the Contract  Anniversary next  following the  termination of  the
systematic withdrawal program.
 
    Implementation  of the systematic withdrawal program may subject an Owner to
adverse tax consequences, including a 10%  tax penalty. (See "Taxes --  Taxation
of  Annuities in General" on page    for a discussion of the tax consequences of
withdrawals.)
 
                                       25
<PAGE>
    THE COMPANY RESERVES THE RIGHT TO DISCONTINUE THIS PROGRAM AT ANY TIME.
 
SURRENDER
 
    Prior to the Annuity Date you  may Surrender the Contract for the  Surrender
Value  by  withdrawing the  entire  Contract Value.  You  must submit  a written
request for Surrender and return the Contract to Us. The Surrender Value will be
based on the Contract Value at the end of the Valuation Period during which  the
Surrender  request  is received  as  described below.  The  Contract may  not be
surrendered after the Annuity Date.
 
SURRENDER VALUE
 
    The Surrender  Value  of the  Contract  varies  each day  depending  on  the
investment  results of the Subaccounts selected  by the Owner. Contract Value in
the Guaranteed Account may be subject to a Market Value Adjustment. (See "Market
Value Adjustment", Appendix   .) The Surrender Value will be the Contract Value,
subject to any applicable  Market Value Adjustment, as  of the date the  Company
receives  Your surrender request,  reduced by the  following: (1) any applicable
taxes not  previously  deducted; (2)  any  applicable portion  of  the  Contract
Maintenance Charge; and (3) any applicable Surrender Charge.
 
PAYMENT OF WITHDRAWALS AND SURRENDER VALUES
 
    Payments  of Withdrawals and Surrender Values will ordinarily be sent to the
Owner within seven  (7) days  of receipt  of the  written request,  but see  the
Deferment  of  Payment  discussion  below.  (Also  see  Statement  of Additional
Information -- "Delay of Payments.")
 
    The Company reserves the right to ensure that an Owner's check or other form
of Premium has been  cleared for payment prior  to processing any withdrawal  or
redemption request occurring shortly after a Premium payment.
 
    If, at the time You make a request for a Withdrawal or a Surrender, You have
not  provided  Us with  a  written election  not  to have  Federal  income taxes
withheld, We must by law  withhold such taxes from  the taxable portion of  Your
payment  and remit that amount to the  IRS. Mandatory withholding rules apply to
distributions  from  qualified   plans  and  Code   Section  403(b)   annuities.
Additionally, the Code provides that a 10% penalty tax may be imposed on certain
early  Withdrawals and Surrenders.  (See "Federal Tax  Matters" on page    , and
"Qualified Contracts" on page   .)
 
DEFERRAL OF PAYMENT
 
    Payment of any Withdrawal,  Surrender, or lump sum  death proceeds from  the
Variable  Account will usually occur  within seven days. We  may be permitted to
defer such payment if: (1) the New York Stock Exchange is closed for other  than
usual  weekends or holidays, or trading on the Exchange is otherwise restricted;
(2) an emergency exists as defined by  the SEC or the SEC requires that  trading
be  restricted; (3) the SEC permits a delay for protection of Owners; or (4) the
check used to pay any Premium has  not cleared through the banking system  (this
may take up to 15 days).
 
    We  may defer  payment of  any Withdrawal  or Surrender  from the Guaranteed
Account for up to six months from the date we receive Your written request.
 
                                     TAXES
 
INTRODUCTION
 
    The Contracts  are designed  to accumulate  Contract Values  for  retirement
plans  which, except for IRAs and  403(b) Plans, are generally not tax-qualified
plans ("Qualified Plans"). The  ultimate effect of Federal  income taxes on  the
amounts held under a Contract, on annuity payments, and on the economic benefits
to  the Owner, Annuitant or  Beneficiary depend on the  Company's tax status and
upon the tax  status of  the individual concerned.  Accordingly, each  potential
Owner  should consult a competent tax  adviser regarding the tax consequences of
purchasing a Contract.
 
                                       26
<PAGE>
    The following discussion  is general in  nature and is  not intended as  tax
advice.  No attempt is made to consider  any applicable state or other tax laws.
Moreover, the  discussion  is based  upon  the Company's  understanding  of  the
Federal  income tax laws as they are currently interpreted. No representation is
made regarding the likelihood  of continuation of the  Federal income tax  laws,
the Treasury Regulations, or the current interpretations by the Internal Revenue
Service (the "Service"). For a discussion of Federal income taxes as they relate
to the Fund, please see the accompanying Prospectus for the Fund.
 
COMPANY TAX STATUS
 
    The  Company is taxed as a life insurance company under the Internal Revenue
Code of 1986,  as amended  (the "Code").  Since the  Variable Account  is not  a
separate  entity from the Company and its operations form a part of the Company,
it will  not be  taxed  separately as  a  "regulated investment  company"  under
Subchapter  M of the Code.  Investment income and realized  capital gains on the
assets of  the  Variable  Account  are reinvested  and  taken  into  account  in
determining  the  Contract Value.  Under existing  Federal  income tax  law, the
Variable Account's investment income, including  realized net capital gains,  is
not taxed to the Company. The Company reserves the right to make a deduction for
taxes  from  the assets  of the  Variable  Account should  they be  imposed with
respect to such items in the future.
 
TAXATION OF ANNUITIES IN GENERAL -- NON-QUALIFIED PLANS
 
    Code Section 72 governs the taxation  of annuities. In general, an Owner  is
not  taxed on increases in value under  a Contract until some form of withdrawal
or  distribution   is  made   under  the   Contract.  However,   under   certain
circumstances,  the  increase in  value may  be subject  to tax  currently. (See
"Contracts Owned  by Non-Natural  Persons," and  "Diversification Standards"  on
page   .)
 
    WITHDRAWALS PRIOR TO THE ANNUITY DATE
 
    Code  Section 72 provides that a total or partial withdrawal from a Contract
prior to the Annuity Date  will be treated as taxable  income to the extent  the
amounts  held  under the  Contract  on the  date  of the  withdrawal  exceed the
"investment in  the contract,"  as that  term  is defined  under the  Code.  The
"investment  in the  contract" can  generally be  described as  the cost  of the
Contract. It generally constitutes the sum of all purchase payments made for the
contract less any  amounts received under  the Contract that  are excluded  from
gross  income. The taxable portion is taxed  as ordinary income. For purposes of
this rule, a pledge or assignment of a Contract is treated as a payment received
on account of a partial withdrawal of a Contract.
 
    WITHDRAWALS ON OR AFTER THE ANNUITY DATE
 
    Upon receipt of a lump sum payment or an annuity payment under the Contract,
the recipient is taxed on the portion of the payment that exceeds the investment
in the Contract. Ordinarily, the taxable portion of payments under the  Contract
will be taxed as ordinary income.
 
    For fixed annuity payments, the taxable portion of each payment is generally
determined  by using a formula known as the "exclusion ratio", which establishes
the ratio that the investment in the Contract bears to the total expected amount
of annuity payments for the term of the Contract. That ratio is then applied  to
each  payment to determine the nontaxable  portion of the payment. The remaining
portion of  each payment  is  taxed as  ordinary  income. For  variable  annuity
payments,  the taxable  portion is determined  by a formula  which establishes a
specific dollar amount of each payment that  is not taxed. The dollar amount  is
determined  by dividing the  investment in the  Contract by the  total number of
expected periodic payments. The  remaining portion of each  payment is taxed  as
ordinary income.
 
    The  Company  is obligated  to withhold  Federal  income taxes  from certain
payments unless the recipient elects otherwise. Prior to the first payment,  the
Company  will notify the payee of the right to elect out of withholding and will
furnish a form on which the election may be made. The payee must properly notify
the Company  of that  election  in advance  of the  payment  in order  to  avoid
withholding.
 
                                       27
<PAGE>
    PENALTY TAX ON CERTAIN WITHDRAWALS
 
    With respect to amounts withdrawn or distributed before the taxpayer reaches
age  59 1/2, a 10% penalty tax is  imposed upon the portion of such amount which
is includable  in gross  income. However,  the  penalty tax  will not  apply  to
withdrawals:  (i) made on or after the death of the Owner (or where the Owner is
not an individual, the death of the  "primary annuitant", who is defined as  the
individual,  the  events  in the  life  of  whom are  of  primary  importance in
affecting the  timing  or  amount  of  the  payout  under  the  Contract);  (ii)
attributable  to the taxpayer's becoming totally  disabled within the meaning of
Code Section 72(m)(7); (iii) which are  part of a series of substantially  equal
periodic payments (not less frequently than annually) made for the life (or life
expectancy)  of the taxpayer, or the joint lives (or joint life expectancies) of
the taxpayer and his beneficiary; (iv)  allocable to investment in the  Contract
before  August 14, 1982; (v) under a qualified funding asset (as defined in Code
Section 130(d)); (vi)  under an immediate  annuity contract; or  (vii) that  are
purchased  by an employer on termination of certain types of qualified plans and
which are held by the employer until the employee separates from service.
 
    If the  penalty tax  does not  apply  to a  withdrawal as  a result  of  the
application  of item  (iii) above, and  the series of  payments are subsequently
modified (other than by reason  of death or disability),  the tax for the  first
year  in which the modification  occurs will be increased  by an amount equal to
the tax that  would have been  imposed but  for item (iii)  above as  determined
under Treasury Regulations, plus interest for the deferral period. The foregoing
rule applies if the modification takes place: (a) before the close of the period
which  is five years from  the date of the first  payment and after the taxpayer
attains age 59 1/2; or (b) before the taxpayer reaches age 59 1/2.
 
    ASSIGNMENTS
 
    Any assignment or pledge of the Contract as collateral for a loan may result
in a taxable event and the excess of the Contract Value over total Premium  will
be  taxed to the  assignor as ordinary  income. Please consult  your tax adviser
prior to making an assignment of the Contract.
 
    DISTRIBUTION-AT-DEATH RULES
 
    In order  to  be treated  as  an annuity  contract  for Federal  income  tax
purposes,  a Contract must generally provide  for the following two distribution
rules: (i) if the Owner dies on or after the Annuity Date, and before the entire
interest in the  Contract has been  distributed, the remaining  portion of  such
interest  will be distributed at least as quickly as the method in effect on the
Owner's death; and  (ii) if a  Owner dies  before the Annuity  Date, the  entire
interest  must  generally be  distributed within  five years  after the  date of
death. To  the extent  such interest  is payable  to a  designated  Beneficiary,
however,  such interest may be  annuitized over the life  of that Beneficiary or
over a period not extending beyond  the life expectancy of that Beneficiary,  so
long  as distributions commence within one year  after the date of death. If the
Beneficiary is the spouse of the Owner, the Contract may be continued  unchanged
in the name of the spouse as Owner.
 
    If the Owner is not an individual, the "primary annuitant" (as defined under
the  Code)  is considered  the  Owner. In  addition, when  the  Owner is  not an
individual, a change in  the primary annuitant  is treated as  the death of  the
Owner.
 
    GIFTS OF CONTRACTS
 
    Any  transfer of a Contract prior to the Annuity Date for less than full and
adequate consideration will generally trigger tax  on the gain in the  Contract.
The  transferee will receive a  step-up in basis for  the amount included in the
transferor's income. This provision, however, does not apply to those  transfers
between  spouses or  incident to  a divorce which  are governed  by Code Section
1041(a).
 
    CONTRACTS OWNED BY NON-NATURAL PERSONS
 
    If the Contract is held by a non-natural person (for example, a  corporation
or  trust) the  Contract is  generally not  treated as  an annuity  contract for
Federal income  tax purposes,  and the  income on  the Contract  (generally  the
excess of the Contract Value over the purchase payments) is includable in income
each  year. The  rule does not  apply where  the non-natural person  is only the
nominal owner
 
                                       28
<PAGE>
such as a trust  or other entity acting  as an agent for  a natural person.  The
rule  also does  not apply  when the  Contract is  acquired by  the estate  of a
decedent, when the  Contract is  held under  certain qualified  plans, when  the
Contract  is  a qualified  funding asset  for  structured settlements,  when the
Contract is purchased on behalf of  an employee upon termination of a  qualified
plan, and in the case of an immediate annuity.
 
    SECTION 1035 EXCHANGES
 
    Code  Section 1035 provides that no gain  or loss shall be recognized on the
exchange of  an annuity  contract for  another annuity  contract. A  replacement
contract  obtained in a tax-free exchange of contracts succeeds to the status of
the surrendered contract.  Special rules  and procedures apply  to Code  Section
1035  transactions. Prospective owners wishing to take advantage of Code Section
1035 should consult their tax advisers.
 
    MULTIPLE CONTRACTS
 
    Annuity contracts that are issued by the Company (or affiliate) to the  same
Owner  during  any calendar  year will  be  treated as  one annuity  contract in
determining the  amount includable  in the  taxpayer's gross  income. Thus,  any
amount received under any such contract prior to the contract's annuity starting
date will be taxable (and possibly subject to the 10% penalty tax) to the extent
of  the combined income in all such contracts. The Treasury has broad regulatory
authority to prevent avoidance of the  purposes of this aggregation rule. It  is
possible  that, under  this authority, Treasury  may apply this  rule to amounts
that are  paid  as annuities  (on  or after  the  starting date)  under  annuity
contracts  issued by the same company to the same Owner during any calendar year
period. In this  case, annuity  payments could  be fully  taxable (and  possibly
subject to the 10% penalty tax) to the extent of the combined income in all such
contracts  and  regardless  of  whether any  amount  would  otherwise  have been
excluded from income. Owners should consult a tax adviser before purchasing more
than one Contract or other annuity contracts.
 
DIVERSIFICATION STANDARDS
 
    To comply  with  the  diversification  regulations  promulgated  under  Code
Section  817(h) (the  "Diversification Regulations"),  after a  start-up period,
each Subaccount is  required to diversify  its investments. The  Diversification
Regulations generally require that on the last day of each quarter of a calendar
year  no more than 55% of the value of the assets of a Subaccount is represented
by any one investment, no more than  70% is represented by any two  investments,
no  more than 80% is represented by any  three investments, and no more than 90%
is represented by any four investments. A "look-through" rule applies so that an
investment in the Fund  is not treated  as one investment but  is treated as  an
investment  in a  pro-rata portion  of each  underlying asset  of the  Fund. All
securities of the same issuer are treated as a single investment. In the case of
government securities, each Government agency or instrumentality is treated as a
separate issuer.
 
    In connection with the issuance of the Diversification Regulations, Treasury
announced that such regulations do not provide guidance concerning the extent to
which Owners may direct their investments to particular divisions of a  separate
account.  It  is  possible  that  if  and  when  additional  regulations  or IRS
pronouncements are issued, the Contract may  need to be modified to comply  with
such  rules. For  these reasons,  the Company reserves  the right  to modify the
Contract, as necessary, to prevent the Owner from being considered the owner  of
the assets of the Variable Account.
 
    The Company intends to comply with the Diversification Regulations to assure
that  the  Contracts continue  to be  treated as  annuity contracts  for Federal
income tax purposes.
 
QUALIFIED PLANS
 
    The Contracts may be used to create an IRA. The Contracts are also available
for use in connection with a  previously established 403(b) Plan. No attempt  is
made  herein  to provide  more than  general  information about  the use  of the
Contracts   with    IRAs   or    403(b)    Plans.   The    information    herein
 
                                       29
<PAGE>
is  not  intended as  tax advice.  A  prospective Owner  considering use  of the
Contract to create  an IRA  or in  connection with  a 403(b)  Plan should  first
consult  a competent tax adviser with regard  to the suitability of the Contract
as an investment vehicle for their qualified plan.
 
    A Contract  may  be used  as  the investment  medium  for several  types  of
retirement  plans. Under  amendments to the  Internal Revenue  Code which became
effective in 1993, distributions from  a qualified plan (other than  non-taxable
distributions  representing  a  return  of  capital,  distributions  meeting the
minimum distribution requirement, distributions for the life or life  expectancy
of the recipient(s) or distributions that are made over a period of more than 10
years)  are  eligible  for tax-free  rollover  within  60 days  of  the  date of
distribution, but are also  subject to federal income  tax withholding at a  20%
rate  unless paid directly to another qualified plan. If the recipient is unable
to take full advantage of the tax-free rollover provisions, there may be taxable
income, and  the imposition  of a  10% penalty  if the  recipient is  under  age
59 1/2. We make no attempt to provide more than general information about use of
Qualified  Contracts  with the  various types  of  retirement plans.  Owners and
participants under retirement plans as well as Annuitants and Beneficiaries  are
cautioned  that  the  rights  of  any person  to  any  benefits  under Qualified
Contracts may be  subject to the  terms and conditions  of the retirement  plan,
regardless  of  the terms  and conditions  of the  Qualified Contract  issued in
connection with such a  retirement plan. Purchasers  of Qualified Contracts  for
use  with any retirement plan should consult their legal counsel and tax adviser
regarding the suitability of a Qualified Contract for their retirement plan.
 
INDIVIDUAL RETIREMENT ANNUITIES
 
    Section 408 of  the Code permits  eligible individuals to  contribute to  an
IRA.  Contracts issued in connection  with an IRA are  subject to limitations on
eligibility, maximum contributions, and time of distribution. Distributions from
certain retirement plans  qualifying for  federal tax advantages  may be  rolled
over  into an  IRA. Sales  of the  Contracts for  use with  IRAs are  subject to
special requirements  imposed by  the Service,  including the  requirement  that
informational  disclosure be given to each  person desiring to establish an IRA.
The IRAs offered by this Prospectus are not available in all states.
 
403(B) PLANS
 
    Code Section 403(b)(11) imposes certain  restrictions on an Owner's  ability
to  make partial withdrawals from Code Section 403(b) Contracts, if attributable
to Premium paid under a  salary reduction agreement. Specifically, Code  Section
403(b)(11)  allows an Owner to  make a surrender or  partial withdrawal only (a)
when the employee attains age 59  1/2, separates from service, dies, or  becomes
disabled  (as defined in the Code), or (b)  in the case of hardship. In the case
of hardship, only an amount equal to the purchase payments may be withdrawn.  In
addition,  under  Code  Section 403(b)  the  employer must  comply  with certain
non-discrimination  requirements.  Owners  should  consult  their  employers  to
determine  whether the employer  has complied with these  rules. The 403(b) Plan
offered by this Prospectus is not available in all states.
    


                                       30
<PAGE>
                               TABLE OF CONTENTS
 
   
<TABLE>
<CAPTION>
                                                                                                              PAGE
                                                                                                            ---------
<S>                                                                                                         <C>
General Information.......................................................................................
  The Company.............................................................................................
  Independent Accountants.................................................................................
  Legal Counsel...........................................................................................
  Distributor.............................................................................................
  Calculation of Performance Related Information..........................................................
  Delay of Payments.......................................................................................
  Transfers...............................................................................................
Method of Determining Contract Values.....................................................................
Annuity Provisions........................................................................................
  Annuity Benefits........................................................................................
  Annuity Options.........................................................................................
  Variable Annuity Payment Values.........................................................................
  Annuity Unit............................................................................................
  Net Investment Factor...................................................................................
  Additional Provisions...................................................................................
Financial Statements......................................................................................
Appendix -- General Account Option........................................................................
  Guaranteed Account......................................................................................
  Guarantee Periods.......................................................................................
  Market Value Adjustment.................................................................................
</TABLE>

    

                                       31
<PAGE>
   
                                    APPENDIX
 
GUARANTEED ACCOUNT OPTION
 
    Under  this  Guaranteed  Account option,  Contract  Values are  held  in the
Company's General  Account. The  General  Account includes  all of  Our  assets,
except  those assets segregated  in Our separate  accounts. Because of exemptive
and exclusionary  provisions, interests  in the  General Account  have not  been
registered  under  the  Securities  Act  of  1933  nor  is  the  General Account
registered as an investment  company under the Investment  Company Act of  1940.
The Company understands that the staff of the Securities and Exchange Commission
has  not reviewed the disclosures in  this Prospectus relating to the Guaranteed
Account portion of  the Contract. Disclosures  regarding the Guaranteed  Account
may,  however,  be subject  to certain  generally  applicable provisions  of the
federal securities laws relating to the accuracy and completeness of  statements
made in prospectuses.
 
    During  the  Accumulation  Period  the Owner  may  allocate  amounts  to the
Guaranteed Account.  The initial  Premium  will be  invested in  the  Guaranteed
Account  if selected by the Owner at the time of application. Additional Premium
will be allocated in  accordance with the selection  made in the application  or
the  most recent instruction received at the Company Office. If the Owner elects
to withdraw  amounts from  the Guaranteed  Account, such  withdrawal, except  as
otherwise  provided in this Appendix, will be  subject to the same conditions as
imposed on withdrawals from the Variable Account. The Company reserves the right
to delay any payment from the Guaranteed  Account for up to six (6) months  from
the date it receives such request at its Office.
 
GUARANTEE PERIODS
 
    The  period(s) for which a guaranteed interest  rate is credited is called a
Guarantee Period. Guarantee Periods may be offered or withdrawn at the Company's
discretion. The initial guarantee period(s) and the guaranteed interest  rate(s)
applicable to the initial Premium are as shown in the Contract. At least 15 days
but  no more  than 75 days  prior to the  expiration of a  Guarantee Period, the
Owner will be mailed a  notice of the guaranteed  interest rate applicable to  a
renewal  of  the Guarantee  Period. At  the expiration  of any  Guarantee Period
applicable to any portion  of the Contract Value,  that portion of the  Contract
Value  will be automatically  renewed for another Guarantee  Period for the same
duration as  the  expired  Guarantee  Period and  will  receive  the  guaranteed
interest  rate then in effect for  that Guarantee Period, unless other Guarantee
Periods or one or more  Subaccounts are requested in  writing by the Owner.  All
requests to change a Guarantee Period at the end of an existing Guarantee Period
must  be received in writing at the Company's Office within 30 days prior to the
end of that Guarantee Period.
 
ALLOCATIONS TO THE GUARANTEED ACCOUNT
 
    The minimum amount that may be allocated to a Guarantee Period, either  from
the  initial  or  a  subsequent  Premium, is  $3,000.  Amounts  invested  in the
Guaranteed Account  are credited  with interest  on a  daily basis  at the  then
applicable  effective guarantee rate. The effective  guarantee rate is that rate
in effect  when the  Owner  allocates or  transfers  amounts to  the  Guaranteed
Account. If the Owner has allocated or transferred amounts at different times to
the  Guaranteed Account, each allocation or transfer may have a unique effective
guarantee rate and Guarantee Period  associated with that amount. The  effective
guarantee  rate will not be changed more than once per year and the minimum rate
will not be less than 3%.
 
GUARANTEED ACCOUNT TRANSFERS
 
    During the accumulation period the Owner may transfer, by written request or
telephone authorization, Contract Values to or from a subaccount of the Variable
Account to or from  a Guarantee Period  of the Guaranteed  Account at any  time,
subject to the conditions set out under Transfer of Contract Values Section.
 
    Prior  to  the  end  of  a  Guarantee  Period  the  Owner  may  specify  the
subaccount(s) of the Variable Account or the applicable Guarantee Period of  the
Guaranteed  Account to  which the  Owner wants  the amounts  from the Guaranteed
Account  transferred  at  the  end  of  the  Guarantee  Period.  If  the   Owner
 
                                      A-1
<PAGE>
does  not notify us  prior to the end  of the Guarantee  Period, we will reapply
that amount to  a new  Guarantee Period  of the  same duration,  provided it  is
available. If a new Guarantee Period of the same duration is not available, that
portion of Your Contract Value shall be transferred to the Guarantee Period next
shortest  in  duration.  The amount  so  applied  is then  subject  to  the same
conditions as the original  Guarantee Period, including  the condition that  the
amount  may not be  transferred until the  end of that  Guarantee Period. In the
event of a  non-specified renewal, there  is a  grace period of  30 days  within
which  the Owner can have transferred amounts reapplied. The effective guarantee
rate applicable to the new Guarantee Period may be different from the  effective
guaranteed  rate applicable  to the  original Guarantee  Period. These transfers
will be handled at no charge to the Owner.
 
MARKET VALUE ADJUSTMENT
 
    Unless accomplished on the expiration date  of a Guarantee Period or  during
the  grace period, a transfer, withdrawal, surrender or annuitization of amounts
allocated to the Guaranteed Account may be subject to a Market Value Adjustment.
The adjusted value is  determined by multiplying the  amount to be  transferred,
withdrawn,  surrendered or annuitized  from a Guarantee  Period by the following
formula:
 
    .75 X (A-B) X [N/12], where:
 
<TABLE>
<S>        <C>        <C>
A              =      The guaranteed interest rate applicable to a Guarantee Period for that portion  of
                      proceeds being transferred, withdrawn, surrendered or annuitized.
 
B              =      The  guaranteed interest rate currently available for the same length of Guarantee
                      Period as that  remaining in  the period applicable  to that  portion of  proceeds
                      being  transferred,  withdrawn, surrendered  or annuitized.  If no  such Guarantee
                      Period is  then  offered, the  guaranteed  interest  rate will  be  calculated  by
                      straight  line  interpolation  of  the  guaranteed  interest  rates  of  available
                      Guarantee Periods.
 
N              =      The number of complete and  partial months remaining to  the end of the  Guarantee
                      Period  applicable  to  that  portion of  proceeds  being  transferred, withdrawn,
                      surrendered or annuitized.
</TABLE>
 
    The Market Value Adjustment is not applicable on the date a Guarantee Period
expires; however, a Withdrawal or Surrender  on such date may remain subject  to
Surrender Charges. Applicable Surrender Charges will be applied after any Market
Value Adjustment to Guaranteed Account values.
 
MINIMUM SURRENDER VALUE
 
    The  minimum Surrender Value for amounts allocated to the Guaranteed Account
equals the  amounts  so allocated  less  withdrawals, with  interest  compounded
annually at the rate of 3%, reduced by any applicable Surrender Charge.
    


                                      A-2
<PAGE>

   













                                        PART B

<PAGE>
                                         PART B
                         STATEMENT OF ADDITIONAL INFORMATION


                         DEFERRED VARIABLE ANNUITY CONTRACTS

                                      ISSUED BY

                                  VARIABLE ACCOUNT A

                                         AND

              AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK


    THIS IS NOT A PROSPECTUS.  THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD
BE READ IN CONJUNCTION WITH THE PROSPECTUS FOR THE  DEFERRED VARIABLE ANNUITY
CONTRACTS WHICH ARE REFERRED TO HEREIN.

    THE PROSPECTUS CONCISELY SETS FORTH INFORMATION THAT A PROSPECTIVE INVESTOR
OUGHT TO KNOW BEFORE INVESTING.  FOR A COPY OF THE PROSPECTUS DATED MAY 1, 1996,
CALL OR WRITE: American Life Assurance Company of New York; Attention: Variable
Products, One Alico Plaza, Wilmington, Delaware 19801, 1-800-340-2765.

DATE OF STATEMENT OF ADDITIONAL INFORMATION: May 1, 1996.







                                            

<PAGE>



                                  TABLE OF CONTENTS

                                                                           PAGE
General Information  . . . . . . . . . . . . . . . . . . . . . . . . . . .
    The Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
    Independent Accountants. . . . . . . . . . . . . . . . . . . . . . . .
    Legal Counsel. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
    Distributor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
    Calculation of Performance Related Information . . . . . . . . . . . .
    Delay of Payments. . . . . . . . . . . . . . . . . . . . . . . . . . .
    Transfers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Method of Determining Contract Values. . . . . . . . . . . . . . . . . . .
Annuity Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . .
    Annuity Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . .
    Annuity Options. . . . . . . . . . . . . . . . . . . . . . . . . . . .
    Variable Annuity Payment Values. . . . . . . . . . . . . . . . . . . .
    Annuity Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
    Net Investment Factor. . . . . . . . . . . . . . . . . . . . . . . . .
    Additional Provisions. . . . . . . . . . . . . . . . . . . . . . . . .

Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . .


                                         B-2

<PAGE>

                                 GENERAL INFORMATION


THE COMPANY

    A description of American International Life Assurance Company of New York
(the "Company"), and its ownership is contained in the Prospectus.  The Company
will provide for the safekeeping of the assets of Variable Account A (the
"Variable Account").

INDEPENDENT ACCOUNTANTS

    The audited financial statements of the Company have been audited by
Coopers and Lybrand, L.L.P., independent certified public accountants, whose
offices are located in Philadelphia, Pennsylvania.

LEGAL COUNSEL

    Legal matters relating to the Federal securities laws in connection with
the Contracts described herein and in the Prospectus are being passed upon by
the law firm of Jorden Burt Berenson & Johnson LLP, Washington, D.C..

DISTRIBUTOR

    AIG Equity Sales Corp. ("AESC"), formerly known as American International
Fund Distributors, Inc., a wholly owned subsidiary of American International
Group, Inc. and an affiliate of the Company, acts as the distributor.  The
offering is on a continuous basis.   Commissions are paid by the Registrant
directly to selling dealers and representatives on behalf of the Distributor.
Commissions are not retained by the Distributor.

CALCULATION OF PERFORMANCE RELATED INFORMATION

    A.YIELD AND EFFECTIVE YIELD QUOTATIONS FOR THE MONEY MARKET SUB-ACCOUNT

    The yield quotation for the Money Market Sub-account to be set forth in the
Prospectus will be for the seven days ended on the date of the most recent
balance sheet of the Variable Account included in the registration statement,
and will be computed by determining the net change, exclusive of capital
changes, in the value of a hypothetical pre-existing account having a balance of
one Accumulation Unit in the Money Market Subaccount at the beginning of the
period, subtracting a hypothetical charge reflecting deductions from Owner
accounts, and dividing the difference by the value of the account at the
beginning of the base period to obtain the base period return, and multiplying
the base period return by (365/7) with the resulting figure carried to at least
the nearest hundredth of one percent.

    Any effective yield quotation for the Money Market Sub-account to be set
forth in the Prospectus will be for the seven days ended on the date of the most
recent balance sheet of the Variable Account included in the registration
statement, and will be carried at least to the nearest hundredth of one percent,
and will be computed by determining the net change, exclusive of capital
changes, in the value of a hypothetical pre-existing account having a balance of
one Accumulation Unit in the Money Market Sub-account at the beginning of the
period, subtracting a hypothetical charge reflecting deductions from Owner
accounts, and dividing the difference by the value of the account at the
beginning of the base period to obtain the base period return, and then
compounding the base period return by adding 1, raising the sum to a power equal
to 365 divided by 7 and subtracting 1 from the result, according to the
following formula:

EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1)365/7]-1.

                                        B - 3

<PAGE>

    For purposes of the yield and effective yield computations, the
hypothetical charge reflects all deductions that are charged to all Owner
accounts in proportion to the length of the base period.  For any fees that vary
with the size of the account, the account size is assumed to be the Money Market
Sub-account's mean account size.  The yield and effective yield quotations do
not reflect the Deferred Sales Charge that may be assessed at the time of
withdrawal in an amount ranging up to 6% of the requested withdrawal amount,
with the specific percentage applicable to a particular withdrawal depending on
the length of time the purchase payment was held under the Contract and whether
withdrawals had been previously made during that Contract Year.  (See "Charges
and Deductions - Deduction for Deferred Sales Charge" on page    of the
Prospectus)  No deductions or sales loads are assessed upon annuitization under
the Contracts.  Realized gains and losses from the sale of securities and
unrealized appreciation and depreciation of the Money Market Sub-account and the
Fund are excluded from the calculation of yield.

    B.TOTAL RETURN QUOTATIONS

    The total return quotations for all of the Sub-accounts to be set forth in
the Prospectus will be average annual total return quotations for the one, five,
and ten year periods (or, where a Sub-account has been in existence for a period
of less than one, five or ten years, for such lesser period) ended on the date
of the most recent balance sheet of the Variable Account and for the period from
the date monies were first placed into the Sub-accounts until the aforesaid
date.  The quotations are computed by finding the average annual compounded
rates of return over the relevant periods that would equate the initial amount
invested to the ending redeemable value, according to the following formula:

                            P(1+T)n = ERV

               Where: P = a hypothetical initial payment of $1,000

                         T = average annual total return

                         n = number of years

                         ERV = ending redeemable value of a hypothetical $1,000
                         payment made at the beginning of the particular
                         period at the end of the particular period.

     For the purposes of the total return quotations for all of the
Sub-accounts, the calculations take into effect all fees that are charged to all
Owner accounts.  For any fees that vary with the size of the account, the
account size is assumed to be the respective Sub-account's mean account size.
The calculations also assume a total withdrawal as of the end of the particular
period.

                                        B - 4

<PAGE>

     Annualized total return for certain Sub-accounts as of December 29, 1995,
were as follows:

                                ONE YEAR     THREE YEARS    INCEPTION TO DATE
                                --------     -----------    -----------------
     Money Market                  -1.91%      N/A               -2.56%
     Premier Growth                37.85%      N/A               10.02%
     Growth & Income               28.44%    11.93%              10.09%
     International                  8.34%      N/A                1.10%
     Short Term Multi              -0.19%    -0.90%              -5.04%
     Global Bond                   17.56%     6.92%               2.95%
     Us Gov't High Grade           12.14%      N/A               -1.18%
     Global Dollar Gov't           15.83%      N/A                3.96%
     North American Gov't          15.33%      N/A               -3.72%
     Utility Income                14.32%      N/A                3.95%
     Conservative Investor         10.05%      N/A                3.21%
     Growth Investors              13.36%      N/A                3.73%
     Growth                        27.91%      N/A               19.96%
     Total Return                  16.50%      N/A                4.69%
     World Wide Privatization       3.88%      N/A               -1.13%
     Technology Portfolio             N/A      N/A                  N/A

     *Funds were first invested in the Portfolios as listed below:

          Short-Term Multi-Market Portfolio            June 22, 1992
          Global Bond Portfolio                        July 8, 1992
          Growth & Income Portfolio                    July 8, 1992
          Premier Growth Portfolio                     February 3, 1993
          Money Market Portfolio                       February 3, 1993
          US Government/High Grade Portfolio           August 20, 1993
          International Portfolio                      October 1, 1993
          North American Government Income Portfolio   April 11, 1994
          Global Dollar Government Portfolio           April 20, 1994
          Utility Income Portfolio                     April 20, 1994
          Worldwide Privatization Portfolio            August 16, 1994
          Growth Investors Portfolio                   August 16, 1994
          Growth Portfolio                             August 16, 1994
          Conservative Investors Portfolio             August 24, 1994
          Total Return Portfolio                       August 26, 1994
          Technology Portfolio                         January 10, 1996


     C.   YIELD QUOTATIONS FOR THE SHORT-TERM MULTI-MARKET, U.S. GOVERNMENT/HIGH
          GRADE SECURITIES AND GLOBAL BOND SUB-ACCOUNTS

     The yield quotations for the Short-Term Multi-Market, U.S. Government/High
Grade Securities and Global Bond Sub-accounts that will be set forth in the
Prospectus will be based on the thirty-day period ended on the date of the most
recent balance sheet of the Variable Account included in the registration
statement, and are computed by dividing the net investment income per
Accumulation Unit earned during the period by the maximum offering price per
unit on the last day of the period, according to the following formula:

                      Yield = 2[(A - B + 1)6 - 1]
                                     cd


                                        B - 5

<PAGE>


          Where:         a =  net investment income earned during the period by
                              the corresponding Series of the Fund attributable
                              to shares owned by the Sub-account.

                         b =  expenses accrued for the period (net of
                              reimbursements).

                         c =  the average daily number of Accumulation Units
                              outstanding during the period.

                         d =  the maximum offering price per Accumulation Unit
                              on the last day of the period.

          For the purposes of the yield quotations for the Short-Term Multi-
Market, U.S. Government/High Grade Securities and Global Bond Sub-accounts, the
calculations take into effect all fees that are charged to all Owner accounts.
For any fees that vary with the size of the account, the account size is assumed
to be the respective Sub-account's mean account size.  The calculations do not
take into account the Deferred Sales Charge or any transfer charges.

          A Deferred Sales Charge may be assessed at the time of withdrawal in
an amount ranging up to 6% of the requested withdrawal amount, with the specific
percentage applicable to a particular withdrawal depending on the length of time
the purchase payment was held under the Contract, and whether withdrawals had
been previously made during that Contract Year.  (See "Charges and Deductions -
Deduction for Deferred Sales Charge" on page 17 of the Prospectus)  There is
currently a transfer charge of $10 per transfer after a specified number of
transfers in each Contract Year.  (See "Alliance Variable Products Series Fund,
Inc., - Transfer of Contract Values" on page 15 of the Prospectus.)

     D.   Non - Standardized Performance Data

          1.   TOTAL RETURN QUOTATIONS

     The total return quotations for all of the Sub-accounts to be set forth in
the Prospectus will be average annual total return quotations for the one, five,
and ten year periods (or, where a Sub-account has been in existence for a period
of less than one, five or ten years, for such lesser period) ended on the date
of the most recent balance sheet of the Variable Account and for the period from
the date monies were first placed into the Sub-accounts until the aforesaid
date.  The quotations are computed by finding the average annual compounded
rates of return over the relevant periods that would equate the initial amount
invested to the ending redeemable value, according to the following formula:

                                 P(1+T)n = ERV

               Where:    P = a hypothetical initial payment of $1,000

                         T = average annual total return

                         n = number of years

                         ERV = ending redeemable value of a hypothetical $1,000
                         payment made at the beginning of the particular period
                         at the end of the particular period.

          For the purposes of the total return quotations, the calculations take
into effect all fees that are charged to all Owner accounts.  For any fees that
vary with the size of the account, the account size is


                                        B - 6

<PAGE>

assumed to be the respective Sub-account's mean account size.  The calculations
do not, however, assume a total withdrawal as of the end of the particular
period and therefore, no Surrender Charge is reflected.

     Annualized total return quotations for certain Sub-accounts as of December
29, 1995, were as follows:

                                  ONE YEAR   THREE YEARS    INCEPTION TO DATE
          Money Market              3.55%      N/A                2.11%
          Premier Growth           43.31%    13.66%              13.78%
          Growth & Income          33.90%    13.16%              13.69%
          International             8.34%      N/A                6.83%
          Short Term Multi Market   5.27%     0.66%              -0.04%
          Global Bond              23.02%     8.27%               6.97%
          US Gov't/High Grade      17.60%      N/A                4.42%
          Global Dollar Gov't      21.29%      N/A               10.38%
          North American Gov't     20.79%      N/A                2.93%
          Utility Income           19.78%      N/A                7.10%
          Conservative Investor    15.51%      N/A               11/46%
          Growth Investors         18.82%      N/A               11.82%
          Growth                   33.37%      N/A               27.65%
          Total Return             21.96%      N/A               12.94%
          Worldwide Privatization   9.34%      N/A                7.10%
          Technology                  N/A      N/A                  N/A


          2.   TAX DEFERRED ACCUMULATION

     In reports or other communications to You or in advertising or sales
materials, the Company may also describe the effects of tax-deferred compounding
on the separate account's investment returns or upon returns in general.  These
effects may be illustrated in charts or graphs and may include comparisons at
various points in time of returns under the Contract or in general on a tax-
deferred basis with the returns on a taxable basdis.  Different tax rates may be
assumed.

     In general, individuals who own annuity contracts are not taxed on inreases
in the value under the annuity contract until some form of distribution is made
from the contract.  Thus, the annuity contract will benefit from tax deferral
during the accumulation period, which generally will have the effect of
permitting an investment in an annuity contract to grow more rapidly than a
comparable investment under which increases in value are taxed on a current
basis.  The chart shows accumulations on an initial investment or Purchase
Payment of $25,000, assuming hypothetical gross annual return of 0%, 4% and 8%,
compounded annually, and a tax rate of 31%.  The values shown for the taxable
investment do not include any deduction for management fees or other expenses
but assume that taxes are deducted annually from investment returns.  The values
shown for the variable annuity reflect the deduction of contractual expenses
such as the mortality and expense risk charge, the Administrative Fee and the
Annual Fee, but not the expenses of an underlying investment vehicle, such as
the Fund.  In addition, these values assume that the Owner does not surrender
the Contract or make any withdrawals until the end of the period shown.  The
chart assumes a full withdrawal, at the end of the period shown, of all contract
value and the payment of taxes at the 31% rate on the amount in excess of the
Purchase Payment.

     The rates of return illustrated are hypothetical and are not an estimate or
guaranty of performance.  Actual tax rates may vary for different taxpayers from
that illustrated and withdrawals by Owners who have not reached age 59 1/2 may
be subject to a tax penalty of 10%.





                                    [INSERT CHART]


                                         B-7


<PAGE>

DELAY OF PAYMENTS

     Any payments due under the Contracts will generally be sent to the Owner
within seven (7) days of a completed request for payment.  However, the Company
has reserved the right to postpone any type of payment from the Variable Account
for any period when:

               (a)  the New York Stock Exchange is closed for other than
                    customary weekends and holidays;

               (b)  trading on the Exchange is restricted;

               (c)  an emergency exists as a result of which it is not
                    reasonably practicable to dispose of securities held in the
                    Variable Account or determine their value; or

               (d)  an order of the Securities and Exchange Commission permits
                    delay for the protection of security holders.

     The applicable rules of the Securities and Exchange Commission shall govern
as to whether the conditions in (b) and (c) exists.

                        METHOD OF DETERMINING CONTRACT VALUES

          The Contract Value will fluctuate in accordance with the investment
results of the underlying Portfolio of the Fund held within the Sub-account.  In
order to determine how these fluctuations affect Contract Values, Accumulation
Units are utilized.  The value of an Accumulation Unit applicable during any
Valuation Period is determined at the end of that period.

          When the first shares of the respective Portfolios of the Fund were
purchased for the Sub-accounts, the Accumulation Units for the Sub-accounts were
valued at $10.  The value of an Accumulation Unit for a Sub-account on any
Valuation Date thereafter is determined by dividing (a) by (b), where:

     (a)  is equal to:

           (i)  the total value of the net assets attributable to Accumulation
          Units in the Sub-account, minus

          (ii)  the daily charge for assuming the risk of guaranteeing mortality
          factors and expense charges which is equal on an annual basis to 1.25%
          multiplied by the daily net asset value of the Sub-account; minus

          (iii)  the daily charge for providing certain administrative functions
          which is equal on an annual basis to 0.15% multiplied by the daily net
          asset value of the Sub-account; minus or plus

          (iv) a charge or credit for any tax provision established for the
          Sub-account.  The Company is not currently making any provision for
          taxes.

     (b)  is the total number of Accumulation Units applicable to that
          Sub-account at the end of the Valuation Period.

                                        B - 8

<PAGE>


          The resulting value of each Sub-account Accumulation Unit is
multiplied by the respective number of Sub-account Accumulation Units for a
Contract.  The Contract Value is the sum of all Sub-account values for the
Contract.

     An Accumulation Unit may increase or decrease in value from Valuation Date
to Valuation Date.

                                  ANNUITY PROVISIONS

ANNUITY BENEFITS

          A description of the Annuity Benefits and Annuity Options is provided
in the prospectus

VARIABLE ANNUITY PAYMENT VALUES

          A Variable Annuity is an annuity with payments which (1) are not
predetermined as to dollar amount and (2) will vary in amount with the net
investment results of the applicable Sub-account(s) of the Variable Account.  At
the Annuity Date the Contract Value in each Sub-account will be applied to the
applicable Annuity Tables contained in the Contract.  The Annuity Table used
will depend upon the payment option chosen.  The same Contract Value amount
applied to each payment option may produce a different initial annuity payment.
If, as of the Annuity Date, the then current annuity rates applicable to  this
class of contracts will provide a larger income than that guaranteed for the
same form of annuity under the Contracts described herein, the larger amount
will be paid.

               The first annuity payment for each Subaccount is determined by
multiplying the amount of the Contract Value allocated to that Sub-account by
the factor shown in the table for the option selected, divided by 1000.

          The dollar amount of Subaccount annuity payments after the first is
determined as follows:

          (a)   The dollar amount of the first annuity payment is divided by the
               value for the Sub-account Annuity Unit as of the Annuity Date.
               This establishes the number of Annuity Units for each monthly
               payment.  The number of Annuity Units remains fixed during the
               Annuity payment period, subject to any transfers.

          (b)   The fixed number of Annuity Units is multiplied by the Annuity
               Unit value for the Valuation Period 14 days prior to the date of
               payment.

          The total dollar amount of each Variable Annuity payment is the sum of
all Sub-account variable annuity payments less the pro-rata amount of the annual
Administrative Charge.

ANNUITY UNIT

          The value of an Annuity Unit for each Sub-account was arbitrarily set
initially at $10.  This was done when the first Fund shares were purchased.  The
Sub-account Annuity Unit value at the end of any subsequent Valuation Period is
determined by multiplying the Sub-account Annuity Unit value for the immediately
preceding Valuation Period by the quotient of (a) and (b) where:


                                        B - 9

<PAGE>

          (a)  is the net investment factor for the Valuation Period for which
               the Sub-account Annuity Unit value is being determined; and

          (b)  is the assumed investment factor for such Valuation Period.  The
               assumed investment factor adjusts for the interest assumed in
               determining the first variable annuity payment.  Such factor for
               any Valuation Period shall be the accumulated value, at the end
               of such period, of $1.00 deposited at the beginning of such
               period at the assumed investment rate of 5%.

NET INVESTMENT FACTOR

          The net investment factor is used to determine how investment results
of the Fund affect Variable Account Values within the Sub-accounts from one
Valuation Period to the next.  The net investment factor for each Sub-account
for any Valuation Period is determined by dividing (a) by (b) and subtracting
(c) from the result, where:

          (a)  is equal to:

                (i)      the net asset value per share of the Fund held in the
                         Sub-account determined at the end of that Valuation
                         Period; plus

               (ii)      the per share amount of any dividend or capital gain
                         distribution made by the Fund held in the Sub-account
                         if the "ex-dividend" date occurs during that same
                         Valuation Period; plus or minus

               (iii)     a per share charge or credit, which is determined by
                         the Company, for changes in tax reserves resulting from
                         investment operations of the Sub-account.

          (b)  is equal to:

                (i)      the net asset value per share of the Fund held in the
                         Sub-account determined as of the end of the prior
                         Valuation Period; plus or minus

               (ii)      the per share charge or credit for any change in tax
                         reserves for the prior Valuation Period.

          (c)  is equal to:

                 (i)     the percentage factor representing the Mortality and
                         Expense Risk Charge, plus

                (ii)     the percentage factor representing the daily
                         Administrative Charge.

The net investment factor may be greater or less than the assumed investment
factor; therefore, the Annuity Unit value may increase or decrease from
Valuation Period to Valuation Period.

ADDITIONAL PROVISIONS

          The Company may require proof of the age of the Annuitant before
making any life annuity payment provided for by the Contract.  If the age of the
Annuitant has been misstated the Company will compute the amount payable based
on the correct age.  If annuity payments have begun, any

                                        B - 10

<PAGE>


underpayments that may have been made will be paid in full with the next annuity
payment.  Any overpayments, unless repaid to the Company in one sum, will be
deducted from future annuity payments until the Company is repaid in full.

          If a Contract provision requires that a person be alive, the Company
may require due proof that the person is alive before the Company acts under
that provision.

          The Company will give the payee under an annuity payment option a
settlement contract for the payment option.


                                 FINANCIAL STATEMENTS

          The financial statements of the Company included herein shall be
considered only as bearing upon the ability of the Company to meet its
obligations under the Contracts.
    


                                        B - 11


<PAGE>
                     AMERICAN INTERNATIONAL LIFE ASSURANCE
                              COMPANY OF NEW YORK
                         (A WHOLLY-OWNED SUBSIDIARY OF
                      AMERICAN INTERNATIONAL GROUP, INC.)
 
                    REPORT ON AUDITS OF FINANCIAL STATEMENTS
 
              FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
 
                                      F-1
<PAGE>
                 (This page has been left blank intentionally.)
 
                                      F-2
<PAGE>
                       REPORT OF INDEPENDENT ACCOUNTANTS
 
To the Stockholders and Board of Directors
American International Life Assurance Company of New York:
 
    We  have audited the  accompanying balance sheets  of American International
Life Assurance  Company  of New  York  (a wholly-owned  subsidiary  of  American
International  Group, Inc.) as  of December 31,  1995 and 1994,  and the related
statements of income, stockholders' equity and cash flows for each of the  three
years  in the period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express  an
opinion on these financial statements based on our audits.
 
    We  conducted  our audits  in  accordance with  generally  accepted auditing
standards. Those standards require that we plan and perform the audit to  obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also  includes
assessing  the  accounting principles  used  and significant  estimates  made by
management, as well as evaluating the overall financial statement  presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
    In  our opinion, the financial statements  referred to above present fairly,
in all material respects, the financial position of American International  Life
Assurance  Company of New York as of December 31, 1995 and 1994, and the results
of its operations and its cash flows for  each of the three years in the  period
ended  December  31,  1995,  in conformity  with  generally  accepted accounting
principles.
 
    As discussed in Note 1 (h) to the financial statements, the Company  changed
in  1993, its  method of  accounting for  investments in  certain fixed maturity
securities.
 
                                          COOPERS & LYBRAND L.L.P.
 
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 22, 1996
 
                                      F-3
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                                 BALANCE SHEETS
                                 (IN THOUSANDS)
 
                                     ASSETS
 
<TABLE>
<CAPTION>
                                                                                           DECEMBER 31,
                                                                                   ----------------------------
                                                                                       1995           1994
                                                                                   -------------  -------------
<S>                                                                                <C>            <C>
Investments and cash:
  Fixed maturities:
    Bonds available for sale, at market value (cost: 1995-$4,139,170: 1994 --
     $3,807,500).................................................................  $   4,434,329  $   3,700,640
  Equity securities:
    Common stock (cost: 1995-$8,540: 1994 -- $8,382..............................         17,703         17,201
    Non-redeemable preferred stocks (cost: 1995 -- $4,564; 1994 -- $5,027).......          4,570          4,701
Mortgage loans on real estate, net...............................................        448,700        399,695
Real estate, net of accumulated depreciation of $6,009 in 1995; and $4,861 in
 1994............................................................................         33,029         34,155
Policy loans.....................................................................         10,991         10,317
Other invested assets............................................................         69,360         63,941
Short-term investments...........................................................        103,040        130,415
Cash.............................................................................          2,460          5,363
                                                                                   -------------  -------------
      Total investments and cash.................................................      5,124,182      4,366,428
Amounts due from related parties.................................................          1,186          2,304
Investment income due and accrued................................................         74,355         67,623
Premium and insurance balances receivable -- net.................................         13,289         14,536
Reinsurance assets...............................................................         22,552         26,313
Deferred policy acquisition cost.................................................         31,225         29,626
Deferred incomes taxes...........................................................       --               44,926
Separate and variable accounts...................................................         68,151         27,630
Other assets.....................................................................         16,814          1,800
                                                                                   -------------  -------------
      Total assets...............................................................  $   5,351,754  $   4,581,186
                                                                                   -------------  -------------
                                                                                   -------------  -------------
</TABLE>
 
                See accompanying notes to financial statements.
 
                                      F-4
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
                           BALANCE SHEETS (CONTINUED)
                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
 
                                  LIABILITIES
 
<TABLE>
<CAPTION>
                                                                                           DECEMBER 31,
                                                                                   ----------------------------
                                                                                       1995           1994
                                                                                   -------------  -------------
<S>                                                                                <C>            <C>
Policyholders' funds on deposit..................................................  $   3,060,581  $   2,742,412
Future policy benefits...........................................................      1,561,760      1,446,327
Reserve for unearned premiums....................................................         10,808         13,099
Policy and contract claims.......................................................         37,201         37,092
Reserve for commissions, expenses and taxes......................................          4,433          3,077
Insurance balances payable.......................................................          7,771          9,128
Federal income tax payable.......................................................          3,477          1,353
Deferred income taxes............................................................         62,252       --
Amounts due to related parties...................................................          5,260          7,654
Separate and variable accounts...................................................         68,151         27,468
Other liabilities................................................................         23,553         26,640
                                                                                   -------------  -------------
    Total Liabilities............................................................      4,845,247      4,314,250
                                                                                   -------------  -------------
 
Commitments and contingencies (See Note 6)
 
STOCKHOLDERS' EQUITY
Common stock, $200 par value; 16,125 shares authorized, issued and outstanding...          3,225          3,225
Additional paid-in capital.......................................................        197,025        197,025
Unrealized appreciation (depreciation) of investments, net of future policy
 benefits and taxes of $82,352 in 1995 and $(32,471) in 1994;....................        152,941        (60,305)
Retained Earnings................................................................        153,316        126,991
                                                                                   -------------  -------------
      Total stockholders' equity.................................................        506,507        266,936
                                                                                   -------------  -------------
Total liabilities and stockholders' equity.......................................  $   5,351,754  $   4,581,186
                                                                                   -------------  -------------
                                                                                   -------------  -------------
</TABLE>
 
                See accompanying notes to financial statements.
 
                                      F-5
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                              STATEMENTS OF INCOME
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                                   YEARS ENDED DECEMBER 31,
                                                                             -------------------------------------
                                                                                1995         1994         1993
                                                                             -----------  -----------  -----------
<S>                                                                          <C>          <C>          <C>
Revenues:
  Premiums.................................................................  $    84,357  $    71,826  $    76,045
  Net investment income....................................................      386,666      335,823      308,089
  Realized capital gains...................................................        1,436        1,932       18,767
                                                                             -----------  -----------  -----------
    Total revenues.........................................................      472,459      409,581      402,901
                                                                             -----------  -----------  -----------
Benefits and expenses:
  Benefits to policyholders................................................      167,319      163,585      156,707
  Increase in future policy benefits and policyholders' funds on deposit...      209,512      165,291      155,434
  Acquisition and insurance expenses.......................................       54,808       62,759       57,758
                                                                             -----------  -----------  -----------
    Total benefits and expenses............................................      431,639      391,635      369,899
                                                                             -----------  -----------  -----------
Income before income taxes.................................................       40,820       17,946       33,002
                                                                             -----------  -----------  -----------
Income taxes (benefits):
  Current..................................................................       22,142       18,986       19,330
  Deferred.................................................................       (7,647)     (12,152)      (9,007)
                                                                             -----------  -----------  -----------
    Total income taxes.....................................................       14,495        6,834       10,323
                                                                             -----------  -----------  -----------
Net income.................................................................  $    26,325  $    11,112  $    22,679
                                                                             -----------  -----------  -----------
                                                                             -----------  -----------  -----------
</TABLE>
 
                See accompanying notes to financial statements.
 
                                      F-6
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                       STATEMENTS OF STOCKHOLDERS' EQUITY
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                                  YEARS ENDED DECEMBER 31,
                                                                           ---------------------------------------
                                                                               1995          1994         1993
                                                                           ------------  ------------  -----------
<S>                                                                        <C>           <C>           <C>
COMMON STOCK
Balance at beginning of year.............................................  $      3,225  $      3,225  $     3,225
                                                                           ------------  ------------  -----------
Balance at end of year...................................................         3,225         3,225        3,225
                                                                           ------------  ------------  -----------
ADDITIONAL PAID-IN CAPITAL
Balance at beginning of year:............................................       197,025       197,025      119,025
Capital contribution.....................................................       --            --            78,000
                                                                           ------------  ------------  -----------
Balance at end of year...................................................       197,025       197,025      197,025
                                                                           ------------  ------------  -----------
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENTS, NET
Balance at beginning of year.............................................       (60,305)       58,102        1,887
Change during year.......................................................       404,070      (182,164)       6,497
Changes due to deferred income tax benefit (expense) and future policy
 benefits................................................................      (190,824)       63,757       (2,302)
Cumulative effect of accounting change, net of taxes of $28,011..........       --            --            52,020
                                                                           ------------  ------------  -----------
Balance at end of year...................................................       152,941       (60,305)      58,102
                                                                           ------------  ------------  -----------
RETAINED EARNINGS
Balance at beginning of year.............................................       126,991       115,879       93,200
Net income...............................................................        26,325        11,112       22,679
                                                                           ------------  ------------  -----------
Balance at end of year...................................................       153,316       126,991      115,879
                                                                           ------------  ------------  -----------
    Total stockholders' equity...........................................  $    506,507  $    266,936  $   374,231
                                                                           ------------  ------------  -----------
                                                                           ------------  ------------  -----------
</TABLE>
 
                See accompanying notes to financial statements.
 
                                      F-7
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                            STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                                 YEARS ENDED DECEMBER 31,
                                                                         -----------------------------------------
                                                                            1995          1994           1993
                                                                         -----------  ------------  --------------
<S>                                                                      <C>          <C>           <C>
Cash flows from operating activities:
    Net income.........................................................  $    26,325  $     11,112  $       22,679
                                                                         -----------  ------------  --------------
Adjustments to reconcile net income to net cash provided by operating
 activities:
  Non-cash revenues, expenses, gains and losses included in income:
    Change in insurance reserves.......................................       37,251        45,554          44,151
    Change in premiums and insurance balances receivable and payable --
     net...............................................................         (110)         (138)          2,251
    Change in reinsurance assets.......................................        3,761         5,570           5,240
    Change in deferred policy acquisition costs........................       (1,599)         (213)          1,632
    Change in investment income due and accrued........................       (6,732)       (8,153)         (7,937)
    Realized capital gains.............................................       (1,436)       (1,932)        (18,767)
    Change in current and deferred income taxes -- net.................       (5,523)       (6,895)        (21,332)
    Change in reserves for commissions, expenses and taxes.............        1,356           149           1,054
    Change in other assets and liabilities -- net......................      (33,021)        7,526          (1,568)
                                                                         -----------  ------------  --------------
      Total adjustments................................................       (6,053)       41,468           4,724
                                                                         -----------  ------------  --------------
    Net cash provided by operating activities..........................       20,272        52,580          27,403
                                                                         -----------  ------------  --------------
Cash flows from investing activities:
  Cost of fixed maturities, at market sold.............................       65,623        63,695         309,595
  Cost of fixed maturities, at market matured or redeemed..............      247,551       255,229         341,223
  Cost of equity securities sold.......................................        1,310           958           6,738
  Realized capital gains...............................................        3,436         4,715          24,542
  Purchase of fixed maturities.........................................     (627,188)     (837,973)     (1,050,415)
  Purchase of equity securities........................................       (1,005)         (137)         (4,449)
  Mortgage loans granted...............................................     (111,402)      (77,824)        (61,932)
  Repayments of mortgage loans.........................................       60,476         9,621          20,397
  Change in policy loans...............................................         (674)          601             870
  Change in short-term investments.....................................       27,375        (7,485)        (59,065)
  Change in other invested assets......................................       (4,083)       (6,479)         (7,164)
  Other -- net.........................................................       (2,763)       (1,086)        (17,821)
                                                                         -----------  ------------  --------------
    Net cash used in investing activities..............................     (341,344)     (596,165)       (497,481)
                                                                         -----------  ------------  --------------
Cash flows from financing activities:
  Change in policyholders' funds on deposit............................      318,169       542,729         395,889
  Proceeds from capital contribution...................................      --            --               78,000
                                                                         -----------  ------------  --------------
    Net cash provided by financing activities..........................      318,169       542,729         473,889
                                                                         -----------  ------------  --------------
Change in cash.........................................................       (2,903)         (856)          3,811
Cash at beginning of year..............................................        5,363         6,219           2,408
                                                                         -----------  ------------  --------------
Cash at end of year....................................................  $     2,460  $      5,363  $        6,219
                                                                         -----------  ------------  --------------
                                                                         -----------  ------------  --------------
</TABLE>
 
           See accompanying notes to statutory financial statements.
 
                                      F-8
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                         NOTES TO FINANCIAL STATEMENTS
 
1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
    (a)   BASIS OF PRESENTATION:   American International Life Assurance Company
of New York (the Company) is a wholly-owned subsidiary of American International
Group, Inc. (the  Parent). The  financial statements  of the  Company have  been
prepared  on the basis  of generally accepted  accounting principles (GAAP). The
preparation of financial statements in conformity with GAAP requires  management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities  and disclosure of contingent assets  and liabilities at the date of
the financial  statements and  the  reported amounts  of revenues  and  expenses
during  the reporting periods. Actual results could differ from those estimates.
The Company is  licensed to sell  life and  accident & health  insurance in  the
District of Columbia and all states except Arizona, Conneticut and Maryland. The
Company is also licensed in America Samoa, Virgin Islands and Guam.
 
    The  Company  also files  financial statements  prepared in  accordance with
statutory practices prescribed or permitted  by the Insurance Department of  the
State  of New York.  Financial statements prepared  in accordance with generally
accepted accounting principles  differ in  certain respects  from the  practices
prescribed  or permitted by regulatory  authorities. The significant differences
are:  (1)  statutory  financial  statements  do  not  reflect  fixed  maturities
available  for  sale  at market  value;  (2) policy  acquisition  costs, charged
against operations as incurred for  regulatory purposes, have been deferred  and
are  being amortized over the anticipated  life of the contracts; (3) individual
life and  annuity policy  reserves  based on  statutory requirements  have  been
adjusted  based  upon mortality,  lapse and  interest assumptions  applicable to
these coverages, including provisions  for reasonable adverse deviations;  these
assumptions  reflect  the  Company's  experience  and  industry  standards;  (4)
deferred income taxes not recognized for regulatory purposes have been  provided
for  temporary  differences  between the  bases  of assets  and  liabilities for
financial reporting  purposes and  tax purposes;  (5) for  regulatory  purposes,
future  policy benefits,  policyholders' funds  on deposit,  policy and contract
claims and reserve for unearned premiums are presented net of ceded reinsurance;
and (6)  an  asset valuation  reserve  and interest  maintenance  reserve  using
National  Association of Insurance Commissioners (NAIC)  formulas are set up for
regulatory purposes.
 
    (b)  INVESTMENTS:   Fixed maturities available for  sale, where the  company
may  not have  the ability  or positive  intent to  hold these  securities until
maturity, are carried at  market value. Included  in fixed maturities  available
for sale are collateralized mortgage obligations (CMO's). Premiums and discounts
arising  from the purchase  of CMO'S are  treated as yield  adjustments over the
estimated life.  Common  stocks and  preferred  stocks available  for  sale  are
carried  at  market value.  Short-term investments  are  carried at  cost, which
approximates market.
 
    Unrealized gains and losses from  investment in equity securities and  fixed
maturities  available for  sale are  reflected in  stockholders' equity,  net of
amounts recorded  as future  policy  benefits and  any related  deferred  income
taxes.
 
    Realized  capital gains  and losses  are determined  principally by specific
identification. Where declines in values  of securities below cost or  amortized
cost  are considered to be other than temporary, a charge is reflected in income
for the difference between cost or  amortized cost and estimated net  realizable
value.
 
    Mortgage  loans on real estate are  carried at unpaid principal balance less
unamortized loan origination fees and costs less an allowance for  uncollectible
loans.
 
    Real  estate  is  carried  at  depreciated  cost  and  is  depreciated  on a
straight-line basis over  31.5 years. Expenditures  for maintenance and  repairs
are  charged to income as incurred; expenditures for betterments are capitalized
and depreciated over their estimated lives.
 
                                      F-9
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    Policy loans are carried at the aggregate unpaid principal balance.
 
    Other invested  assets consist  primarily of  limited partnership  interests
which  are  carried  at  market  value. Unrealized  gains  and  losses  from the
revaluation of these investments are  reflected in stockholders' equity, net  of
any  related  taxes. Also  included in  this  category is  an interest  rate cap
agreement, which is carried at its amortized cost. The cost of the cap is  being
amortized  against investment income on  a straight line basis  over the life of
the cap.
 
    (c)  INCOME TAXES:  The Company  joins in a consolidated federal income  tax
return with the Parent and its domestic subsidiaries. The Company and the Parent
have  a written tax allocation agreement whereby the Parent agrees not to charge
the Company a greater portion of the consolidated tax liability than would  have
been  paid by the Company  if it had filed  a separate return. Additionally, the
Parent agrees to reimburse the Company for  any tax benefits arising out of  its
net  losses within ninety days after the  filing of that consolidated tax return
for the year in which these  losses are utilized. Deferred federal income  taxes
are  provided  for  temporary differences  related  to the  expected  future tax
consequences of  events that  have been  recognized in  the Company's  financial
statements or tax returns.
 
    (d)   PREMIUM  RECOGNITION AND RELATED  BENEFITS AND EXPENSES:   Premiums on
traditional life insurance and life contingent annuity contracts are  recognized
when  due. Revenues for  universal life and  investment-type products consist of
policy charges for the cost of insurance, administration, and surrenders  during
the  period. Premiums  on accident and  health insurance are  reported as earned
over the contract term. The portion of accident and health premiums which is not
earned at  the end  of a  reporting  period is  recorded as  unearned  premiums.
Estimates of premiums due but not yet collected are accrued. Policy benefits and
expenses   are  associated  with  earned  premiums  on  long-duration  contracts
resulting in a  level recognition of  profits over the  anticipated life of  the
contracts.
 
    Policy  acquisition  costs  for  traditional  life  insurance  products  are
generally deferred and amortized over the  premium paying period of the  policy.
Deferred  policy  acquisition  costs  and  policy  initiation  costs  related to
universal life  and  investment-type  products  are  amortized  in  relation  to
expected gross profits over the life of the policies (see Note 3).
 
    The  liability  for  future  policy  benefits  and  policyholders'  contract
deposits is established using assumptions described in Note 4.
 
    (e)  POLICY AND CONTRACT CLAIMS:  Policy and contract claims include amounts
representing: (1) the actual  in-force amounts for reported  life claims and  an
estimate  of incurred  but unreported  claims; and  (2) an  estimate, based upon
prior experience, for accident and  health reported and incurred but  unreported
losses.  The methods  of making  such estimates  and establishing  the resulting
reserves are  continually reviewed  and updated  and any  adjustments  resulting
therefrom are reflected in income currently.
 
    (f)   SEPARATE  AND VARIABLE ACCOUNTS:   These accounts  represent funds for
which investment income and investment gains  and losses accrue directly to  the
policyholders.  Each account has specific  investment objectives, and the assets
are carried at  market value. These  assets are legally  segregated and are  not
subject to claims which arise out of any other business of the Company.
 
    (g)   REINSURANCE ASSETS:  Reinsurance  assets include the balances due from
both reinsurance  and  insurance companies  under  the terms  of  the  Company's
reinsurance arrangements for ceded unearned premiums, future policy benefits for
life  and  accident  and  health insurance  contracts,  policyholders'  funds on
deposit and  policy and  contract  claims. It  also  includes funds  held  under
reinsurance treaties.
 
                                      F-10
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    (h)    ACCOUNTING  STANDARDS:    In  March  1995,  the  Financial Accounting
Standards Board (FASB)  issued Statement of  Financial Accounting Standards  No.
121  "Accounting  for the  Impairment of  Long-lived  Assets and  for Long-lived
Assets to Be Disposed  Of" (FASB 121). This  statement requires that  long-lived
assets  and certain identifiable intangibles be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable and an impairment loss must be recognized.
 
    FASB 121  is effective  for  the Company  commencing  January 1,  1996.  The
Company  believes  that the  adoption of  this  statement in  1996 will  have an
immaterial  impact  on  the  results  of  operations,  financial  condition  and
liquidity.
 
    In December 1995, FASB issued "Special Report, a Guide to the Implementation
of  Statement No. 115 on  Accounting for Certain Investments  in Debt and Equity
Securities". Among other things, this guide provided for a transition  provision
permitting  a one-time  transfer of  debt securities  from the  held to maturity
classification to the  available for  sale classification. The  Company did  not
transfer  any securities from  the held to  maturity classification to available
for sale classification.
 
    In 1994,  the American  Institute of  Certified Public  Accountants  (AICPA)
issued  a Statement  of Position (SOP)  94-6 "Disclosure  of Certain Significant
Risks and Uncertainties" (SOP 94-6). Pursuant to SOP 94-6, the Company has  made
certain  disclosures as to the nature of the Company's operations and the use of
estimates in the  preparation of  its 1995 financial  statements. Certain  other
disclosures  were  not  necessary  as  the Company  did  not  meet  the required
criteria.
 
    In November of 1992, FASB issued Statement of Financial Accounting Standards
No. 112 "Employers' Accounting for Postemployment Benefits" (FASB 112). FASB 112
established accounting standards for employers who provide benefits to former or
inactive employees after employment but before retirement. FASB 112 was  adopted
effective  January  1, 1994,  and  had no  significant  effect on  the Company's
results of operations, financial condition or liquidity.
 
    In October 1994, FASB issued Statement of Financial Accounting Standards No.
118 "Accounting by  Creditors for  Impairment of a  Loan-Income Recognition  and
Disclosures"  (FASB 118). FASB  118 amends FASB  114 to allow  a creditor to use
existing methods to recognize interest income on an impaired loan. FASB 118 also
amends certain disclosure requirements of FASB 114. The Company adopted FASB 114
and FASB 118 effective December 31,  1994. The adoption of these statements  did
not  cause  any  significant  impact on  the  Company's  results  of operations,
financial condition or liquidity.
 
    In October 1994, FASB issued  Statement of Financial Accounting Standard  No
119  "Disclosure  about  Derivative  Financial  Instruments  and  Fair  Value of
Financial Instruments" (FASB 119). FASB 119 requires disclosure about derivative
financial instruments  and  amends FASB  105  "Disclosure of  Information  about
Financial Instruments with Off-Balance Sheet Risk and Financial Instruments with
Concentrations  of Credit Risk" (FASB 105) and Statement of Financial Accounting
Standards No. 107 "Disclosure about Fair Value of Financial Instruments".
 
    FASB 119  requires  disclosure  about  the  amounts,  nature  and  terms  of
derivatives that are not subject to FASB 105. Also, FASB 119 requires disclosure
about  financial instruments  held or issued  for trading  purposes and purposes
other than trading. This statement was adopted by the Company effective December
31, 1994.
 
    In May  1993, the  FASB issued  Statement of  Accounting Standards  No.  115
"Accounting  for Certain Investments  on Debt and  Equity Securities" (FASB 115)
and the Company adopted this standard at December 31, 1993. The pretax  increase
in carrying value of fixed maturities available for
 
                                      F-11
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
sale  as a result of marking to  market was $242,000,000. A portion was recorded
as a component of future policy  benefits. Thus, the unrealized appreciation  of
investments increased $52,020,000, net of taxes of $28,011,000.
 
    (i)  Certain amounts  in the  1994 balance  sheet have  been reclassified to
conform to the 1995 presentation.
 
2.  INVESTMENT INFORMATION
 
    (a)  STATUTORY DEPOSITS:  Securities with a carrying value of $9,381,000 and
$8,289,000 were  deposited  by  the Company  under  requirements  of  regulatory
authorities as of December 31, 1995 and 1994, respectively.
 
    (b)   NET  INVESTMENT INCOME:   An analysis  of net investment  income is as
follows (in thousands):
 
<TABLE>
<CAPTION>
                                                               YEARS ENDED DECEMBER 31,
                                                         -------------------------------------
                                                            1995         1994         1993
                                                         -----------  -----------  -----------
<S>                                                      <C>          <C>          <C>
Fixed maturities.......................................  $   334,828  $   289,374  $   271,962
Equity securities......................................        1,006        1,156        1,190
Mortgage loans.........................................       40,383       33,251       29,163
Real estate............................................        3,446        3,771        3,305
Policy loans...........................................          733          764          846
Cash and short-term investments........................        4,124        6,839        3,593
Other invested assets..................................        6,381        4,465        1,661
                                                         -----------  -----------  -----------
    Total investment income............................      390,901      339,620      311,720
Investment expenses....................................        4,235        3,797        3,631
                                                         -----------  -----------  -----------
    Net investment income..............................  $   386,666  $   335,823  $   308,089
                                                         -----------  -----------  -----------
                                                         -----------  -----------  -----------
</TABLE>
 
    (c)  INVESTMENT GAINS AND LOSSES:   The net realized capital gains  (losses)
and  change in unrealized  appreciation (depreciation) of  investments for 1995,
1994 and 1993 are summarized below (in thousands):
 
<TABLE>
<CAPTION>
                                                               YEARS ENDED DECEMBER 31,
                                                         ------------------------------------
                                                            1995          1994        1993
                                                         -----------  ------------  ---------
<S>                                                      <C>          <C>           <C>
Net realized gains (losses) on investments:
  Fixed maturities.....................................  $      (115) $        (75) $  20,106
  Equity securities....................................        3,515         2,046     (2,415)
  Mortgage loans.......................................       (2,000)       (2,783)    (5,775)
  Other invested assets................................           36         2,744      6,851
                                                         -----------  ------------  ---------
  Net realized gains...................................  $     1,436  $      1,932  $  18,767
                                                         -----------  ------------  ---------
                                                         -----------  ------------  ---------
Change in unrealized appreciation (depreciation) of
 investments:
  Fixed maturities.....................................  $   402,020  $   (186,892) $  --
  Equity securities....................................          677          (853)     6,499
  Other invested assets................................        1,373         5,581         (2)
  Cumulative effect of accounting change...............      --            --          80,031
                                                         -----------  ------------  ---------
  Change in unrealized appreciation (depreciation) of
   investments.........................................  $   404,070  $   (182,164) $  86,528
                                                         -----------  ------------  ---------
                                                         -----------  ------------  ---------
</TABLE>
 
                                      F-12
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
2.  INVESTMENT INFORMATION (CONTINUED)
    Proceeds from the sale of investments in fixed maturities during 1995,  1994
and 1993 were $80,003,000, $79,504,000 and $59,251,000, respectively.
 
    During  1995,  1994  and  1993,  gross  gains  of  $624,000,  $4,861,000 and
$30,195,000,  respectively,  and  gross  losses  of  $739,000,  $4,936,000   and
$10,089,000, respectively, were realized on dispositions of fixed maturities.
 
    During  1995,  1994  and 1993,  gross  gains of  $3,516,000,  $2,047,000 and
$516,000, respectively,  and  gross losses  of  $1,000, $1,000  and  $2,931,000,
respectively, were realized on dispositions of equity securities.
 
    (d)    MARKET  VALUE  OF FIXED  MATURITIES  AND  UNREALIZED  APPRECIATION OF
INVESTMENTS:   At  December  31,  1995  and  1994,  unrealized  appreciation  of
investments  in equity securities (before applicable taxes) included gross gains
of $9,650,000  and  $9,341,000  and  gross  losses  of  $480,000  and  $848,000,
respectively.
 
    The  amortized  cost and  estimated market  values  of investments  in fixed
maturities at December 31, 1995 and 1994 are as follows (in thousands):
<TABLE>
<CAPTION>
                                                                             GROSS        GROSS
                                                             AMORTIZED    UNREALIZED   UNREALIZED
1995                                                           COST          GAINS       LOSSES     MARKET VALUE
- ---------------------------------------------------------  -------------  -----------  -----------  -------------
<S>                                                        <C>            <C>          <C>          <C>
Fixed maturities:
  U.S. Government and government agencies and
   authorities...........................................  $      84,063  $    19,982  $        39  $     104,006
  States, municipalities and political subdivisions......        883,646       56,568           89        940,125
  Foreign governments....................................         33,927        5,291           75         39,143
  All other corporate....................................      3,137,534      224,452       10,931      3,351,055
                                                           -------------  -----------  -----------  -------------
    Total fixed maturities...............................  $   4,139,170  $   306,293  $    11,134  $   4,434,329
                                                           -------------  -----------  -----------  -------------
                                                           -------------  -----------  -----------  -------------
 
<CAPTION>
 
                                                                             GROSS        GROSS
                                                             AMORTIZED    UNREALIZED   UNREALIZED
1994                                                           COST          GAINS       LOSSES     MARKET VALUE
- ---------------------------------------------------------  -------------  -----------  -----------  -------------
<S>                                                        <C>            <C>          <C>          <C>
Fixed maturities:
  U.S. Government and government agencies and
   authorities...........................................  $      89,861  $     4,381  $     3,235  $      91,007
  States, municipalities and political subdivisions......        819,297        7,687       46,602        780,382
  Foreign governments....................................         34,230        1,481        2,310         33,401
  All other corporate....................................      2,886,112       36,160      104,422      2,795,850
                                                           -------------  -----------  -----------  -------------
    Total fixed maturities...............................  $   3,807,500  $    49,709  $   156,569  $   3,700,640
                                                           -------------  -----------  -----------  -------------
                                                           -------------  -----------  -----------  -------------
</TABLE>
 
                                      F-13
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
2.  INVESTMENT INFORMATION (CONTINUED)
    The amortized cost and estimated market value of fixed maturities  available
for  sale at  December 31,  1995, by contractual  maturity, are  shown below (in
thousands). Actual maturities could  differ from contractual maturities  because
certain  borrowers have the right to call  or prepay obligations with or without
call or prepayment penalties.
 
<TABLE>
<CAPTION>
                                                                 AMORTIZED      ESTIMATED
                                                                   COST       MARKET VALUE
                                                               -------------  -------------
<S>                                                            <C>            <C>
Due in one year or less......................................  $     310,922  $     326,318
Due after one year through five years........................      1,110,307      1,172,894
Due after five years through ten years.......................      1,632,691      1,759,253
Due after ten years..........................................      1,085,250      1,175,864
                                                               -------------  -------------
                                                               $   4,139,170  $   4,434,329
                                                               -------------  -------------
                                                               -------------  -------------
</TABLE>
 
    (e)   CMO'S:   CMOs are  U.S. Government  and Government  agency backed  and
triple  A-rated securities. In the preceding  table, CMO's are included in other
corporate fixed maturities. At December 31,  1995 and 1994, the market value  of
the  CMO  portfolio  was  $1,114,196,000  and  $967,179,000,  respectively;  the
estimated  amortized  cost   was  approximately  $1,049,450,000   in  1995   and
$989,346,000  in 1994. The Company's CMO  portfolio is readily marketable. There
were no derivative  (high risk)  CMO securities  contained in  the portfolio  at
December 31, 1995.
 
    (f)   FIXED  MATURITIES BELOW  INVESTMENT GRADE:   At December  31, 1995 and
1994, the fixed maturities held by the Company that were below investment  grade
had  an aggregate amortized cost of $204,254,000 and $205,986,000, respectively,
and an aggregate market value of $206,442,000 and $195,443,000, respectively.
 
    (g)    NON-INCOME  PRODUCING  ASSETS:    Non-income  producing  assets  were
insignificant.
 
    (h)   INVESTMENTS GREATER THAN 10% EQUITY:   The market value of investments
in the following companies and institutions exceeded 10% of the Company's  total
stockholders' equity at December 31, 1995 (in thousands):
 
<TABLE>
<S>                                                        <C>
Fixed Maturities:
  Standard Credit Card...................................  $ 113,683
  Morgan Stanley Mortgage Trust..........................  $  80,482
  General Motors Acceptance Corporation..................  $  71,742
  Transamerica Finance...................................  $  57,329
</TABLE>
 
3.  DEFERRED POLICY ACQUISITION COSTS
    The  following reflects the policy  acquisition costs deferred (commissions,
direct solicitation  and other  costs) which  will be  amortized against  future
income and the related current amortization charged to income, excluding certain
amounts deferred and amortized in the same period (in thousands):
 
<TABLE>
<CAPTION>
                                                                YEARS ENDED DECEMBER 31,
                                                             -------------------------------
                                                               1995       1994       1993
                                                             ---------  ---------  ---------
<S>                                                          <C>        <C>        <C>
Balance at beginning of year...............................  $  29,626  $  29,413  $  31,045
Acquisition costs deferred.................................      5,933      3,286      2,157
Amortization charged to income.............................     (4,334)    (3,073)    (3,789)
                                                             ---------  ---------  ---------
Balance at end of year.....................................  $  31,225  $  29,626  $  29,413
                                                             ---------  ---------  ---------
                                                             ---------  ---------  ---------
</TABLE>
 
                                      F-14
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
4.  FUTURE POLICY BENEFITS AND POLICYHOLDERS' FUNDS ON DEPOSIT
 
    (a)  The analysis of the future  policy benefits and policyholders' funds on
deposit liabilities as at December 31, 1995 and 1994 follows (in thousands):
 
<TABLE>
<CAPTION>
                                                                   1995           1994
                                                               -------------  -------------
<S>                                                            <C>            <C>
Future policy benefits:
  Long duration contracts....................................  $   1,549,758  $   1,436,875
                                                               -------------  -------------
  Short duration contracts...................................         12,002          9,452
                                                               -------------  -------------
                                                               $   1,561,760  $   1,446,327
                                                               -------------  -------------
                                                               -------------  -------------
Policyholder funds on deposit:
  Annuities..................................................  $   2,131,609  $   1,974,234
  Guaranteed investment contracts (GICs).....................        739,947        667,968
  Universal life.............................................         84,741         94,998
  Other investment contracts.................................        104,284          5,212
                                                               -------------  -------------
                                                               $   3,060,581  $   2,742,412
                                                               -------------  -------------
                                                               -------------  -------------
</TABLE>
 
    (b) Long duration contract liabilities  included in future policy  benefits,
as  presented in the  table above, result from  traditional life products. Short
duration contract liabilities  are primarily accident  and health products.  The
liability  for  future  policy  benefits has  been  established  based  upon the
following assumptions:
 
        (i) Interest  rates  for traditional  life  insurance products  are  9.5
    percent graded to 7.0 percent over 30 years. The liability for future policy
    benefits for universal life insurance has been established using FASB 97 and
    assumes  a  1.0  percent  investment margin.  Interest  rates  (exclusive of
    immediate/terminal funding annuities),  which vary by  year of issuance  and
    products,  range  from  3.0  percent  to  10.0  percent.  Interest  rates on
    immediate/terminal funding annuities are  at a maximum  of 12.2 percent  and
    grade to not greater than 7.5 percent.
 
        (ii)  Mortality and  withdrawal rates  are based  upon actual experience
    modified to allow for variations in policy form. The weighted average  lapse
    rate, including surrenders, for individual life approximated 14.8 percent.
 
    (c)  The liability for  policyholders' fund on  deposit has been established
based on the following assumptions:
 
        (i) Interest  rates  credited on  deferred  annuities vary  by  year  of
    issuance  and range from 4.0 percent  to 8.3 percent. Credited interest rate
    guarantees are  generally  for a  period  of one  year.  Withdrawal  charges
    generally  range from  6.0 percent  to 10.0 percent  grading to  zero over a
    period of 6 to 10 years.
 
        (ii)  GICs  have  market  value  withdrawal  provisions  for  any  funds
    withdrawn  other than  benefit responsive payments.  Interest rates credited
    generally range from 4.7 percent to 9.1 percent and maturities range from  2
    to 7 years.
 
       (iii)  The  universal  life funds  have  credited interest  rates  of 6.1
    percent to  7.0 percent  and  guarantees ranging  from  4.0 percent  to  5.5
    percent  depending on the year of  issue. Additionally, universal life funds
    are subject to  surrender charges  that amount to  7.5 percent  of the  fund
    balance and grade to zero over a period not longer than 20 years.
 
                                      F-15
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
5.  INCOME TAXES
 
    (a)  The Federal income  tax rate applicable  to ordinary income  is 35% for
1995, 1994 and 1993. Actual tax  expense on income from operations differs  from
the  "expected" amount computed by applying  the Federal income tax rate because
of the following (in thousands except percentages):
 
<TABLE>
<CAPTION>
                                                              YEARS ENDED DECEMBER 31,
                                     --------------------------------------------------------------------------
                                               1995                      1994                     1993
                                     ------------------------  ------------------------  ----------------------
                                                 PERCENT OF                PERCENT OF               PERCENT OF
                                                   PRE-TAX                   PRE-TAX                  PRE-TAX
                                                  OPERATING                 OPERATING                OPERATING
                                      AMOUNT       INCOME       AMOUNT       INCOME       AMOUNT      INCOME
                                     ---------  -------------  ---------  -------------  ---------  -----------
<S>                                  <C>        <C>            <C>        <C>            <C>        <C>
"Expected" income tax expense......  $  14,288        35.0%    $   6,281        35.0%    $  11,551      135.0%
Prior year federal income tax
 benefit...........................     --           --           --           --           (1,954)      (5.9)
State income tax...................        627         1.5           714         4.0           758        2.3
Other..............................       (420)       (1.0)         (161)       (0.9)          (32)      (0.1)
                                     ---------         ---     ---------         ---     ---------      -----
Actual income tax expense..........  $  14,495        35.5%    $   6,834        38.1%    $  10,323       31.3%
                                     ---------         ---     ---------         ---     ---------      -----
                                     ---------         ---     ---------         ---     ---------      -----
</TABLE>
 
    (b) The components  of the net  deferred tax liability  were as follows  (in
thousands):
 
<TABLE>
<CAPTION>
                                                                     YEARS ENDED DECEMBER
                                                                              31,
                                                                     ---------------------
                                                                       1995        1994
                                                                     ---------  ----------
<S>                                                                  <C>        <C>
Deferred tax assets:
  Adjustments to mortgage loans and investment income..............  $   5,420  $    4,672
  Unrealized depreciation on investments...........................     --          32,471
  Adjustment to life reserves......................................     23,835      13,752
                                                                     ---------  ----------
  Other............................................................      1,571       2,336
                                                                        30,826      53,231
                                                                     ---------  ----------
Deferred tax liabilities:
  Deferred policy acquisition costs................................  $   1,637  $    2,501
  Fixed maturities discount........................................      8,745       5,497
  Unrealized appreciation on investments...........................     82,352      --
  Other............................................................        344         307
                                                                     ---------  ----------
                                                                        93,078       8,305
                                                                     ---------  ----------
Net deferred tax liability (asset).................................  $  62,252  $  (44,926)
                                                                     ---------  ----------
                                                                     ---------  ----------
</TABLE>
 
    (c)  At December 31,  1995, accumulated earnings of  the Company for Federal
income tax purposes include approximately $2,879,000 of "Policyholders' Surplus"
as defined  under  the  Code.  Under provisions  of  the  Code,  "Policyholders'
Surplus"  has not been  currently taxed but  would be taxed  at current rates if
distributed  to  the  Parent.  There  is  no  present  intention  to  make  cash
distributions  from "Policyholders'  Surplus" and accordingly,  no provision has
been made for taxes on this amount.
 
    (d) Income  taxes paid  in 1995,  1994, and  1993 amounted  to  $19,056,000,
$13,537,000, and $23,984,000, respectively.
 
6.  COMMITMENTS AND CONTINGENT LIABILITIES
    The Company, in common with the insurance industry in general, is subject to
litigation, including claims for punitive damages, in the normal course of their
business. The Company does not believe that such litigation will have a material
effect on its operating results and financial condition.
 
                                      F-16
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
7.  FAIR VALUE OF FINANCIAL INSTRUMENTS
 
    (a)  Statement of Financial Accounting  Standards No. 107 "Disclosures about
Fair Value  of Financial  Instruments" (FASB  107) requires  disclosure of  fair
value  information about  financial instruments for  which it  is practicable to
estimate such  fair  value.  These  financial instruments  may  or  may  not  be
recognized in the balance sheet. In the measurement of the fair value of certain
of  the financial instruments, quoted market prices were not available and other
valuation techniques  were  utilized. These  derived  fair value  estimates  are
significantly  affected  by  the  assumptions used.  FASB  107  excludes certain
financial instruments, including those related to insurance contracts.
 
    The following methods and assumptions were used by the Company in estimating
the fair value of the financial instruments presented:
 
        CASH AND SHORT TERM INVESTMENTS:   The carrying amounts reported in  the
    balance sheet for these instruments approximate fair value.
 
        FIXED  MATURITIES:  Fair values for fixed maturity securities carried at
    market value  are generally  based upon  quoted market  prices. For  certain
    fixed  maturities for which  market prices were  not readily available, fair
    values  were  estimated  using  values  obtained  from  independent  pricing
    services.
 
        EQUITY  SECURITIES:  Fair  values for equity  securities were based upon
    quoted market prices.
 
        MORTGAGE AND POLICY LOANS:  Where practical, the fair values of loans on
    real estate were  estimated using  discounted cash  flow calculations  based
    upon the Company's current incremental lending rates for similar type loans.
    The  fair values of policy loans were not calculated as the Company believes
    it would have to expend excessive costs for the benefits derived. Therefore,
    the fair value of policy loans was estimated at carrying value.
 
        INTEREST RATE CAP:  Fair values for the interest rate cap were estimated
    using values obtained from an independent pricing service.
 
        POLICYHOLDERS' FUNDS ON DEPOSIT:   Fair values of policyholder  contract
    deposits  were estimated using discounted  cash flow calculations based upon
    interest rates currently being offered for similar contracts consistent with
    those remaining for the contracts being valued.
 
                                      F-17
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
7.  FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
    (b) The  fair value  and carrying  amounts of  financial instruments  is  as
follows (in thousands):
<TABLE>
<CAPTION>
                                                                                          CARRYING
1995                                                                      FAIR VALUE       AMOUNT
- -----------------------------------------------------------------------  -------------  -------------
<S>                                                                      <C>            <C>
Cash and short-term investments........................................  $     105,500  $     105,500
Fixed maturities.......................................................      4,434,329      4,434,329
Equity securities......................................................         22,273         22,273
Mortgage and policy loans..............................................        489,768        459,691
Interest rate cap......................................................            433            510
                                                                         -------------  -------------
Policyholders' funds on deposit........................................  $   3,125,730  $   3,060,581
                                                                         -------------  -------------
                                                                         -------------  -------------
 
<CAPTION>
 
                                                                                          CARRYING
1994                                                                      FAIR VALUE       AMOUNT
- -----------------------------------------------------------------------  -------------  -------------
<S>                                                                      <C>            <C>
Cash and short-term investments........................................  $     135,778  $     135,778
Fixed maturities.......................................................      3,700,640      3,700,640
Equity securities......................................................         21,902         21,902
Mortgage and policy loans..............................................        414,354        410,012
Interest rate cap......................................................          1,567            736
                                                                         -------------  -------------
Policyholders' funds on deposit........................................  $   2,755,594  $   2,742,412
                                                                         -------------  -------------
                                                                         -------------  -------------
</TABLE>
 
8.  STOCKHOLDERS' EQUITY
 
    (a)  The Company  may not distribute  dividends to the  Parent without prior
approval of  regulatory agencies.  Generally, this  limits the  payment of  such
dividends  to an  amount which,  in the opinion  of the  regulatory agencies, is
warranted by the financial condition of the Company.
 
    (b) The  Company's stockholders'  equity as  determined in  accordance  with
statutory  accounting  practices  was  $257,910,000  at  December  31,  1995 and
$214,273,000 at December 31, 1994. Statutory net income amounted to $49,059,000,
$21,226,000, and $2,298,000 for 1995, 1994 and 1993, respectively.
 
9.  EMPLOYEE BENEFITS
 
    (a)  The  Company   participates  with  its   affiliates  in  a   qualified,
non-contributory,  defined  benefit pension  plan which  is administered  by the
Parent. All qualified employees  who have attained age  21 and completed  twelve
months  of  continuous service  are  eligible to  participate  in this  plan. An
employee with  5  or more  years  of service  is  entitled to  pension  benefits
beginning  at normal retirement age 65. Benefits  are based upon a percentage of
average final compensation multiplied by years of credited service limited to 44
years  of  credited  service.  Prior  to  January  1,  1996  the  average  final
compensation  is subject to certain limitations. Annual funding requirements are
determined based on the "projected unit  credit" cost method which attributes  a
pro  rata portion of the total projected benefit payable at normal retirement to
each year  of  credited service.  Pension  expense for  current  service  costs,
retirement  and termination benefits for the years ended December 31, 1995, 1994
and 1993 were approximately $225,000,  $190,000 and $323,000, respectively.  The
Parent's plans do not separately identify projected benefit obligations and plan
assets  attributable  to employees  of  participating affiliates.  The projected
benefit  obligations  exceeded  the  plan   assets  at  December  31,  1995   by
$59,620,000.
 
    (b) The Parent also sponsors a voluntary savings plan for domestic employees
(a  401(k) plan), which during  the two years ended  December 31, 1994, provided
for salary reduction contributions by
 
                                      F-18
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
9.  EMPLOYEE BENEFITS (CONTINUED)
employees and matching  contributions by the  Parent up to  2 percent of  annual
salary.  Commencing  January  1, 1995,  the  401(k) plan  provided  for matching
contributions by the Parent of up to 6 percent of annual salary depending on the
employee's years of service.
 
    (c) On April 1, 1985, the  Parent terminated and replaced its then  existing
U.S.  pension  plan, a  contributory qualified  defined  benefit plan,  with the
current non-contributory  qualified  defined  benefit plan.  Settlement  of  the
obligations of the prior plan was accomplished through the purchase of annuities
from  the Company  for accrued  benefits as of  the date  of termination. Future
policy benefits reserves in the accompanying balance sheet that relate to  these
annuity  contracts  are  $73,171,000 at  December  31, 1995  and  $70,791,000 at
December 31, 1994.
 
    (d) In addition to the Parent's defined benefit pension plan, the Parent and
its subsidiaries provide a post-retirement benefit program for medical care  and
life  insurance.  Eligibility  in  the various  plans  is  generally  based upon
completion of a specified  period of eligible service  and reaching a  specified
age.
 
    (e)  Employees of the Company participate  in certain stock option and stock
purchase plans of the Parent. In general, under the stock option plans, officers
and other key employees are  granted options to purchase  AIG common stock at  a
price  not less  than fair market  value at the  date of grant.  In general, the
stock purchase plans  provide for  eligible employees to  receive privileges  to
purchase  AIG common stock at a  price equal to 85% of  the fair market value on
the date of grant of the purchase privilege.
 
10. LEASES
 
    (a) The  Company  occupies leased  space  in many  locations  under  various
long-term  leases and has entered into various leases covering the long-term use
of data processing  equipment. At December  31, 1995, the  future minimum  lease
payments under operating leases were as follows:
 
<TABLE>
<CAPTION>
YEAR                                                                        PAYMENT
- -------------------------------------------------------------------------  ---------
<S>                                                                        <C>
1996.....................................................................  $     583
1997.....................................................................        463
1998.....................................................................        368
1999.....................................................................        153
2000.....................................................................         54
Remaining years after 2000...............................................     --
                                                                           ---------
    Total................................................................  $   1,621
                                                                           ---------
                                                                           ---------
</TABLE>
 
    Rent  expense  approximated $661,000,  $801,000 and  $657,000 for  the years
ended December 31, 1995, 1994 and 1993, respectively.
 
    (b) Sublease  Income  --  The  Company  does  not  participate  in  sublease
agreements.
 
11. REINSURANCE
 
    (a)  The  Company reinsures  portions of  its life  and accident  and health
insurance risks with unaffiliated companies. Life insurance risks are  reinsured
primarily  under coinsurance  and yearly  renewable term  treaties. Accident and
health insurance risks are reinsured primarily under coinsurance, excess of loss
and quota share treaties. Amounts recoverable from reinsurers are estimated in a
manner consistent with the assumptions  used for the underlying policy  benefits
and  are presented as a component  of reinsurance assets. A contingent liability
exists with respect to reinsurance ceded to
 
                                      F-19
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
11. REINSURANCE (CONTINUED)
the extent that any  reinsurer is unable to  meet the obligations assumed  under
the  reinsurance agreements. The Company also reinsures portions of its life and
accident and health insurance risks with affiliated companies (see Note 12).
 
    The effect of all reinsurance  contracts, including reinsurance assumed,  is
as follows (in thousands, except percentages):
<TABLE>
<CAPTION>
                                                                                            PERCENTAGE OF
                                                                                               AMOUNT
                                                                                               ASSUMED
DECEMBER 31, 1995                         GROSS         CEDED      ASSUMED        NET          TO NET
- ------------------------------------  -------------  -----------  ---------  -------------  -------------
<S>                                   <C>            <C>          <C>        <C>            <C>
Life Insurance in Force.............  $   4,415,460  $   711,025  $   3,574  $   3,708,009         0.2%
                                      -------------  -----------  ---------  -------------
                                      -------------  -----------  ---------  -------------
  Premiums:
    Life............................         25,939        3,368          6         22,577         0.0%
    Accident and Health.............         22,136        8,034     20,822         34,924        59.6%
    Annuity.........................         27,496          639     --             26,857       --
                                      -------------  -----------  ---------  -------------
                                      -------------  -----------  ---------  -------------
      Total Premiums................  $      75,571  $    12,041  $  20,828  $      84,358        24.7%
                                      -------------  -----------  ---------  -------------
                                      -------------  -----------  ---------  -------------
 
<CAPTION>
 
                                                                                            PERCENTAGE OF
                                                                                               AMOUNT
                                                                                               ASSUMED
DECEMBER 31, 1994                         GROSS         CEDED      ASSUMED        NET          TO NET
- ------------------------------------  -------------  -----------  ---------  -------------  -------------
<S>                                   <C>            <C>          <C>        <C>            <C>
Life Insurance in Force.............  $   4,241,039  $   512,028  $   3,980  $   3,732,991         0.1%
  Premiums:
    Life............................         26,345        3,677         13         22,681         0.1%
    Accident and Health.............         23,622        9,520     20,612         34,714        59.4%
    Annuity.........................         14,892          461     --             14,431       --
                                      -------------  -----------  ---------  -------------
      Total Premiums................  $      64,859  $    13,658  $  20,625  $      71,826        28.7%
                                      -------------  -----------  ---------  -------------
                                      -------------  -----------  ---------  -------------
<CAPTION>
 
                                                                                            PERCENTAGE OF
                                                                                               AMOUNT
                                                                                               ASSUMED
DECEMBER 31, 1993                         GROSS         CEDED      ASSUMED        NET          TO NET
- ------------------------------------  -------------  -----------  ---------  -------------  -------------
<S>                                   <C>            <C>          <C>        <C>            <C>
Life Insurance in Force.............  $   3,726,676  $   667,040  $   4,177  $   3,063,813         0.1%
                                      -------------  -----------  ---------  -------------
                                      -------------  -----------  ---------  -------------
  Premiums:
    Life............................         28,098        3,943        594         24,749         2.4%
    Accident and Health.............         23,625        9,285     18,482         32,822        56.3%
    Annuity.........................         19,679        1,205     --             18,474       --
                                      -------------  -----------  ---------  -------------
      Total Premiums................  $      71,402  $    14,433  $  19,076  $      76,045        25.1%
                                      -------------  -----------  ---------  -------------
                                      -------------  -----------  ---------  -------------
</TABLE>
 
    (b) The maximum amount retained on any one life by the Company is $500,000.
 
    (c)   Reinsurance  recoveries,  which  reduced  death  and  other  benefits,
approximated $7,667,000, $6,720,000 and $8,477,000 respectively, for each of the
years ended December 31, 1995, 1994 and 1993.
 
    The Company's reinsurance  arrangements do  not relieve it  from its  direct
obligation to its insureds.
 
                                      F-20
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
12. TRANSACTIONS WITH RELATED PARTIES
 
    (a)  The  Company  is  party  to  several  reinsurance  agreements  with its
affiliates covering  certain  life  and accident  and  health  insurance  risks.
Premium  income  and commission  ceded to  affiliates  amounted to  $800,000 and
$(3,000), respectively, for the year ended December 31, 1995. Premium income and
commission ceded  for  1994 amounted  to  $574,000 and  $(3,000),  respectively.
Premium  income and commission ceded for 1993 amounted to $849,000 and $(2,000),
respectively.  Premium  income  and  ceding  commission  expense  assumed   from
affiliates  aggregated  $19,679,000  and  $(141,000),  respectively,  for  1995,
compared to $19,331,000 and $98,000, respectively, for 1994, and $17,189,000 and
$5,000, respectively, for 1993.
 
    (b) The Company provides life insurance coverage to employees of the  Parent
and  its domestic subsidiaries in connection  with the Parent's employee benefit
plans. The statement of income includes $4,080,000 in premiums relating to  this
business for 1995, $3,952,000 for 1994, and $3,908,000 for 1993.
 
    (c)  The  Company  is party  to  several  cost sharing  agreements  with its
affiliates. Generally, these agreements provide for the allocation of costs upon
either the specific identification basis or a proportional cost allocation basis
which management believes  to be reasonable.  For the years  ended December  31,
1995,  1994  and 1993,  the Company  was  charged $19,148,000,  $17,401,000, and
$14,907,000, respectively, for expenses attributed  to the Company but  incurred
by  affiliates. During the same period, the Company received reimbursements from
affiliates aggregating $20,920,000,  $19,505,000 and $18,579,000,  respectively,
for costs incurred by the Company but attributable to affiliates.
 
    (d)  The Company received cash surplus  contributions of $78,000,000 in 1993
from AIG, Inc., the  Parent and American Home  Assurance Company, an  affiliated
insurer.
 
    (e)  During 1993, the Company  sold a mortgage loan  to Atlanta 17th Street,
Inc., for the aggregate unpaid principal balance of $17,500,000.
 
    (f) During  1995,  the Company  sold  a mortgage  loan  to AIG  Real  Estate
Investment  and Management Company for the aggregate unpaid principal balance of
$5,000,000.
 
                                      F-21
<PAGE>


                         REPORT OF INDEPENDENT ACCOUNTANTS


To the Contract Owners of
American International Life Assurance Company of New York
Variable Account A

We have audited the accompanying statements of assets and liabilities of 
American Life Assurance Company of New York Variable Account A (the 
"Account") comprising the Money Market, Premier Growth, Growth and Income, 
International, Short-Term Multi-Market, Global Bond, U.S. Government/High 
Grade Securities, Global Dollar Government, North American Government, 
Utility Income, Conservative Investors, Growth Investors, Growth, Total 
Return, and Worldwide Privatization Subaccounts, as of December 31, 1995, and 
the related statement of operations for the year then ended, and the 
statement of changes in net assets for each of the two years in the period 
then ended. These financial statements are the responsibility of the 
management of Variable Account A. Our responsibility is to express an opinion 
on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing 
standards. Those standards require that we plan and perform the audit to 
obtain reasonable assurance about whether the financial statements are free 
of material misstatement. An audit includes examining, on a test basis, 
evidence supporting the amounts and disclosures in the financial statements. 
Our procedures included confirmation of investments held at December 31, 1995 
by correspondence with the transfer agent. 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 American International Life 
Assurance Company of New York Variable Account A as of December 31, 1995, and 
the results of its operations for the year then ended, and the changes in its 
net assets for each of the two years in the period then ended, in conformity 
with generally accepted accounting principles.



COOPERS & LYBRAND L.L.P.

2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 19, 1996



<PAGE>

                  AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY
                              OF NEW YORK (AI LIFE)
                               VARIABLE ACCOUNT A

                       STATEMENT OF ASSETS AND LIABILITIES
                                DECEMBER 31, 1995

<TABLE>
<CAPTION>

ASSETS:
  Investments at Market Value:
    Alliance Variable Products Series Fund, Inc.                            Shares                Cost
                                                                            ------                ----
<S>                                                                     <C>                   <C>                 <C>

          Money Market Portfolio . . . . . . . . . . . . . . . .        5,913,989.000         $ 5,913,989         $ 5,913,989
          Premier Growth Portfolio . . . . . . . . . . . . . . .          391,023.860           6,336,648           6,960,224
          Growth & Income Portfolio. . . . . . . . . . . . . . .          523,555.400           7,251,710           8,266,939
          International Portfolio. . . . . . . . . . . . . . . .          213,085.910           2,818,862           2,998,118
          Short-Term Multi-Market Portfolio. . . . . . . . . . .           77,816.920             806,355             823,302
          Global Bond Portfolio. . . . . . . . . . . . . . . . .           80,131.190             863,593             973,594
          U.S. Government/High Grade Securities Portfolio. . . .          385,825.483           4,148,111           4,498,725
          Global Dollar Government Portfolio . . . . . . . . . .           15,985.410             162,959             191,025
          North American Government Portfolio. . . . . . . . . .           95,687.440             913,275           1,002,798
          Utility Income Portfolio . . . . . . . . . . . . . . .          104,741.390           1,162,178           1,257,944
          Conservative Investors Portfolio . . . . . . . . . . .          161,986.420           1,811,171           1,904,960
          Growth Investors Portfolio . . . . . . . . . . . . . .           61,846.600             693,410             734,120
          Growth Portfolio . . . . . . . . . . . . . . . . . . .          766,068.790           9,766,208          10,901,160
          Total Return Portfolio . . . . . . . . . . . . . . . .          112,596.170           1,341,148           1,441,231
          Worldwide Privatization Portfolio. . . . . . . . . . .           61,844.200             665,270             690,801
                                                                                              -----------         -----------
          Total Investments. . . . . . . . . . . . . . . . . . .                              $44,654,887          48,558,930

  Dividends Receivable . . . . . . . . . . . . . . . . . . . . .                                                       21,941


                                                                                                                  -----------
          Total Assets . . . . . . . . . . . . . . . . . . . . .                                                  $48,580,871
                                                                                                                  -----------
                                                                                                                  -----------


LIABILITIES:
Payable to American International Life
  Assurance Company of New York. . . . . . . . . . . . . . . . .                                                  $    26,735

EQUITY:
  Contract Owners' Equity. . . . . . . . . . . . . . . . . . . .                                                   48,554,136
                                                                                                                  -----------
          Total Liabilities and Equity . . . . . . . . . . . . .                                                  $48,580,871
                                                                                                                  -----------
                                                                                                                  -----------
</TABLE>


                        See Notes to Financial Statements
<PAGE>

                  AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY
                              OF NEW YORK (AI LIFE)
                               VARIABLE ACCOUNT A

                             STATEMENT OF OPERATIONS
                      For the Year Ended December 31, 1995

<TABLE>
<CAPTION>

                                             ----------       ---------      ---------   ----------     ---------    ------------
                                                                MONEY         PREMIER     GROWTH &       INTER-       SHORT-TERM
                                                               MARKET         GROWTH       INCOME       NATIONAL     MULTI-MARKET
                                                TOTAL         PORTFOLIO      PORTFOLIO    PORTFOLIO     PORTFOLIO      PORTFOLIO
                                             ----------       ---------      ---------   ----------     ---------    ------------
<S>                                          <C>              <C>            <C>         <C>            <C>          <C>

Investment Income (Loss):
  Dividends. . . . . . . . . . . . . .       $  382,587        $196,937      $ 14,734   $   84,710      $ 11,131      $     -

  Expenses:
    Mortality & Expense Risk Fees. . .          316,207          51,459        39,595       56,534        26,650        4,021
    Daily Administrative Charges . . .           14,350           1,985         1,908        2,327           937          194
                                             ----------        --------      --------   ----------      --------      -------
      Net Investment Income (Loss) . .           52,300         143,493       (26,769)      25,849       (16,456)      (4,215)
                                             ----------        --------      --------   ----------      --------      -------

Realized and Unrealized Gain (Loss)
 on Investments:

  Realized Gain (Loss) on
   Investment Activity . . . . . . . .          438,752               -       206,646      179,555        26,266       (3,483)
  Change in Unrealized Appreciation
   (Depreciation). . . . . . . . . . .        4,059,714               -       631,962    1,035,975       194,742       30,769
                                             ----------        --------      --------   ----------      --------      -------
  Net Gain (Loss) on Investments . . .        4,498,466               -       838,608    1,215,530       221,008       27,286
                                             ----------        --------      --------   ----------      --------      -------

Increase (Decrease) in Net Assets
  Resulting From Operations. . . . . .       $4,550,766        $143,493      $811,839   $1,241,379      $204,552      $23,071
                                             ----------        --------      --------   ----------      --------      -------
                                             ----------        --------      --------   ----------      --------      -------

</TABLE>


                        See Notes to Financial Statements
<PAGE>


                  AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY
                              OF NEW YORK (AI LIFE)
                               VARIABLE ACCOUNT A

                             STATEMENT OF OPERATIONS
                      For the Year Ended December 31, 1995
                                   (Continued)

<TABLE>
<CAPTION>

                                             ----------      ----------    ------------  ----------     ---------    ------------
                                               GLOBAL        U.S. GOV'T       GLOBAL       N.AMER.       UTILITY     CONSERVATIVE
                                                BOND          HIGH GRD     DOLLAR GOV'T     GOV'T        INCOME        INVESTORS
                                              PORTFOLIO       PORTFOLIO      PORTFOLIO    PORTFOLIO     PORTFOLIO      PORTFOLIO
                                             ----------      ----------    ------------  ----------     ---------    ------------
<S>                                             <C>              <C>            <C>            <C>             <C>           <C>

Investment Income (Loss):
  Dividends. . . . . . . . . . . . . .        $   4,268       $  36,715       $ 1,684    $  22,560     $   4,260     $    509

  Expenses:
    Mortality & Expense Risk Fees. . .            6,976          30,640         1,592       10,584         7,310        7,610
    Daily Administrative Charges . . .              288           1,365            56          323           350          531
                                              ---------       ---------      --------    ---------     ---------     --------
      Net Investment Income (Loss) . .           (2,996)          4,710            36       11,653        (3,400)      (7,632)
                                              ---------       ---------      --------    ---------     ---------     --------

Realized and Unrealized Gain (Loss)
  on Investments:

  Realized Gain (Loss) on
   Investment Activity . . . . . . . .             (247)         18,645         1,659      (33,120)       (8,865)      (7,540)
  Change in Unrealized Appreciation
   (Depreciation). . . . . . . . . . .          114,189         362,005        28,993      183,345        97,317       93,187
                                              ---------       ---------      --------    ---------     ---------     --------
  Net Gain (Loss) on Investments . . .          113,942         380,650        30,652      150,225       106,182      100,727
                                              ---------       ---------      --------    ---------     ---------     --------

Increase (Decrease) in Net Assets
  Resulting From Operations. . . . . .        $ 110,946       $ 385,360      $ 30,688    $ 161,878     $ 102,782     $ 93,095
                                              ---------       ---------      --------    ---------     ---------     --------
                                              ---------       ---------      --------    ---------     ---------     --------
</TABLE>


                        See Notes to Financial Statements
<PAGE>

                  AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY
                              OF NEW YORK (AI LIFE)
                               VARIABLE ACCOUNT A

                             STATEMENT OF OPERATIONS
                      For the Year Ended December 31, 1995
                                   (Continued)
<TABLE>
<CAPTION>

                                              ---------       ---------     ----------  -------------
                                               GROWTH                          TOTAL      WORLDWIDE
                                              INVESTORS        GROWTH         RETURN    PRIVATIZATION
                                              PORTFOLIO       PORTFOLIO      PORTFOLIO    PORTFOLIO
                                              ---------       ---------     ----------  -------------
<S>                                           <C>             <C>           <C>         <C>

Investment Income (Loss):
  Dividends. . . . . . . . . . . . . .         $    101     $     2,452      $  2,111     $    685

  Expenses:
  Mortality & Expense Risk Fees. . . .            3,205          59,093         6,691        4,247
    Daily Administrative Charges . . .              206           3,250           415          215
                                               --------     -----------      --------     --------
    Net Investment Income (Loss) . . .           (3,310)        (59,891)       (4,995)      (3,777)
                                               --------     -----------      --------     --------


Realized and Unrealized Gain (Loss)
  on Investments:

  Realized Gain (Loss) on
   Investment Activity . . . . . . . .            3,354          19,182         1,861        2,029
  Change in Unrealized Appreciation
   (Depreciation). . . . . . . . . . .           40,929       1,120,763       100,209       25,329
                                               --------     -----------      --------     --------
  Net Gain (Loss) on Investments . . .           44,283       1,139,945       102,070       27,358
                                               --------     -----------      --------     --------

Increase (Decrease) in Net Assets
  Resulting From Operations. . . . . .         $ 40,973     $ 1,080,054      $ 97,075     $ 23,581
                                               --------     -----------      --------     --------
                                               --------     -----------      --------     --------

</TABLE>


                        See Notes to Financial Statements
<PAGE>

                  AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY
                              OF NEW YORK (AI LIFE)
                               VARIABLE ACCOUNT A

                       STATEMENT OF CHANGES IN NET ASSETS
           For the Years Ended December 31, 1995 and December 31, 1994

<TABLE>
<CAPTION>

                                                                                     1995
                                           ------------     ----------     ----------   ----------    ----------    ------------
                                                               MONEY         PREMIER     GROWTH &       INTER-       SHORT-TERM
                                                              MARKET         GROWTH       INCOME       NATIONAL     MULTI-MARKET
                                               TOTAL         PORTFOLIO      PORTFOLIO    PORTFOLIO     PORTFOLIO      PORTFOLIO
                                           ------------     ----------     ----------   ----------    ----------    ------------
<S>                                        <C>              <C>           <C>          <C>           <C>            <C>

Increase (Decrease) in Net Assets
Operations:
  Net Investment Income (Loss) . . . .     $     52,300     $   143,493   $   (26,769) $    25,849   $   (16,456)   $  (4,215)
  Realized Gain (Loss) on Investment
   Activity. . . . . . . . . . . . . .          438,752               -       206,646      179,555        26,266       (3,483)
  Change in Unrealized Appreciation
   (Depreciation) of Investments . . .        4,059,714               -       631,962    1,035,975       194,742       30,769
                                           ------------     -----------   -----------  -----------   -----------    ---------

Increase (Decrease) in Net Assets
  Resulting from Operations. . . . . .        4,550,766         143,493       811,839    1,241,379       204,552       23,071
                                           ------------     -----------   -----------  -----------   -----------    ---------

Capital Transactions:
  Contract Deposits. . . . . . . . . .       37,156,227      15,453,447     3,643,200    3,834,979     1,225,656      784,239
  Transfers Between Funds. . . . . . .                -      (9,732,102)    1,447,409    1,285,496       304,156     (135,351)
  Transfers From (To) AI Life. . . . .       (1,437,541)     (1,444,946)            -            -             -            -
  Administrative Charges . . . . . . .           (9,296)         (1,236)         (977)      (1,208)       (1,683)         (63)
  Contract Withdrawals . . . . . . . .       (1,174,004)       (602,457)      (49,333)    (128,790)     (112,438)           -
  Deferred Sales Charges . . . . . . .          (39,979)        (23,450)       (1,553)      (2,412)       (3,737)           -
  Death Benefits . . . . . . . . . . .         (145,741)           (336)      (42,673)     (37,226)            -            -
                                           ------------     -----------   -----------  -----------   -----------    ---------

  Increase (Decrease) in Net Assets
   Resulting from Capital
   Transactions. . . . . . . . . . . .       34,349,666       3,648,920     4,996,073    4,950,839     1,411,954      648,825
                                           ------------     -----------   -----------  -----------   -----------    ---------
Total Increase (Decrease) in
  Net Assets . . . . . . . . . . . . .       38,900,432       3,792,413     5,807,912    6,192,218     1,616,506      671,896
Net Assets, at Beginning of Year . . .        9,653,704       2,115,416     1,152,825    2,074,756     1,381,633      151,407
                                           ------------     -----------   -----------  -----------   -----------    ---------
Net Assets, at End of Year . . . . . .     $ 48,554,136     $ 5,907,829   $ 6,960,737  $ 8,266,974   $ 2,998,139    $ 823,303
                                           ------------     -----------   -----------  -----------   -----------    ---------
                                           ------------     -----------   -----------  -----------   -----------    ---------

<PAGE>

<CAPTION>

                                                                                    1994

                                             -----------     ----------     ----------   ----------    ----------    ------------
                                                                MONEY                      GROWTH &      INTER-       SHORT-TERM
                                                               MARKET         GROWTH       INCOME       NATIONAL     MULTI-MARKET
                                                TOTAL         PORTFOLIO      PORTFOLIO    PORTFOLIO     PORTFOLIO      PORTFOLIO
                                             -----------     ----------     ----------   ----------    ----------    ------------
<S>                                         <C>              <C>           <C>          <C>           <C>            <C>

Increase (Decrease) in Net Assets
Operations: 
  Net Investment Income (Loss) . . . .      $    18,265     $    14,414   $    (6,357) $     9,350   $    (4,738)   $   1,978
  Realized Gain (Loss) on Investment
   Activity. . . . . . . . . . . . . .           20,415               -         5,524       10,503         8,741         (430)
  Change in Unrealized Appreciation
   (Depreciation) of Investments . . .         (189,962)              -       (18,043)     (38,575)      (20,545)     (14,865)
                                            -----------     -----------   -----------  -----------   -----------    ---------

Increase (Decrease) in Net Assets
  Resulting from Operations. . . . . .         (151,282)         14,414       (18,876)     (18,722)      (16,542)     (13,317)
                                            -----------     -----------   -----------  -----------   -----------    ---------

Capital Transactions:
  Contract Deposits. . . . . . . . . .        8,637,099       3,018,765       673,722    1,428,657       991,291       94,714
  Transfers Between Funds. . . . . . .                -        (898,617)      109,455      265,001       170,842         (478)
  Administrative Charges . . . . . . .             (954)            (49)         (201)        (350)         (114)         (33)
  Contract Withdrawals . . . . . . . .         (126,914)        (35,111)       (3,750)     (41,074)       (3,802)         (60)
  Deferred Sales Charges . . . . . . .           (1,915)              -             -         (703)            -            -
                                            -----------     -----------   -----------  -----------   -----------    ---------

  Increase (Decrease) in Net Assets
   Resulting from Capital
   Transactions. . . . . . . . . . . .        8,507,316       2,084,988       779,226    1,651,531     1,158,217       94,143
                                            -----------     -----------   -----------  -----------   -----------    ---------
Total Increase (Decrease) in
 Net Assets. . . . . . . . . . . . . .        8,356,034       2,099,402       760,350    1,632,809     1,141,675       80,826
Net Assets, at Beginning of Year . . .        1,297,670          16,014       392,475      441,947       239,958       70,581
                                            -----------     -----------   -----------  -----------   -----------    ---------
Net Assets, at End of Year . . . . . .      $ 9,653,704     $ 2,115,416   $ 1,152,825  $ 2,074,756   $ 1,381,633    $ 151,407
                                            -----------     -----------   -----------  -----------   -----------    ---------
                                            -----------     -----------   -----------  -----------   -----------    ---------

</TABLE>


                        See Notes to Financial Statements
<PAGE>

                  AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY
                              OF NEW YORK (AI LIFE)
                               VARIABLE ACCOUNT A

                       STATEMENT OF CHANGES IN NET ASSETS
           For the Years Ended December 31, 1995 and December 31, 1994
                                   (Continued)

<TABLE>
<CAPTION>

                                                                                      1995

                                             ----------      ----------    ------------   ---------     ---------    ------------
                                               GLOBAL        U.S. GOV'T       GLOBAL       N.AMER.       UTILITY     CONSERVATIVE
                                                BOND          HIGH GRD     DOLLAR GOV'T     GOV'T        INCOME        INVESTORS
                                              PORTFOLIO       PORTFOLIO      PORTFOLIO    PORTFOLIO     PORTFOLIO      PORTFOLIO
                                             ----------      ----------    ------------   ---------     ---------    ------------
<S>                                         <C>             <C>            <C>         <C>           <C>          <C>


Increase (Decrease) in Net Assets
Operations:
  Net Investment Income (Loss) . . . .        $  (2,996)    $     4,710      $     36  $    11,653   $    (3,400) $    (7,632)
  Realized Gain (Loss) on Investment
   Activity. . . . . . . . . . . . . .             (247)         18,645         1,659      (33,120)        8,865        7,540
  Change in Unrealized Appreciation
   (Depreciation) of Investments . . .          114,189         362,005        28,993      183,345        97,317       93,187
                                              ---------     -----------     ---------  -----------   -----------  -----------

Increase (Decrease) in Net Assets
  Resulting from Operations. . . . . .          110,946         385,360        30,688      161,878       102,782       93,095
                                              ---------     -----------     ---------  -----------   -----------  -----------

Capital Transactions:
  Contract Deposits. . . . . . . . . .          290,274       2,199,892       114,973      498,520       735,782    1,295,707
  Transfers Between Funds. . . . . . .          326,218       1,240,474        (7,100)    (353,701)      298,196      464,257
  Transfers From (To) AI Life. . . . .                -               -             -            -             -            -
  Administrative Charges . . . . . . .             (162)           (484)          (29)      (1,048)         (117)        (102)
  Contract Withdrawals . . . . . . . .          (29,399)        (25,751)       (5,466)     (45,276)      (11,410)     (17,859)
  Deferred Sales Charges . . . . . . .             (692)            (63)            -       (1,770)         (232)        (119)
  Death Benefits . . . . . . . . . . .                -         (33,092)            -      (32,414)            -            -
                                              ---------     -----------     ---------  -----------   -----------  -----------

  Increase (Decrease) in Net Assets
   Resulting from Capital
   Transactions. . . . . . . . . . . .          586,239       3,380,976       102,378       64,311     1,022,219    1,741,884
                                              ---------     -----------     ---------  -----------   -----------  -----------

Total Increase (Decrease) in
 Net Assets. . . . . . . . . . . . . .          697,185       3,766,336       133,066      226,189     1,125,001    1,834,979
Net Assets, at Beginning of Year . . .          276,373         733,222        57,960      776,586       132,905       69,994
                                              ---------     -----------     ---------  -----------   -----------  -----------
Net Assets, at End of Year . . . . . .        $ 973,558     $ 4,499,558     $ 191,026  $ 1,002,775   $ 1,257,906  $ 1,904,973
                                              ---------     -----------     ---------  -----------   -----------  -----------
                                              ---------     -----------     ---------  -----------   -----------  -----------

<PAGE>

<CAPTION>

                                                                                      1994

                                             ----------      ----------    ------------   ---------     ---------    ------------
                                               GLOBAL        U.S. GOV'T       GLOBAL       N.AMER.       UTILITY     CONSERVATIVE
                                                BOND          HIGH GRD     DOLLAR GOV'T     GOV'T        INCOME        INVESTORS
                                              PORTFOLIO       PORTFOLIO      PORTFOLIO    PORTFOLIO     PORTFOLIO      PORTFOLIO
                                             ----------      ----------    ------------   ---------     ---------    ------------
<S>                                          <C>             <C>           <C>           <C>           <C>           <C>

Increase (Decrease) in Net Assets
Operations:
  Net Investment Income (Loss) . . . .        $   2,296       $   5,673      $   (132)   $  (2,182)    $    (458)    $   (152)
  Realized Gain (Loss) on Investment
   Activity. . . . . . . . . . . . . .           (2,139)         (1,938)            -          151            (1)           -
  Change in Unrealized Appreciation
   (Depreciation) of Investments . . .           (4,275)        (11,904)         (927)     (93,816)       (1,551)         492
                                              ---------       ---------      --------    ---------     ---------     --------

Increase (Decrease) in Net Assets
  Resulting from Operations. . . . . .           (4,118)         (8,169)       (1,059)     (95,847)       (2,010)         340
                                              ---------       ---------      --------    ---------     ---------     --------

Capital Transactions:
  Contract Deposits. . . . . . . . . .          212,264         637,687        59,220      847,370        89,098       45,002
  Transfers Between Funds. . . . . . .           20,738          58,085             -       25,263        46,365       24,652
  Administrative Charges . . . . . . .              (84)           (123)            -            -             -            -
  Contract Withdrawals . . . . . . . .          (11,067)        (31,101)         (201)        (200)         (548)           -
  Deferred Sales Charges . . . . . . .             (670)           (542)            -            -             -            -
                                              ---------       ---------      --------    ---------     ---------     --------

  Increase (Decrease) in Net Assets
  Resulting from Capital
   Transactions. . . . . . . . . . . .          221,181         664,006        59,019      872,433       134,915       69,654
                                              ---------       ---------      --------    ---------     ---------     --------

Total Increase (Decrease) in
 Net Assets. . . . . . . . . . . . . .          217,063         655,837        57,960      776,586       132,905       69,994
Net Assets, at Beginning of Year . . .           59,310          77,385             -            -             -            -
                                              ---------       ---------      --------    ---------     ---------     --------
Net Assets, at End of Year . . . . . .        $ 276,373       $ 733,222      $ 57,960    $ 776,586     $ 132,905     $ 69,994
                                              ---------       ---------      --------    ---------     ---------     --------
                                              ---------       ---------      --------    ---------     ---------     --------

</TABLE>


                        See Notes to Financial Statements
<PAGE>

                  AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY
                              OF NEW YORK (AI LIFE)
                               VARIABLE ACCOUNT A

                       STATEMENT OF CHANGES IN NET ASSETS
           For the Years Ended December 31, 1995 and December 31, 1994
                                   (Continued)
<TABLE>
<CAPTION>

                                                                       1995

                                              ---------       ---------      ---------  -------------
                                               GROWTH                          TOTAL      WORLDWIDE
                                              INVESTORS        GROWTH         RETURN    PRIVATIZATION
                                              PORTFOLIO       PORTFOLIO      PORTFOLIO    PORTFOLIO
                                              ---------       ---------      ---------  -------------
<S>                                           <C>          <C>            <C>           <C>

Increase (Decrease) in Net Assets
Operations:
  Net Investment Income (Loss) . . . .        $  (3,310)   $    (59,891)  $    (4,995)   $  (3,777)
  Realized Gain (Loss) on Investment
   Activity. . . . . . . . . . . . . .            3,354          19,182         1,861        2,029
  Change in Unrealized Appreciation
   (Depreciation) of Investments . . .           40,929       1,120,763       100,209       25,329
                                              ---------    ------------   -----------    ---------

Increase (Decrease) in Net Assets
  Resulting from Operations. . . . . .           40,973       1,080,054        97,075       23,581
                                              ---------    ------------   -----------    ---------

Capital Transactions:
  Contract Deposits. . . . . . . . . .          268,883       5,741,124       793,257      276,294
  Transfers Between Funds. . . . . . .          397,035       3,625,601       509,809      329,603
  Transfers From (To) AI Life. . . . .            7,405               -             -            -
  Administrative Charges . . . . . . .              (40)         (1,999)          (68)         (80)
  Contract Withdrawals . . . . . . . .          (11,434)       (125,673)       (6,235)      (2,483)
  Deferred Sales Charges . . . . . . .              (22)         (5,814)          (84)         (31)
  Death Benefits . . . . . . . . . . .                -               -             -            -
                                              ---------    ------------   -----------    ---------

  Increase (Decrease) in Net Assets
  Resulting from Capital
   Transactions. . . . . . . . . . . .          661,827       9,233,239     1,296,679      603,303
                                              ---------    ------------   -----------    ---------

Total Increase (Decrease) in
 Net Assets. . . . . . . . . . . . . .          702,800      10,313,293     1,393,754      626,884
Net Assets, at Beginning of Year . . .           31,321         587,905        47,480       63,921
                                              ---------    ------------   -----------    ---------
Net Assets, at End of Year . . . . . .        $ 734,121    $ 10,901,198   $ 1,441,234    $ 690,805
                                              ---------    ------------   -----------    ---------
                                              ---------    ------------   -----------    ---------
<PAGE>

<CAPTION>

                                                                       1995

                                              ---------       ---------      ---------  -------------
                                               GROWTH                          TOTAL      WORLDWIDE
                                              INVESTORS        GROWTH         RETURN    PRIVATIZATION
                                              PORTFOLIO       PORTFOLIO      PORTFOLIO    PORTFOLIO
                                              ---------       ---------      ---------  -------------
<S>                                           <C>             <C>            <C>        <C>

Increase (Decrease) in Net Assets
Operations:
  Net Investment Income (Loss) . . . .         $    (58)      $  (1,232)     $    (78)   $     (59)
  Realized Gain (Loss) on Investment
   Activity. . . . . . . . . . . . . .               (1)              6            (1)           -
  Change in Unrealized Appreciation
   (Depreciation) of Investments . . .             (219)         14,189          (125)         202
                                               --------       ---------      --------    ---------

Increase (Decrease) in Net Assets
  Resulting from Operations. . . . . .             (278)         12,963          (204)         143
                                               --------       ---------      --------    ---------

Capital Transactions:
  Contract Deposits. . . . . . . . . .           25,250         436,832        19,298       57,929
  Transfers Between Funds. . . . . . .            6,349         138,110        28,386        5,849
  Administrative Charges . . . . . . .                -               -             -            -
  Contract Withdrawals . . . . . . . .                -               -             -            -
  Deferred Sales Charges . . . . . . .                -               -             -            -
                                               --------       ---------      --------    ---------

  Increase (Decrease) in Net Assets
  Resulting from Capital
   Transactions. . . . . . . . . . . .           31,599         574,942        47,684       63,778
                                               --------       ---------      --------    ---------

Total Increase (Decrease) in
 Net Assets. . . . . . . . . . . . . .           31,321         587,905        47,480       63,921
Net Assets, at Beginning of Year . . .                -               -             -            -
                                               --------       ---------      --------    ---------
Net Assets, at End of Year . . . . . .         $ 31,321       $ 587,905      $ 47,480     $ 63,921
                                               --------       ---------      --------    ---------
                                               --------       ---------      --------    ---------


</TABLE>


                        See Notes to Financial Statements
<PAGE>


                  AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY
                              OF NEW YORK (AI LIFE)
                               VARIABLE ACCOUNT A

                         NOTES TO FINANCIAL STATEMENTS

1.  HISTORY
Variable Account A (the "Account") is a separate investment account established
in June 1987 under the provisions of New York Insurance Law by American
International Life Assurance Company of New York (the "Company"), a subsidiary
of American International Group, Inc.  The Account operates as a unit investment
trust registered under the Investment Company Act of 1940, as amended, and
supports the operations of the Company's individual single purchase payment
deferred variable annuity contracts (the "contracts").  The Account invests in
shares of Alliance Variable Products Series Fund, Inc. (the "Fund").  The Fund
consists of fifteen series:  Money Market Portfolio; Short-Term Multi-Market
Portfolio; Premier Growth Portfolio (formerly the Growth Portfolio); Growth and
Income Portfolio; International Portfolio; Global Bond Portfolio;
U.S.Government/High Grade Securities Portfolio; Global Dollar Government
Portfolio; North American Government Portfolio; Utility Income Portfolio;
Conservative Investors Portfolio; Growth Investors Portfolio; Growth Portfolio;
Total Return Portfolio and World Privatization Portfolio.  The Account invests
in shares of other funds which are not available to these contracts.

On April 16, 1992, the initial investment was made in the Fund.

The assets of the Account are the property of the Company.  The portion of the
Account's assets applicable to the contracts are not chargeable with liabilities
arising out of any other business conducted by the Company.

In addition to the Account, a contract owner may also allocate funds to the
Guaranteed Account, which is part of the Company's general account.  Amounts
allocated to the Guaranteed Account are credited with a guaranteed rate for one
year.  Because of exemptive and exclusionary provisions, interests in the
Guaranteed Account have not been registered under the Securities Act of 1933 and
the Guaranteed Account has not been registered as an investment company under
the Investment Company Act of 1940.

2.  SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Account in preparation of the financial statements in conformity with generally
accepted accounting principles.

A.  Investment Valuation - The investments in the Funds are stated at market
value which is the net asset value of each of the respective series as
determined at the close of business on the last business day of the period by
the Fund.

B.  Accounting for Investments - Investment transactions are accounted for on
the date the investments are purchased or sold.  Dividend income is recorded on
the ex-dividend date.

C.  Federal Income Taxes - The Company is taxed under federal law as a life
insurance company.  The Account is part of the Company's total operations and is
not taxed separately.  Under existing federal law, no taxes are payable on
investment income and realized capital gains of the Account.

D.  The preparation of the accompanying financial statements required management
to make estimates and assumptions that affect the reported values of assets and
liabilities as of December 31, 1995 and the reported amounts from operations and
policy transactions during 1995 and 1994.  Actual results could differ from
those estimates.
<PAGE>

                  AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY
                              OF NEW YORK (AI LIFE)
                               VARIABLE ACCOUNT A

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)



3.  CONTRACT CHARGES
Daily charges for mortality and expense risks assumed by the Company are
assessed through the daily unit value calculation and are equivalent on an
annual basis to 1.25% of the value of the contracts.

Daily charges for administrative expenses are assessed through the daily unit
value calculation on all contracts issued subsequent to April 1, 1994 (i.e.
Variable Annuity II contracts) and are equivalent on an annual basis to 0.15% of
the value of the contracts.  In addition, an annual administrative expense
charge of $30 is assessed against each contract on its anniversary date by
surrendering units.

The contracts provide that in the event that a contract owner withdraws all or a
portion of the contract value within six contract years they will be assessed a
deferred sales charge.  The deferred sales charge is based on a table of
charges, of which the maximum charge is 6% of the contract value subject to a
maximum of 8.5% of purchase payments.

Certain states impose premium taxes upon contracts.  The Company intends to
advance premium taxes due until the contract is surrendered or annuitized.

<PAGE>


                  AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY
                              OF NEW YORK (AI LIFE)
                               VARIABLE ACCOUNT A

                    NOTES TO FINANCIAL STATEMENTS (continued)





4.  PURCHASES OF INVESTMENTS
For the year ended December 31, 1995 investment activity in the Fund was as
follows:


<TABLE>
<CAPTION>

                                                       ---------------   ---------------                                        --
                                                           COST OF          PROCEEDS
     SHARES OF                                            PURCHASES        FROM SALES
     ---------------                                   ---------------   ---------------
     <S>                                               <C>               <C>

     Alliance Variable Product Series Fund, Inc.:
         Money Market Portfolio ....................   $    12,870,122   $     9,111,196
         Premier Growth Portfolio ..................         5,767,441           808,729
         Growth & Income Portfolio .................         5,995,161         1,028,929
         International Portfolio ...................         1,917,772           532,939
         Short-Term Multi-Market Portfolio .........           883,446           239,035
         Global Bond Portfolio .....................           609,386            26,318
         U.S. Government/High Grade
             Securities Portfolio ..................         3,715,608           331,256
         Global Dollar Government Portfolio ........           144,679            42,307
         North American Government Portfolio .......           662,338           587,096
         Utility Income Portfolio ..................         1,085,769            67,034
         Conservative Investors Portfolio...........         1,902,672           168,602
         Growth Investors Portfolio.................           681,600            23,110
         Growth Portfolio...........................         9,261,087            88,309
         Total Return Portfolio.....................         1,309,428            17,782
         Worldwide Privatization Portfolio..........           623,657            24,175

</TABLE>


For the year ended December 31, 1994  investment activity in the Fund was as
follows:


<TABLE>
<CAPTION>

                                                       ---------------   ---------------
                                                           COST OF          PROCEEDS
     SHARES OF                                            PURCHASES        FROM SALES
     ---------------                                   ---------------   ---------------
     <S>                                               <C>               <C>

     Alliance Variable Product Series Fund, Inc.:
         Money Market Portfolio ....................   $     2,951,824   $       844,456
         Premier Growth Portfolio ..................           839,549            56,911
         Growth & Income Portfolio .................         1,774,507           102,841
         International Portfolio ...................         1,258,929            95,363
         Short-Term Multi-Market Portfolio .........           146,207            49,865
         Global Bond Portfolio .....................           247,971            24,290
         U.S. Government/High Grade
             Securities Portfolio ..................           717,751            47,573
         Global Dollar Government Portfolio ........            59,220               293
         North American Government Portfolio .......           885,222            14,219
         Utility Income Portfolio ..................           135,356               775
         Conservative Investors Portfolio...........            69,652                90
         Growth Investors Portfolio.................            31,598                32
         Growth Portfolio...........................           574,622               382
         Total Return Portfolio.....................            47,684                43
         Worldwide Privatization Portfolio..........            63,778                19

</TABLE>

<PAGE>

                  AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY
                              OF NEW YORK (AI LIFE)
                               VARIABLE ACCOUNT A

                    NOTES TO FINANCIAL STATEMENTS (continued)




5.  NET INCREASE (DECREASE) IN ACCUMULATION UNITS
For the year ended December 31, 1995, transactions in accumulation units of the
account were as follows:

<TABLE>
<CAPTION>

                                             MONEY             PREMIER          GROWTH &            INTER-          SHORT-TERM
                                            MARKET             GROWTH            INCOME            NATIONAL        MULTI-MARKET
                                            SERIES             SERIES             SERIES            SERIES            SERIES
            VARIABLE ANNUITY            ---------------    ---------------    --------------    --------------    --------------
<S>                                     <C>                <C>                <C>               <C>               <C>

  Units Purchased ..................       1,474,507.45         255,335.90        275,156.25        106,146.66         80,290.48
  Units Withdrawn ..................         (59,780.26)         (6,829.75)       (12,306.52)       (10,060.65)            (6.30)
  Units Transferred Between Funds ..        (929,873.13)         64,045.33         60,572.38          9,551.85        (14,774.17)
  Units Transferred From (To) AI
   Life.............................        (139,332.95)            -                 -                 -                 -
                                        ---------------    ---------------    --------------    --------------    --------------
  Net Increase (Decrease) ..........         345,521.11         312,551.48        323,422.11        105,637.86         65,510.01
  Units, at Beginning of the Year ..         206,034.73         108,111.20        179,245.69        122,616.95         15,915.04
                                        ---------------    ---------------    --------------    --------------    --------------
  Units, at End of the Year ........         551,555.84         420,662.68        502,667.80        228,254.81         81,425.05
                                        ===============    ===============    ==============    ==============    ==============

  Unit Value at December 31, 1995 ..    $         10.64    $         15.25    $        15.52    $        12.22    $        10.03
                                        ===============    ===============    ==============    ==============    ==============

<CAPTION>

                                            GLOBAL           U.S. GOV'T           GLOBAL           N.AMER.           UTILITY
                                             BOND             HIGH GRD         DOLLAR GOV'T         GOV'T             INCOME
                                            SERIES             SERIES             SERIES            SERIES            SERIES
                                        ---------------    ---------------    --------------    --------------    --------------
<S>                                     <C>                <C>                <C>               <C>               <C>

  Units Purchased ..................          25,508.98         206,884.09         11,512.25         51,797.75         68,523.56
  Units Withdrawn ..................          (2,036.29)         (5,262.62)          (343.45)        (8,644.23)        (1,062.80)
  Units Transferred Between Funds ..          25,325.29         112,980.43           (955.35)       (37,286.74)        21,891.91
  Units Transferred From (To) AI
   Life.............................           -                  -                 -                 -                 -
                                        ---------------    ---------------    --------------    --------------    --------------
  Net Increase (Decrease) ..........          48,797.98         314,601.90         10,213.45          5,866.78         89,352.67
  Units, at Beginning of the Period           27,806.30          75,881.31          5,958.18         89,164.68         13,690.19
                                        ---------------    ---------------    --------------    --------------    --------------
  Units, at Beginning of the Year ..          76,604.28         390,483.21         16,171.63         95,031.46        103,042.86
                                        ===============    ===============    ==============    ==============    ==============
  Units, at End of the Year ........
  Unit Value at December 31, 1995 ..    $         12.24    $         11.38    $        11.81    $        10.55  $          11.64
                                        ===============    ===============    ==============    ==============    ==============

<CAPTION>

                                         CONSERVATIVE          GROWTH                               TOTAL           WORLDWIDE
                                           INVESTORS          INVESTORS           GROWTH            RETURN        PRIVATIZATION
                                            SERIES             SERIES             SERIES            SERIES            SERIES
                                        ---------------    ---------------    --------------    --------------    --------------
<S>                                     <C>                <C>                <C>               <C>               <C>

  Units Purchased ..................         117,399.46          24,345.73        451,869.60         71,975.09         25,896.57
  Units Withdrawn ..................          (1,679.57)           (334.21)       (12,157.07)          (556.36)          (262.73)
  Units Transferred Between Funds ..          41,703.20          35,565.66        280,735.13         44,804.97         30,777.77
  Units Transferred From (To) AI
   Life.............................           -                  -                   554.38          -                 -
                                        ---------------    ---------------    --------------    --------------    --------------
  Net Increase (Decrease) ..........         157,423.09          59,577.18        721,002.04        116,223.70         56,411.61
  Units, at Beginning of the Year ..           6,977.55           3,185.25         56,106.84          4,871.12          6,357.69
                                        ---------------    ---------------    --------------    --------------    --------------
  Units, at End of the Year ........         164,400.64          62,762.43        777,108.88        121,094.82         62,769.30
                                        ===============    ===============    ==============    ==============    ==============

  Unit Value at December 31, 1995 ..    $         11.59    $         11.70    $        13.99    $        11.90    $        11.01
                                        ===============    ===============    ==============    ==============    ==============

</TABLE>


<PAGE>


                  AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY
                              OF NEW YORK (AI LIFE)
                               VARIABLE ACCOUNT A

                    NOTES TO FINANCIAL STATEMENTS (continued)

<TABLE>
<CAPTION>

                                            MONEY             PREMIER          GROWTH &           INTER-          SHORT-TERM
                                            MARKET             GROWTH           INCOME            NATIONAL       MULTI-MARKET
                                            SERIES             SERIES            SERIES           SERIES            SERIES
            VARIABLE ANNUITY II        ----------------    --------------    --------------    -------------    --------------
<S>                                    <C>                 <C>               <C>               <C>              <C>

  Units Purchased .................           -                  -                 -                 -                -
  Units Withdrawn .................           -                    (61.04)           (57.17)          (59.31)         -
  Units Transferred Between Funds .            3,518.68         35,795.31         30,186.10        17,119.79            679.80
  Units Transferred From (To) AI
   Life ...........................           -                  -                 -                 -                -
                                       ----------------    --------------    --------------    -------------    --------------
  Net Increase (Decrease) .........            3,518.68         35,734.27         30,128.93        17,060.48            679.80
  Units, at Beginning of the Year .           -                  -                 -                 -                -
                                       ----------------    --------------    --------------    -------------    --------------
  Units, at End of the Year .......            3,518.68         35,734.27         30,128.93        17,060.48            679.80
                                       ================    ==============    ==============    =============    ==============

  Unit Value at December 31, 1995 .    $          10.65    $        15.26    $        15.52    $       12.23    $        10.03
                                       ================    ==============    ==============    =============    ==============

<CAPTION>

                                            GLOBAL           U.S. GOV'T          GLOBAL           N.AMER.          UTILITY
                                             BOND             HIGH GRD        DOLLAR GOV'T         GOV'T            INCOME
                                            SERIES             SERIES            SERIES           SERIES            SERIES
                                       ----------------    --------------    --------------    -------------    --------------
<S>                                    <C>                 <C>               <C>               <C>              <C>

  Units Purchased .................           -                  -                 -                 -                -
  Units Withdrawn .................               (0.47)           (58.92)         -                 -                   (1.29)
  Units Transferred Between Funds .            2,930.50          5,054.53          -                 -                5,017.70
  Units Transferred From (To) AI
   Life............................           -                  -                 -                 -                -
                                       ----------------    --------------    --------------    -------------    --------------
  Net Increase (Decrease) .........            2,930.03          4,995.61          -                 -                5,016.41
  Units, at Beginning of the Period           -                  -                 -                 -                -
                                       ----------------    --------------    --------------    -------------    --------------
  Units, at Beginning of the Year .            2,930.03          4,995.61          -                 -                5,016.41
                                       ================    ==============    ==============    =============    ==============
  Units, at End of the Year .......
  Unit Value at December 31, 1995 .    $          12.25    $        11.38    $        11.13    $        9.84    $        11.64
                                       ================    ==============    ==============    =============    ==============


<CAPTION>

                                        CONSERVATIVE           GROWTH                             TOTAL           WORLDWIDE
                                          INVESTORS          INVESTORS           GROWTH           RETURN        PRIVATIZATION
                                            SERIES             SERIES            SERIES           SERIES            SERIES
                                       ----------------    --------------    --------------    -------------    --------------
<S>                                    <C>                 <C>               <C>               <C>              <C>

  Units Purchased .................           -                  -                 -                 -                -
  Units Withdrawn .................           -                  -                 -                 -                -
  Units Transferred Between Funds .           -                  -                 2,064.78          -                -
  Units Transferred From (To) AI
   Life............................           -                  -                 -                 -                -
                                       ----------------    --------------    --------------    -------------    --------------
  Net Increase (Decrease) .........           -                  -                 2,064.78          -                -
  Units, at Beginning of the Year .           -                  -                 -                 -                -
                                       ----------------    --------------    --------------    -------------    --------------
  Units, at End of the Year .......           -                  -                 2,064.78          -                -
                                       ================    ==============    ==============    =============    ==============

  Unit Value at December 31, 1995 .    $          11.19    $        11.34    $        14.00    $       11.39    $        11.01
                                       ================    ==============    ==============    =============    ==============


</TABLE>
<PAGE>
                 AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY
                                  OF NEW YORK
                                 80 PINE STREET
                            NEW YORK, NEW YORK 10005
                  INDIVIDUAL SINGLE PURCHASE PAYMENT DEFERRED
                           VARIABLE ANNUITY CONTRACTS
                                   ISSUED BY
                               VARIABLE ACCOUNT A
                                      AND
                 AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY
                                  OF NEW YORK
 
    The  Individual Single Purchase Payment  Deferred Variable Annuity Contracts
(the "Contracts")  described  in this  Prospectus  provide for  accumulation  of
Contract  Values and payment  of monthly annuity payments.  The Contracts may be
used by individuals  in retirement plans  which do not  qualify for federal  tax
advantages  ("Non-Qualified Contracts")  or in connection  with retirement plans
which may qualify as Individual  Retirement Annuities ("IRA") under Section  408
of  the Internal Revenue Code of 1986, as amended (the "Code") or Section 403(b)
of the Code ("403(b) Plan"). The  Contracts will not be available in  connection
with  retirement plans designed by American International Life Assurance Company
of New  York  (the "Company")  which  qualify  for the  federal  tax  advantages
available  under Sections 401 & 457 of the Code. Purchasers intending to use the
Contracts in connection with an IRA or  a 403(b) Plan should seek competent  tax
advice.

   
 
    Purchase  payments  for  the Contracts  will  be allocated  to  a segregated
investment account of  the Company  which account has  been designated  Variable
Account  A (the "Variable  Account"). The Variable Account  invests in shares of
Alliance Variable Products  Series Fund, Inc.  (the "Fund"). The  Fund has  made
available   the  following   Portfolios:  Money   Market  Portfolio;  Short-Term
Multi-Market  Portfolio;  Growth   Portfolio;  Growth   and  Income   Portfolio;
International  Portfolio; U.S. Government/High Grade Securities Portfolio; North
American  Government  Income  Portfolio;  Global  Dollar  Government  Portfolio;
Utility Income Portfolio; Global Bond Portfolio; Premier Growth Portfolio; Total
Return  Portfolio; Conservative Investors Portfolio; Growth Investors Portfolio;
Technology Portfolio,  and  Worldwide Privatization  Portfolio.  (See  "Alliance
Variable  Products Series  Fund, Inc. on  Page    .) The Fund  consists of other
Portfolios which are not currently available for use by Variable Account A.
 
    This Prospectus concisely sets forth the information a prospective  investor
ought  to know before  investing. Additional information  about the Contracts is
contained in the "Statement of Additional Information" which is available at  no
charge.  The  Statement  of  Additional  Information  has  been  filed  with the
Securities and Exchange Commission and is hereby incorporated by reference.  The
Table  of Contents of  the Statement of  Additional Information can  be found on
page   of this Prospectus. For the Statement of Additional Information dated May
1, 1996, call  or write  American International  Life Assurance  Company of  New
York;  Attention: Variable Products, 80 Pine  Street, New York, New York, 10005,
1-800-340-2765.
 
    INQUIRIES:  Contract  Owner inquiries  can be  made by  calling the  service
office at 1-800-255-8402.
 
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.
 
    PLEASE  READ  THIS  PROSPECTUS  CAREFULLY  AND  RETAIN  IT  FOR  YOUR FUTURE
REFERENCE.
 
    THE CONTRACTS OFFERED BY THIS PROSPECTUS ARE NOT AVAILABLE IN ALL STATES.
 
                                                 Date of Prospectus: May 1, 1996
    

<PAGE>
                                 TABLE CONTENTS
 
   
<TABLE>
<CAPTION>
                                                                                                                PAGE
                                                                                                                -----
<S>                                                                                                          <C>
Definitions................................................................................................           3
Highlights.................................................................................................           4
Summary of Expenses........................................................................................           5
Calculation of Performance Data............................................................................           9
The Company................................................................................................          10
The Variable Account.......................................................................................          11
Alliance Variable Products Series Fund, Inc................................................................          11
Charges and Deductions.....................................................................................          15
Administration of the Contracts............................................................................          17
Rights under the Contracts.................................................................................          17
Annuity Period.............................................................................................          18
Death Benefit..............................................................................................          19
Purchasing a Contract......................................................................................          20
Contract Value.............................................................................................          21
Withdrawals................................................................................................          21
Taxes......................................................................................................          22
Table of Contents of the Statement of Additional Information...............................................          26
Appendix -- General Account Option.........................................................................         A-1
</TABLE>
    

 
                                       2
<PAGE>
   

                                  DEFINITIONS
 
ACCUMULATION PERIOD -- The period prior to the Annuity Date.
 
ACCUMULATION  UNIT -- Accounting unit of  measure used to calculate the Contract
Value prior to the Annuity Date.
 
AGE -- Age means age last birthday.
 
ANNUITANT -- The  person upon  whose continuation  of life  any annuity  payment
involving life contingencies depends. The Annuitant is named in the application.
 
ANNUITY DATE -- The date at which annuity payments are to begin.
 
ANNUITY  UNIT -- Accounting  unit of measure used  to calculate variable annuity
payments.
 
BENEFICIARY -- The person or persons  named in the application who will  receive
any  benefit upon the death  of the Contract Owner  (or Annuitant as applicable)
prior to the Annuity Date.
 
CONTINGENT OWNER --  The Contingent Owner,  if any,  must be the  spouse of  the
Contract Owner as named in the application, unless changed.
 
CONTRACT  ANNIVERSARY -- The  same month and date  as the Date  of Issue in each
subsequent year of the Contract.
 
CONTRACT OWNER -- The  person designated as Contract  Owner in the  application,
unless changed.
 
CONTRACT VALUE -- The value of all amounts accumulated under the Contract.
 
CONTRACT  YEAR -- Any period  of twelve (12) months  commencing with the Date of
Issue and each Contract Anniversary thereafter.
 
DATE OF ISSUE -- The date when the purchase payment was invested.
 
DEFERRED SALES CHARGE --  The sales charge that  may be applied against  amounts
withdrawn  prior to the  Annuity Date if  withdrawal is within  six years of the
Date of Issue.
 
GENERAL ACCOUNT --  All of the  Company's assets  other than the  assets of  the
Variable Account and any other separate accounts of the Company.
 
OFFICE  --  The  Annuity Service  Office  of  the Company:  c/o  Delaware Valley
Financial Services, Inc., 300 Berwyn  Park, P.O. Box 3031, Berwyn,  Pennsylvania
19312-0031.
 
VALUATION DATE -- Each day that the New York Stock Exchange is open for trading.
 
VALUATION  PERIOD -- The period commencing as of the close of the New York Stock
Exchange (presently 4 P.M., New York time) on each Valuation Date and ending  as
of  the close of  the New York  Stock Exchange on  the next succeeding Valuation
Date.
 
VARIABLE ACCOUNT --  A separate  investment account of  the Company,  designated
Variable Account A, into which purchase payments will be allocated.
    

 
                                       3
<PAGE>
                                   HIGHLIGHTS
 
    Purchase  payments  for  the Contracts  will  be allocated  to  a segregated
investment account of American International Life Assurance Company of New  York
(the  "Company")  which  account has  been  designated Variable  Account  A (the
"Variable Account"). The Variable Account invests in shares of Alliance Variable
Products Series Fund, Inc. (the "Fund"). (See "Alliance Variable Products Series
Fund, Inc." on page   .)
 
   
    The Contracts provide that in the event that a Contract Owner withdraws  all
or  a portion  of the  Contract Value  within six  Contract Years  there will be
assessed a Deferred Sales Charge. The Deferred Sales Charge is based on a  table
of  charges, of which the  maximum charge is currently  6% of the Contract Value
subject to  a  maximum  of 8.5%  of  the  purchase payment.  (See  "Charges  and
Deductions -- Deduction for Deferred Sales Charge" on page   .)
    
 
    Any premium or other taxes levied by any governmental entity with respect to
the  Contracts  will be  charged against  the purchase  payment or  the Contract
Value. Premium taxes currently imposed by certain states on the Contracts  range
from  0% to 3.5%. The Company will also deduct from any amount payable under the
Contracts any  income taxes  a governmental  authority requires  the Company  to
withhold  with respect to that amount. (See "Charges and Deductions -- Deduction
for Premium and Other Taxes" on page   .)
 
    The Company deducts from the Contract Value and/or the Variable Account  any
Federal  income taxes resulting from the  operation of the Variable Account. The
Company does not currently anticipate incurring any income taxes. (See  "Charges
and Deductions -- Deduction for Income Taxes" on page   .)
 
    The  Company deducts for each Valuation  Period a Mortality and Expense Risk
Charge which is equal on an annual basis to 1.25% of the average daily net asset
value of the  Variable Account. (See  "Charges and Deductions  -- Deduction  for
Mortality and Expense Risk Charge" on page   .)
 
    The  Company deducts an annual Administrative Charge, which is currently $30
per year, from the  Contract Value to reimburse  it for administrative  expenses
relating  to maintenance of  the Contract and the  Variable Account. The Company
may increase this charge to an amount not to exceed $100 per year. (See "Charges
and Deductions -- Deduction for Administrative Charge" on page   .)
 
    There are deductions and expenses paid out  of the assets of the Fund  which
are described in the accompanying Prospectus for the Fund.
 
    There  is a 10% tax  penalty applied to the  income portion of any premature
distribution from the Contracts. However, the penalty is not imposed on  amounts
received:  (a) after the taxpayer reaches age 59 1/2; (b) after the death of the
Annuitant (or Contract  Owner, as applicable);  (c) if the  taxpayer is  totally
disabled;  (d) in a series of substantially equal periodic payments made for the
life of the taxpayer or for the joint lives of the taxpayer and his beneficiary;
(e) under an immediate annuity; or (f) which are allocable to purchase  payments
made   prior  to  August   14,  1982.  Withdrawals   are  deemed  to   be  on  a
last-in-first-out basis. (See  "Taxes --  Taxation of Annuities  in General"  on
page   )
 
    The  Contract Owner may return the Contract  within ten (10) days (the "Free
Look Period") after it is received by delivering or mailing it to the  Company's
Office.  If the Contract is  purchased in Kansas or  South Carolina and replaces
any existing life insurance policy or annuity, the Contract Owner will be  given
a  twenty (20) day Free Look Period. The  return of the Contract by mail will be
effective when  the postmark  is affixed  to a  properly addressed  and  postage
prepaid  envelope. The Company  will refund the Contract  Value. However, if the
laws of a state require that the Company refund, during the Free Look Period, an
amount equal to the purchase payment paid less any withdrawals, the Company will
refund such an amount. In the case of Contracts issued in connection with an IRA
the  Company  will  refund  the  greater  of  the  purchase  payment,  less  any
withdrawals, or the Contract Value.
 
                                       4
<PAGE>
                              SUMMARY OF EXPENSES
 
OWNER TRANSACTION EXPENSES

   
 
<TABLE>
<CAPTION>
                                                    ALL
                                                    SUBACCOUNTS
                                                    -----
<S>                                                 <C>
Sales Load Imposed on Purchases...................   None
 
Deferred Sales Charge (as a percentage of amount
 surrendered):
Contract Year 1                                        6%
Contract Year 2                                        5%
Contract Year 3                                        4%
Contract Year 4                                        3%
Contract Year 5                                        2%
Contract Year 6                                        1%
Contract Year 7 and thereafter                       None
 
Exchange Fee Currently:
  First 12 Per Contract Year......................   None
  Thereafter......................................    $10
 
Annual Contract Fee...............................    $30
 
Separate Account Expenses
 (as a percentage of average account value)
  Mortality and Expense Risk Fees.................  1.25%
  Account Fees and Expenses.......................  0.15%
Total Separate Account Annual Expenses............  1.40%
</TABLE>
 
ANNUAL FUND EXPENSES AFTER EXPENSE REIMBURSEMENTS*
 
<TABLE>
<CAPTION>
                                                                                                                  TOTAL
                                                                                                    OTHER       PORTFOLIO
PORTFOLIO                                                                       MANAGEMENT FEE     EXPENSES      EXPENSES
- ------------------------------------------------------------------------------  ---------------  ------------  ------------
<S>                                                                             <C>              <C>           <C>
Alliance Money Market.........................................................         0.38%           0.57%         0.95%
Alliance Short-Term Multi-Market..............................................         0.20            0.75          0.95
Alliance Growth...............................................................         0.43            0.52          0.95
Alliance Growth and Income....................................................         0.63            0.16          0.79
Alliance International........................................................         0.00            0.95          0.95
Alliance U.S. Government/High Grade Securities................................         0.00            0.95          0.95
Alliance North American Government Income.....................................         0.00            0.95          0.95
Alliance Global Dollar Government.............................................         0.00            0.95          0.95
Alliance Utility Income.......................................................         0.00            0.95          0.95
Alliance Global Bond..........................................................         0.00            0.95          0.95
Alliance Premier Growth.......................................................         0.76            0.19          0.95
Alliance Total Return.........................................................         0.00            0.95          0.95
Alliance Conservative Investors...............................................         0.00            0.95          0.95
Alliance Growth Investors.....................................................         0.00            0.95          0.95
Alliance Worldwide Privatization..............................................         0.00            0.95          0.95
Alliance Technology...........................................................         0.00            0.95          0.95
</TABLE>
 
    The  purpose  of  the  table set  forth  above  is to  assist  the  Owner in
understanding the various costs and expenses that an Owner will bear directly or
indirectly. The table reflects expenses of  the Variable Account as well as  the
Fund.  The Annual  Contract fee  for purposes of  the Expense  Table, above, was
based upon the assessment of  a $30 charge on a  Contract Value of $5,000.  (See
"Charges  and Deductions" on  page    of this Prospectus  and "Management of the
Fund" in the Fund Prospectus.)
 
                                       5
<PAGE>
    Any premium or other taxes levied by any governmental entity with respect to
the Contracts will be charged against the purchase payment or the Contract Value
based on  a percentage  of premiums  paid. Premium  taxes currently  imposed  by
certain  states on the  Contracts range from  0% to 3.5%  of premiums paid. (See
"Charges and Deductions -- Deduction for Premium and Other Taxes" on page   .)
 
    "Other Expenses" are estimated  based upon the  expenses outlined under  the
section entitled "Management of the Fund" in the Fund Prospectus.
- ------------------------
    *Expense   information  for  the  Money  Market  Portfolio,  Premier  Growth
Portfolio,  U.S.  Government/High  Grade  Securities  Portfolio,  Total   Return
Portfolio,  International  Portfolio,  Growth and  Income  Portfolio, Short-Term
Multi-Market Portfolio and Global Bond  Portfolio have been restated to  reflect
current  fees. The expenses listed in the  table for the Money Market Portfolio,
Premier Growth  Portfolio, Growth  and  Income Portfolio,  U.S.  Government/High
Grade  Securities  Portfolio, Total  Return Portfolio,  International Portfolio,
Short-Term  Multi-Market  Portfolio,  Global  Bond  Portfolio,  North   American
Government  Income Portfolio, Global Dollar Government Portfolio, Utility Income
Portfolio, Conservative Investors Portfolio, Growth Investors Portfolio,  Growth
Portfolio, Worldwide Privatization Portfolio and Technology Portfolio are net of
voluntary  expense  reimbursements,  which  are  not  required  to  be continued
indefinitely; however, the Advisor intends  to continue such reimbursements  for
the foreseeable future. The expenses of the following Portfolios, before expense
reimbursements,  would be: Money Market Portfolio: Management Fees -- 50%, Other
Expenses -- .57% and Total Portfolio Operating Expenses -- 1.07%; Premier Growth
Portfolio: Management Fees -- 1.00%, Other Expenses -- .19% and Total  Portfolio
Operating  Expenses --  1.19%; Growth and  Income Portfolio:  Management Fees --
 .63%, Other Expenses  -- .16% and  Total Portfolio Operating  Expenses --  .79%;
U.S.  Government/High Grade Securities Portfolio: Management Fees -- .60%, Other
Expenses -- .98% and Total Portfolio  Operating Expenses -- 1.58%; Total  Return
Portfolio:  Management Fees -- .63%, Other Expenses -- 3.86% and Total Portfolio
Operating Expenses -- 4.49%; International Portfolio: Management Fees --  1.00%,
Other  Expenses  --  1.99%  and Total  Portfolio  Operating  Expenses  -- 2.99%;
Short-Term Multi-Market Portfolio:  Management Fees --  .55%, Other Expenses  --
 .75%  and Total  Portfolio Operating Expenses  -- 1.30%;  Global Bond Portfolio:
Management Fees -- .65%, Other Expenses  -- 1.12% and Total Portfolio  Operating
Expenses  -- 1.77%; North American  Government Income Portfolio: Management Fees
- -- .65%,  Other Expenses  -- 1.92%  and Total  Portfolio Operating  Expenses  --
2.57%;  Global  Dollar  Government  Portfolio: Management  Fees  --  .75%, Other
Expenses --  4.07% and  Total  Portfolio Operating  Expenses --  4.82%;  Utility
Income  Portfolio: Management  Fees -- .75%,  Other Expenses --  3.04% and Total
Portfolio  Operating  Expenses  --  3.79%;  Worldwide  Privatization  Portfolio:
Management  Fees -- 1.00%, Other Expenses -- 3.17% and Total Portfolio Operating
Expenses -- 4.17%;  Conservative Investors Portfolio:  Management Fees --  .75%,
Other  Expenses -- 3.50% and Total  Portfolio Operating Expense -- 4.25%; Growth
Investors Portfolio: Management Fees -- .75%, Other Expenses -- 5.42% and  Total
Portfolio  Operating  Expenses --  6.17%; Growth  Portfolio: Management  Fees --
 .75%, Other Expenses --  .52% and Total Portfolio  Operating Expenses --  1.27%.
The   estimated   expenses   of  the   Technology   Portfolios   before  expense
reimbursements would be:  Technology Portfolio: Management  Fees -- 1.0%,  Other
Expenses  -- 1.55% and Total Operating Expenses -- 2.55%. THE EXAMPLE SHOULD NOT
BE CONSIDERED REPRESENTATIVE OF FUTURE EXPENSES: ACTUAL EXPENSES MAY BE  GREATER
OR LESS THAN THOSE SHOWN.
 
                                       6
<PAGE>
EXPENSES ON A HYPOTHETICAL $1,000 POLICY, ASSUMING 5% GROWTH:
<TABLE>
<CAPTION>
                                                                                 IF YOU SURRENDER
                                                                --------------------------------------------------
PORTFOLIO                                                         1 YEAR       3 YEARS      5 YEARS     10 YEARS
- --------------------------------------------------------------  -----------  -----------  -----------  -----------
<S>                                                             <C>          <C>          <C>          <C>
Alliance Money Market.........................................   $      80    $     114    $     149    $     275
Alliance Short Term Multi-Market..............................          80          114          149          275
Alliance Growth...............................................          80          114          149          275
Alliance Growth and Income....................................          78          109          141          258
Alliance International........................................          80          114          149          275
Alliance U.S. Gov't/High Grade Securities.....................          80          114          149          275
Alliance North American Gov't Income..........................          80          114          149          275
Alliance Global Dollar Government.............................          80          114          149          275
Alliance Utility Income.......................................          80          114          149          275
Alliance Global Bond..........................................          80          114          149          275
Alliance Premier Growth.......................................          80          114          149          275
Alliance Total Return.........................................          80          114          149          275
Alliance Conservative Investors...............................          80          114          149          275
Alliance Growth Investors.....................................          80          114          149          275
Alliance Worldwide Privatization..............................          80          114          149          275
Alliance Technology...........................................          80          114          149          275
 
<CAPTION>
 
                                                                               IF YOU ANNUITIZE OR
                                                                             IF YOU DO NOT SURRENDER
                                                                --------------------------------------------------
PORTFOLIO                                                         1 YEAR       3 YEARS      5 YEARS     10 YEARS
- --------------------------------------------------------------  -----------  -----------  -----------  -----------
<S>                                                             <C>          <C>          <C>          <C>
Alliance Money Market.........................................   $      24    $      75    $     129    $     275
Alliance Short Term Multi-Market..............................          24           75          129          275
Alliance Growth...............................................          24           75          129          275
Alliance Growth and Income....................................          23           70          120          258
Alliance International........................................          24           75          129          275
Alliance U.S. Gov't/High Grade Securities.....................          24           75          129          275
Alliance North American Gov't Income..........................          24           75          129          275
Alliance Global Dollar Government.............................          24           75          129          275
Alliance Utility Income.......................................          24           75          129          275
Alliance Global Bond..........................................          24           75          129          275
Alliance Premier Growth.......................................          24           75          129          275
Alliance Total Return.........................................          24           75          129          275
Alliance Conservative Investors...............................          24           75          129          275
Alliance Growth Investors.....................................          24           75          129          275
Alliance Worldwide Privatization..............................          24           75          129          275
Alliance Technology...........................................          24           75          129          275
</TABLE>
 
    THE  EXAMPLE SHOULD  NOT BE  CONSIDERED A  REPRESENTATION OF  PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
 
                                       7
<PAGE>
                        CONDENSED FINANCIAL INFORMATION
                           ACCUMULATION UNIT VALUES*
 
<TABLE>
<CAPTION>
                                                               1995           1994          1993         1992
                                                           -------------  -------------  -----------  ----------
<S>                                                        <C>            <C>            <C>          <C>
ALLIANCE MONEY MARKET
  Accumulation Unit Value
    Beginning of Period..................................          10.27          10.07        10.00         N/A
    End of Period........................................          10.64          10.27        10.07         N/A
  Accum Units o/s @ end of period........................     551,555.84     206,034.73     1,590.74         N/A
ALLIANCE SHORT-TERM MULTI-MARKET
  Accumulation Unit Value
    Beginning of Period..................................           9.51          10.31         9.79       10.00
    End of Period........................................          10.03           9.51        10.31        9.79
  Accum Units o/s @ end of period........................      81,425.05      15,915.04     6,843.27    8,369.93
ALLIANCE GROWTH
  Accumulation Unit Value
    Beginning of Period..................................          10.48          11.13        10.00       10.00
    End of Period........................................          13.99          10.48        11.13       10.00
  Accum Units o/s @ end of period........................     777,108.88      56,104.84    35,271.53    2,081.43
ALLIANCE GROWTH & INCOME
  Accumulation Unit Value
    Beginning of Period..................................          11.57          11.76        10.66       10.00
    End of Period........................................          15.52          11.57        11.76       10.66
  Accum Units o/s @ end of period........................     502,667.80     179,245.69    37,573.04    7,731.36
ALLIANCE INTERNATIONAL
  Accumulation Unit Value
    Beginning of Period..................................          11.27          10.69        10.00         N/A
    End of Period........................................          12.22          11.27        10.69         N/A
  Accum Units o/s @ end of period........................     228,254.81     122,616.95    22,441.08         N/A
ALLIANCE U.S. GOVERNMENT/HIGH GRADE
  Accumulation Unit Value
    Beginning of Period..................................           9.66          10.17        10.00         N/A
    End of Period........................................          11.38           9.66        10.17         N/A
  Accum Units o/s @ end of period........................     390,483.21      75,881.31     7,608.84         N/A
ALLIANCE NORTH AMERICAN GOVERNMENT INCOME
  Accumulation Unit Value
    Beginning of Period..................................           8.71          10.00          N/A         N/A
    End of Period........................................          10.55           8.71          N/A         N/A
  Accum Units o/s @ end of period........................      95,031.46      89,164.68          N/A         N/A
ALLIANCE GLOBAL DOLLAR GOVERNMENT
  Accumulation Unit Value
    Beginning of Period..................................           9.73          10.00          N/A         N/A
    End of Period                                                  11.81           9.73          N/A         N/A
  Accum Units o/s @ end of period........................      16,171.63       5,958.18          N/A         N/A
ALLIANCE UTILITY INCOME
  Accumulation Unit Value
    Beginning of Period..................................           9.71          10.00          N/A         N/A
    End of Period........................................          11.64           9.71          N/A         N/A
  Accum Units o/s @ end of period........................     103,042.86      13,690.19          N/A         N/A
</TABLE>
 
                                       8
<PAGE>
<TABLE>
<CAPTION>
                                                               1995           1994          1993         1992
                                                           -------------  -------------  -----------  ----------
<S>                                                        <C>            <C>            <C>          <C>
ALLIANCE GLOBAL BOND
  Accumulation Unit Value
    Beginning of Period..................................           9.94          10.61        10.00         N/A
    End of Period........................................          12.24           9.94        10.61         N/A
  Accum Units o/s @ end of period........................      76,604.28      27,806.30     5,589.55         N/A
ALLIANCE PREMIER GROWTH
  Accumulation Unit Value
    Beginning of Period..................................          10.66          10.00          N/A         N/A
    End of Period........................................          15.25          10.66          N/A         N/A
  Accum Units o/s @ end of period........................     420,662.68     108,111.20          N/A         N/A
ALLIANCE TOTAL RETURN
  Accumulation Unit Value
    Beginning of Period..................................           9.75          10.00          N/A         N/A
    End of Period........................................          11.90           9.75          N/A         N/A
  Accum Units o/s @ end of period........................     121,094.82       4,871.12          N/A         N/A
ALLIANCE CONSERVATIVE INVESTORS
  Accumulation Unit Value
    Beginning of Period..................................          10.03          10.00          N/A         N/A
    End of Period........................................          11.59          10.03          N/A         N/A
  Accum Units o/s @ end of period........................     164,400.64       6,977.55          N/A         N/A
ALLIANCE GROWTH INVESTORS
  Accumulation Unit Value
    Beginning of Period..................................           9.83          10.00          N/A         N/A
    End of Period........................................          11.70           9.83          N/A         N/A
  Accum Units o/s @ end of period........................      62,762.43       3,185.25          N/A         N/A
ALLIANCE WORLDWIDE PRIVATIZATION
  Accumulation Unit Value
    Beginning of Period..................................          10.05          10.00          N/A         N/A
    End of Period........................................          11.01          10.05          N/A         N/A
  Accum Units o/s @ end of period........................      62,769.30       6,357.69          N/A         N/A
ALLIANCE TECHNOLOGY
  Accumulation Unit Value
    Beginning of Period..................................            N/A            N/A          N/A         N/A
    End of Period........................................            N/A            N/A          N/A         N/A
  Accum Units o/s @ end of period........................            N/A            N/A          N/A         N/A
</TABLE>
 
- ------------------------
    *Funds were first invested in the Portfolios as listed below:
 
<TABLE>
<S>                                                  <C>
Premier Growth Portfolio                              December 7, 1992
Growth & Income Portfolio                               April 17, 1992
Short-Term Multi-Market Portfolio                        June 25, 1992
Global Bond Portfolio                                     May 10, 1993
Money Market Portfolio                                    May 13, 1993
International Portfolio                                   June 1, 1993
U.S. Government/High Grade Securities Portfolio          June 14, 1993
North American Government Income Portfolio              April 11, 1994
Global Dollar Government Portfolio                      April 20, 1994
Utility Income Portfolio                                April 20, 1994
Conservative Investors Portfolio                       August 24, 1994
Growth Investors Portfolio                             August 16, 1994
Growth Portfolio                                       August 16, 1994
Total Return Portfolio                                 August 26, 1994
Worldwide Privatization Portfolio                      August 16, 1994
Technology Portfolio                                  January 10, 1996
</TABLE>
 
    

                                       9
<PAGE>
CALCULATION OF PERFORMANCE DATA
 
    The Company may, from  time to time,  advertise certain performance  related
information concerning one or more of the Sub-accounts, including information as
to  total return and yield. PERFORMANCE INFORMATION ABOUT A SUB-ACCOUNT IS BASED
ON THE SUB-ACCOUNT'S PAST PERFORMANCE ONLY AND IS NOT INTENDED AS AN  INDICATION
OF FUTURE PERFORMANCE.
 
    When   the  Company  advertises  the  average   annual  total  return  of  a
Sub-account, it will usually be calculated  for one, five, and ten year  periods
or,  where a Sub-account has been in existence  for a period less than one, five
or ten years, for such lesser period. Average annual total return is measured by
comparing the value of the investment in  a Sub-account at the beginning of  the
relevant  period  to  the value  of  the investment  at  the end  of  the period
(assuming the deduction of any Deferred  Sales Charge which would be payable  if
the  account were redeemed at the end of the period) and calculating the average
annual compounded  rate  of  return  necessary  to  produce  the  value  of  the
investment  at the  end of  the period.  The Company  may simultaneously present
returns that  do  not assume  a  surrender and,  therefore,  do not  deduct  the
Deferred Sales Charge.
 
    When the Company advertises the yield of a Sub-account it will be calculated
based upon a 30-day period ended on the date of the most recent balance sheet of
the  Company included in its registration  statement. The yield is determined by
dividing the  net investment  income  per Accumulation  Unit earned  during  the
period by the maximum offering price per unit on the last day of the period.
 
    When  the Company advertises the performance of the Money Market Sub-account
it may  advertise in  addition  to the  total return  either  the yield  or  the
effective  yield. The yield of the Money Market Sub-account refers to the income
generated by an investment in that  Sub-account over a 7-day period. The  income
is  then  annualized (i.e.,  the amount  of income  generated by  the investment
during that week is assumed to be generated each week over a 52-week period  and
is  shown as a percentage of the  investment). The effective yield is calculated
similarly but when annualized  the income earned by  an investment in the  Money
Market  Sub-account is  assumed to  be reinvested.  The effective  yield will be
slightly higher than the yield because of the compounding effect of this assumed
reinvestment during a 52-week period.
 
    Total return  at the  Variable  Account level  is  reduced by  all  contract
charges:   sales  charges,   mortality  and   expense  risk   charges,  and  the
administrative charge, and is therefore lower than the total return at the  Fund
level,  which has no comparable charges.  Likewise, yield and effective yield at
the Variable Account level take into account all recurring charges (except sales
charges), and are therefore lower than the yield and effective yield at the Fund
level, which has no comparable charges.
 
    Performance information  for  a Sub-account  may  be compared  to:  (i)  the
Standard  & Poor's 500 Stock Index, Dow Jones Industrial Average, Donoghue Money
Market Institutional Averages, indices  measuring corporate bond and  government
security  prices as prepared  by Shearson Lehman Hutton  and Salomon Brothers or
other indices measuring performance of a  pertinent group of securities so  that
investors  may  compare  a  Sub-account's  results  with  those  of  a  group of
securities widely  regarded by  investors as  representative of  the  securities
markets  in  general; (ii)  other variable  annuity  separate accounts  or other
investment products  tracked  by  Lipper  Analytical  Services,  a  widely  used
independent  research  firm  which  ranks  mutual  funds  and  other  investment
companies by overall performance, investment objectives, and assets, or  tracked
by other ratings services, companies, publications, or persons who rank separate
accounts  or other investment products on overall performance or other criteria;
(iii) the Consumer Price Index (measure  for inflation) to assess the real  rate
of  return from an investment  in the Contract; and  (iv) indices or averages of
alternative financial products available to prospective investors, including the
BANK RATE MONITOR which monitors average returns of various bank instruments.
 
FINANCIAL DATA
 
    Financial Statements of the Company and the Variable Account may be found in
the Statement of Additional Information.
 
                                       10
<PAGE>
                                  THE COMPANY
 
    American International Life Assurance Company of New York (the "Company") is
a stock life insurance company which was  organized under the laws of the  State
of  New York in  1962. The Company provides  a full range  of life insurance and
annuity plans.  The Company  is a  subsidiary of  American International  Group,
Inc.,  which serves as the holding company  for a number of companies engaged in
the international  insurance  business,  both  life and  general,  in  over  130
countries and jurisdictions around the world.

   
    The   Company  may  from  time-to-time   publish  in  advertisements,  sales
literature and reports to Owners, the ratings and other information assigned  to
it  by one or more independent rating  organizations such as A. M. Best Company,
Moody's, and Standard &  Poor's. The purpose  of the ratings  is to reflect  the
financial strength and/or claims-paying ability of the Company and should not be
considered  as  bearing on  the  investment performance  of  assets held  in the
separate account. Each year the A. M. Best Company reviews the financial  status
of thousands of insurers, culminating in the assignment of Best's Ratings. These
ratings  reflect A. M. Best's current opinion of the relative financial strength
and operating performance of an insurance company in comparison to the norms  of
the  life/ health insurance industry. In  addition, the claims-paying ability of
the Company as measured by Standard & Poor's Insurance Ratings Services, and the
financial strength of the Company as measured by Moody's Investors Services, may
be referred to  in advertisements,  sales literature  or in  reports to  Owners.
These  ratings are their opinions of  an operating insurance company's financial
capacity to meet  the obligations  of its  life insurance  policies and  annuity
contracts  in accordance  with their  terms. In regard  to their  ratings of the
Company, these  ratings are  explicitly  based on  the  existence of  a  Support
Agreement,  dated as of  December 13, 1991,  between the Company  and its parent
American International Group, Inc. ("AIG"), pursuant to which AIG has agreed  to
cause  the Company to maintain  a positive net worth  and to provide the Company
with funds on a timely basis sufficient to meet the Company's obligations to its
policyholders. The  Support Agreement  is  not, however,  a direct  or  indirect
guarantee  by  AIG  to  any  person  of the  payment  of  any  of  the Company's
indebtedness, liabilities  or other  obligations (including  obligations to  the
Company's policyholders).
 
    The ratings are not recommendations to purchase the Company's life insurance
or  annuity products, or to hold or sell  these products, and the ratings do not
comment on the suitability of such products for a particular investor. There can
be no assurance that any  rating will remain in effect  for any given period  of
time  or that any rating  will not be lowered or  withdrawn entirely by a rating
organization if, in such organization's judgment, future circumstances  relating
to  the Support Agreement, such as a lowering of AIG's long-term debt rating, so
warrant. The ratings do not reflect  the investment performance of the  Variable
Account  or the  degree of  risk associated with  an investment  in the Variable
Account.
    

 
                              THE VARIABLE ACCOUNT
 
    The Board of Directors  of the Company adopted  a resolution to establish  a
segregated  asset account pursuant  to New York  insurance law on  June 5, 1986.
This segregated  asset  account has  been  designated Variable  Account  A  (the
"Variable  Account").  The  Company  has  caused  the  Variable  Account  to  be
registered with  the Securities  and Exchange  Commission as  a unit  investment
trust pursuant to the provisions of the Investment Company Act of 1940.
 
    The assets of the Variable Account are the property of the Company. However,
the  assets of the  Variable Account, equal  to the reserves  and other contract
liabilities with  respect  to the  Variable  Account, are  not  chargeable  with
liabilities  arising out of any other  business the Company may conduct. Income,
gains and  losses,  whether  or  not  realized,  are,  in  accordance  with  the
Contracts, credited to or charged against the Variable Account without regard to
other income, gains or losses of
 
                                       11
<PAGE>
the  Company. The Company's obligations arising  under the Contracts are general
corporate obligations of  the Company. The  Variable Account may  be subject  to
liabilities  arising from  Sub-accounts whose  assets are  attributable to other
variable annuity contracts offered by Variable Account A which are not described
in this Prospectus.
 
    The Variable Account is divided into  Sub-accounts, with the assets of  each
Sub-account invested in one Portfolio of the Fund. The Company may, from time to
time,  add additional portfolios to the  Fund, and, when appropriate, additional
mutual funds to act as the funding vehicles for the Contracts.

   
                                    THE FUND
 
    Alliance Variable Products Series Fund, Inc.,  (the "Fund") will act as  the
funding  vehicle  for  the Contracts  offered  hereby.  The Fund  is  managed by
Alliance Capital Management  L.P., (the  "Investment Manager"). The  Fund is  an
open-end,  diversified management investment company,  which is intended to meet
differing investment  objectives.  The Fund  has  made available  the  following
Portfolios:  Money Market  Portfolio; Short-Term  Multi-Market Portfolio; Growth
Portfolio;  Growth   and  Income   Portfolio;  International   Portfolio;   U.S.
Government/High   Grade  Securities  Portfolio;  Global  Bond  Portfolio;  North
American  Government  Income  Portfolio;  Global  Dollar  Government  Portfolio;
Utility  Income  Portfolio; Premier  Growth  Portfolio; Total  Return Portfolio;
Conservative  Investors   Portfolio;  Growth   Investors  Portfolio;   Worldwide
Privatization  Portfolio;  and  Technology Portfolio.  The  fund  includes other
portfolios which  are  not  available  for use  by  the  Variable  Account.  The
Investment  Manager has  entered into a  sub-advisory agreement  with AIG Global
Investors, Inc.  (the "Sub-Adviser"),  a  subsidiary of  American  International
Group,  Inc. and an affiliate  of the Company, to  provide investment advice for
the Global Bond Portfolio.  A summary of investment  objectives is contained  in
the  description  of the  Fund below.  More  detailed information  including the
investment advisory fee and other charges assessed by the Fund, may be found  in
the  current Prospectus for  the Fund which  contains a discussion  of the risks
involved in investing in the Fund. The Prospectus for the Fund is included  with
this  Prospectus.  Additional  Prospectuses  and  the  Statement  of  Additional
Information can be  obtained by calling  the number  on the cover  page of  this
Prospectus. Please read both Prospectuses carefully before investing.
    

    The investment objectives of the portfolios are as follows:
 
MONEY MARKET PORTFOLIO
 
    This  Portfolio  seeks safety  of  principal, maintenance  of  liquidity and
maximum current income by investing in a broadly diversified portfolio of  money
market securities.
 
SHORT-TERM MULTI-MARKET PORTFOLIO
 
    This  Portfolio seeks the  highest level of  current income, consistent with
what the Investment  Manager considers  to be  prudent investment  risk that  is
available  from  a portfolio  of high-quality  debt securities  having remaining
maturities of not more than three years.
 
GROWTH PORTFOLIO
 
    This Portfolio  seeks  growth of  capital  rather than  current  income.  In
pursuing  its investment objective, the  Growth Portfolio will employ aggressive
investment policies. Since investments will  be made based upon their  potential
for  capital appreciation, current income will be incidental to the objective of
capital growth. Because of the risks  involved in any investment, the  selection
of  securities on  the basis of  their appreciation  possibilities cannot ensure
against possible loss in value. Moreover,  to the extent the Portfolio seeks  to
achieve  its objective through such aggressive  investment policies, the risk of
loss increases.  The Portfolio  is therefore  not intended  for investors  whose
principal objective is assured income or preservation of capital.
 
                                       12
<PAGE>
GROWTH AND INCOME PORTFOLIO
 
    This  Portfolio seeks to balance the objectives of reasonable current income
and reasonable opportunities for  appreciation through investments primarily  in
dividend-paying common stocks of good quality.
 
INTERNATIONAL PORTFOLIO
 
    This  Portfolio seeks to obtain a total  return on its assets from long-term
growth of  capital and  from income  principally through  a broad  portfolio  of
marketable  securities  of established  non-United  States companies  (or United
States companies having  their principal  activities and  interests outside  the
United  States), companies participating in foreign economies with prospects for
growth, and foreign government securities.
 
NORTH AMERICAN GOVERNMENT INCOME PORTFOLIO
 
    This Portfolio seeks the  highest level of  current income, consistent  with
what the adviser considers to be prudent investment risk, that is available from
a  portfolio of debt securities  issued or guaranteed by  the governments of the
United States,  Canada  and  Mexico,  their  political  subdivisions  (including
Canadian  Provinces but  excluding the States  of the  United States), agencies,
instrumentalities or authorities.  The Portfolio  seeks high  current yields  by
investing  in  government  securities  denominated in  local  currency  and U.S.
Dollars. Normally, the Portfolio expects to maintain at least 25% of its  assets
in securities denominated in the U.S. Dollar.
 
GLOBAL DOLLAR GOVERNMENT PORTFOLIO
 
    This  portfolio  seeks  a high  level  of current  income  through investing
substantially all of  its assets in  U.S. and non-U.S.  fixed income  securities
denominated  only in U.S. Dollars. As a secondary objective, the Portfolio seeks
capital appreciation.  Substantially  all  of the  Portfolio's  assets  will  be
invested  in high  yield, high risk  securities that are  low-rated (i.e., below
investment grade), or of comparable quality and unrated, and that are considered
to be predominately speculative as regards the issuer's capacity to pay interest
and repay principal.
 
UTILITY INCOME PORTFOLIO
 
    This Portfolio seeks  current income and  capital appreciation by  investing
primarily  in  the  equity  and  fixed-income  securities  of  companies  in the
"utilities industry."  The Portfolio's  investment  objective and  policies  are
designed  to take advantage of the characteristics and historical performance of
securities of utilities companies. The utilities industry consists of  companies
engaged  in  the manufacture,  production, generation,  provision, transmission,
sale and distribution of gas, electric energy, and communications equipment  and
services,  and in  the provision of  other utility or  utility-related goods and
services.
 
U.S. GOVERNMENT/HIGH GRADE SECURITIES PORTFOLIO
 
    This Portfolio  seeks  a  high  level  of  current  income  consistent  with
preservation  of  capital  by  investing  principally  in  a  portfolio  of U.S.
Government Securities, and other high grade debt securities.
 
GLOBAL BOND PORTFOLIO
 
    This Portfolio  seeks  to  provide  the  highest  level  of  current  income
consistent  with what the Fund's Adviser  and Sub-Adviser consider to be prudent
investment risk  that  is available  from  a multi-currency  portfolio  of  high
quality debt securities of varying maturities.
 
PREMIER GROWTH PORTFOLIO
 
    This  Portfolio  seeks  growth of  capital  rather than  current  income. In
pursuing its  investment objective,  the Premier  Growth Portfolio  will  employ
aggressive  investment policies. Since  investments will be  made based on their
potential for capital  appreciation, current  income will be  incidental to  the
objective  of capital growth. The Portfolio  is not intended for investors whose
principal objective is assured income or preservation of capital.
 
                                       13
<PAGE>
TOTAL RETURN PORTFOLIO
 
    This Portfolio  seeks to  achieve a  high return  through a  combination  of
current  income and capital appreciation by investing in a diversified portfolio
of common  and preferred  stocks,  senior corporate  debt securities,  and  U.S.
Government and Agency obligations, bonds and senior debt securities.
 
CONSERVATIVE INVESTORS PORTFOLIO
 
    This  Portfolio seeks the highest  total return without, in  the view of the
Fund's Adviser, undue  risk to principal  by investing in  a diversified mix  of
publicly traded equity and fixed-income securities.
 
GROWTH INVESTORS PORTFOLIO
 
    This  Portfolio  seeks the  highest total  return  consistent with  what the
Fund's Adviser considers to be reasonable risk by investing in a diversified mix
of publicly traded equity and fixed-income securities.
 
WORLDWIDE PRIVATIZATION PORTFOLIO
 
    This Portfolio seeks long-term capital appreciation by investing principally
in equity  securities  issued  by  enterprises  that  are  undergoing,  or  have
undergone,  privatization. The  balance of the  Portfolio's investment portfolio
will include equity  securities of  companies that  are believed  by the  Fund's
Adviser to be beneficiaries of the privatization process.

   
TECHNOLOGY PORTFOLIO
 
    This  Portfolio  seeks growth  of  capital through  investment  in companies
expected to  benefit  from  advances in  technology.  The  Technology  Portfolio
invests  principally in a diversified portfolio of securities of companies which
use technology extensively  in the development  of new or  improved products  or
processes.
    

    THERE  IS NO ASSURANCE THAT THE INVESTMENT OBJECTIVES OF THE PORTFOLIOS WILL
BE MET.
 
VOTING RIGHTS
 
    The Fund does not  hold regular meetings of  shareholders. The Directors  of
the  Fund may  call Special Meetings  of Shareholders for  action by shareholder
vote as may be required by the Investment Company Act of 1940 or the Articles of
Incorporation of the  Fund. In accordance  with its view  of present  applicable
law,  the Company will vote the shares of  the Fund held in the Variable Account
at special  meetings  of  the  shareholders  of  the  Fund  in  accordance  with
instructions  received from persons  having the voting  interest in the Variable
Account. The Company will vote shares for which it has not received instructions
from Contract Owners and those shares which it owns in the same proportion as it
votes shares for which it has received instructions from Contract Owners.
 
    The number of shares which a person  has a right to vote will be  determined
as  of a date to be chosen by the Company not more than sixty (60) days prior to
the meeting  of the  Fund.  Voting instructions  will  be solicited  by  written
communication  at least  fourteen (14)  days prior  to such  meeting. The person
having such voting rights will be the Contract Owner before the Annuity Date  or
the  death of the Annuitant (or  Contract Owner, as applicable), and thereafter,
the payee entitled to  receive payments under the  Contract. During the  Annuity
Period,  voting rights attributable to a Contract will generally decrease as the
Contract Value attributable to an Annuitant decreases.
 
    The voting rights relate only to  amounts invested in the Variable  Account.
There  are  no voting  rights  with respect  to  funds invested  in  the General
Account.
 
    Shares of the  Fund are  sold only to  separate accounts  of life  insurance
companies.  The shares  of the  Fund will  be sold  to separate  accounts of the
Company, its  affiliate,  AIG  Life  Insurance  Company  and  unaffiliated  life
insurance  companies  to fund  variable annuity  contracts and/or  variable life
insurance  policies.  It  is  conceivable  that,  in  the  future,  it  may   be
disadvantageous  for  variable  life insurance  separate  accounts  and variable
annuity separate accounts to invest in the Fund simultaneously. Although neither
the Company nor the  Fund currently foresees any  such disadvantages, either  to
variable life insurance policyowners or to variable annuity Contract Owners, the
Fund's Board of
 
                                       14
<PAGE>
Directors  will monitor events in order  to identify any material irreconcilable
conflicts which may possibly arise and to determine what action, if any,  should
be  taken in  response thereto.  If a  material irreconcilable  conflict were to
occur, the  relevant participating  life insurance  companies will  under  their
agreements   governing  participation  in  the  Fund  take  whatever  steps  are
necessary, at their expense, to remedy or eliminate the irreconcilable  material
conflict.  If  such a  conflict were  to  occur, one  or more  insurance company
separate accounts might withdraw its investments  in the Fund. This might  force
the Fund to sell securities at disadvantageous prices.
 
SUBSTITUTION OF SHARES
 
    If  the shares  of the  Fund (or  any Portfolio  within the  Fund) should no
longer be  available  for investment  by  the Variable  Account  or if,  in  the
judgment  of  the  Company,  further investment  in  such  shares  should become
inappropriate in  view  of  the  purpose  of  the  Contracts,  the  Company  may
substitute shares of another mutual fund (or Portfolio within the Fund) for Fund
shares  already purchased or to be purchased  in the future by purchase payments
under the Contracts. No  substitution of securities may  take place without  any
required prior approval of the Securities and Exchange Commission and under such
requirements as it may impose.
 
ALLOCATION OF PURCHASE PAYMENT TO SUB-ACCOUNTS
 
    The  purchase payment  is allocated  to the  Sub-account(s) selected  by the
Contract Owner in the application except that in those states which require  the
Company to pay a premium tax upon receipt of a purchase payment the Company will
deduct  the  premium  tax  prior  to allocating  the  purchase  payment  to such
Sub-account(s). The selection  must specify  a percentage  for each  Sub-account
that  is a whole number, and  must be either 0% or  a number equal to or greater
than 10%. At the time of the  allocation the purchase payment is divided by  the
value  of the Accumulation Unit for the particular Sub-account for the Valuation
Period  during  which  such  allocation  occurs  to  determine  the  number   of
Accumulation Units attributable to the purchase payment.
 
    The purchase payment under an IRA plan will be allocated to the Money Market
Sub-account  until the expiration of fifteen (15) days from the day the Contract
is mailed from  the Company's office.  Thereafter, the Contract  Value shall  be
reallocated in accordance with instructions specified in the application.
 
TRANSFER OF CONTRACT VALUES
 
    Before the Annuity Date, the Contract Owner may transfer, by written request
or  telephone  authorization, Contract  Values from  one Sub-account  to another
Sub-account, subject to the following conditions:
 
    (a) the amount transferred from any Sub-account must be at least $1,000  (or
       the entire Sub-account value, if less);
 
    (b)  if less than $1,000 would remain in the Sub-account after the transfer,
       the Company will transfer the entire amount in the Sub-account;
 
    (c) the Company may reject any  more than twelve (12) transfer requests  per
       Contract Year; and
 
    (d) the Company will deduct any transfer charge assessed on the transaction.
       The  Company  is currently  not assessing  a transfer  fee for  the first
       twelve (12)  transfers per  Contract  Year. The  Company is  assessing  a
       transfer fee of $10 per transfer thereafter. The Company may increase the
       transfer  fee to an amount  not to exceed $30  per transfer. The transfer
       fee will be deducted from either  the Sub-account which is the source  of
       the  transfer or from the  amount transferred if the  entire value in the
       Sub-account is transferred.
 
                                       15
<PAGE>
    Transfer by telephone authorization is available to a Contract Owner only by
prior  election. A Contract Owner must complete, sign, and file with the Company
a Telephone Transfer  Authorization Form  for each Contract  owned. The  Company
will  undertake reasonable procedures to  confirm that instructions communicated
by telephone are genuine. All calls will be recorded. All transfers performed by
telephone authorization will be confirmed in writing to the Contract Owner.  The
Company  is not liable  for any loss,  cost, or expense  for action on telephone
instructions  which  are  believed  to  be  genuine  in  accordance  with  these
procedures.
 
    Transfer  privileges are  further explained  in the  Statement of Additional
Information.
 
    After the Annuity Date, the payee  of the annuity payments may transfer  the
Contract Value allocated to the Variable Account from one Sub-account to another
Sub-account. However, the Company reserves the right to refuse any more than one
transfer  per month. The  transfer fee is  the same as  before the Annuity Date.
This transfer  fee will  be deducted  from the  next annuity  payment after  the
transfer.  If following  the transfer,  the units  remaining in  the Sub-account
would generate  a  monthly payment  of  less than  $100,  then the  Company  may
transfer the entire amount in the Sub-account.
 
    Once  the transfer  is effected,  the Company  will recompute  the number of
Annuity Units  for  each Sub-account.  The  number  of Annuity  Units  for  each
Sub-account  will remain the same for the remainder of the payment period unless
the payee requests another change.
 
                             CHARGES AND DEDUCTIONS
 
    Various charges  and  deductions  are  made from  Contract  Values  and  the
Variable Account. These charges and deductions are:
 
DEDUCTION FOR PREMIUM AND OTHER TAXES
 
    Any premium or other taxes levied by any governmental entity with respect to
the Contracts will be charged against the purchase payment or the Contract Value
 .  Premium taxes currently imposed by certain states on the Contracts range from
0% to  3.5% of  premiums paid.  Some states  assess premium  taxes at  the  time
purchase  payments  are  made;  others  assess  premium  taxes  at  the  time of
annuitization. The Company currently intends to advance any premium taxes due at
the time  purchase payments  are made  and then  deduct premium  taxes from  the
Contract  Value at  the time  annuity payments  begin or  upon surrender  if the
Company is unable  to obtain  refund of  or otherwise  obtain a  credit for  any
excess  premium taxes  paid. The  Company reserves  the right  to deduct premium
taxes when incurred. Premium  taxes are subject to  being changed or amended  by
state legislatures, administrative interpretations or judicial acts.
 
    The Company will also deduct from any amount payable under the Contracts any
income  taxes a  governmental authority  requires the  Company to  withhold with
respect to that amount.
 
DEDUCTION FOR MORTALITY AND EXPENSE RISK CHARGE
 
    The Company deducts for each Valuation  Period a Mortality and Expense  Risk
Charge which is equal on an annual basis to 1.25% of the average daily net asset
value  of the Variable  Account (consisting of  approximately .90% for mortality
risks and approximately .35% for expense risks). The mortality risks assumed  by
the Company arise from its contractual obligation to make annuity payments after
the  Annuity Date  for the life  of the  Annuitant, to waive  the Deferred Sales
Charge in the  event of  the death  of the Annuitant  and to  provide the  death
benefit  prior to the Annuity  Date. The expense risk  assumed by the Company is
that the costs  of administering  the Contracts  and the  Variable Account  will
exceed the amount received from the Administrative Charge.
 
    If the Mortality and Expense Risk Charge is insufficient to cover the actual
costs, the loss will be borne by the Company. Conversely, if the amount deducted
proves more than sufficient, the excess will be profit to the Company.
 
    The  Mortality  and Expense  Risk Charge  is guaranteed  by the  Company and
cannot be increased.
 
                                       16
<PAGE>
    The Mortality and Expense  Risk Charge is  deducted during the  Accumulation
Period and after the Annuity Date.
 
    The  Company currently  offers annuity payment  options that are  based on a
life contingency. (See "Annuity Period  -- Annuity Options" on page    ). It  is
possible  that in  the future the  Company may offer  additional payment options
which are  not based  on a  life  contingency. If  this should  occur and  if  a
Contract  Owner should elect a  payment option not based  on a life contingency,
the Mortality and Expense Risk Charge  is still deducted but the Contract  Owner
receives no benefit from it.
 
DEDUCTION FOR DEFERRED SALES CHARGE
 
    In  the  event that  a  Contract Owner  withdraws all  or  a portion  of the
Contract Value in excess of the Free Withdrawal Amount for the first  withdrawal
in  a Contract Year other  than by way of  the Systematic Withdrawal Program, or
makes subsequent withdrawals in a Contract Year, a Deferred Sales Charge may  be
imposed. The Free Withdrawal Amount is equal to 10% of the Contract Value at the
time of withdrawal.
 
    The  Deferred  Sales  Charge is  deducted  based  upon a  percentage  of the
Contract Value which includes the purchase payment and earnings. Since  earnings
are  included it is possible that the actual amount of the Deferred Sales Charge
may increase even though the percentage may go down.
 
    The Deferred Sales Charge will vary in amount depending upon the time  which
has  elapsed since the Date of Issue. The amount of any withdrawal which exceeds
the Free Withdrawal Amount will be subject to the following charge:
 
<TABLE>
<CAPTION>
                                                                         APPLICABLE DEFERRED
                                                                             SALES CHARGE
CONTRACT YEAR                                                                 PERCENTAGE
- ----------------------------------------------------------------------  ----------------------
<S>                                                                     <C>
1.....................................................................            6%
2.....................................................................            5%
3.....................................................................            4%
4.....................................................................            3%
5.....................................................................            2%
6.....................................................................            1%
7 and thereafter......................................................            0%
</TABLE>
 
    The aggregate Deferred Sales Charges paid  with respect to a Contract  shall
not exceed 8.5% of the purchase payment for such Contract.
 
    The  Deferred Sales Charge is intended to reimburse the Company for expenses
incurred which are related  to Contract sales. The  Company does not expect  the
proceeds  from the Deferred Sales Charge to cover all distribution costs. To the
extent such charge is insufficient to cover all distribution costs, the  Company
may  use any of its corporate assets, including potential profit which may arise
from the Mortality and Expense Risk Charge, to make up any difference.
 
    Certain restrictions  on  surrenders  are imposed  on  Contracts  issued  in
connection  with retirement  plans which  qualify under  Code Section  403(b) (a
"403(b) Plan"). (See "Taxes -- 403(b) Plans" on page   .)
 
DEDUCTION FOR ADMINISTRATIVE CHARGE
 
    The Company deducts an annual Administrative Charge, which is currently  $30
per  year,  from the  Contract Value  to reimburse  it for  the costs  it incurs
relating to maintenance of  the Contract and the  Variable Account. The  Company
may  increase  this  charge  to an  amount  not  to exceed  $100  per  year. The
Administrative Charge is  designed to  reimburse the  Company for  the costs  it
incurs relating to the maintenance of the Contract and the Variable Account.
 
    Prior  to the Annuity  Date, the Administrative Charge  is deducted from the
Contract Value on each Contract Anniversary. If the Annuity Date is a date other
than a Contract Anniversary, the Company will also deduct a pro-rata portion  of
the  Administrative  Charge from  the  Contract Value  for  the fraction  of the
Contract Year preceding the Annuity Date.
 
                                       17
<PAGE>
    This charge is also deducted  in full on the  date of any total  withdrawal.
The charge will be deducted from each Sub-account of the Variable Account in the
proportion that the value of each Sub-account attributable to the Contract bears
to the total Contract Value.
 
    After  the Annuity Date,  this charge is  deducted on a  pro-rata basis from
each annuity payment and is  guaranteed to remain at the  same amount as at  the
Annuity Date.
 
DEDUCTION FOR INCOME TAXES
 
    The  Company deducts from the Contract Value and/or the Variable Account any
Federal income taxes resulting from the  operation of the Variable Account.  The
Company does not currently anticipate incurring any income taxes.
 
OTHER EXPENSES
 
    There  are deductions from and  expenses paid out of  the assets of the Fund
which are described in the accompanying Prospectus for the Fund.
 
                        ADMINISTRATION OF THE CONTRACTS
 
    While the Company has primary  responsibility for all administration of  the
Contracts  and the  Variable Account, it  has retained the  services of Delaware
Valley  Financial  Services,  Inc.   ("DVFS")  pursuant  to  an   administrative
agreement.  Such administrative services  include issuance of  the Contracts and
maintenance of Contract  Owners' records.  DVFS serves as  the administrator  to
various insurance companies offering variable contracts .
 
                           RIGHTS UNDER THE CONTRACTS
 
    The  Contract Owner has  all rights and  may receive all  benefits under the
Contract. The  Contract Owner  is named  in the  application. Ownership  may  be
changed prior to the Annuity Date through the submission of written notification
of  the change to the Company on a  form acceptable to the Company. On and after
the Annuity Date,  the Annuitant and  Contract Owner  shall be one  in the  same
person  unless  otherwise  provided for.  In  the  case of  Contracts  issued in
connection with an IRA, the Contract Owner must be the Annuitant.
 
    The Contract Owner's spouse is the only person eligible to be the Contingent
Owner. (See "Death  Benefit -- Death  of Contract Owner"  on page    ). Any  new
choice of Contingent Owner will automatically revoke any prior choices.
 
    The  Contract  Owner  may,  except  in the  case  of  a  Contract  issued in
connection with either an IRA  or a 403(b) Plan, assign  a Contract at any  time
before  the  Annuity  Date and  while  the Annuitant  is  alive. A  copy  of any
assignment must be filed  with the Company. The  Company is not responsible  for
the  validity of any assignment. If the  Contract is assigned, the rights of the
Contract Owner and  those of any  revocable Beneficiary will  be subject to  the
assignment.  An assignment will not affect any  payments the Company may make or
action it may take before it is recorded. In as much as an assignment or  change
of  ownership may be  a taxable event, Contract  Owners should consult competent
tax advisers should they wish to assign their Contracts.
 
    The Contract may be  modified only with the  consent of the Contract  Owner,
except as may be required by applicable law.
 
                                 ANNUITY PERIOD
 
ANNUITY BENEFITS
 
    If  the Annuitant  and Contract  Owner are  alive on  the Annuity  Date, the
Company will begin making payments to the Annuitant under the annuity option  or
options the Contract Owner has chosen.
 
                                       18
<PAGE>
    The  Contract Owner may choose or change an annuity payment option by making
a written request at least thirty (30) days prior to the Annuity Date.
 
    The amount of the payments will be determined by applying the Contract Value
on the Annuity Date. The amount of  the annuity payments will depend on the  age
or  sex of  the payee  at the  time the  settlement contract  is issued.  At the
Annuity Date  the Contract  Value in  each Sub-account  will be  applied to  the
applicable  annuity  tables  contained  in  the  Contract.  The  amount  of  the
Sub-account annuity payments are determined  through a calculation described  in
the  Section  captioned  "Annuity  Provisions" in  the  Statement  of Additional
Information.
 
ANNUITY DATE
 
    The Annuity Date for the Annuitant is:
 
    (a) the  first  day  of  the  calendar month  following  the  later  of  the
       Annuitant's 85th birthday or the 10th Contract Anniversary; or
 
    (b) such earlier date as may be set by applicable law.
 
    The  Contract Owner may designate an earlier  date in the application or may
change the Annuity Date by  making a written request  at least thirty (30)  days
prior to the Annuity Date being changed. However, any Annuity Date must be:
 
    (a) no later than the date defined in (a) above; and
 
    (b) the first day of a calendar month.
 
ANNUITY OPTIONS
 
    The  Contract Owner may choose to  receive annuity payments which are fixed,
or which are based on the Variable Account, or a combination of the two. If  the
Contract  Owner elects annuity payments which are based on the Variable Account,
the amount of the payments will be variable. The Contract Owner may not transfer
Contract Values between the General Account  and the Variable Account after  the
Annuity  Date, but may, subject to  certain conditions, transfer Contract Values
from one Sub-account  to another Sub-account.  (See "Alliance Variable  Products
Series Fund, Inc. -- Transfer of Contract Values" on page   .)
 
    If  the Contract Owner has not made  any annuity payment option selection at
the Annuity Date, the Contract Value will be applied to purchase Option 2  fixed
basis  annuity  payments  and  Option  2  variable  basis  annuity  payments, in
proportion to  the amount  of Contract  Value  in the  General Account  and  the
Variable Account, respectively.
 
    The annuity payment options are:
 
    OPTION 1:  LIFE INCOME.  The Company will pay an annuity during the lifetime
of the payee.
 
    OPTION  2:  LIFE INCOME  WITH 10 YEARS OF  PAYMENTS GUARANTEED.  The Company
will pay an annuity during  the lifetime of the payee.  If, at the death of  the
payee, payments have been made for less than 10 years:
 
    (a)  payments will be  continued during the  remainder of the  period to the
       successor payee;
 
    (b) the successor payee may elect to receive in a lump sum the present value
       of the remaining payments, commuted at  the interest rate used to  create
       the annuity factor for this Option; or
 
    (c)  the  guaranteed period  will not  in  the case  of Contracts  issued in
       connection with an IRA exceed the life expectancy of the Annuitant at the
       time the first payment is due.
 
    OPTION 3:  JOINT AND LAST SURVIVOR INCOME.  The Company will pay an  annuity
for  as long as either the payee or  a designated second person is alive. In the
event that the Contract  is issued in  connection with an  IRA, the payments  in
this Option will be made only to the Annuitant and the Annuitant's spouse.
 
                                       19
<PAGE>
    The  annuity payment  options are more  fully explained in  the Statement of
Additional Information. The Company may also offer additional options at its own
discretion.
 
ANNUITY PAYMENTS
 
    If the  Contract Value  applied  to annuity  payment  options is  less  than
$2,000,  the Company has the  right to pay the  amount in a lump  sum in lieu of
annuity payments. The Company makes all other annuity payments monthly. However,
if the total monthly annuity payment would be less than $100 the Company has the
right to make payments semi-annually or annually.
 
    If fixed annuity payments are selected, the amount of each fixed payment  is
determined by multiplying the Contract Value allocated to purchase fixed annuity
payments  by the factor shown in the annuity table specified in the Contract for
the option selected, divided by 1,000.
 
    If variable annuity payments are selected, the Annuitant receives the  value
of  a fixed  number of  Annuity Units  each month.  The actual  dollar amount of
variable annuity payments is dependent upon: (i) the Contract Value at the  time
of  annuitization; (ii) the  annuity table specified in  the Contract; (iii) the
Annuity Option  selected; (iv)  the investment  performance of  the  Sub-account
selected; and (v) the pro-rata portion of the Administrative Charge.
 
    The  annuity tables  contained in  the Contract  are based  on a  5% assumed
investment rate. If  the actual net  investment rate exceeds  5%, payments  will
increase.  Conversely, if the actual rate is less than 5%, annuity payments will
decrease.
 
                                 DEATH BENEFIT
 
    If the Annuitant (or Contract Owner, if applicable) dies before the  Annuity
Date,  the Company will pay a death benefit equal to the greater of the purchase
payment paid less partial withdrawals or the Contract Value.
 
    Before the Company will pay any death benefit, the Company will require  due
proof  of death. The Company will determine the value of the death benefit as of
the Valuation Period following receipt of  due proof of death. The Company  will
pay  the death benefit to the Beneficiary in accordance with any applicable laws
governing the payment of death proceeds.
 
    Payment of the death benefit  may be made in one  lump sum or applied  under
one  of the annuity payment options. (See "Annuity Period -- Annuity Options" on
page   .) The Contract Owner may by written request elect that any death benefit
of at  least $2,000  be received  by the  Beneficiary under  an annuity  payment
option. (See "Annuity Period -- Annuity Options" on page   .) The Contract Owner
may  choose or  change a  payment option  at any  time prior  to the Annuitant's
death. If at the time the Annuitant dies, the Contract Owner has made no request
for a payment option,  the Beneficiary has  sixty (60) days in  which to make  a
written  request  to elect  either a  lump  sum payment  or any  annuity payment
option. Any  lump sum  payment will  be made  within seven  (7) days  after  the
Company  has  received  due proof  of  death  and the  written  election  of the
Beneficiary, unless a delay of payments  provision is in effect. (See  Statement
of Additional Information -- "General Information -- Delay of Payments.")
 
    In  the  event  that the  Annuitant  and  the Contract  Owner  are  the same
individual, the death of that individual will  be treated by the Company as  the
death of the Annuitant.
 
DEATH OF THE CONTRACT OWNER
 
    If  a Contract Owner dies before the Annuity Date, the entire Contract Value
must be distributed within five (5) years of the date of death, unless:
 
    (a) it  is  payable over  the  lifetime  of a  designated  Beneficiary  with
       distributions beginning within one (1) year of the date of death; or
 
    (b)  the Contingent Owner, if any, continues  the Contract in his or her own
       name.
 
                                       20
<PAGE>
    In the case of Contracts issued  in connection with an IRA, the  Beneficiary
or  Contingent  Owner may  elect  to accelerate  these  payments. Any  method of
acceleration chosen must be approved by the Company.
 
    If the Contract Owner dies after  the Annuity Date, distribution will be  as
provided in the annuity payment option selected.
 
                             PURCHASING A CONTRACT
 
APPLICATION
 
    In  order to acquire a Contract, an application provided by the Company must
be completed and submitted to the Company for acceptance. The Company must  also
receive  the purchase  payment. Upon acceptance,  the Contract is  issued to the
Contract Owner and the Purchase Payment is then credited to the Variable Account
and converted  into  Accumulation  Units,  except  in  those  states  where  the
applicable  premium tax  is deducted from  the purchase  payment. (See "Alliance
Variable Products  Series  Fund,  Inc.  -- Allocation  of  Purchase  Payment  to
Sub-accounts"  on page   .) If the  application for a Contract is in good order,
the Company will apply the purchase  payment to the Variable Account and  credit
the Contract with Accumulation Units within two (2) business days of receipt. In
addition  to the underwriting requirements of the Company, good order means that
the Company has received federal funds (monies credited to a bank's account with
its regional Federal Reserve Bank). If the application for a Contract is not  in
good  order, the Company  will attempt to get  it in good  order within five (5)
business days  or the  Company  will return  the  application and  the  purchase
payment, unless the prospective purchaser specifically consents to the Company's
retaining them until the application is made complete.
 
MINIMUM PURCHASE PAYMENT
 
    The  Contracts are offered  on a single purchase  payment basis. The minimum
purchase payment the Company will accept is $5,000.
 
DISTRIBUTOR
 
    AIG Equity Sales Corp. ("AESC"), 80 Pine Street, New York, New York, acts as
the distributor of the Contracts. AESC is a wholly-owned subsidiary of  American
International Group, Inc. and an affiliate of the Company.
 
    Commissions not to exceed 3.5% of purchase payments will be paid to entities
which  sell the Contracts. In addition,  expense reimbursement allowances may be
paid. Additional payments may be made for other services not directly related to
the sale of the Contracts.
 
    Under the Glass-Steagall  Act and other  laws, certain banking  institutions
may  be prohibited from distributing variable  annuity contracts. If a bank were
prohibited  from  performing  certain  agency  or  administrative  services  and
receiving  fees from AESC,  Contract Owners who  purchased Contracts through the
bank would  be permitted  to  retain their  Contracts  and alternate  means  for
servicing  those Contract Owners  would be sought. It  is not expected, however,
that Contract Owners  would suffer  any loss  of services  or adverse  financial
consequences as a result of any of these occurrences.
 
                                 CONTRACT VALUE
 
    The  Contract Value is the sum of  the value of all Sub-account Accumulation
Units attributable to the Contract. The value of an Accumulation Unit will  vary
from  Valuation Period to Valuation Period. The value of an Accumulation Unit is
determined at  the end  of  the Valuation  Period  and reflects  the  investment
earnings, or loss, and the deductions for the Valuation Period.
 
                                       21
<PAGE>
                                  WITHDRAWALS
 
PARTIAL WITHDRAWAL
 
    The  Contract Owner may partially withdraw Contract Values from the Contract
prior to the Annuity  Date. Any partial withdrawal  is subject to the  following
conditions:
 
    (a) the Company must receive a written request;
 
    (b) the amount requested must be at least $500;
 
    (c) any applicable Deferred Sales Charge will be deducted;
 
    (d)  the amount withdrawn  will be the  sum of the  amount requested and the
       amount of any applicable Deferred Sales Charge; and
 
    (e) the Company  will deduct the  amount requested plus  any Deferred  Sales
       Charge  from each Sub-account of the Variable Account either as specified
       or in the  proportion that the  Sub-account bears to  the total  Contract
       Value.
 
SYSTEMATIC WITHDRAWAL PROGRAM
 
    During  the Accumulation Period a  Contract Owner may at  any time elect, in
writing, to take systematic withdrawals from one or more of the Sub-accounts for
a period of time not to exceed 12 months. In order to initiate this program, the
amount to be  systematically withdrawn  must be equal  to or  greater than  $200
provided  that the Contract  Value is equal  to or greater  than $24,000 and the
amount to be withdrawn  does not exceed the  Free Withdrawal Amount.  Systematic
withdrawals will be made without the imposition of the Deferred Sales Charge.
 
    Systematic withdrawals may occur monthly or quarterly.
 
    The  systematic withdrawal program  may be cancelled at  any time by written
request or automatically  should the Contract  Value fall below  $1,000. In  the
event the systematic withdrawal program is cancelled, the Contract Owner may not
elect to participate in such program until the next Contract Anniversary.
 
    A  Contract Owner may change once per  calendar year the amount or frequency
subject to be withdrawn on a systematic basis.
 
    The program is annually renewable, although the limitations set forth  above
shall continue to apply.
 
    The  Free Withdrawal  Amount (See "Charges  and Deductions  -- Deduction for
Deferred Sales Charge" on page    ) and Dollar Cost Averaging (See Statement  of
Additional  Information -- "General Information -- Transfers") are not available
while a Contract  Owner is  receiving systematic withdrawals.  A Contract  Owner
will  be entitled to the Free Withdrawal Amount and Dollar Cost Averaging on and
after the Contract Anniversary next following the termination of the  systematic
withdrawal program.
 
    Implementation  of the systematic withdrawal  program may subject a Contract
Owner to adverse tax consequences, including  a 10% tax penalty. (See "Taxes  --
Taxation  of  Annuities in  General"  on page     for  a  discussion of  the tax
consequences of withdrawals.)
 
TOTAL WITHDRAWAL
 
    The Contract  Owner may  withdraw the  entire Contract  Value prior  to  the
Annuity  Date. A total withdrawal will cancel the Contract. The total withdrawal
value is  equal to  the Contract  Value  next calculated  after receipt  of  the
written  withdrawal request, less any applicable Deferred Sales Charge, less the
Administrative Charge and less any  applicable premium taxes. (See "Charges  and
Deductions" on page   .)
 
                                       22
<PAGE>
PAYMENT OF WITHDRAWALS
 
    Any  Contract Values  withdrawn will be  sent to the  Contract Owners within
seven (7) days of receipt of the  written request, unless the Delay of  Payments
provision  is in  effect. (See Statement  of Additional  Information -- "General
Information -- Delay  of Payments.")  (See "Taxes  -- Taxation  of Annuities  in
General" on page   for a discussion of the tax consequences of withdrawals.)
 
    The  Company reserves the right  to ensure that a  Contract Owner's check or
other form of purchase payment has been cleared for payment prior to  processing
any withdrawal or redemption request occurring shortly after a purchase payment.
 
    Certain  restrictions  on withdrawals  are  imposed on  Contracts  issued in
connection with 403(b) Plans. (See "Taxes -- 403(b) Plans" on page   .)
 
                                     TAXES
 
INTRODUCTION
 
    The Contracts are  designed for  use by individuals  to accumulate  Contract
Values  with  retirement plans  which,  except for  IRAs  and 403(b)  Plans, are
generally not tax-qualified  plans ("Qualified Plans").  The ultimate effect  of
Federal  income taxes on the amounts held under a Contract, on annuity payments,
and on the  economic benefits to  the Contract Owner,  Annuitant or  Beneficiary
depend on the Company's tax status and upon the tax and employment status of the
individual  concerned. Accordingly, each  person should consult  a competent tax
adviser regarding the tax consequences of purchasing a Contract.
 
    The following discussion  is general in  nature and is  not intended as  tax
advice.  No attempt is made to consider  any applicable state or other tax laws.
Moreover, the  discussion  is based  upon  the Company's  understanding  of  the
Federal  income tax laws as they are currently interpreted. No representation is
made regarding the likelihood  of continuation of the  Federal income tax  laws,
the Treasury Regulations, or the current interpretations by the Internal Revenue
Service (the "Service"). For a discussion of Federal income taxes as they relate
to the Fund, please see the accompanying Prospectus for the Fund.
 
COMPANY TAX STATUS
 
    The  Company is taxed as a life insurance company under Part I of Subchapter
L of the  Internal Revenue  Code of  1986, as  amended (the  "Code"). Since  the
Variable  Account is not a  separate entity from the  Company and its operations
form a part  of the Company,  it will not  be taxed separately  as a  "regulated
investment  company"  under  Subchapter M  of  the Code.  Investment  income and
realized capital gains on the assets of the Variable Account are reinvested  and
taken  into account  in determining the  Contract Value.  Under existing Federal
income tax law, the Variable Account's investment income, including realized net
capital gains, is not taxed  to the Company. The  Company reserves the right  to
make  a deduction for taxes from the  assets of the Variable Account should they
be imposed with respect to such items in the future.
 
TAXATION OF ANNUITIES IN GENERAL -- NON-QUALIFIED PLANS
 
    Code Section 72 governs  the taxation of annuities.  In general, a  Contract
Owner  is not taxed  on increases in value  under a Contract  until some form of
withdrawal or distribution is  made under the  Contract. However, under  certain
circumstances,  the  increase in  value may  be subject  to tax  currently. (See
"Taxes -- Contracts  Owned by  Non-Natural Persons,"  on page     and "Taxes  --
Diversification Standards" on       .)
 
    WITHDRAWALS PRIOR TO THE ANNUITY DATE
 
    Code  Section 72 provides that a total or partial withdrawal from a Contract
prior to the Annuity Date  will be treated as taxable  income to the extent  the
amounts held under the Contract exceed the "investment in the contract," as that
term  is defined under the Code. The  "investment in the contract" can generally
be described as the cost  of the Contract. It  generally constitutes the sum  of
all
 
                                       23
<PAGE>
purchase  payments made  for the  contract less  any amounts  received under the
Contract that are excluded  from gross income. The  taxable portion is taxed  as
ordinary income. For purposes of this rule, a pledge or assignment of a Contract
is  treated  as a  payment  received on  account of  a  partial withdrawal  of a
Contract.
 
    WITHDRAWALS ON OR AFTER THE ANNUITY DATE
 
    Upon receipt of a lump sum payment or an annuity payment under the Contract,
the recipient is taxed on the portion of the payment that exceeds the investment
in the Contract. Ordinarily, the taxable portion of payments under the  Contract
will be taxed as ordinary income.
 
    For fixed annuity payments, the taxable portion of each payment is generally
determined  by using a formula known as the "exclusion ratio", which establishes
the ratio that the investment in the Contract bears to the total expected amount
of annuity payments for the term of the Contract. That ratio is then applied  to
each  payment to determine the nontaxable  portion of the payment. The remaining
portion of  each payment  is  taxed as  ordinary  income. For  variable  annuity
payments,  the taxable  portion is determined  by a formula  which establishes a
specific dollar amount of each payment that  is not taxed. The dollar amount  is
determined  by dividing the  investment in the  Contract by the  total number of
expected periodic payments. The  remaining portion of each  payment is taxed  as
ordinary income.
 
    The  Company  is obligated  to withhold  Federal  income taxes  from certain
payments unless the recipient elects otherwise. Prior to the first payment,  the
Company  will notify the payee of the right to elect out of withholding and will
furnish a form on which the election may be made. The payee must properly notify
the Company  of that  election  in advance  of the  payment  in order  to  avoid
withholding.
 
    PENALTY TAX ON CERTAIN WITHDRAWALS
 
    With respect to amounts withdrawn or distributed before the taxpayer reaches
age  59 1/2, a 10% penalty tax is  imposed upon the portion of such amount which
is includable  in gross  income. However,  the  penalty tax  will not  apply  to
withdrawals:  (i) made on or after the death of the Contract Owner (or where the
Contract Owner is not an individual,  the death of the "primary annuitant",  who
is  defined as  the individual, the  events in the  life of whom  are of primary
importance in affecting the timing or amount of the payout under the  Contract);
(ii) attributable to the taxpayer's becoming totally disabled within the meaning
of  Code Section  72(m)(7); (iii)  which are part  of a  series of substantially
equal periodic payments (not  less frequently than annually)  made for the  life
(or  life  expectancy)  of the  taxpayer,  or  the joint  lives  (or  joint life
expectancies) of the taxpayer and his beneficiary; (iv) allocable to  investment
in  the Contract before August 14, 1982; (v) under a qualified funding asset (as
defined in Code Section  130(d)); (vi) under an  immediate annuity contract;  or
(vii)  that are  purchased by  an employer  on termination  of certain  types of
qualified plans and which are held by the employer until the employee  separates
from service.
 
    If  the  penalty tax  does not  apply to  a  withdrawal as  a result  of the
application of item  (iii) above, and  the series of  payments are  subsequently
modified  (other than by reason  of death or disability),  the tax for the first
year in which the modification  occurs will be increased  by an amount equal  to
the  tax that  would have been  imposed but  for item (iii)  above as determined
under Treasury Regulations, plus interest for the deferral period. The foregoing
rule applies if the modification takes place: (a) before the close of the period
which is five years from  the date of the first  payment and after the  taxpayer
attains age 59 1/2; or (b) before the taxpayer reaches age 59 1/2.
 
    ASSIGNMENTS
 
    Any assignment or pledge of the Contract as collateral for a loan may result
in  a taxable event and the excess  of the Contract Value over purchase payments
will be  taxed to  the assignor  as  ordinary income.  Please consult  your  tax
adviser prior to making an assignment of the Contract.
 
                                       24
<PAGE>
    DISTRIBUTION-AT-DEATH RULES
 
    In  order  to be  treated  as an  annuity  contract for  Federal  income tax
purposes, a Contract must generally  provide for the following two  distribution
rules:  (i) if the Contract Owner dies on  or after the Annuity Date, and before
the entire interest in the Contract has been distributed, the remaining  portion
of such interest will be distributed at least as quickly as the method in effect
on  the Contract  Owner's death; and  (ii) if  a Contract Owner  dies before the
Annuity Date,  the entire  interest must  generally be  distributed within  five
years  after the  date of  death. To the  extent such  interest is  payable to a
designated Beneficiary, however, such interest  may be annuitized over the  life
of that Beneficiary or over a period not extending beyond the life expectancy of
that  Beneficiary, so long  as distributions commence within  one year after the
date of death.  If the  Beneficiary is  the spouse  of the  Contract Owner,  the
Contract may be continued unchanged in the name of the spouse as Contract Owner.
 
    If  the Contract  Owner is  not an  individual, the  "primary annuitant" (as
defined under the Code) is considered the Contract Owner. In addition, when  the
Contract  Owner  is not  an individual,  a  change in  the primary  annuitant is
treated as the death of the Contract Owner.
 
    GIFTS OF CONTRACTS
 
    Any transfer of a Contract prior to the Annuity Date for less than full  and
adequate  consideration will generally trigger tax  on the gain in the Contract.
The transferee will receive a  step-up in basis for  the amount included in  the
transferor's  income. This provision, however, does not apply to those transfers
between spouses or  incident to  a divorce which  are governed  by Code  Section
1041(a).
 
    CONTRACTS OWNED BY NON-NATURAL PERSONS
 
    If  the Contract is held by a non-natural person (for example, a corporation
or trust)  the Contract  is generally  not treated  as an  annuity contract  for
Federal  income  tax purposes,  and the  income on  the Contract  (generally the
excess of the Contract Value over the purchase payments) is includable in income
each year. The  rule does not  apply where  the non-natural person  is only  the
nominal  owner such as a trust or other  entity acting as an agent for a natural
person. The rule also does not apply when the Contract is acquired by the estate
of a decedent, when the Contract is held under certain qualified plans, when the
Contract is  a qualified  funding  asset for  structured settlements,  when  the
Contract  is purchased on behalf of an  employee upon termination of a qualified
Plan, and in the case of an immediate annuity.
 
    SECTION 1035 EXCHANGES
 
    Code Section 1035 provides that no gain  or loss shall be recognized on  the
exchange  of an  annuity contract  for another  annuity contract.  A replacement
contract obtained in a tax-free exchange of contracts succeeds to the status  of
the  surrendered contract.  Special rules and  procedures apply  to Code Section
1035 transactions.  Prospective purchasers  wishing to  take advantage  of  Code
Section 1035 should consult their tax advisers.
 
    MULTIPLE CONTRACTS
 
    Annuity  contracts that are issued by the same company (or affiliate) to the
same policy  owner during  any calendar  year  will be  treated as  one  annuity
contract  in determining the  amount includable in  the taxpayer's gross income.
Thus, any  amount received  under  any such  contract  prior to  the  contract's
annuity  starting date will be taxable (and  possibly subject to the 10% penalty
tax) to the extent of  the combined income in  all such contracts. The  Treasury
has  broad regulatory  authority to  prevent avoidance  of the  purposes of this
aggregation rule. It is possible that, under this authority, Treasury may  apply
this  rule to amounts that are paid as annuities (on or after the starting date)
under annuity contracts  issued by  the same company  to the  same policy  owner
during  any calendar year period. In this  case, annuity payments could be fully
taxable (and possibly  subject to  the 10%  penalty tax)  to the  extent of  the
combined income in all such contracts and regardless of whether any amount would
otherwise  have been excluded from income.  Contract Owners should consult a tax
adviser before purchasing more than one Contract or other annuity contracts.
 
                                       25
<PAGE>
DIVERSIFICATION STANDARDS
 
    To comply  with  the  diversification  regulations  promulgated  under  Code
Section  817(h) (the  "Diversification Regulations"),  after a  start-up period,
each Sub-account is required to  diversify its investments. The  Diversification
Regulations generally require that on the last day of each quarter of a calendar
year no more than 55% of the value of the assets of a Sub-account is represented
by  any one investment, no more than  70% is represented by any two investments,
no more than 80% is represented by  any three investments, and no more than  90%
is represented by any four investments. A "look-through" rule applies so that an
investment  in the Fund  is not treated as  one investment but  is treated as an
investment in  a pro-rata  portion of  each underlying  asset of  the Fund.  All
securities of the same issuer are treated as a single investment. In the case of
government securities, each Government agency or instrumentality is treated as a
separate issuer.
 
    In connection with the issuance of the proposed and temporary version of the
Diversification  Regulations, Treasury  announced that  such regulations  do not
provide guidance concerning the extent to which Contract Owners may direct their
investments to particular divisions of a  separate account. It is possible  that
if  and  when  additional  regulations or  IRS  pronouncements  are  issued, the
Contract may need to be modified to  comply with such rules. For these  reasons,
the  Company reserves the right to modify the Contract, as necessary, to prevent
the Contract Owner from being considered the owner of the assets of the Variable
Account.
 
    The Company intends to comply with the Diversification Regulations to assure
that the  Contracts continue  to be  treated as  annuity contracts  for  Federal
income tax purposes.
 
QUALIFIED PLANS
 
    The Contracts may be used to create an IRA. The Contracts are also available
for  use in connection with a previously  established 403(b) Plan. No attempt is
made herein  to provide  more than  general  information about  the use  of  the
Contracts  with IRAs or 403(b) Plans. The  information herein is not intended as
tax advice. A  prospective Contract  Owner considering  use of  the Contract  to
create  an  IRA or  in  connection with  a 403(b)  Plan  should first  consult a
competent tax  adviser with  regard to  the suitability  of the  Contract as  an
investment vehicle for their qualified plan.
 
    While the Contract will not be available in connection with retirement plans
designed  by the Company which qualify  for the federal tax advantages available
under Sections 401 and 457 of the Code, a Contract can be used as the investment
medium for an individual Contract Owner's separately qualified retirement  plan.
Under  amendments to the  Internal Revenue Code which  became effective in 1993,
distributions  for  a  qualified  plan  (other  than  non-taxable  distributions
representing a return of capital, distributions meeting the minimum distribution
requirement,  distributions for the life or  life expectancy of the recipient(s)
or distributions that are made over a period of more than 10 years) are eligible
for tax-free rollover within 60 days of  the date of distribution, but are  also
subject  to federal income tax withholding at a 20% rate unless paid directly to
another qualified plan. If the recipient is unable to take full advantage of the
tax-free rollover provisions, there may be taxable income, and the imposition of
a 10% penalty tax if the recipient  is under age 59 1/2. A prospective  Contract
Owner  considering use of the Contract in this manner should consult a competent
tax adviser with regard to the suitability of the Contract for this purpose  and
for  information concerning the  provisions of the  Code applicable to qualified
plans.
 
INDIVIDUAL RETIREMENT ANNUITIES
 
    Section 408 of  the Code permits  eligible individuals to  contribute to  an
IRA.  Contracts issued in connection  with an IRA are  subject to limitations on
eligibility, maximum contributions, and time of distribution. Distributions from
certain retirement plans  qualifying for  federal tax advantages  may be  rolled
over  into an  IRA. Sales  of the  Contracts for  use with  IRAs are  subject to
special requirements  imposed by  the Service,  including the  requirement  that
informational  disclosure be given to each  person desiring to establish an IRA.
The IRAs offered by this Prospectus are not available in all states.
 
                                       26
<PAGE>
403(B) PLANS
 
    Code Section 403(b)(11) imposes certain  restrictions on a Contract  Owner's
ability  to  make partial  withdrawals from  Code  Section 403(b)  Contracts, if
attributable to  purchase  payments made  under  a salary  reduction  agreement.
Specifically,  Code  Section  403(b)(11)  allows  a  Contract  Owner  to  make a
surrender or partial withdrawal only (a)  when the employee attains age 59  1/2,
separates  from service, dies, or becomes disabled  (as defined in the Code), or
(b) in the case of  hardship. In the case of  hardship, only an amount equal  to
the  purchase payments may be withdrawn.  In addition, under Code Section 403(b)
the employer must  comply with certain  non-discrimination requirements.  Owners
should  consult their employers  to determine whether  the employer has complied
with these rules. The 403(b) Plan offered by this Prospectus is not available in
all states.
 
          TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
 
<TABLE>
<CAPTION>
                                                                                                                PAGE
                                                                                                                -----
<S>                                                                                                          <C>
General Information........................................................................................
  The Company..............................................................................................
  Independent Accountants..................................................................................
  Legal Counsel............................................................................................
  Distributor..............................................................................................
  Calculation of Performance Related Information...........................................................
  Delay of Payments........................................................................................
  Transfers................................................................................................
Method of Determining Contract Values......................................................................
Annuity Provisions.........................................................................................
  Annuity Benefits.........................................................................................
  Annuity Options..........................................................................................
  Variable Annuity Payment Values..........................................................................
  Annuity Unit.............................................................................................
  Net Investment Factor....................................................................................
  Additional Provisions....................................................................................
Financial Statements.......................................................................................
</TABLE>
 
                                       27
<PAGE>
                                    APPENDIX
 
GENERAL ACCOUNT OPTION
 
    Under  the General Account option, Contract Values are held in the Company's
General Account. Because of exemptive and exclusionary provisions, interests  in
the  General Account have not  been registered under the  Securities Act of 1933
nor is  the  General Account  registered  as  an investment  company  under  the
Investment  Company Act of 1940.  The Company understands that  the staff of the
Securities and  Exchange Commission  has not  reviewed the  disclosures in  this
Prospectus  relating to the General Account portion of the Contract. Disclosures
regarding the  General Account  may, however,  be subject  to certain  generally
applicable  provisions of the  federal securities laws  relating to the accuracy
and completeness of statements made in prospectuses. The General Account  option
is not available in all states.
 
    Contract  Owners  may  elect  to allocate  amounts  to  the  General Account
provided that the Contract Owner specifies  a percentage that is a whole  number
and  is equal to  0 or equal  to or greater  than 10%. Contract  Owners may also
transfer amounts to the General Account. Amounts allocated or transferred to the
General Account  are  credited  with interest  on  a  daily basis  at  the  then
applicable  effective guarantee rate. The effective  guarantee rate is that rate
declared for the calendar month in which amounts are allocated or transferred to
the  General  Account.  Therefore,  if  the  Contract  Owner  has  allocated  or
transferred  amounts at different times to  the General Account, each allocation
or transfer may  have a  unique effective  guarantee rate  and guarantee  period
associated with that amount. The Company guarantees that the effective guarantee
rate  will not be changed more  than once per year and  will not be less than 4%
per annum.
 
    The Contract Owner may transfer amounts to the General Account prior to  the
Annuity  Date by  written request or  telephone authorization.  However, no more
than four transfers may be made to the General Account per Contract Year and the
amount transferred to the General Account must  be at least 25% of the  Contract
Value,  or the entire  amount in the  Variable Account, if  less. (See "Alliance
Variable Products Series Fund, Inc. -- Transfer of Contract Values" on page   .)
 
    The Contract Owner may transfer amounts  out of the General Account only  at
the end of the guarantee period associated with that amount. Prior to the end of
the  guarantee period  the Contract  Owner may  specify the  Sub-accounts of the
Variable Account to which the Contract  Owner wants amounts transferred. If  the
Contract  Owner does not  notify the Company  prior to the  end of the guarantee
period, the Company  will apply that  amount to  a new guarantee  period in  the
General  Account, which is then  subject to the same  conditions as the original
guarantee period. The guarantee  rate associated with  the new guarantee  period
may  be different from  the effective guarantee rate  applicable to the previous
guarantee period. These transfers will be  handled at no charge to the  Contract
Owner. All other provisions which apply to transfers among the Sub-accounts (See
"Alliance Variable Products Series Fund, Inc. -- Transfer of Contract Values" on
page    )  and which do  not conflict with  the provisions set  forth above will
continue to apply.
 
    Contract Owners may not make a  partial withdrawal from the General  Account
prior to the Annuity Date unless:
 
    (a) all of the Contract Owner's funds are in the General Account; or
 
    (b)  the  Contract  Owner does  not  specify  from which  funds  the partial
       withdrawal is to be deducted. In that event, the Company will deduct  the
       amount  from each  Sub-account of  the Variable  Account and  each amount
       allocated to  each  guarantee  period  of  the  General  Account  in  the
       proportion that each bears to the Contract Value.
 
    The  Deferred Sales  Charge (See  "Charges and  Deductions --  Deduction for
Deferred Sales Charge" on page   ) will be deducted from the Sub-accounts of the
Variable Account and from each amount allocated to each guarantee period of  the
General  Account  in the  proportion  that the  withdrawal  was made  from these
accounts.
 
                                      A-1
<PAGE>
    The Administrative Charge  (See "Charges  and Deductions  -- Deductions  for
Administrative  Charge"  on page     )  and Premium  Taxes, if  applicable, (See
"Charges and Deductions -- Deduction  for Premium and Other Taxes"  on page    )
will  be deducted proportionately from each  Sub-account of the Variable Account
and from each amount in each guarantee period of the General Account.
 
    If the  Contract Owner  has not  made any  annuity option  selection at  the
Annuity  Date, the  Contract Value  will be applied  to purchase  Option 2 fixed
basis annuity  payments  and  Option  2  variable  basis  annuity  payments,  in
proportion  to  the amount  of Contract  Value  in the  General Account  and the
Variable Account, respectively. (See "Annuity Period -- Annuity Options" on page
  .)
 
                                      A-2
<PAGE>


                                        PART B
                         STATEMENT OF ADDITIONAL INFORMATION



                              INDIVIDUAL SINGLE PURCHASE
                     PAYMENT DEFERRED VARIABLE ANNUITY CONTRACTS



                                      ISSUED BY



                                  VARIABLE ACCOUNT A



                                         AND



              AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK



         THIS IS NOT A PROSPECTUS.  THIS STATEMENT OF ADDITIONAL INFORMATION
SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS FOR THE VARIABLE ANNUITY
CONTRACTS WHICH ARE REFERRED TO HEREIN.

   

         THE PROSPECTUS CONCISELY SETS FORTH INFORMATION THAT A PROSPECTIVE
INVESTOR OUGHT TO KNOW BEFORE INVESTING.  FOR A COPY OF THE PROSPECTUS DATED
MAY 1, 1996,  CALL OR WRITE: American International Life Assurance Company of
New York; Attention:  Variable Products, 80 Pine Street, New York, New York,
10005, 1-800-340-2765.

DATE OF STATEMENT OF ADDITIONAL INFORMATION:     MAY 1, 1996
                                                -----------
    



<PAGE>

                                  TABLE OF CONTENTS


                                                                            PAGE
General Information. . . . . . . . . . . . . . . . . . . . . . . . .
    The Company. . . . . . . . . . . . . . . . . . . . . . . . . . .
    Independent Accountants. . . . . . . . . . . . . . . . . . . . .
    Legal Counsel. . . . . . . . . . . . . . . . . . . . . . . . . .
    Distributor. . . . . . . . . . . . . . . . . . . . . . . . . . .
    Calculation of Performance Related Information . . . . . . . . .
    Delay of Payments. . . . . . . . . . . . . . . . . . . . . . . .
    Transfers. . . . . . . . . . . . . . . . . . . . . . . . . . . .

Method of Determining Contract Values. . . . . . . . . . . . . . . .

Annuity Provisions . . . . . . . . . . . . . . . . . . . . . . . . .
    Annuity Benefits . . . . . . . . . . . . . . . . . . . . . . . .
    Annuity Options. . . . . . . . . . . . . . . . . . . . . . . . .
    Variable Annuity Payment Values. . . . . . . . . . . . . . . . .
    Annuity Unit . . . . . . . . . . . . . . . . . . . . . . . . . .
    Net Investment Factor. . . . . . . . . . . . . . . . . . . . . .
    Additional Provisions. . . . . . . . . . . . . . . . . . . . . .

Financial Statements . . . . . . . . . . . . . . . . . . . . . . . .


                                         B-2

<PAGE>

                                 GENERAL INFORMATION

THE COMPANY
          A description of American International Life Assurance Company of New
York (the "Company"), and its ownership is contained in the Prospectus.  The
Company will provide for the safekeeping of the assets of the Variable Account.

INDEPENDENT ACCOUNTANTS
          The audited financial statements of the Company and Variable Account A
have been audited by Coopers and Lybrand, independent certified public
accountants, whose offices are located in Philadelphia, Pennsylvania.

LEGAL COUNSEL
          Legal matters relating to the Federal securities laws in connection
with the Contracts described herein and in the Prospectus are being passed upon
by the law firm of Jorden Burt Berenson & Johnson LLP, Washington,D.C.

DISTRIBUTOR
     AIG Equity Sales Corp. ("AESC"), a wholly owned subsidiary of American
International Group, Inc. and an affiliate of the Company, acts as the
distributor.  The offering is on a continuous basis.  Commissions in the amount
of $6,828 were retained by the Distributor in 1995.

CALCULATION OF PERFORMANCE RELATED INFORMATION

          A.   YIELD AND EFFECTIVE YIELD QUOTATIONS FOR THE MONEY MARKET
               SUB-ACCOUNT
          The yield quotation for the Money Market Sub-account to be set forth
in the Prospectus will be for the seven days ended on the date of the most
recent balance sheet of the Variable Account included in the registration
statement, and will be computed by determining the net change, exclusive of
capital changes, in the value of a hypothetical preexisting account having a
balance of one Accumulation Unit in the Money Market Sub-account at the
beginning of the period, subtracting a hypothetical charge reflecting deductions
from Contract Owner accounts, and dividing the difference by the value of the
account at the beginning of the base period to obtain the base period return,
and multiplying the base period return by (365/7) with the resulting figure
carried to at least the nearest hundredth of one percent.

          Any effective yield quotation for the Money Market Sub-account to be
set forth in the Prospectus will be for the seven days ended on the date of the
most recent balance sheet of the Variable Account included in the registration
statement, and will be carried at least to the nearest hundredth of one percent,
and will be computed by determining the net change, exclusive of capital
changes, in the value of a hypothetical preexisting account having a balance of
one Accumulation Unit in the Money Market Sub-account at the beginning of the
period, subtracting a hypothetical charge reflecting deductions from Contract
Owner accounts, and dividing the difference by the value of the account at the
beginning of the base period to obtain the base period return, and then
compounding the base period return by adding 1, raising the sum to a power equal
to 365 divided by 7 and subtracting 1 from the result, according to the
following formula:
                                                     365/7
          EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1)     ]-1.

     For purposes of the yield and effective yield computations, the
hypothetical charge reflects all deductions that are charged to all Contract
Owner accounts in proportion to the length of the base period.  For any fees
that vary with the size of the account, the account size is assumed to be the
Money Market Sub-account's mean account size.  The yield and effective yield
quotations do not reflect the Deferred Sales Charge that may be assessed at the
time of withdrawal in an amount ranging up to 6% of the requested withdrawal
amount, with the specific percentage applicable to a particular withdrawal
depending on the length of time the purchase payment was held under the Contract
and whether withdrawals had been previously made during that Contract Year.
(See "Charges and Deductions - Deduction for Deferred Sales Charge" on page __
of the Prospectus)  No deductions or sales loads are assessed upon annuitization
under the Contracts.  Realized gains and losses from the sale of securities and
unrealized appreciation and depreciation of the Money Market Sub-account and the
Fund are excluded from the calculation of yield.


                                         B-3

<PAGE>

          B.   TOTAL RETURN QUOTATIONS
     The total return quotations for all the Sub-accounts set forth in the
Prospectus will be average annual total return quotations for the one, five, and
ten year periods (or, where a Sub-account has been in existence for a period of
less than one, five or ten years, for such lesser period) ended on the date of
the most recent balance sheet of the Variable Account and for the period from
the date monies were first placed into the Sub-accounts until the aforesaid
date.  The quotations are computed by finding the average annual compounded
rates of return over the relevant periods that would equate the initial amount
invested to the ending redeemable value, according to the following formula:

                                  n
                            P(1+T)  = ERV

          Where:  P = a hypothetical initial payment of $1,000

                  T = average annual total return

                  n = number of years

                ERV = ending redeemable value of a hypothetical $1,000
                      payment made at the beginning of the particular
                      period at the end of the particular period.

          For the purposes of the total return quotations , the calculations
take into effect all fees that are charged to all Contract Owner accounts.  For
any fees that vary with the size of the account, the account size is assumed to
be the respective Sub-account's mean account size.  The calculations also assume
a total withdrawal as of the end of the particular period.

     Annualized total return quotations for certain Sub-accounts were as
follows:

          Annualized total return quotations for certain Sub-accounts as of
December 31, 1995, were as follows:

                                One Year     Three Years    Inception to Date
                                --------     -----------    -----------------
     Money Market                  -1.91%      N/A               -2.56% 
     Premier Growth                37.85%      N/A               10.02% 
     Growth & Income               28.44%    11.93%              10.09% 
     International                  8.34%      N/A                1.10% 
     Short Term Multi              -0.19%    -0.90%              -5.04% 
     Global Bond                   17.56%     6.92%               2.95% 
     Us Gov't High Grade           12.14%      N/A               -1.18% 
     Global Dollar Gov't           15.83%      N/A                3.96% 
     North American Gov't          15.33%      N/A               -3.72% 
     Utility Income                14.32%      N/A                3.95% 
     Conservative Investor         10.05%      N/A                3.21% 
     Growth Investors              13.36%      N/A                3.73% 
     Growth                        27.91%      N/A               19.96% 
     Total Return                  16.50%      N/A                4.69% 
     World Wide Privatization       3.88%      N/A               -1.13% 
     Technology Portfolio             N/A      N/A                  N/A 


                                         B-4

<PAGE>


  *Funds were first invested in the Portfolios as listed below:
     Growth Portfolio                                       August 12, 1994
     Growth & Income Portfolio                              April 16, 1992
     Short-Term Multi-Market Portfolio                      June 25, 1992
     Global Bond Portfolio                                  May 10, 1993
     Money Market Portfolio                                 February 4, 1993
     International Portfolio                                June 1, 1993
     U.S. Gov't/High Grade Portfolio                        June 14, 1993
     North American Government Income Portfolio             April 8, 1994
     Global Dollar Government Portfolio                     May 26, 1994
     Utility Income Portfolio                               June 15, 1994
     Conservative Investors Portfolio                       September 8, 1994
     Growth Investors Portfolio                             October 12, 1994
     Total Return Portfolio                                 September 12, 1994
     Premier Growth                                         December 7, 1992
     Worldwide Privitization Portfolio                      October 17, 1994
     Technology Portfolio                                   January 10, 1996


     C.   YIELD QUOTATIONS FOR THE SHORT-TERM MULTI-MARKET, U.S. GOVERNMENT/HIGH
          GRADE SECURITIES AND GLOBAL BOND SUB-ACCOUNTS

     The yield quotations for the Short-Term Multi-Market, U.S. Government/High
Grade Securities and Global Bond Sub-accounts that will be set forth in the
Prospectus will be based on the thirty-day period ended on the date of the most
recent balance sheet of the Variable Account included in the registration
statement, and are computed by dividing the net investment income per
Accumulation Unit earned during the period bythe maximum offering price per unit
on the last day of the period, according to the following formula:

                                                6
                           Yield = 2[(A - B + 1)  - 1]
                                      -----
                                        cd

     Where:         a =  net investment income earned during the period by the
                         corresponding Portfolio of the Fund attributable to
                         shares owned by the Sub-account.

                    b =  expenses accrued for the period (net of
                         reimbursements).

                    c =  the average daily number of Accumulation Units
                         outstanding during the period.

                    d =  the maximum offering price per Accumulation Unit on the
                         last day of the period.


          For the purposes of the yield quotations for the Short-Term
Multi-Market, U.S. Government/High Grade Securities and Global Bond
Sub-accounts, the calculations take into effect all fees that are charged to all
Contract Owner accounts.  For any fees that vary with the size of the account,
the account size is assumed to be the respective Sub-account's mean account
size.  The calculations do not take into account the Deferred Sales Charge or
any transfer charges.

          A Deferred Sales Charge may be assessed at the time of withdrawal in
an amount ranging up to 6% of the requested withdrawal amount, with the specific
percentage applicable to a particular withdrawal depending on the length of time
the purchase payment was held under the Contract, and whether withdrawals had
been previously made during that Contract Year.  (See "Charges and Deductions -
Deduction for Deferred Sales Charge" on page 17 of the Prospectus)  There is
currently a transfer charge of $10 per transfer after a specified number


                                         B-5

<PAGE>

of transfers in each Contract Year.  (See "Alliance Variable Products Series
Fund, Inc. - Transfer of Contract Values" on page __ of the Prospectus)




     D.   Non- Standardized Performance Data

          1.   TOTAL RETURN QUOTATIONS
          The total return quotations for all the Sub-accounts set forth in the
Prospectus will be average annual total return quotations for the one, five, and
ten year periods (or, where a Sub-account has been in existence for a period of
less than one, five or ten years, for such lesser period) ended on the date of
the most recent balance sheet of the Variable Account and for the period from
the date monies were first placed into the Sub-accounts until the aforesaid
date.  The quotations are computed by finding the average annual compounded
rates of return over the relevant periods that would equate the initial amount
invested to the ending redeemable value, according to the following formula:

                                       n
                                 P(1+T)  = ERV

               Where:    P =   a hypothetical initial payment of $1,000

                         T =   average annual total return

                         n =   number of years

                       ERV =  ending redeemable value of a hypothetical $1,000
                              payment made at the beginning of the
                              particularperiod at the end of the particular
                              period.

     For the purposes of the total return quotations, the calculations take into
effect all fees that are charged to all Contract Owner accounts.  For any fees
that vary with the size of the account, the account size is assumed to be the
respective Sub-account's mean account size.  The calculations do not, however,
assume a total withdrawal as of the end of the particular period.

          Annualized total return quotations for certain Sub-accounts as of
December 31, 1995, were as follows:

                                 One Year     Three Years    Inception to Date
                                 --------     -----------    -----------------
    Money Market                   3.55%      N/A                2.11%
    Premier Growth                43.31%    13.66%              13.78%
    Growth & Income               33.90%    13.16%              13.69%
    International                  8.34%      N/A                6.83%
    Short Term Multi Market        5.27%     0.66%              -0.04%
    Global Bond                   23.02%     8.27%               6.97%
    US Gov't/High Grade           17.60%      N/A                4.42%
    Global Dollar Gov't           21.29%      N/A               10.38%
    North American Gov't          20.79%      N/A                2.93%
    Utility Income                19.78%      N/A                7.10%
    Conservative Investor         15.51%      N/A               11/46%
    Growth Investors              18.82%      N/A               11.82%
    Growth                        33.37%      N/A               27.65%
    Total Return                  21.96%      N/A               12.94%
    Worldwide Privatization        9.34%      N/A                7.10%
    Technology                       N/A      N/A                  N/A


                                         B-6

<PAGE>

2.   TAX DEFERRED ACCUMULATION

     In reports or other communications to You or in advertising or sales
materials, the Company may also describe the effects of tax-deferred compounding
on the Variable Account's investment returns or upon returns in general.  These
effects may be illustrated in charts or graphs and may include comparisons at
various points in time of returns under the Contract or in general on a tax-
deferred basis with the returns on a taxable basis.  Different tax rates may be
assumed.

     In general, individuals who own annuity contracts are not taxed on inreases
in the value under the annuity contract until some form of distribution is made
from the contract.  Thus, the annuity contract will benefit from tax deferral
during the accumulation period, which generally will have the effect of
permitting an investment in an annuity contract to grow more rapidly than a
comparable investment under which increases in value are taxed on a current
basis.  The following chart illustrates this benefit by comparing accumulation
under the Contract with accumulations from an investment on which gains are
taxed on a current basis.  The chart shows accumulations on an initial
investment or Purchase Payment of $25,000, assuming hypothetical gross annual
return of 0%, 4% and 8%, compounded annually, and a tax rate of 31%.  The values
shown for the taxable investment do not include any deduction for management
fees or other expenses but assume that taxes are deducted annually from
investment returns.  The values shown for the contract reflect the deduction of
contractual expenses such as the 1.25% mortality and expense risk charge, the
0.15% Administrative Charge and the $30 Contract Maintenance Charge, but not the
expenses of an underlying investment vehicle such as the Fund.  In addition,
these values assume that the Owner does not surrender the Contract or make any
withdrawals until the end of the period shown.  The chart assumes a full
withdrawal, at the end of the period shown, of all contract value and the
payment of taxes at the 31% rate on the amount in excess of the Purchase
Payment.

     The rates of return illustrated are hypothetical and are not an estimate or
guaranty of performance.  Actual tax rates may vary for different taxpayers from
that illustrated and withdrawals by Owners who have not reached age 59 1/2 may
be subject to a tax penalty of 10%.







                                    [INSERT CHART]




                                         B-7

<PAGE>

DELAY OF PAYMENTS
          Any payments due under the Contracts will generally be sent to the
Contract Owner within seven (7) days of a completed request for payment.
However, the Company has reserved the right to postpone any type of payment from
the Variable Account for any period when:

               (a)   the New York Stock Exchange is closed for other than
          customary weekends and holidays;
               (b)   trading on the Exchange is restricted;
               (c)   an emergency exists as a result of which it is not
          reasonably practicable to dispose of securities held in the Variable
          Account or determine their value; or
               (d)   an order of the Securities and Exchange Commission permits
          delay for the protection of security holders.

          The applicable rules of the Securities and Exchange Commission shall
govern as to whether the conditions in (b) and (c) exists.

     TRANSFERS
     A Contract Owner may deposit prior to the Annuity Date, all or part of his
Contract Value into either the Money Market or Short-Term Multi-Market
Sub-account (the "Sending Sub-account"), and then automatically transfer those
assets into one or more of the other Sub-accounts on a systematic basis.  The
amount transferred to the Sending Sub-account must be at least $12,000 in order
to initiate this option.  This process is called Automatic Dollar Cost
Averaging.

     The Automatic Dollar Cost Averaging option is available for use with any of
the investment options, other than the General Account.

     Automatic Dollar Cost Averaging transfers may occur monthly or quarterly.
The Contract Owner may designate the dollar amount to be transferred each month
or elect to have a percentage transferred each month, up to a maximum of 60
months.

     The Company will make all Automatic Dollar Cost Averaging transfers on the
15th calendar day of each month, or the next day the New York Stock Exchange is
open for business if the 15th calendar day of the month should fall on a day the
New York Stock Exchange is closed.  In order to process an Automatic Dollar Cost
Averaging transfer, the Company must have received a request in writing by no
later than the 6th calendar day of the month.

     The Automatic Dollar Cost Averaging option may be cancelled at any time by
written request or automatically if the value of the Sending Sub-account subject
to the Automatic Dollar Cost Averaging option is less than $1,000.

     A Contract Owner may change his Automatic Dollar Cost Averaging investment
allocation only once during any 12 month period.

     Any transfers made under this section are subject to the conditions of the
section entitled "Alliance Variable Products Series Fund, Inc. - Transfer of
Contract Values" on page 12 of the Prospectus, except that the Company will not
deem the election of the Automatic Dollar Cost Averaging option to count towards
a Contract Owner's twelve (12) free transfers.


                                         B-8

<PAGE>


                        METHOD OF DETERMINING CONTRACT VALUES
          The Contract Value will fluctuate in accordance with the investment
results of the underlying Portfolios of the Fund held within the Sub-account.
In order to determine how these fluctuations affect Contract Values,
Accumulation Units are utilized.  The value of an Accumulation Unit applicable
during any Valuation Period is determined at the end of that period.

          When the first shares of the respective Portfolios of the Fund were
purchased for the Sub-accounts, the Accumulation Units for the Sub-accounts were
valued at $10.  The value of an Accumulation Unit for a Sub-account on any
Valuation Date thereafter is determined by dividing (a) by (b), where:

          (a)  is equal to:

                (i)  the total value of the net assets attributable to
               Accumulation Units in the Sub-account, minus
               (ii)  the daily charge for assuming the risk of guaranteeing
               mortality factors and expense charges, which is equal on an
               annual basis to 1.25% multiplied by the daily net asset value of
               the Sub-account; minus
               (iii) in California and New York only, the daily charge for
               providing certain administrative functions which is equal on an
               annual basis to 0.15% multiplied by the daily net asset value of
               the Sub-Account, minus or plus
               (iv)  a charge or credit for any tax provision established for
               the Sub-account.  The Company is not currently making any
               provision for taxes.

          (b)  is the total number of Accumulation Units applicable to that
          Sub-account at the end of the Valuation Period.

          The resulting value of each Sub-account Accumulation Unit is
multiplied by the respective number of Sub-account Accumulation Units for a
Contract.  The Contract Value is the sum of all Sub-account values for the
Contract.

          An Accumulation Unit may increase or decrease in value from Valuation
Date to Valuation Date.


                                  ANNUITY PROVISIONS
ANNUITY BENEFITS
          If the Annuitant is alive on the Annuity Date the Company will begin
making payments to the Annuitant under the payment option or options selected.
The amount of the annuity payments will depend on the age or sex of the payee at
the time the settlement contract is issued.

ANNUITY OPTIONS
          The annuity options are as follows:

          OPTION 1:  LIFE INCOME.  The Company will pay an annuity during the
          lifetime of the payee.

          OPTION 2:  INCOME WITH 10 YEARS OF PAYMENTS GUARANTEED.  The Company
          will pay an annuity during the lifetime of the payee.  If, at the
          death of the payee, payments have been made for less than 10 years:

               (a)  payments will be continued during the remainder of the
               period to the successor payee; or


                                         B-9

<PAGE>

               (b)  the successor payee may elect to receive in a lump sum the
               present value of the remaining payments, commuted at the interest
               rate used to create the annuity factor for this Option.

          OPTION 3:  JOINT AND LAST SURVIVOR INCOME.  The Company will pay an
          annuity for as long as either payee or a designated second person is
          alive.

          Annuity options are available on a fixed and/or a variable basis.  The
Contract Owner may allocate Contract Values to purchase only fixed annuity
payments, or to purchase only variable annuity payments, or to purchase a
combination of the two.  Contract Values which purchase fixed annuity payments
will be invested in the General Account.  Contract Values which purchase
variable annuity payments will be invested in the Variable Account.  The
Contract Owner may make no transfers between the General Account and the
Variable Account after the Annuity Date.  The Company also may offer additional
options at its discretion.

VARIABLE ANNUITY PAYMENT VALUES
          A Variable Annuity is an annuity with payments which (1) are not
predetermined as to dollar amount; and (2) will vary in amount with the net
investment results of the applicable Sub-account(s) of the Variable Account.  At
the Annuity Date the Contract Value in each Sub-account will be applied to the
applicable Annuity Tables contained in the Contract.  The Annuity Table used
will depend upon the payment option chosen.  The same Contract Value amount
applied to each payment option may produce a different initial annuity payment.
If, as of the Annuity Date, the then current annuity rates applicable to  this
class of contracts will provide a larger income than that guaranteed for the
same form of annuity under the Contracts described herein, the larger amount
will be paid.

          The first annuity payment for each Sub-account is determined by
multiplying the amount of the Contract Value allocated to that Sub-account by
the factor shown in the table for the option selected, divided by 1000.

          The dollar amount of Sub-account annuity payments after the first is
determined as follows:

               (a)  The dollar amount of the first annuity payment is divided by
               the value for the Sub-account Annuity Unit as of the Annuity
               Date.  This establishes the number of Annuity Units for each
               monthly payment.  The number of Annuity Units remains fixed
               during the Annuity payment period, subject to any transfers.
               (b)  The fixed number of Annuity Units is multiplied by the
               Annuity Unit value for the Valuation Period 14 days prior to the
               date of payment.

          The total dollar amount of each Variable Annuity payment is the sum of
all Sub-account variable annuity payments less the pro-rata amount of the
Administrative Charge.

ANNUITY UNIT
          The value of an Annuity Unit for each Sub-account was arbitrarily set
initially at $10.  This was done when the first Fund shares were purchased.  The
Sub-account Annuity Unit value at the end of any subsequent Valuation Period is
determined by multiplying the Sub-account Annuity Unit value for the immediately
preceding Valuation Period by the quotient of (a) and (b) where:

               (a)  is the net investment factor for the Valuation Period for
               which the Sub-account Annuity Unit value is being determined; and
               (b)  is the assumed investment factor for such Valuation Period.
               The assumed investment factor adjusts for the interest assumed in
               determining the first variable annuity payment.  Such factor for
               any Valuation Period shall be the accumulated


                                         B-10

<PAGE>

value, at the end of such period, of $1.00 deposited at the beginning of such
period at the assumed investment rate of 5%.

NET INVESTMENT FACTOR
          The net investment factor is used to determine how investment results
of the Fund affect Variable Account Values within the Sub-accounts from one
Valuation Period to the next.  The net investment factor for each Sub-account
for any Valuation Period is determined by dividing (a) by (b) and subtracting
(c) from the result, where:

          (a)  is equal to:

                (i)  the net asset value per share of the Fund held in the
          Sub-account determined at the end of that Valuation Period; plus
               (ii)  the per share amount of any dividend or capital gain
          distribution made by the Fund held in the Sub-account if the
          "ex-dividend" date occurs during that same Valuation Period; plus or
          minus
               (iii)  a per share charge or credit, which is determined by the
          Company, for changes in tax reserves resulting from investment
          operations of the Sub-account.

          (b)  is equal to:

                (i)  the net asset value per share of the Fund held in the
          Sub-account determined as of the end of the prior Valuation Period;
          plus or minus
               (ii)  the per share charge or credit for any change in tax
          reserves for the prior Valuation Period.

          (c)  is the percentage factor representing the Mortality and Expense
          Risk Charge.

The net investment factor may be greater or less than the assumed investment
factor; therefore, the Annuity Unit value may increase or decrease from
Valuation Period to Valuation Period.

ADDITIONAL PROVISIONS
          The Company may require proof of the age or sex of the Annuitant
before making any life annuity payment provided for by the Contract.  If the age
or sex of the Annuitant has been misstated the Company will compute the amount
payable based on the correct age or sex.  If annuity payments have begun, any
underpayments that may have been made will be paid in full with the next annuity
payment.  Any overpayments, unless repaid to the Company in one sum, will be
deducted from future annuity payments until the Company is repaid in full.

          If a Contract provision requires that a person be alive, the Company
may require proof that the person is alive before the Company acts under that
provision.

          The Company will give the payee under an annuity payment option a
settlement contract for the payment option.


                                 FINANCIAL STATEMENTS
          The financial statements of the Company included herein should be
considered only as bearing upon the ability of the Company to meet its
obligations under the Contracts.


                                         B-11

<PAGE>
                     AMERICAN INTERNATIONAL LIFE ASSURANCE
                              COMPANY OF NEW YORK
                         (A WHOLLY-OWNED SUBSIDIARY OF
                      AMERICAN INTERNATIONAL GROUP, INC.)
 
                    REPORT ON AUDITS OF FINANCIAL STATEMENTS
 
              FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
 
                                      F-1
<PAGE>
                 (This page has been left blank intentionally.)
 
                                      F-2
<PAGE>
                       REPORT OF INDEPENDENT ACCOUNTANTS
 
To the Stockholders and Board of Directors
American International Life Assurance Company of New York:
 
    We  have audited the  accompanying balance sheets  of American International
Life Assurance  Company  of New  York  (a wholly-owned  subsidiary  of  American
International  Group, Inc.) as  of December 31,  1995 and 1994,  and the related
statements of income, stockholders' equity and cash flows for each of the  three
years  in the period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express  an
opinion on these financial statements based on our audits.
 
    We  conducted  our audits  in  accordance with  generally  accepted auditing
standards. Those standards require that we plan and perform the audit to  obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also  includes
assessing  the  accounting principles  used  and significant  estimates  made by
management, as well as evaluating the overall financial statement  presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
    In  our opinion, the financial statements  referred to above present fairly,
in all material respects, the financial position of American International  Life
Assurance  Company of New York as of December 31, 1995 and 1994, and the results
of its operations and its cash flows for  each of the three years in the  period
ended  December  31,  1995,  in conformity  with  generally  accepted accounting
principles.
 
    As discussed in Note 1 (h) to the financial statements, the Company  changed
in  1993, its  method of  accounting for  investments in  certain fixed maturity
securities.
 
                                          COOPERS & LYBRAND L.L.P.
 
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 22, 1996
 
                                      F-3
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                                 BALANCE SHEETS
                                 (IN THOUSANDS)
 
                                     ASSETS
 
<TABLE>
<CAPTION>
                                                                                           DECEMBER 31,
                                                                                   ----------------------------
                                                                                       1995           1994
                                                                                   -------------  -------------
<S>                                                                                <C>            <C>
Investments and cash:
  Fixed maturities:
    Bonds available for sale, at market value (cost: 1995-$4,139,170: 1994 --
     $3,807,500).................................................................  $   4,434,329  $   3,700,640
  Equity securities:
    Common stock (cost: 1995-$8,540: 1994 -- $8,382..............................         17,703         17,201
    Non-redeemable preferred stocks (cost: 1995 -- $4,564; 1994 -- $5,027).......          4,570          4,701
Mortgage loans on real estate, net...............................................        448,700        399,695
Real estate, net of accumulated depreciation of $6,009 in 1995; and $4,861 in
 1994............................................................................         33,029         34,155
Policy loans.....................................................................         10,991         10,317
Other invested assets............................................................         69,360         63,941
Short-term investments...........................................................        103,040        130,415
Cash.............................................................................          2,460          5,363
                                                                                   -------------  -------------
      Total investments and cash.................................................      5,124,182      4,366,428
Amounts due from related parties.................................................          1,186          2,304
Investment income due and accrued................................................         74,355         67,623
Premium and insurance balances receivable -- net.................................         13,289         14,536
Reinsurance assets...............................................................         22,552         26,313
Deferred policy acquisition cost.................................................         31,225         29,626
Deferred incomes taxes...........................................................       --               44,926
Separate and variable accounts...................................................         68,151         27,630
Other assets.....................................................................         16,814          1,800
                                                                                   -------------  -------------
      Total assets...............................................................  $   5,351,754  $   4,581,186
                                                                                   -------------  -------------
                                                                                   -------------  -------------
</TABLE>
 
                See accompanying notes to financial statements.
 
                                      F-4
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
                           BALANCE SHEETS (CONTINUED)
                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
 
                                  LIABILITIES
 
<TABLE>
<CAPTION>
                                                                                           DECEMBER 31,
                                                                                   ----------------------------
                                                                                       1995           1994
                                                                                   -------------  -------------
<S>                                                                                <C>            <C>
Policyholders' funds on deposit..................................................  $   3,060,581  $   2,742,412
Future policy benefits...........................................................      1,561,760      1,446,327
Reserve for unearned premiums....................................................         10,808         13,099
Policy and contract claims.......................................................         37,201         37,092
Reserve for commissions, expenses and taxes......................................          4,433          3,077
Insurance balances payable.......................................................          7,771          9,128
Federal income tax payable.......................................................          3,477          1,353
Deferred income taxes............................................................         62,252       --
Amounts due to related parties...................................................          5,260          7,654
Separate and variable accounts...................................................         68,151         27,468
Other liabilities................................................................         23,553         26,640
                                                                                   -------------  -------------
    Total Liabilities............................................................      4,845,247      4,314,250
                                                                                   -------------  -------------
 
Commitments and contingencies (See Note 6)
 
STOCKHOLDERS' EQUITY
Common stock, $200 par value; 16,125 shares authorized, issued and outstanding...          3,225          3,225
Additional paid-in capital.......................................................        197,025        197,025
Unrealized appreciation (depreciation) of investments, net of future policy
 benefits and taxes of $82,352 in 1995 and $(32,471) in 1994;....................        152,941        (60,305)
Retained Earnings................................................................        153,316        126,991
                                                                                   -------------  -------------
      Total stockholders' equity.................................................        506,507        266,936
                                                                                   -------------  -------------
Total liabilities and stockholders' equity.......................................  $   5,351,754  $   4,581,186
                                                                                   -------------  -------------
                                                                                   -------------  -------------
</TABLE>
 
                See accompanying notes to financial statements.
 
                                      F-5
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                              STATEMENTS OF INCOME
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                                   YEARS ENDED DECEMBER 31,
                                                                             -------------------------------------
                                                                                1995         1994         1993
                                                                             -----------  -----------  -----------
<S>                                                                          <C>          <C>          <C>
Revenues:
  Premiums.................................................................  $    84,357  $    71,826  $    76,045
  Net investment income....................................................      386,666      335,823      308,089
  Realized capital gains...................................................        1,436        1,932       18,767
                                                                             -----------  -----------  -----------
    Total revenues.........................................................      472,459      409,581      402,901
                                                                             -----------  -----------  -----------
Benefits and expenses:
  Benefits to policyholders................................................      167,319      163,585      156,707
  Increase in future policy benefits and policyholders' funds on deposit...      209,512      165,291      155,434
  Acquisition and insurance expenses.......................................       54,808       62,759       57,758
                                                                             -----------  -----------  -----------
    Total benefits and expenses............................................      431,639      391,635      369,899
                                                                             -----------  -----------  -----------
Income before income taxes.................................................       40,820       17,946       33,002
                                                                             -----------  -----------  -----------
Income taxes (benefits):
  Current..................................................................       22,142       18,986       19,330
  Deferred.................................................................       (7,647)     (12,152)      (9,007)
                                                                             -----------  -----------  -----------
    Total income taxes.....................................................       14,495        6,834       10,323
                                                                             -----------  -----------  -----------
Net income.................................................................  $    26,325  $    11,112  $    22,679
                                                                             -----------  -----------  -----------
                                                                             -----------  -----------  -----------
</TABLE>
 
                See accompanying notes to financial statements.
 
                                      F-6
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                       STATEMENTS OF STOCKHOLDERS' EQUITY
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                                  YEARS ENDED DECEMBER 31,
                                                                           ---------------------------------------
                                                                               1995          1994         1993
                                                                           ------------  ------------  -----------
<S>                                                                        <C>           <C>           <C>
COMMON STOCK
Balance at beginning of year.............................................  $      3,225  $      3,225  $     3,225
                                                                           ------------  ------------  -----------
Balance at end of year...................................................         3,225         3,225        3,225
                                                                           ------------  ------------  -----------
ADDITIONAL PAID-IN CAPITAL
Balance at beginning of year:............................................       197,025       197,025      119,025
Capital contribution.....................................................       --            --            78,000
                                                                           ------------  ------------  -----------
Balance at end of year...................................................       197,025       197,025      197,025
                                                                           ------------  ------------  -----------
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENTS, NET
Balance at beginning of year.............................................       (60,305)       58,102        1,887
Change during year.......................................................       404,070      (182,164)       6,497
Changes due to deferred income tax benefit (expense) and future policy
 benefits................................................................      (190,824)       63,757       (2,302)
Cumulative effect of accounting change, net of taxes of $28,011..........       --            --            52,020
                                                                           ------------  ------------  -----------
Balance at end of year...................................................       152,941       (60,305)      58,102
                                                                           ------------  ------------  -----------
RETAINED EARNINGS
Balance at beginning of year.............................................       126,991       115,879       93,200
Net income...............................................................        26,325        11,112       22,679
                                                                           ------------  ------------  -----------
Balance at end of year...................................................       153,316       126,991      115,879
                                                                           ------------  ------------  -----------
    Total stockholders' equity...........................................  $    506,507  $    266,936  $   374,231
                                                                           ------------  ------------  -----------
                                                                           ------------  ------------  -----------
</TABLE>
 
                See accompanying notes to financial statements.
 
                                      F-7
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                            STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                                 YEARS ENDED DECEMBER 31,
                                                                         -----------------------------------------
                                                                            1995          1994           1993
                                                                         -----------  ------------  --------------
<S>                                                                      <C>          <C>           <C>
Cash flows from operating activities:
    Net income.........................................................  $    26,325  $     11,112  $       22,679
                                                                         -----------  ------------  --------------
Adjustments to reconcile net income to net cash provided by operating
 activities:
  Non-cash revenues, expenses, gains and losses included in income:
    Change in insurance reserves.......................................       37,251        45,554          44,151
    Change in premiums and insurance balances receivable and payable --
     net...............................................................         (110)         (138)          2,251
    Change in reinsurance assets.......................................        3,761         5,570           5,240
    Change in deferred policy acquisition costs........................       (1,599)         (213)          1,632
    Change in investment income due and accrued........................       (6,732)       (8,153)         (7,937)
    Realized capital gains.............................................       (1,436)       (1,932)        (18,767)
    Change in current and deferred income taxes -- net.................       (5,523)       (6,895)        (21,332)
    Change in reserves for commissions, expenses and taxes.............        1,356           149           1,054
    Change in other assets and liabilities -- net......................      (33,021)        7,526          (1,568)
                                                                         -----------  ------------  --------------
      Total adjustments................................................       (6,053)       41,468           4,724
                                                                         -----------  ------------  --------------
    Net cash provided by operating activities..........................       20,272        52,580          27,403
                                                                         -----------  ------------  --------------
Cash flows from investing activities:
  Cost of fixed maturities, at market sold.............................       65,623        63,695         309,595
  Cost of fixed maturities, at market matured or redeemed..............      247,551       255,229         341,223
  Cost of equity securities sold.......................................        1,310           958           6,738
  Realized capital gains...............................................        3,436         4,715          24,542
  Purchase of fixed maturities.........................................     (627,188)     (837,973)     (1,050,415)
  Purchase of equity securities........................................       (1,005)         (137)         (4,449)
  Mortgage loans granted...............................................     (111,402)      (77,824)        (61,932)
  Repayments of mortgage loans.........................................       60,476         9,621          20,397
  Change in policy loans...............................................         (674)          601             870
  Change in short-term investments.....................................       27,375        (7,485)        (59,065)
  Change in other invested assets......................................       (4,083)       (6,479)         (7,164)
  Other -- net.........................................................       (2,763)       (1,086)        (17,821)
                                                                         -----------  ------------  --------------
    Net cash used in investing activities..............................     (341,344)     (596,165)       (497,481)
                                                                         -----------  ------------  --------------
Cash flows from financing activities:
  Change in policyholders' funds on deposit............................      318,169       542,729         395,889
  Proceeds from capital contribution...................................      --            --               78,000
                                                                         -----------  ------------  --------------
    Net cash provided by financing activities..........................      318,169       542,729         473,889
                                                                         -----------  ------------  --------------
Change in cash.........................................................       (2,903)         (856)          3,811
Cash at beginning of year..............................................        5,363         6,219           2,408
                                                                         -----------  ------------  --------------
Cash at end of year....................................................  $     2,460  $      5,363  $        6,219
                                                                         -----------  ------------  --------------
                                                                         -----------  ------------  --------------
</TABLE>
 
           See accompanying notes to statutory financial statements.
 
                                      F-8
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                         NOTES TO FINANCIAL STATEMENTS
 
1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
    (a)   BASIS OF PRESENTATION:   American International Life Assurance Company
of New York (the Company) is a wholly-owned subsidiary of American International
Group, Inc. (the  Parent). The  financial statements  of the  Company have  been
prepared  on the basis  of generally accepted  accounting principles (GAAP). The
preparation of financial statements in conformity with GAAP requires  management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities  and disclosure of contingent assets  and liabilities at the date of
the financial  statements and  the  reported amounts  of revenues  and  expenses
during  the reporting periods. Actual results could differ from those estimates.
The Company is  licensed to sell  life and  accident & health  insurance in  the
District of Columbia and all states except Arizona, Conneticut and Maryland. The
Company is also licensed in America Samoa, Virgin Islands and Guam.
 
    The  Company  also files  financial statements  prepared in  accordance with
statutory practices prescribed or permitted  by the Insurance Department of  the
State  of New York.  Financial statements prepared  in accordance with generally
accepted accounting principles  differ in  certain respects  from the  practices
prescribed  or permitted by regulatory  authorities. The significant differences
are:  (1)  statutory  financial  statements  do  not  reflect  fixed  maturities
available  for  sale  at market  value;  (2) policy  acquisition  costs, charged
against operations as incurred for  regulatory purposes, have been deferred  and
are  being amortized over the anticipated  life of the contracts; (3) individual
life and  annuity policy  reserves  based on  statutory requirements  have  been
adjusted  based  upon mortality,  lapse and  interest assumptions  applicable to
these coverages, including provisions  for reasonable adverse deviations;  these
assumptions  reflect  the  Company's  experience  and  industry  standards;  (4)
deferred income taxes not recognized for regulatory purposes have been  provided
for  temporary  differences  between the  bases  of assets  and  liabilities for
financial reporting  purposes and  tax purposes;  (5) for  regulatory  purposes,
future  policy benefits,  policyholders' funds  on deposit,  policy and contract
claims and reserve for unearned premiums are presented net of ceded reinsurance;
and (6)  an  asset valuation  reserve  and interest  maintenance  reserve  using
National  Association of Insurance Commissioners (NAIC)  formulas are set up for
regulatory purposes.
 
    (b)  INVESTMENTS:   Fixed maturities available for  sale, where the  company
may  not have  the ability  or positive  intent to  hold these  securities until
maturity, are carried at  market value. Included  in fixed maturities  available
for sale are collateralized mortgage obligations (CMO's). Premiums and discounts
arising  from the purchase  of CMO'S are  treated as yield  adjustments over the
estimated life.  Common  stocks and  preferred  stocks available  for  sale  are
carried  at  market value.  Short-term investments  are  carried at  cost, which
approximates market.
 
    Unrealized gains and losses from  investment in equity securities and  fixed
maturities  available for  sale are  reflected in  stockholders' equity,  net of
amounts recorded  as future  policy  benefits and  any related  deferred  income
taxes.
 
    Realized  capital gains  and losses  are determined  principally by specific
identification. Where declines in values  of securities below cost or  amortized
cost  are considered to be other than temporary, a charge is reflected in income
for the difference between cost or  amortized cost and estimated net  realizable
value.
 
    Mortgage  loans on real estate are  carried at unpaid principal balance less
unamortized loan origination fees and costs less an allowance for  uncollectible
loans.
 
    Real  estate  is  carried  at  depreciated  cost  and  is  depreciated  on a
straight-line basis over  31.5 years. Expenditures  for maintenance and  repairs
are  charged to income as incurred; expenditures for betterments are capitalized
and depreciated over their estimated lives.
 
                                      F-9
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    Policy loans are carried at the aggregate unpaid principal balance.
 
    Other invested  assets consist  primarily of  limited partnership  interests
which  are  carried  at  market  value. Unrealized  gains  and  losses  from the
revaluation of these investments are  reflected in stockholders' equity, net  of
any  related  taxes. Also  included in  this  category is  an interest  rate cap
agreement, which is carried at its amortized cost. The cost of the cap is  being
amortized  against investment income on  a straight line basis  over the life of
the cap.
 
    (c)  INCOME TAXES:  The Company  joins in a consolidated federal income  tax
return with the Parent and its domestic subsidiaries. The Company and the Parent
have  a written tax allocation agreement whereby the Parent agrees not to charge
the Company a greater portion of the consolidated tax liability than would  have
been  paid by the Company  if it had filed  a separate return. Additionally, the
Parent agrees to reimburse the Company for  any tax benefits arising out of  its
net  losses within ninety days after the  filing of that consolidated tax return
for the year in which these  losses are utilized. Deferred federal income  taxes
are  provided  for  temporary differences  related  to the  expected  future tax
consequences of  events that  have been  recognized in  the Company's  financial
statements or tax returns.
 
    (d)   PREMIUM  RECOGNITION AND RELATED  BENEFITS AND EXPENSES:   Premiums on
traditional life insurance and life contingent annuity contracts are  recognized
when  due. Revenues for  universal life and  investment-type products consist of
policy charges for the cost of insurance, administration, and surrenders  during
the  period. Premiums  on accident and  health insurance are  reported as earned
over the contract term. The portion of accident and health premiums which is not
earned at  the end  of a  reporting  period is  recorded as  unearned  premiums.
Estimates of premiums due but not yet collected are accrued. Policy benefits and
expenses   are  associated  with  earned  premiums  on  long-duration  contracts
resulting in a  level recognition of  profits over the  anticipated life of  the
contracts.
 
    Policy  acquisition  costs  for  traditional  life  insurance  products  are
generally deferred and amortized over the  premium paying period of the  policy.
Deferred  policy  acquisition  costs  and  policy  initiation  costs  related to
universal life  and  investment-type  products  are  amortized  in  relation  to
expected gross profits over the life of the policies (see Note 3).
 
    The  liability  for  future  policy  benefits  and  policyholders'  contract
deposits is established using assumptions described in Note 4.
 
    (e)  POLICY AND CONTRACT CLAIMS:  Policy and contract claims include amounts
representing: (1) the actual  in-force amounts for reported  life claims and  an
estimate  of incurred  but unreported  claims; and  (2) an  estimate, based upon
prior experience, for accident and  health reported and incurred but  unreported
losses.  The methods  of making  such estimates  and establishing  the resulting
reserves are  continually reviewed  and updated  and any  adjustments  resulting
therefrom are reflected in income currently.
 
    (f)   SEPARATE  AND VARIABLE ACCOUNTS:   These accounts  represent funds for
which investment income and investment gains  and losses accrue directly to  the
policyholders.  Each account has specific  investment objectives, and the assets
are carried at  market value. These  assets are legally  segregated and are  not
subject to claims which arise out of any other business of the Company.
 
    (g)   REINSURANCE ASSETS:  Reinsurance  assets include the balances due from
both reinsurance  and  insurance companies  under  the terms  of  the  Company's
reinsurance arrangements for ceded unearned premiums, future policy benefits for
life  and  accident  and  health insurance  contracts,  policyholders'  funds on
deposit and  policy and  contract  claims. It  also  includes funds  held  under
reinsurance treaties.
 
                                      F-10
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    (h)    ACCOUNTING  STANDARDS:    In  March  1995,  the  Financial Accounting
Standards Board (FASB)  issued Statement of  Financial Accounting Standards  No.
121  "Accounting  for the  Impairment of  Long-lived  Assets and  for Long-lived
Assets to Be Disposed  Of" (FASB 121). This  statement requires that  long-lived
assets  and certain identifiable intangibles be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable and an impairment loss must be recognized.
 
    FASB 121  is effective  for  the Company  commencing  January 1,  1996.  The
Company  believes  that the  adoption of  this  statement in  1996 will  have an
immaterial  impact  on  the  results  of  operations,  financial  condition  and
liquidity.
 
    In December 1995, FASB issued "Special Report, a Guide to the Implementation
of  Statement No. 115 on  Accounting for Certain Investments  in Debt and Equity
Securities". Among other things, this guide provided for a transition  provision
permitting  a one-time  transfer of  debt securities  from the  held to maturity
classification to the  available for  sale classification. The  Company did  not
transfer  any securities from  the held to  maturity classification to available
for sale classification.
 
    In 1994,  the American  Institute of  Certified Public  Accountants  (AICPA)
issued  a Statement  of Position (SOP)  94-6 "Disclosure  of Certain Significant
Risks and Uncertainties" (SOP 94-6). Pursuant to SOP 94-6, the Company has  made
certain  disclosures as to the nature of the Company's operations and the use of
estimates in the  preparation of  its 1995 financial  statements. Certain  other
disclosures  were  not  necessary  as  the Company  did  not  meet  the required
criteria.
 
    In November of 1992, FASB issued Statement of Financial Accounting Standards
No. 112 "Employers' Accounting for Postemployment Benefits" (FASB 112). FASB 112
established accounting standards for employers who provide benefits to former or
inactive employees after employment but before retirement. FASB 112 was  adopted
effective  January  1, 1994,  and  had no  significant  effect on  the Company's
results of operations, financial condition or liquidity.
 
    In October 1994, FASB issued Statement of Financial Accounting Standards No.
118 "Accounting by  Creditors for  Impairment of a  Loan-Income Recognition  and
Disclosures"  (FASB 118). FASB  118 amends FASB  114 to allow  a creditor to use
existing methods to recognize interest income on an impaired loan. FASB 118 also
amends certain disclosure requirements of FASB 114. The Company adopted FASB 114
and FASB 118 effective December 31,  1994. The adoption of these statements  did
not  cause  any  significant  impact on  the  Company's  results  of operations,
financial condition or liquidity.
 
    In October 1994, FASB issued  Statement of Financial Accounting Standard  No
119  "Disclosure  about  Derivative  Financial  Instruments  and  Fair  Value of
Financial Instruments" (FASB 119). FASB 119 requires disclosure about derivative
financial instruments  and  amends FASB  105  "Disclosure of  Information  about
Financial Instruments with Off-Balance Sheet Risk and Financial Instruments with
Concentrations  of Credit Risk" (FASB 105) and Statement of Financial Accounting
Standards No. 107 "Disclosure about Fair Value of Financial Instruments".
 
    FASB 119  requires  disclosure  about  the  amounts,  nature  and  terms  of
derivatives that are not subject to FASB 105. Also, FASB 119 requires disclosure
about  financial instruments  held or issued  for trading  purposes and purposes
other than trading. This statement was adopted by the Company effective December
31, 1994.
 
    In May  1993, the  FASB issued  Statement of  Accounting Standards  No.  115
"Accounting  for Certain Investments  on Debt and  Equity Securities" (FASB 115)
and the Company adopted this standard at December 31, 1993. The pretax  increase
in carrying value of fixed maturities available for
 
                                      F-11
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
sale  as a result of marking to  market was $242,000,000. A portion was recorded
as a component of future policy  benefits. Thus, the unrealized appreciation  of
investments increased $52,020,000, net of taxes of $28,011,000.
 
    (i)  Certain amounts  in the  1994 balance  sheet have  been reclassified to
conform to the 1995 presentation.
 
2.  INVESTMENT INFORMATION
 
    (a)  STATUTORY DEPOSITS:  Securities with a carrying value of $9,381,000 and
$8,289,000 were  deposited  by  the Company  under  requirements  of  regulatory
authorities as of December 31, 1995 and 1994, respectively.
 
    (b)   NET  INVESTMENT INCOME:   An analysis  of net investment  income is as
follows (in thousands):
 
<TABLE>
<CAPTION>
                                                               YEARS ENDED DECEMBER 31,
                                                         -------------------------------------
                                                            1995         1994         1993
                                                         -----------  -----------  -----------
<S>                                                      <C>          <C>          <C>
Fixed maturities.......................................  $   334,828  $   289,374  $   271,962
Equity securities......................................        1,006        1,156        1,190
Mortgage loans.........................................       40,383       33,251       29,163
Real estate............................................        3,446        3,771        3,305
Policy loans...........................................          733          764          846
Cash and short-term investments........................        4,124        6,839        3,593
Other invested assets..................................        6,381        4,465        1,661
                                                         -----------  -----------  -----------
    Total investment income............................      390,901      339,620      311,720
Investment expenses....................................        4,235        3,797        3,631
                                                         -----------  -----------  -----------
    Net investment income..............................  $   386,666  $   335,823  $   308,089
                                                         -----------  -----------  -----------
                                                         -----------  -----------  -----------
</TABLE>
 
    (c)  INVESTMENT GAINS AND LOSSES:   The net realized capital gains  (losses)
and  change in unrealized  appreciation (depreciation) of  investments for 1995,
1994 and 1993 are summarized below (in thousands):
 
<TABLE>
<CAPTION>
                                                               YEARS ENDED DECEMBER 31,
                                                         ------------------------------------
                                                            1995          1994        1993
                                                         -----------  ------------  ---------
<S>                                                      <C>          <C>           <C>
Net realized gains (losses) on investments:
  Fixed maturities.....................................  $      (115) $        (75) $  20,106
  Equity securities....................................        3,515         2,046     (2,415)
  Mortgage loans.......................................       (2,000)       (2,783)    (5,775)
  Other invested assets................................           36         2,744      6,851
                                                         -----------  ------------  ---------
  Net realized gains...................................  $     1,436  $      1,932  $  18,767
                                                         -----------  ------------  ---------
                                                         -----------  ------------  ---------
Change in unrealized appreciation (depreciation) of
 investments:
  Fixed maturities.....................................  $   402,020  $   (186,892) $  --
  Equity securities....................................          677          (853)     6,499
  Other invested assets................................        1,373         5,581         (2)
  Cumulative effect of accounting change...............      --            --          80,031
                                                         -----------  ------------  ---------
  Change in unrealized appreciation (depreciation) of
   investments.........................................  $   404,070  $   (182,164) $  86,528
                                                         -----------  ------------  ---------
                                                         -----------  ------------  ---------
</TABLE>
 
                                      F-12
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
2.  INVESTMENT INFORMATION (CONTINUED)
    Proceeds from the sale of investments in fixed maturities during 1995,  1994
and 1993 were $80,003,000, $79,504,000 and $59,251,000, respectively.
 
    During  1995,  1994  and  1993,  gross  gains  of  $624,000,  $4,861,000 and
$30,195,000,  respectively,  and  gross  losses  of  $739,000,  $4,936,000   and
$10,089,000, respectively, were realized on dispositions of fixed maturities.
 
    During  1995,  1994  and 1993,  gross  gains of  $3,516,000,  $2,047,000 and
$516,000, respectively,  and  gross losses  of  $1,000, $1,000  and  $2,931,000,
respectively, were realized on dispositions of equity securities.
 
    (d)    MARKET  VALUE  OF FIXED  MATURITIES  AND  UNREALIZED  APPRECIATION OF
INVESTMENTS:   At  December  31,  1995  and  1994,  unrealized  appreciation  of
investments  in equity securities (before applicable taxes) included gross gains
of $9,650,000  and  $9,341,000  and  gross  losses  of  $480,000  and  $848,000,
respectively.
 
    The  amortized  cost and  estimated market  values  of investments  in fixed
maturities at December 31, 1995 and 1994 are as follows (in thousands):
<TABLE>
<CAPTION>
                                                                             GROSS        GROSS
                                                             AMORTIZED    UNREALIZED   UNREALIZED
1995                                                           COST          GAINS       LOSSES     MARKET VALUE
- ---------------------------------------------------------  -------------  -----------  -----------  -------------
<S>                                                        <C>            <C>          <C>          <C>
Fixed maturities:
  U.S. Government and government agencies and
   authorities...........................................  $      84,063  $    19,982  $        39  $     104,006
  States, municipalities and political subdivisions......        883,646       56,568           89        940,125
  Foreign governments....................................         33,927        5,291           75         39,143
  All other corporate....................................      3,137,534      224,452       10,931      3,351,055
                                                           -------------  -----------  -----------  -------------
    Total fixed maturities...............................  $   4,139,170  $   306,293  $    11,134  $   4,434,329
                                                           -------------  -----------  -----------  -------------
                                                           -------------  -----------  -----------  -------------
 
<CAPTION>
 
                                                                             GROSS        GROSS
                                                             AMORTIZED    UNREALIZED   UNREALIZED
1994                                                           COST          GAINS       LOSSES     MARKET VALUE
- ---------------------------------------------------------  -------------  -----------  -----------  -------------
<S>                                                        <C>            <C>          <C>          <C>
Fixed maturities:
  U.S. Government and government agencies and
   authorities...........................................  $      89,861  $     4,381  $     3,235  $      91,007
  States, municipalities and political subdivisions......        819,297        7,687       46,602        780,382
  Foreign governments....................................         34,230        1,481        2,310         33,401
  All other corporate....................................      2,886,112       36,160      104,422      2,795,850
                                                           -------------  -----------  -----------  -------------
    Total fixed maturities...............................  $   3,807,500  $    49,709  $   156,569  $   3,700,640
                                                           -------------  -----------  -----------  -------------
                                                           -------------  -----------  -----------  -------------
</TABLE>
 
                                      F-13
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
2.  INVESTMENT INFORMATION (CONTINUED)
    The amortized cost and estimated market value of fixed maturities  available
for  sale at  December 31,  1995, by contractual  maturity, are  shown below (in
thousands). Actual maturities could  differ from contractual maturities  because
certain  borrowers have the right to call  or prepay obligations with or without
call or prepayment penalties.
 
<TABLE>
<CAPTION>
                                                                 AMORTIZED      ESTIMATED
                                                                   COST       MARKET VALUE
                                                               -------------  -------------
<S>                                                            <C>            <C>
Due in one year or less......................................  $     310,922  $     326,318
Due after one year through five years........................      1,110,307      1,172,894
Due after five years through ten years.......................      1,632,691      1,759,253
Due after ten years..........................................      1,085,250      1,175,864
                                                               -------------  -------------
                                                               $   4,139,170  $   4,434,329
                                                               -------------  -------------
                                                               -------------  -------------
</TABLE>
 
    (e)   CMO'S:   CMOs are  U.S. Government  and Government  agency backed  and
triple  A-rated securities. In the preceding  table, CMO's are included in other
corporate fixed maturities. At December 31,  1995 and 1994, the market value  of
the  CMO  portfolio  was  $1,114,196,000  and  $967,179,000,  respectively;  the
estimated  amortized  cost   was  approximately  $1,049,450,000   in  1995   and
$989,346,000  in 1994. The Company's CMO  portfolio is readily marketable. There
were no derivative  (high risk)  CMO securities  contained in  the portfolio  at
December 31, 1995.
 
    (f)   FIXED  MATURITIES BELOW  INVESTMENT GRADE:   At December  31, 1995 and
1994, the fixed maturities held by the Company that were below investment  grade
had  an aggregate amortized cost of $204,254,000 and $205,986,000, respectively,
and an aggregate market value of $206,442,000 and $195,443,000, respectively.
 
    (g)    NON-INCOME  PRODUCING  ASSETS:    Non-income  producing  assets  were
insignificant.
 
    (h)   INVESTMENTS GREATER THAN 10% EQUITY:   The market value of investments
in the following companies and institutions exceeded 10% of the Company's  total
stockholders' equity at December 31, 1995 (in thousands):
 
<TABLE>
<S>                                                        <C>
Fixed Maturities:
  Standard Credit Card...................................  $ 113,683
  Morgan Stanley Mortgage Trust..........................  $  80,482
  General Motors Acceptance Corporation..................  $  71,742
  Transamerica Finance...................................  $  57,329
</TABLE>
 
3.  DEFERRED POLICY ACQUISITION COSTS
    The  following reflects the policy  acquisition costs deferred (commissions,
direct solicitation  and other  costs) which  will be  amortized against  future
income and the related current amortization charged to income, excluding certain
amounts deferred and amortized in the same period (in thousands):
 
<TABLE>
<CAPTION>
                                                                YEARS ENDED DECEMBER 31,
                                                             -------------------------------
                                                               1995       1994       1993
                                                             ---------  ---------  ---------
<S>                                                          <C>        <C>        <C>
Balance at beginning of year...............................  $  29,626  $  29,413  $  31,045
Acquisition costs deferred.................................      5,933      3,286      2,157
Amortization charged to income.............................     (4,334)    (3,073)    (3,789)
                                                             ---------  ---------  ---------
Balance at end of year.....................................  $  31,225  $  29,626  $  29,413
                                                             ---------  ---------  ---------
                                                             ---------  ---------  ---------
</TABLE>
 
                                      F-14
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
4.  FUTURE POLICY BENEFITS AND POLICYHOLDERS' FUNDS ON DEPOSIT
 
    (a)  The analysis of the future  policy benefits and policyholders' funds on
deposit liabilities as at December 31, 1995 and 1994 follows (in thousands):
 
<TABLE>
<CAPTION>
                                                                   1995           1994
                                                               -------------  -------------
<S>                                                            <C>            <C>
Future policy benefits:
  Long duration contracts....................................  $   1,549,758  $   1,436,875
                                                               -------------  -------------
  Short duration contracts...................................         12,002          9,452
                                                               -------------  -------------
                                                               $   1,561,760  $   1,446,327
                                                               -------------  -------------
                                                               -------------  -------------
Policyholder funds on deposit:
  Annuities..................................................  $   2,131,609  $   1,974,234
  Guaranteed investment contracts (GICs).....................        739,947        667,968
  Universal life.............................................         84,741         94,998
  Other investment contracts.................................        104,284          5,212
                                                               -------------  -------------
                                                               $   3,060,581  $   2,742,412
                                                               -------------  -------------
                                                               -------------  -------------
</TABLE>
 
    (b) Long duration contract liabilities  included in future policy  benefits,
as  presented in the  table above, result from  traditional life products. Short
duration contract liabilities  are primarily accident  and health products.  The
liability  for  future  policy  benefits has  been  established  based  upon the
following assumptions:
 
        (i) Interest  rates  for traditional  life  insurance products  are  9.5
    percent graded to 7.0 percent over 30 years. The liability for future policy
    benefits for universal life insurance has been established using FASB 97 and
    assumes  a  1.0  percent  investment margin.  Interest  rates  (exclusive of
    immediate/terminal funding annuities),  which vary by  year of issuance  and
    products,  range  from  3.0  percent  to  10.0  percent.  Interest  rates on
    immediate/terminal funding annuities are  at a maximum  of 12.2 percent  and
    grade to not greater than 7.5 percent.
 
        (ii)  Mortality and  withdrawal rates  are based  upon actual experience
    modified to allow for variations in policy form. The weighted average  lapse
    rate, including surrenders, for individual life approximated 14.8 percent.
 
    (c)  The liability for  policyholders' fund on  deposit has been established
based on the following assumptions:
 
        (i) Interest  rates  credited on  deferred  annuities vary  by  year  of
    issuance  and range from 4.0 percent  to 8.3 percent. Credited interest rate
    guarantees are  generally  for a  period  of one  year.  Withdrawal  charges
    generally  range from  6.0 percent  to 10.0 percent  grading to  zero over a
    period of 6 to 10 years.
 
        (ii)  GICs  have  market  value  withdrawal  provisions  for  any  funds
    withdrawn  other than  benefit responsive payments.  Interest rates credited
    generally range from 4.7 percent to 9.1 percent and maturities range from  2
    to 7 years.
 
       (iii)  The  universal  life funds  have  credited interest  rates  of 6.1
    percent to  7.0 percent  and  guarantees ranging  from  4.0 percent  to  5.5
    percent  depending on the year of  issue. Additionally, universal life funds
    are subject to  surrender charges  that amount to  7.5 percent  of the  fund
    balance and grade to zero over a period not longer than 20 years.
 
                                      F-15
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
5.  INCOME TAXES
 
    (a)  The Federal income  tax rate applicable  to ordinary income  is 35% for
1995, 1994 and 1993. Actual tax  expense on income from operations differs  from
the  "expected" amount computed by applying  the Federal income tax rate because
of the following (in thousands except percentages):
 
<TABLE>
<CAPTION>
                                                              YEARS ENDED DECEMBER 31,
                                     --------------------------------------------------------------------------
                                               1995                      1994                     1993
                                     ------------------------  ------------------------  ----------------------
                                                 PERCENT OF                PERCENT OF               PERCENT OF
                                                   PRE-TAX                   PRE-TAX                  PRE-TAX
                                                  OPERATING                 OPERATING                OPERATING
                                      AMOUNT       INCOME       AMOUNT       INCOME       AMOUNT      INCOME
                                     ---------  -------------  ---------  -------------  ---------  -----------
<S>                                  <C>        <C>            <C>        <C>            <C>        <C>
"Expected" income tax expense......  $  14,288        35.0%    $   6,281        35.0%    $  11,551      135.0%
Prior year federal income tax
 benefit...........................     --           --           --           --           (1,954)      (5.9)
State income tax...................        627         1.5           714         4.0           758        2.3
Other..............................       (420)       (1.0)         (161)       (0.9)          (32)      (0.1)
                                     ---------         ---     ---------         ---     ---------      -----
Actual income tax expense..........  $  14,495        35.5%    $   6,834        38.1%    $  10,323       31.3%
                                     ---------         ---     ---------         ---     ---------      -----
                                     ---------         ---     ---------         ---     ---------      -----
</TABLE>
 
    (b) The components  of the net  deferred tax liability  were as follows  (in
thousands):
 
<TABLE>
<CAPTION>
                                                                     YEARS ENDED DECEMBER
                                                                              31,
                                                                     ---------------------
                                                                       1995        1994
                                                                     ---------  ----------
<S>                                                                  <C>        <C>
Deferred tax assets:
  Adjustments to mortgage loans and investment income..............  $   5,420  $    4,672
  Unrealized depreciation on investments...........................     --          32,471
  Adjustment to life reserves......................................     23,835      13,752
                                                                     ---------  ----------
  Other............................................................      1,571       2,336
                                                                        30,826      53,231
                                                                     ---------  ----------
Deferred tax liabilities:
  Deferred policy acquisition costs................................  $   1,637  $    2,501
  Fixed maturities discount........................................      8,745       5,497
  Unrealized appreciation on investments...........................     82,352      --
  Other............................................................        344         307
                                                                     ---------  ----------
                                                                        93,078       8,305
                                                                     ---------  ----------
Net deferred tax liability (asset).................................  $  62,252  $  (44,926)
                                                                     ---------  ----------
                                                                     ---------  ----------
</TABLE>
 
    (c)  At December 31,  1995, accumulated earnings of  the Company for Federal
income tax purposes include approximately $2,879,000 of "Policyholders' Surplus"
as defined  under  the  Code.  Under provisions  of  the  Code,  "Policyholders'
Surplus"  has not been  currently taxed but  would be taxed  at current rates if
distributed  to  the  Parent.  There  is  no  present  intention  to  make  cash
distributions  from "Policyholders'  Surplus" and accordingly,  no provision has
been made for taxes on this amount.
 
    (d) Income  taxes paid  in 1995,  1994, and  1993 amounted  to  $19,056,000,
$13,537,000, and $23,984,000, respectively.
 
6.  COMMITMENTS AND CONTINGENT LIABILITIES
    The Company, in common with the insurance industry in general, is subject to
litigation, including claims for punitive damages, in the normal course of their
business. The Company does not believe that such litigation will have a material
effect on its operating results and financial condition.
 
                                      F-16
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
7.  FAIR VALUE OF FINANCIAL INSTRUMENTS
 
    (a)  Statement of Financial Accounting  Standards No. 107 "Disclosures about
Fair Value  of Financial  Instruments" (FASB  107) requires  disclosure of  fair
value  information about  financial instruments for  which it  is practicable to
estimate such  fair  value.  These  financial instruments  may  or  may  not  be
recognized in the balance sheet. In the measurement of the fair value of certain
of  the financial instruments, quoted market prices were not available and other
valuation techniques  were  utilized. These  derived  fair value  estimates  are
significantly  affected  by  the  assumptions used.  FASB  107  excludes certain
financial instruments, including those related to insurance contracts.
 
    The following methods and assumptions were used by the Company in estimating
the fair value of the financial instruments presented:
 
        CASH AND SHORT TERM INVESTMENTS:   The carrying amounts reported in  the
    balance sheet for these instruments approximate fair value.
 
        FIXED  MATURITIES:  Fair values for fixed maturity securities carried at
    market value  are generally  based upon  quoted market  prices. For  certain
    fixed  maturities for which  market prices were  not readily available, fair
    values  were  estimated  using  values  obtained  from  independent  pricing
    services.
 
        EQUITY  SECURITIES:  Fair  values for equity  securities were based upon
    quoted market prices.
 
        MORTGAGE AND POLICY LOANS:  Where practical, the fair values of loans on
    real estate were  estimated using  discounted cash  flow calculations  based
    upon the Company's current incremental lending rates for similar type loans.
    The  fair values of policy loans were not calculated as the Company believes
    it would have to expend excessive costs for the benefits derived. Therefore,
    the fair value of policy loans was estimated at carrying value.
 
        INTEREST RATE CAP:  Fair values for the interest rate cap were estimated
    using values obtained from an independent pricing service.
 
        POLICYHOLDERS' FUNDS ON DEPOSIT:   Fair values of policyholder  contract
    deposits  were estimated using discounted  cash flow calculations based upon
    interest rates currently being offered for similar contracts consistent with
    those remaining for the contracts being valued.
 
                                      F-17
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
7.  FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
    (b) The  fair value  and carrying  amounts of  financial instruments  is  as
follows (in thousands):
<TABLE>
<CAPTION>
                                                                                          CARRYING
1995                                                                      FAIR VALUE       AMOUNT
- -----------------------------------------------------------------------  -------------  -------------
<S>                                                                      <C>            <C>
Cash and short-term investments........................................  $     105,500  $     105,500
Fixed maturities.......................................................      4,434,329      4,434,329
Equity securities......................................................         22,273         22,273
Mortgage and policy loans..............................................        489,768        459,691
Interest rate cap......................................................            433            510
                                                                         -------------  -------------
Policyholders' funds on deposit........................................  $   3,125,730  $   3,060,581
                                                                         -------------  -------------
                                                                         -------------  -------------
 
<CAPTION>
 
                                                                                          CARRYING
1994                                                                      FAIR VALUE       AMOUNT
- -----------------------------------------------------------------------  -------------  -------------
<S>                                                                      <C>            <C>
Cash and short-term investments........................................  $     135,778  $     135,778
Fixed maturities.......................................................      3,700,640      3,700,640
Equity securities......................................................         21,902         21,902
Mortgage and policy loans..............................................        414,354        410,012
Interest rate cap......................................................          1,567            736
                                                                         -------------  -------------
Policyholders' funds on deposit........................................  $   2,755,594  $   2,742,412
                                                                         -------------  -------------
                                                                         -------------  -------------
</TABLE>
 
8.  STOCKHOLDERS' EQUITY
 
    (a)  The Company  may not distribute  dividends to the  Parent without prior
approval of  regulatory agencies.  Generally, this  limits the  payment of  such
dividends  to an  amount which,  in the opinion  of the  regulatory agencies, is
warranted by the financial condition of the Company.
 
    (b) The  Company's stockholders'  equity as  determined in  accordance  with
statutory  accounting  practices  was  $257,910,000  at  December  31,  1995 and
$214,273,000 at December 31, 1994. Statutory net income amounted to $49,059,000,
$21,226,000, and $2,298,000 for 1995, 1994 and 1993, respectively.
 
9.  EMPLOYEE BENEFITS
 
    (a)  The  Company   participates  with  its   affiliates  in  a   qualified,
non-contributory,  defined  benefit pension  plan which  is administered  by the
Parent. All qualified employees  who have attained age  21 and completed  twelve
months  of  continuous service  are  eligible to  participate  in this  plan. An
employee with  5  or more  years  of service  is  entitled to  pension  benefits
beginning  at normal retirement age 65. Benefits  are based upon a percentage of
average final compensation multiplied by years of credited service limited to 44
years  of  credited  service.  Prior  to  January  1,  1996  the  average  final
compensation  is subject to certain limitations. Annual funding requirements are
determined based on the "projected unit  credit" cost method which attributes  a
pro  rata portion of the total projected benefit payable at normal retirement to
each year  of  credited service.  Pension  expense for  current  service  costs,
retirement  and termination benefits for the years ended December 31, 1995, 1994
and 1993 were approximately $225,000,  $190,000 and $323,000, respectively.  The
Parent's plans do not separately identify projected benefit obligations and plan
assets  attributable  to employees  of  participating affiliates.  The projected
benefit  obligations  exceeded  the  plan   assets  at  December  31,  1995   by
$59,620,000.
 
    (b) The Parent also sponsors a voluntary savings plan for domestic employees
(a  401(k) plan), which during  the two years ended  December 31, 1994, provided
for salary reduction contributions by
 
                                      F-18
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
9.  EMPLOYEE BENEFITS (CONTINUED)
employees and matching  contributions by the  Parent up to  2 percent of  annual
salary.  Commencing  January  1, 1995,  the  401(k) plan  provided  for matching
contributions by the Parent of up to 6 percent of annual salary depending on the
employee's years of service.
 
    (c) On April 1, 1985, the  Parent terminated and replaced its then  existing
U.S.  pension  plan, a  contributory qualified  defined  benefit plan,  with the
current non-contributory  qualified  defined  benefit plan.  Settlement  of  the
obligations of the prior plan was accomplished through the purchase of annuities
from  the Company  for accrued  benefits as of  the date  of termination. Future
policy benefits reserves in the accompanying balance sheet that relate to  these
annuity  contracts  are  $73,171,000 at  December  31, 1995  and  $70,791,000 at
December 31, 1994.
 
    (d) In addition to the Parent's defined benefit pension plan, the Parent and
its subsidiaries provide a post-retirement benefit program for medical care  and
life  insurance.  Eligibility  in  the various  plans  is  generally  based upon
completion of a specified  period of eligible service  and reaching a  specified
age.
 
    (e)  Employees of the Company participate  in certain stock option and stock
purchase plans of the Parent. In general, under the stock option plans, officers
and other key employees are  granted options to purchase  AIG common stock at  a
price  not less  than fair market  value at the  date of grant.  In general, the
stock purchase plans  provide for  eligible employees to  receive privileges  to
purchase  AIG common stock at a  price equal to 85% of  the fair market value on
the date of grant of the purchase privilege.
 
10. LEASES
 
    (a) The  Company  occupies leased  space  in many  locations  under  various
long-term  leases and has entered into various leases covering the long-term use
of data processing  equipment. At December  31, 1995, the  future minimum  lease
payments under operating leases were as follows:
 
<TABLE>
<CAPTION>
YEAR                                                                        PAYMENT
- -------------------------------------------------------------------------  ---------
<S>                                                                        <C>
1996.....................................................................  $     583
1997.....................................................................        463
1998.....................................................................        368
1999.....................................................................        153
2000.....................................................................         54
Remaining years after 2000...............................................     --
                                                                           ---------
    Total................................................................  $   1,621
                                                                           ---------
                                                                           ---------
</TABLE>
 
    Rent  expense  approximated $661,000,  $801,000 and  $657,000 for  the years
ended December 31, 1995, 1994 and 1993, respectively.
 
    (b) Sublease  Income  --  The  Company  does  not  participate  in  sublease
agreements.
 
11. REINSURANCE
 
    (a)  The  Company reinsures  portions of  its life  and accident  and health
insurance risks with unaffiliated companies. Life insurance risks are  reinsured
primarily  under coinsurance  and yearly  renewable term  treaties. Accident and
health insurance risks are reinsured primarily under coinsurance, excess of loss
and quota share treaties. Amounts recoverable from reinsurers are estimated in a
manner consistent with the assumptions  used for the underlying policy  benefits
and  are presented as a component  of reinsurance assets. A contingent liability
exists with respect to reinsurance ceded to
 
                                      F-19
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
11. REINSURANCE (CONTINUED)
the extent that any  reinsurer is unable to  meet the obligations assumed  under
the  reinsurance agreements. The Company also reinsures portions of its life and
accident and health insurance risks with affiliated companies (see Note 12).
 
    The effect of all reinsurance  contracts, including reinsurance assumed,  is
as follows (in thousands, except percentages):
<TABLE>
<CAPTION>
                                                                                            PERCENTAGE OF
                                                                                               AMOUNT
                                                                                               ASSUMED
DECEMBER 31, 1995                         GROSS         CEDED      ASSUMED        NET          TO NET
- ------------------------------------  -------------  -----------  ---------  -------------  -------------
<S>                                   <C>            <C>          <C>        <C>            <C>
Life Insurance in Force.............  $   4,415,460  $   711,025  $   3,574  $   3,708,009         0.2%
                                      -------------  -----------  ---------  -------------
                                      -------------  -----------  ---------  -------------
  Premiums:
    Life............................         25,939        3,368          6         22,577         0.0%
    Accident and Health.............         22,136        8,034     20,822         34,924        59.6%
    Annuity.........................         27,496          639     --             26,857       --
                                      -------------  -----------  ---------  -------------
                                      -------------  -----------  ---------  -------------
      Total Premiums................  $      75,571  $    12,041  $  20,828  $      84,358        24.7%
                                      -------------  -----------  ---------  -------------
                                      -------------  -----------  ---------  -------------
 
<CAPTION>
 
                                                                                            PERCENTAGE OF
                                                                                               AMOUNT
                                                                                               ASSUMED
DECEMBER 31, 1994                         GROSS         CEDED      ASSUMED        NET          TO NET
- ------------------------------------  -------------  -----------  ---------  -------------  -------------
<S>                                   <C>            <C>          <C>        <C>            <C>
Life Insurance in Force.............  $   4,241,039  $   512,028  $   3,980  $   3,732,991         0.1%
  Premiums:
    Life............................         26,345        3,677         13         22,681         0.1%
    Accident and Health.............         23,622        9,520     20,612         34,714        59.4%
    Annuity.........................         14,892          461     --             14,431       --
                                      -------------  -----------  ---------  -------------
      Total Premiums................  $      64,859  $    13,658  $  20,625  $      71,826        28.7%
                                      -------------  -----------  ---------  -------------
                                      -------------  -----------  ---------  -------------
<CAPTION>
 
                                                                                            PERCENTAGE OF
                                                                                               AMOUNT
                                                                                               ASSUMED
DECEMBER 31, 1993                         GROSS         CEDED      ASSUMED        NET          TO NET
- ------------------------------------  -------------  -----------  ---------  -------------  -------------
<S>                                   <C>            <C>          <C>        <C>            <C>
Life Insurance in Force.............  $   3,726,676  $   667,040  $   4,177  $   3,063,813         0.1%
                                      -------------  -----------  ---------  -------------
                                      -------------  -----------  ---------  -------------
  Premiums:
    Life............................         28,098        3,943        594         24,749         2.4%
    Accident and Health.............         23,625        9,285     18,482         32,822        56.3%
    Annuity.........................         19,679        1,205     --             18,474       --
                                      -------------  -----------  ---------  -------------
      Total Premiums................  $      71,402  $    14,433  $  19,076  $      76,045        25.1%
                                      -------------  -----------  ---------  -------------
                                      -------------  -----------  ---------  -------------
</TABLE>
 
    (b) The maximum amount retained on any one life by the Company is $500,000.
 
    (c)   Reinsurance  recoveries,  which  reduced  death  and  other  benefits,
approximated $7,667,000, $6,720,000 and $8,477,000 respectively, for each of the
years ended December 31, 1995, 1994 and 1993.
 
    The Company's reinsurance  arrangements do  not relieve it  from its  direct
obligation to its insureds.
 
                                      F-20
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
12. TRANSACTIONS WITH RELATED PARTIES
 
    (a)  The  Company  is  party  to  several  reinsurance  agreements  with its
affiliates covering  certain  life  and accident  and  health  insurance  risks.
Premium  income  and commission  ceded to  affiliates  amounted to  $800,000 and
$(3,000), respectively, for the year ended December 31, 1995. Premium income and
commission ceded  for  1994 amounted  to  $574,000 and  $(3,000),  respectively.
Premium  income and commission ceded for 1993 amounted to $849,000 and $(2,000),
respectively.  Premium  income  and  ceding  commission  expense  assumed   from
affiliates  aggregated  $19,679,000  and  $(141,000),  respectively,  for  1995,
compared to $19,331,000 and $98,000, respectively, for 1994, and $17,189,000 and
$5,000, respectively, for 1993.
 
    (b) The Company provides life insurance coverage to employees of the  Parent
and  its domestic subsidiaries in connection  with the Parent's employee benefit
plans. The statement of income includes $4,080,000 in premiums relating to  this
business for 1995, $3,952,000 for 1994, and $3,908,000 for 1993.
 
    (c)  The  Company  is party  to  several  cost sharing  agreements  with its
affiliates. Generally, these agreements provide for the allocation of costs upon
either the specific identification basis or a proportional cost allocation basis
which management believes  to be reasonable.  For the years  ended December  31,
1995,  1994  and 1993,  the Company  was  charged $19,148,000,  $17,401,000, and
$14,907,000, respectively, for expenses attributed  to the Company but  incurred
by  affiliates. During the same period, the Company received reimbursements from
affiliates aggregating $20,920,000,  $19,505,000 and $18,579,000,  respectively,
for costs incurred by the Company but attributable to affiliates.
 
    (d)  The Company received cash surplus  contributions of $78,000,000 in 1993
from AIG, Inc., the  Parent and American Home  Assurance Company, an  affiliated
insurer.
 
    (e)  During 1993, the Company  sold a mortgage loan  to Atlanta 17th Street,
Inc., for the aggregate unpaid principal balance of $17,500,000.
 
    (f) During  1995,  the Company  sold  a mortgage  loan  to AIG  Real  Estate
Investment  and Management Company for the aggregate unpaid principal balance of
$5,000,000.
 
                                      F-21
<PAGE>


                         REPORT OF INDEPENDENT ACCOUNTANTS


To the Contract Owners of
American International Life Assurance Company of New York
Variable Account A

We have audited the accompanying statements of assets and liabilities of 
American Life Assurance Company of New York Variable Account A (the 
"Account") comprising the Money Market, Premier Growth, Growth and Income, 
International, Short-Term Multi-Market, Global Bond, U.S. Government/High 
Grade Securities, Global Dollar Government, North American Government, 
Utility Income, Conservative Investors, Growth Investors, Growth, Total 
Return, and Worldwide Privatization Subaccounts, as of December 31, 1995, and 
the related statement of operations for the year then ended, and the 
statement of changes in net assets for each of the two years in the period 
then ended. These financial statements are the responsibility of the 
management of Variable Account A. Our responsibility is to express an opinion 
on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing 
standards. Those standards require that we plan and perform the audit to 
obtain reasonable assurance about whether the financial statements are free 
of material misstatement. An audit includes examining, on a test basis, 
evidence supporting the amounts and disclosures in the financial statements. 
Our procedures included confirmation of investments held at December 31, 1995 
by correspondence with the transfer agent. 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 American International Life 
Assurance Company of New York Variable Account A as of December 31, 1995, and 
the results of its operations for the year then ended, and the changes in its 
net assets for each of the two years in the period then ended, in conformity 
with generally accepted accounting principles.



COOPERS & LYBRAND L.L.P.

2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 19, 1996



<PAGE>

                  AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY
                              OF NEW YORK (AI LIFE)
                               VARIABLE ACCOUNT A

                       STATEMENT OF ASSETS AND LIABILITIES
                                DECEMBER 31, 1995

<TABLE>
<CAPTION>

ASSETS:
  Investments at Market Value:
    Alliance Variable Products Series Fund, Inc.                            Shares                Cost
                                                                            ------                ----
<S>                                                                     <C>                   <C>                 <C>

          Money Market Portfolio . . . . . . . . . . . . . . . .        5,913,989.000         $ 5,913,989         $ 5,913,989
          Premier Growth Portfolio . . . . . . . . . . . . . . .          391,023.860           6,336,648           6,960,224
          Growth & Income Portfolio. . . . . . . . . . . . . . .          523,555.400           7,251,710           8,266,939
          International Portfolio. . . . . . . . . . . . . . . .          213,085.910           2,818,862           2,998,118
          Short-Term Multi-Market Portfolio. . . . . . . . . . .           77,816.920             806,355             823,302
          Global Bond Portfolio. . . . . . . . . . . . . . . . .           80,131.190             863,593             973,594
          U.S. Government/High Grade Securities Portfolio. . . .          385,825.483           4,148,111           4,498,725
          Global Dollar Government Portfolio . . . . . . . . . .           15,985.410             162,959             191,025
          North American Government Portfolio. . . . . . . . . .           95,687.440             913,275           1,002,798
          Utility Income Portfolio . . . . . . . . . . . . . . .          104,741.390           1,162,178           1,257,944
          Conservative Investors Portfolio . . . . . . . . . . .          161,986.420           1,811,171           1,904,960
          Growth Investors Portfolio . . . . . . . . . . . . . .           61,846.600             693,410             734,120
          Growth Portfolio . . . . . . . . . . . . . . . . . . .          766,068.790           9,766,208          10,901,160
          Total Return Portfolio . . . . . . . . . . . . . . . .          112,596.170           1,341,148           1,441,231
          Worldwide Privatization Portfolio. . . . . . . . . . .           61,844.200             665,270             690,801
                                                                                              -----------         -----------
          Total Investments. . . . . . . . . . . . . . . . . . .                              $44,654,887          48,558,930

  Dividends Receivable . . . . . . . . . . . . . . . . . . . . .                                                       21,941


                                                                                                                  -----------
          Total Assets . . . . . . . . . . . . . . . . . . . . .                                                  $48,580,871
                                                                                                                  -----------
                                                                                                                  -----------


LIABILITIES:
Payable to American International Life
  Assurance Company of New York. . . . . . . . . . . . . . . . .                                                  $    26,735

EQUITY:
  Contract Owners' Equity. . . . . . . . . . . . . . . . . . . .                                                   48,554,136
                                                                                                                  -----------
          Total Liabilities and Equity . . . . . . . . . . . . .                                                  $48,580,871
                                                                                                                  -----------
                                                                                                                  -----------
</TABLE>


                        See Notes to Financial Statements
<PAGE>

                  AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY
                              OF NEW YORK (AI LIFE)
                               VARIABLE ACCOUNT A

                             STATEMENT OF OPERATIONS
                      For the Year Ended December 31, 1995

<TABLE>
<CAPTION>

                                             ----------       ---------      ---------   ----------     ---------    ------------
                                                                MONEY         PREMIER     GROWTH &       INTER-       SHORT-TERM
                                                               MARKET         GROWTH       INCOME       NATIONAL     MULTI-MARKET
                                                TOTAL         PORTFOLIO      PORTFOLIO    PORTFOLIO     PORTFOLIO      PORTFOLIO
                                             ----------       ---------      ---------   ----------     ---------    ------------
<S>                                          <C>              <C>            <C>         <C>            <C>          <C>

Investment Income (Loss):
  Dividends. . . . . . . . . . . . . .       $  382,587        $196,937      $ 14,734   $   84,710      $ 11,131      $     -

  Expenses:
    Mortality & Expense Risk Fees. . .          316,207          51,459        39,595       56,534        26,650        4,021
    Daily Administrative Charges . . .           14,350           1,985         1,908        2,327           937          194
                                             ----------        --------      --------   ----------      --------      -------
      Net Investment Income (Loss) . .           52,300         143,493       (26,769)      25,849       (16,456)      (4,215)
                                             ----------        --------      --------   ----------      --------      -------

Realized and Unrealized Gain (Loss)
 on Investments:

  Realized Gain (Loss) on
   Investment Activity . . . . . . . .          438,752               -       206,646      179,555        26,266       (3,483)
  Change in Unrealized Appreciation
   (Depreciation). . . . . . . . . . .        4,059,714               -       631,962    1,035,975       194,742       30,769
                                             ----------        --------      --------   ----------      --------      -------
  Net Gain (Loss) on Investments . . .        4,498,466               -       838,608    1,215,530       221,008       27,286
                                             ----------        --------      --------   ----------      --------      -------

Increase (Decrease) in Net Assets
  Resulting From Operations. . . . . .       $4,550,766        $143,493      $811,839   $1,241,379      $204,552      $23,071
                                             ----------        --------      --------   ----------      --------      -------
                                             ----------        --------      --------   ----------      --------      -------

</TABLE>


                        See Notes to Financial Statements
<PAGE>


                  AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY
                              OF NEW YORK (AI LIFE)
                               VARIABLE ACCOUNT A

                             STATEMENT OF OPERATIONS
                      For the Year Ended December 31, 1995
                                   (Continued)

<TABLE>
<CAPTION>

                                             ----------      ----------    ------------  ----------     ---------    ------------
                                               GLOBAL        U.S. GOV'T       GLOBAL       N.AMER.       UTILITY     CONSERVATIVE
                                                BOND          HIGH GRD     DOLLAR GOV'T     GOV'T        INCOME        INVESTORS
                                              PORTFOLIO       PORTFOLIO      PORTFOLIO    PORTFOLIO     PORTFOLIO      PORTFOLIO
                                             ----------      ----------    ------------  ----------     ---------    ------------
<S>                                             <C>              <C>            <C>            <C>             <C>           <C>

Investment Income (Loss):
  Dividends. . . . . . . . . . . . . .        $   4,268       $  36,715       $ 1,684    $  22,560     $   4,260     $    509

  Expenses:
    Mortality & Expense Risk Fees. . .            6,976          30,640         1,592       10,584         7,310        7,610
    Daily Administrative Charges . . .              288           1,365            56          323           350          531
                                              ---------       ---------      --------    ---------     ---------     --------
      Net Investment Income (Loss) . .           (2,996)          4,710            36       11,653        (3,400)      (7,632)
                                              ---------       ---------      --------    ---------     ---------     --------

Realized and Unrealized Gain (Loss)
  on Investments:

  Realized Gain (Loss) on
   Investment Activity . . . . . . . .             (247)         18,645         1,659      (33,120)       (8,865)      (7,540)
  Change in Unrealized Appreciation
   (Depreciation). . . . . . . . . . .          114,189         362,005        28,993      183,345        97,317       93,187
                                              ---------       ---------      --------    ---------     ---------     --------
  Net Gain (Loss) on Investments . . .          113,942         380,650        30,652      150,225       106,182      100,727
                                              ---------       ---------      --------    ---------     ---------     --------

Increase (Decrease) in Net Assets
  Resulting From Operations. . . . . .        $ 110,946       $ 385,360      $ 30,688    $ 161,878     $ 102,782     $ 93,095
                                              ---------       ---------      --------    ---------     ---------     --------
                                              ---------       ---------      --------    ---------     ---------     --------
</TABLE>


                        See Notes to Financial Statements
<PAGE>

                  AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY
                              OF NEW YORK (AI LIFE)
                               VARIABLE ACCOUNT A

                             STATEMENT OF OPERATIONS
                      For the Year Ended December 31, 1995
                                   (Continued)
<TABLE>
<CAPTION>

                                              ---------       ---------     ----------  -------------
                                               GROWTH                          TOTAL      WORLDWIDE
                                              INVESTORS        GROWTH         RETURN    PRIVATIZATION
                                              PORTFOLIO       PORTFOLIO      PORTFOLIO    PORTFOLIO
                                              ---------       ---------     ----------  -------------
<S>                                           <C>             <C>           <C>         <C>

Investment Income (Loss):
  Dividends. . . . . . . . . . . . . .         $    101     $     2,452      $  2,111     $    685

  Expenses:
  Mortality & Expense Risk Fees. . . .            3,205          59,093         6,691        4,247
    Daily Administrative Charges . . .              206           3,250           415          215
                                               --------     -----------      --------     --------
    Net Investment Income (Loss) . . .           (3,310)        (59,891)       (4,995)      (3,777)
                                               --------     -----------      --------     --------


Realized and Unrealized Gain (Loss)
  on Investments:

  Realized Gain (Loss) on
   Investment Activity . . . . . . . .            3,354          19,182         1,861        2,029
  Change in Unrealized Appreciation
   (Depreciation). . . . . . . . . . .           40,929       1,120,763       100,209       25,329
                                               --------     -----------      --------     --------
  Net Gain (Loss) on Investments . . .           44,283       1,139,945       102,070       27,358
                                               --------     -----------      --------     --------

Increase (Decrease) in Net Assets
  Resulting From Operations. . . . . .         $ 40,973     $ 1,080,054      $ 97,075     $ 23,581
                                               --------     -----------      --------     --------
                                               --------     -----------      --------     --------

</TABLE>


                        See Notes to Financial Statements
<PAGE>

                  AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY
                              OF NEW YORK (AI LIFE)
                               VARIABLE ACCOUNT A

                       STATEMENT OF CHANGES IN NET ASSETS
           For the Years Ended December 31, 1995 and December 31, 1994

<TABLE>
<CAPTION>

                                                                                     1995
                                           ------------     ----------     ----------   ----------    ----------    ------------
                                                               MONEY         PREMIER     GROWTH &       INTER-       SHORT-TERM
                                                              MARKET         GROWTH       INCOME       NATIONAL     MULTI-MARKET
                                               TOTAL         PORTFOLIO      PORTFOLIO    PORTFOLIO     PORTFOLIO      PORTFOLIO
                                           ------------     ----------     ----------   ----------    ----------    ------------
<S>                                        <C>              <C>           <C>          <C>           <C>            <C>

Increase (Decrease) in Net Assets
Operations:
  Net Investment Income (Loss) . . . .     $     52,300     $   143,493   $   (26,769) $    25,849   $   (16,456)   $  (4,215)
  Realized Gain (Loss) on Investment
   Activity. . . . . . . . . . . . . .          438,752               -       206,646      179,555        26,266       (3,483)
  Change in Unrealized Appreciation
   (Depreciation) of Investments . . .        4,059,714               -       631,962    1,035,975       194,742       30,769
                                           ------------     -----------   -----------  -----------   -----------    ---------

Increase (Decrease) in Net Assets
  Resulting from Operations. . . . . .        4,550,766         143,493       811,839    1,241,379       204,552       23,071
                                           ------------     -----------   -----------  -----------   -----------    ---------

Capital Transactions:
  Contract Deposits. . . . . . . . . .       37,156,227      15,453,447     3,643,200    3,834,979     1,225,656      784,239
  Transfers Between Funds. . . . . . .                -      (9,732,102)    1,447,409    1,285,496       304,156     (135,351)
  Transfers From (To) AI Life. . . . .       (1,437,541)     (1,444,946)            -            -             -            -
  Administrative Charges . . . . . . .           (9,296)         (1,236)         (977)      (1,208)       (1,683)         (63)
  Contract Withdrawals . . . . . . . .       (1,174,004)       (602,457)      (49,333)    (128,790)     (112,438)           -
  Deferred Sales Charges . . . . . . .          (39,979)        (23,450)       (1,553)      (2,412)       (3,737)           -
  Death Benefits . . . . . . . . . . .         (145,741)           (336)      (42,673)     (37,226)            -            -
                                           ------------     -----------   -----------  -----------   -----------    ---------

  Increase (Decrease) in Net Assets
   Resulting from Capital
   Transactions. . . . . . . . . . . .       34,349,666       3,648,920     4,996,073    4,950,839     1,411,954      648,825
                                           ------------     -----------   -----------  -----------   -----------    ---------
Total Increase (Decrease) in
  Net Assets . . . . . . . . . . . . .       38,900,432       3,792,413     5,807,912    6,192,218     1,616,506      671,896
Net Assets, at Beginning of Year . . .        9,653,704       2,115,416     1,152,825    2,074,756     1,381,633      151,407
                                           ------------     -----------   -----------  -----------   -----------    ---------
Net Assets, at End of Year . . . . . .     $ 48,554,136     $ 5,907,829   $ 6,960,737  $ 8,266,974   $ 2,998,139    $ 823,303
                                           ------------     -----------   -----------  -----------   -----------    ---------
                                           ------------     -----------   -----------  -----------   -----------    ---------

<PAGE>

<CAPTION>

                                                                                    1994

                                             -----------     ----------     ----------   ----------    ----------    ------------
                                                                MONEY                      GROWTH &      INTER-       SHORT-TERM
                                                               MARKET         GROWTH       INCOME       NATIONAL     MULTI-MARKET
                                                TOTAL         PORTFOLIO      PORTFOLIO    PORTFOLIO     PORTFOLIO      PORTFOLIO
                                             -----------     ----------     ----------   ----------    ----------    ------------
<S>                                         <C>              <C>           <C>          <C>           <C>            <C>

Increase (Decrease) in Net Assets
Operations: 
  Net Investment Income (Loss) . . . .      $    18,265     $    14,414   $    (6,357) $     9,350   $    (4,738)   $   1,978
  Realized Gain (Loss) on Investment
   Activity. . . . . . . . . . . . . .           20,415               -         5,524       10,503         8,741         (430)
  Change in Unrealized Appreciation
   (Depreciation) of Investments . . .         (189,962)              -       (18,043)     (38,575)      (20,545)     (14,865)
                                            -----------     -----------   -----------  -----------   -----------    ---------

Increase (Decrease) in Net Assets
  Resulting from Operations. . . . . .         (151,282)         14,414       (18,876)     (18,722)      (16,542)     (13,317)
                                            -----------     -----------   -----------  -----------   -----------    ---------

Capital Transactions:
  Contract Deposits. . . . . . . . . .        8,637,099       3,018,765       673,722    1,428,657       991,291       94,714
  Transfers Between Funds. . . . . . .                -        (898,617)      109,455      265,001       170,842         (478)
  Administrative Charges . . . . . . .             (954)            (49)         (201)        (350)         (114)         (33)
  Contract Withdrawals . . . . . . . .         (126,914)        (35,111)       (3,750)     (41,074)       (3,802)         (60)
  Deferred Sales Charges . . . . . . .           (1,915)              -             -         (703)            -            -
                                            -----------     -----------   -----------  -----------   -----------    ---------

  Increase (Decrease) in Net Assets
   Resulting from Capital
   Transactions. . . . . . . . . . . .        8,507,316       2,084,988       779,226    1,651,531     1,158,217       94,143
                                            -----------     -----------   -----------  -----------   -----------    ---------
Total Increase (Decrease) in
 Net Assets. . . . . . . . . . . . . .        8,356,034       2,099,402       760,350    1,632,809     1,141,675       80,826
Net Assets, at Beginning of Year . . .        1,297,670          16,014       392,475      441,947       239,958       70,581
                                            -----------     -----------   -----------  -----------   -----------    ---------
Net Assets, at End of Year . . . . . .      $ 9,653,704     $ 2,115,416   $ 1,152,825  $ 2,074,756   $ 1,381,633    $ 151,407
                                            -----------     -----------   -----------  -----------   -----------    ---------
                                            -----------     -----------   -----------  -----------   -----------    ---------

</TABLE>


                        See Notes to Financial Statements
<PAGE>

                  AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY
                              OF NEW YORK (AI LIFE)
                               VARIABLE ACCOUNT A

                       STATEMENT OF CHANGES IN NET ASSETS
           For the Years Ended December 31, 1995 and December 31, 1994
                                   (Continued)

<TABLE>
<CAPTION>

                                                                                      1995

                                             ----------      ----------    ------------   ---------     ---------    ------------
                                               GLOBAL        U.S. GOV'T       GLOBAL       N.AMER.       UTILITY     CONSERVATIVE
                                                BOND          HIGH GRD     DOLLAR GOV'T     GOV'T        INCOME        INVESTORS
                                              PORTFOLIO       PORTFOLIO      PORTFOLIO    PORTFOLIO     PORTFOLIO      PORTFOLIO
                                             ----------      ----------    ------------   ---------     ---------    ------------
<S>                                         <C>             <C>            <C>         <C>           <C>          <C>


Increase (Decrease) in Net Assets
Operations:
  Net Investment Income (Loss) . . . .        $  (2,996)    $     4,710      $     36  $    11,653   $    (3,400) $    (7,632)
  Realized Gain (Loss) on Investment
   Activity. . . . . . . . . . . . . .             (247)         18,645         1,659      (33,120)        8,865        7,540
  Change in Unrealized Appreciation
   (Depreciation) of Investments . . .          114,189         362,005        28,993      183,345        97,317       93,187
                                              ---------     -----------     ---------  -----------   -----------  -----------

Increase (Decrease) in Net Assets
  Resulting from Operations. . . . . .          110,946         385,360        30,688      161,878       102,782       93,095
                                              ---------     -----------     ---------  -----------   -----------  -----------

Capital Transactions:
  Contract Deposits. . . . . . . . . .          290,274       2,199,892       114,973      498,520       735,782    1,295,707
  Transfers Between Funds. . . . . . .          326,218       1,240,474        (7,100)    (353,701)      298,196      464,257
  Transfers From (To) AI Life. . . . .                -               -             -            -             -            -
  Administrative Charges . . . . . . .             (162)           (484)          (29)      (1,048)         (117)        (102)
  Contract Withdrawals . . . . . . . .          (29,399)        (25,751)       (5,466)     (45,276)      (11,410)     (17,859)
  Deferred Sales Charges . . . . . . .             (692)            (63)            -       (1,770)         (232)        (119)
  Death Benefits . . . . . . . . . . .                -         (33,092)            -      (32,414)            -            -
                                              ---------     -----------     ---------  -----------   -----------  -----------

  Increase (Decrease) in Net Assets
   Resulting from Capital
   Transactions. . . . . . . . . . . .          586,239       3,380,976       102,378       64,311     1,022,219    1,741,884
                                              ---------     -----------     ---------  -----------   -----------  -----------

Total Increase (Decrease) in
 Net Assets. . . . . . . . . . . . . .          697,185       3,766,336       133,066      226,189     1,125,001    1,834,979
Net Assets, at Beginning of Year . . .          276,373         733,222        57,960      776,586       132,905       69,994
                                              ---------     -----------     ---------  -----------   -----------  -----------
Net Assets, at End of Year . . . . . .        $ 973,558     $ 4,499,558     $ 191,026  $ 1,002,775   $ 1,257,906  $ 1,904,973
                                              ---------     -----------     ---------  -----------   -----------  -----------
                                              ---------     -----------     ---------  -----------   -----------  -----------

<PAGE>

<CAPTION>

                                                                                      1994

                                             ----------      ----------    ------------   ---------     ---------    ------------
                                               GLOBAL        U.S. GOV'T       GLOBAL       N.AMER.       UTILITY     CONSERVATIVE
                                                BOND          HIGH GRD     DOLLAR GOV'T     GOV'T        INCOME        INVESTORS
                                              PORTFOLIO       PORTFOLIO      PORTFOLIO    PORTFOLIO     PORTFOLIO      PORTFOLIO
                                             ----------      ----------    ------------   ---------     ---------    ------------
<S>                                          <C>             <C>           <C>           <C>           <C>           <C>

Increase (Decrease) in Net Assets
Operations:
  Net Investment Income (Loss) . . . .        $   2,296       $   5,673      $   (132)   $  (2,182)    $    (458)    $   (152)
  Realized Gain (Loss) on Investment
   Activity. . . . . . . . . . . . . .           (2,139)         (1,938)            -          151            (1)           -
  Change in Unrealized Appreciation
   (Depreciation) of Investments . . .           (4,275)        (11,904)         (927)     (93,816)       (1,551)         492
                                              ---------       ---------      --------    ---------     ---------     --------

Increase (Decrease) in Net Assets
  Resulting from Operations. . . . . .           (4,118)         (8,169)       (1,059)     (95,847)       (2,010)         340
                                              ---------       ---------      --------    ---------     ---------     --------

Capital Transactions:
  Contract Deposits. . . . . . . . . .          212,264         637,687        59,220      847,370        89,098       45,002
  Transfers Between Funds. . . . . . .           20,738          58,085             -       25,263        46,365       24,652
  Administrative Charges . . . . . . .              (84)           (123)            -            -             -            -
  Contract Withdrawals . . . . . . . .          (11,067)        (31,101)         (201)        (200)         (548)           -
  Deferred Sales Charges . . . . . . .             (670)           (542)            -            -             -            -
                                              ---------       ---------      --------    ---------     ---------     --------

  Increase (Decrease) in Net Assets
  Resulting from Capital
   Transactions. . . . . . . . . . . .          221,181         664,006        59,019      872,433       134,915       69,654
                                              ---------       ---------      --------    ---------     ---------     --------

Total Increase (Decrease) in
 Net Assets. . . . . . . . . . . . . .          217,063         655,837        57,960      776,586       132,905       69,994
Net Assets, at Beginning of Year . . .           59,310          77,385             -            -             -            -
                                              ---------       ---------      --------    ---------     ---------     --------
Net Assets, at End of Year . . . . . .        $ 276,373       $ 733,222      $ 57,960    $ 776,586     $ 132,905     $ 69,994
                                              ---------       ---------      --------    ---------     ---------     --------
                                              ---------       ---------      --------    ---------     ---------     --------

</TABLE>


                        See Notes to Financial Statements
<PAGE>

                  AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY
                              OF NEW YORK (AI LIFE)
                               VARIABLE ACCOUNT A

                       STATEMENT OF CHANGES IN NET ASSETS
           For the Years Ended December 31, 1995 and December 31, 1994
                                   (Continued)
<TABLE>
<CAPTION>

                                                                       1995

                                              ---------       ---------      ---------  -------------
                                               GROWTH                          TOTAL      WORLDWIDE
                                              INVESTORS        GROWTH         RETURN    PRIVATIZATION
                                              PORTFOLIO       PORTFOLIO      PORTFOLIO    PORTFOLIO
                                              ---------       ---------      ---------  -------------
<S>                                           <C>          <C>            <C>           <C>

Increase (Decrease) in Net Assets
Operations:
  Net Investment Income (Loss) . . . .        $  (3,310)   $    (59,891)  $    (4,995)   $  (3,777)
  Realized Gain (Loss) on Investment
   Activity. . . . . . . . . . . . . .            3,354          19,182         1,861        2,029
  Change in Unrealized Appreciation
   (Depreciation) of Investments . . .           40,929       1,120,763       100,209       25,329
                                              ---------    ------------   -----------    ---------

Increase (Decrease) in Net Assets
  Resulting from Operations. . . . . .           40,973       1,080,054        97,075       23,581
                                              ---------    ------------   -----------    ---------

Capital Transactions:
  Contract Deposits. . . . . . . . . .          268,883       5,741,124       793,257      276,294
  Transfers Between Funds. . . . . . .          397,035       3,625,601       509,809      329,603
  Transfers From (To) AI Life. . . . .            7,405               -             -            -
  Administrative Charges . . . . . . .              (40)         (1,999)          (68)         (80)
  Contract Withdrawals . . . . . . . .          (11,434)       (125,673)       (6,235)      (2,483)
  Deferred Sales Charges . . . . . . .              (22)         (5,814)          (84)         (31)
  Death Benefits . . . . . . . . . . .                -               -             -            -
                                              ---------    ------------   -----------    ---------

  Increase (Decrease) in Net Assets
  Resulting from Capital
   Transactions. . . . . . . . . . . .          661,827       9,233,239     1,296,679      603,303
                                              ---------    ------------   -----------    ---------

Total Increase (Decrease) in
 Net Assets. . . . . . . . . . . . . .          702,800      10,313,293     1,393,754      626,884
Net Assets, at Beginning of Year . . .           31,321         587,905        47,480       63,921
                                              ---------    ------------   -----------    ---------
Net Assets, at End of Year . . . . . .        $ 734,121    $ 10,901,198   $ 1,441,234    $ 690,805
                                              ---------    ------------   -----------    ---------
                                              ---------    ------------   -----------    ---------
<PAGE>

<CAPTION>

                                                                       1995

                                              ---------       ---------      ---------  -------------
                                               GROWTH                          TOTAL      WORLDWIDE
                                              INVESTORS        GROWTH         RETURN    PRIVATIZATION
                                              PORTFOLIO       PORTFOLIO      PORTFOLIO    PORTFOLIO
                                              ---------       ---------      ---------  -------------
<S>                                           <C>             <C>            <C>        <C>

Increase (Decrease) in Net Assets
Operations:
  Net Investment Income (Loss) . . . .         $    (58)      $  (1,232)     $    (78)   $     (59)
  Realized Gain (Loss) on Investment
   Activity. . . . . . . . . . . . . .               (1)              6            (1)           -
  Change in Unrealized Appreciation
   (Depreciation) of Investments . . .             (219)         14,189          (125)         202
                                               --------       ---------      --------    ---------

Increase (Decrease) in Net Assets
  Resulting from Operations. . . . . .             (278)         12,963          (204)         143
                                               --------       ---------      --------    ---------

Capital Transactions:
  Contract Deposits. . . . . . . . . .           25,250         436,832        19,298       57,929
  Transfers Between Funds. . . . . . .            6,349         138,110        28,386        5,849
  Administrative Charges . . . . . . .                -               -             -            -
  Contract Withdrawals . . . . . . . .                -               -             -            -
  Deferred Sales Charges . . . . . . .                -               -             -            -
                                               --------       ---------      --------    ---------

  Increase (Decrease) in Net Assets
  Resulting from Capital
   Transactions. . . . . . . . . . . .           31,599         574,942        47,684       63,778
                                               --------       ---------      --------    ---------

Total Increase (Decrease) in
 Net Assets. . . . . . . . . . . . . .           31,321         587,905        47,480       63,921
Net Assets, at Beginning of Year . . .                -               -             -            -
                                               --------       ---------      --------    ---------
Net Assets, at End of Year . . . . . .         $ 31,321       $ 587,905      $ 47,480     $ 63,921
                                               --------       ---------      --------    ---------
                                               --------       ---------      --------    ---------


</TABLE>


                        See Notes to Financial Statements
<PAGE>


                  AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY
                              OF NEW YORK (AI LIFE)
                               VARIABLE ACCOUNT A

                         NOTES TO FINANCIAL STATEMENTS

1.  HISTORY
Variable Account A (the "Account") is a separate investment account established
in June 1987 under the provisions of New York Insurance Law by American
International Life Assurance Company of New York (the "Company"), a subsidiary
of American International Group, Inc.  The Account operates as a unit investment
trust registered under the Investment Company Act of 1940, as amended, and
supports the operations of the Company's individual single purchase payment
deferred variable annuity contracts (the "contracts").  The Account invests in
shares of Alliance Variable Products Series Fund, Inc. (the "Fund").  The Fund
consists of fifteen series:  Money Market Portfolio; Short-Term Multi-Market
Portfolio; Premier Growth Portfolio (formerly the Growth Portfolio); Growth and
Income Portfolio; International Portfolio; Global Bond Portfolio;
U.S.Government/High Grade Securities Portfolio; Global Dollar Government
Portfolio; North American Government Portfolio; Utility Income Portfolio;
Conservative Investors Portfolio; Growth Investors Portfolio; Growth Portfolio;
Total Return Portfolio and World Privatization Portfolio.  The Account invests
in shares of other funds which are not available to these contracts.

On April 16, 1992, the initial investment was made in the Fund.

The assets of the Account are the property of the Company.  The portion of the
Account's assets applicable to the contracts are not chargeable with liabilities
arising out of any other business conducted by the Company.

In addition to the Account, a contract owner may also allocate funds to the
Guaranteed Account, which is part of the Company's general account.  Amounts
allocated to the Guaranteed Account are credited with a guaranteed rate for one
year.  Because of exemptive and exclusionary provisions, interests in the
Guaranteed Account have not been registered under the Securities Act of 1933 and
the Guaranteed Account has not been registered as an investment company under
the Investment Company Act of 1940.

2.  SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Account in preparation of the financial statements in conformity with generally
accepted accounting principles.

A.  Investment Valuation - The investments in the Funds are stated at market
value which is the net asset value of each of the respective series as
determined at the close of business on the last business day of the period by
the Fund.

B.  Accounting for Investments - Investment transactions are accounted for on
the date the investments are purchased or sold.  Dividend income is recorded on
the ex-dividend date.

C.  Federal Income Taxes - The Company is taxed under federal law as a life
insurance company.  The Account is part of the Company's total operations and is
not taxed separately.  Under existing federal law, no taxes are payable on
investment income and realized capital gains of the Account.

D.  The preparation of the accompanying financial statements required management
to make estimates and assumptions that affect the reported values of assets and
liabilities as of December 31, 1995 and the reported amounts from operations and
policy transactions during 1995 and 1994.  Actual results could differ from
those estimates.
<PAGE>

                  AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY
                              OF NEW YORK (AI LIFE)
                               VARIABLE ACCOUNT A

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)



3.  CONTRACT CHARGES
Daily charges for mortality and expense risks assumed by the Company are
assessed through the daily unit value calculation and are equivalent on an
annual basis to 1.25% of the value of the contracts.

Daily charges for administrative expenses are assessed through the daily unit
value calculation on all contracts issued subsequent to April 1, 1994 (i.e.
Variable Annuity II contracts) and are equivalent on an annual basis to 0.15% of
the value of the contracts.  In addition, an annual administrative expense
charge of $30 is assessed against each contract on its anniversary date by
surrendering units.

The contracts provide that in the event that a contract owner withdraws all or a
portion of the contract value within six contract years they will be assessed a
deferred sales charge.  The deferred sales charge is based on a table of
charges, of which the maximum charge is 6% of the contract value subject to a
maximum of 8.5% of purchase payments.

Certain states impose premium taxes upon contracts.  The Company intends to
advance premium taxes due until the contract is surrendered or annuitized.

<PAGE>


                  AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY
                              OF NEW YORK (AI LIFE)
                               VARIABLE ACCOUNT A

                    NOTES TO FINANCIAL STATEMENTS (continued)





4.  PURCHASES OF INVESTMENTS
For the year ended December 31, 1995 investment activity in the Fund was as
follows:


<TABLE>
<CAPTION>

                                                       ---------------   ---------------                                        --
                                                           COST OF          PROCEEDS
     SHARES OF                                            PURCHASES        FROM SALES
     ---------------                                   ---------------   ---------------
     <S>                                               <C>               <C>

     Alliance Variable Product Series Fund, Inc.:
         Money Market Portfolio ....................   $    12,870,122   $     9,111,196
         Premier Growth Portfolio ..................         5,767,441           808,729
         Growth & Income Portfolio .................         5,995,161         1,028,929
         International Portfolio ...................         1,917,772           532,939
         Short-Term Multi-Market Portfolio .........           883,446           239,035
         Global Bond Portfolio .....................           609,386            26,318
         U.S. Government/High Grade
             Securities Portfolio ..................         3,715,608           331,256
         Global Dollar Government Portfolio ........           144,679            42,307
         North American Government Portfolio .......           662,338           587,096
         Utility Income Portfolio ..................         1,085,769            67,034
         Conservative Investors Portfolio...........         1,902,672           168,602
         Growth Investors Portfolio.................           681,600            23,110
         Growth Portfolio...........................         9,261,087            88,309
         Total Return Portfolio.....................         1,309,428            17,782
         Worldwide Privatization Portfolio..........           623,657            24,175

</TABLE>


For the year ended December 31, 1994  investment activity in the Fund was as
follows:


<TABLE>
<CAPTION>

                                                       ---------------   ---------------
                                                           COST OF          PROCEEDS
     SHARES OF                                            PURCHASES        FROM SALES
     ---------------                                   ---------------   ---------------
     <S>                                               <C>               <C>

     Alliance Variable Product Series Fund, Inc.:
         Money Market Portfolio ....................   $     2,951,824   $       844,456
         Premier Growth Portfolio ..................           839,549            56,911
         Growth & Income Portfolio .................         1,774,507           102,841
         International Portfolio ...................         1,258,929            95,363
         Short-Term Multi-Market Portfolio .........           146,207            49,865
         Global Bond Portfolio .....................           247,971            24,290
         U.S. Government/High Grade
             Securities Portfolio ..................           717,751            47,573
         Global Dollar Government Portfolio ........            59,220               293
         North American Government Portfolio .......           885,222            14,219
         Utility Income Portfolio ..................           135,356               775
         Conservative Investors Portfolio...........            69,652                90
         Growth Investors Portfolio.................            31,598                32
         Growth Portfolio...........................           574,622               382
         Total Return Portfolio.....................            47,684                43
         Worldwide Privatization Portfolio..........            63,778                19

</TABLE>

<PAGE>

                  AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY
                              OF NEW YORK (AI LIFE)
                               VARIABLE ACCOUNT A

                    NOTES TO FINANCIAL STATEMENTS (continued)




5.  NET INCREASE (DECREASE) IN ACCUMULATION UNITS
For the year ended December 31, 1995, transactions in accumulation units of the
account were as follows:

<TABLE>
<CAPTION>

                                             MONEY             PREMIER          GROWTH &            INTER-          SHORT-TERM
                                            MARKET             GROWTH            INCOME            NATIONAL        MULTI-MARKET
                                            SERIES             SERIES             SERIES            SERIES            SERIES
            VARIABLE ANNUITY            ---------------    ---------------    --------------    --------------    --------------
<S>                                     <C>                <C>                <C>               <C>               <C>

  Units Purchased ..................       1,474,507.45         255,335.90        275,156.25        106,146.66         80,290.48
  Units Withdrawn ..................         (59,780.26)         (6,829.75)       (12,306.52)       (10,060.65)            (6.30)
  Units Transferred Between Funds ..        (929,873.13)         64,045.33         60,572.38          9,551.85        (14,774.17)
  Units Transferred From (To) AI
   Life.............................        (139,332.95)            -                 -                 -                 -
                                        ---------------    ---------------    --------------    --------------    --------------
  Net Increase (Decrease) ..........         345,521.11         312,551.48        323,422.11        105,637.86         65,510.01
  Units, at Beginning of the Year ..         206,034.73         108,111.20        179,245.69        122,616.95         15,915.04
                                        ---------------    ---------------    --------------    --------------    --------------
  Units, at End of the Year ........         551,555.84         420,662.68        502,667.80        228,254.81         81,425.05
                                        ===============    ===============    ==============    ==============    ==============

  Unit Value at December 31, 1995 ..    $         10.64    $         15.25    $        15.52    $        12.22    $        10.03
                                        ===============    ===============    ==============    ==============    ==============

<CAPTION>

                                            GLOBAL           U.S. GOV'T           GLOBAL           N.AMER.           UTILITY
                                             BOND             HIGH GRD         DOLLAR GOV'T         GOV'T             INCOME
                                            SERIES             SERIES             SERIES            SERIES            SERIES
                                        ---------------    ---------------    --------------    --------------    --------------
<S>                                     <C>                <C>                <C>               <C>               <C>

  Units Purchased ..................          25,508.98         206,884.09         11,512.25         51,797.75         68,523.56
  Units Withdrawn ..................          (2,036.29)         (5,262.62)          (343.45)        (8,644.23)        (1,062.80)
  Units Transferred Between Funds ..          25,325.29         112,980.43           (955.35)       (37,286.74)        21,891.91
  Units Transferred From (To) AI
   Life.............................           -                  -                 -                 -                 -
                                        ---------------    ---------------    --------------    --------------    --------------
  Net Increase (Decrease) ..........          48,797.98         314,601.90         10,213.45          5,866.78         89,352.67
  Units, at Beginning of the Period           27,806.30          75,881.31          5,958.18         89,164.68         13,690.19
                                        ---------------    ---------------    --------------    --------------    --------------
  Units, at Beginning of the Year ..          76,604.28         390,483.21         16,171.63         95,031.46        103,042.86
                                        ===============    ===============    ==============    ==============    ==============
  Units, at End of the Year ........
  Unit Value at December 31, 1995 ..    $         12.24    $         11.38    $        11.81    $        10.55  $          11.64
                                        ===============    ===============    ==============    ==============    ==============

<CAPTION>

                                         CONSERVATIVE          GROWTH                               TOTAL           WORLDWIDE
                                           INVESTORS          INVESTORS           GROWTH            RETURN        PRIVATIZATION
                                            SERIES             SERIES             SERIES            SERIES            SERIES
                                        ---------------    ---------------    --------------    --------------    --------------
<S>                                     <C>                <C>                <C>               <C>               <C>

  Units Purchased ..................         117,399.46          24,345.73        451,869.60         71,975.09         25,896.57
  Units Withdrawn ..................          (1,679.57)           (334.21)       (12,157.07)          (556.36)          (262.73)
  Units Transferred Between Funds ..          41,703.20          35,565.66        280,735.13         44,804.97         30,777.77
  Units Transferred From (To) AI
   Life.............................           -                  -                   554.38          -                 -
                                        ---------------    ---------------    --------------    --------------    --------------
  Net Increase (Decrease) ..........         157,423.09          59,577.18        721,002.04        116,223.70         56,411.61
  Units, at Beginning of the Year ..           6,977.55           3,185.25         56,106.84          4,871.12          6,357.69
                                        ---------------    ---------------    --------------    --------------    --------------
  Units, at End of the Year ........         164,400.64          62,762.43        777,108.88        121,094.82         62,769.30
                                        ===============    ===============    ==============    ==============    ==============

  Unit Value at December 31, 1995 ..    $         11.59    $         11.70    $        13.99    $        11.90    $        11.01
                                        ===============    ===============    ==============    ==============    ==============

</TABLE>


<PAGE>


                  AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY
                              OF NEW YORK (AI LIFE)
                               VARIABLE ACCOUNT A

                    NOTES TO FINANCIAL STATEMENTS (continued)

<TABLE>
<CAPTION>

                                            MONEY             PREMIER          GROWTH &           INTER-          SHORT-TERM
                                            MARKET             GROWTH           INCOME            NATIONAL       MULTI-MARKET
                                            SERIES             SERIES            SERIES           SERIES            SERIES
            VARIABLE ANNUITY II        ----------------    --------------    --------------    -------------    --------------
<S>                                    <C>                 <C>               <C>               <C>              <C>

  Units Purchased .................           -                  -                 -                 -                -
  Units Withdrawn .................           -                    (61.04)           (57.17)          (59.31)         -
  Units Transferred Between Funds .            3,518.68         35,795.31         30,186.10        17,119.79            679.80
  Units Transferred From (To) AI
   Life ...........................           -                  -                 -                 -                -
                                       ----------------    --------------    --------------    -------------    --------------
  Net Increase (Decrease) .........            3,518.68         35,734.27         30,128.93        17,060.48            679.80
  Units, at Beginning of the Year .           -                  -                 -                 -                -
                                       ----------------    --------------    --------------    -------------    --------------
  Units, at End of the Year .......            3,518.68         35,734.27         30,128.93        17,060.48            679.80
                                       ================    ==============    ==============    =============    ==============

  Unit Value at December 31, 1995 .    $          10.65    $        15.26    $        15.52    $       12.23    $        10.03
                                       ================    ==============    ==============    =============    ==============

<CAPTION>

                                            GLOBAL           U.S. GOV'T          GLOBAL           N.AMER.          UTILITY
                                             BOND             HIGH GRD        DOLLAR GOV'T         GOV'T            INCOME
                                            SERIES             SERIES            SERIES           SERIES            SERIES
                                       ----------------    --------------    --------------    -------------    --------------
<S>                                    <C>                 <C>               <C>               <C>              <C>

  Units Purchased .................           -                  -                 -                 -                -
  Units Withdrawn .................               (0.47)           (58.92)         -                 -                   (1.29)
  Units Transferred Between Funds .            2,930.50          5,054.53          -                 -                5,017.70
  Units Transferred From (To) AI
   Life............................           -                  -                 -                 -                -
                                       ----------------    --------------    --------------    -------------    --------------
  Net Increase (Decrease) .........            2,930.03          4,995.61          -                 -                5,016.41
  Units, at Beginning of the Period           -                  -                 -                 -                -
                                       ----------------    --------------    --------------    -------------    --------------
  Units, at Beginning of the Year .            2,930.03          4,995.61          -                 -                5,016.41
                                       ================    ==============    ==============    =============    ==============
  Units, at End of the Year .......
  Unit Value at December 31, 1995 .    $          12.25    $        11.38    $        11.13    $        9.84    $        11.64
                                       ================    ==============    ==============    =============    ==============


<CAPTION>

                                        CONSERVATIVE           GROWTH                             TOTAL           WORLDWIDE
                                          INVESTORS          INVESTORS           GROWTH           RETURN        PRIVATIZATION
                                            SERIES             SERIES            SERIES           SERIES            SERIES
                                       ----------------    --------------    --------------    -------------    --------------
<S>                                    <C>                 <C>               <C>               <C>              <C>

  Units Purchased .................           -                  -                 -                 -                -
  Units Withdrawn .................           -                  -                 -                 -                -
  Units Transferred Between Funds .           -                  -                 2,064.78          -                -
  Units Transferred From (To) AI
   Life............................           -                  -                 -                 -                -
                                       ----------------    --------------    --------------    -------------    --------------
  Net Increase (Decrease) .........           -                  -                 2,064.78          -                -
  Units, at Beginning of the Year .           -                  -                 -                 -                -
                                       ----------------    --------------    --------------    -------------    --------------
  Units, at End of the Year .......           -                  -                 2,064.78          -                -
                                       ================    ==============    ==============    =============    ==============

  Unit Value at December 31, 1995 .    $          11.19    $        11.34    $        14.00    $       11.39    $        11.01
                                       ================    ==============    ==============    =============    ==============


</TABLE>
<PAGE>
   

                                   PROSPECTUS
                                      FOR
 
                              INDIVIDUAL AND GROUP
                      SINGLE PREMIUM AND FLEXIBLE PREMIUM
                                    DEFERRED
                           VARIABLE ANNUITY CONTRACTS
 
                                   ISSUED BY
 
                               VARIABLE ACCOUNT A
 
                                      AND
 
                 AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY
                                  OF NEW YORK
                                 80 PINE STREET
                            NEW YORK, NEW YORK 10005
 
    This  Prospectus sets forth the information  a prospective investor ought to
know before investing.
 
    The  Individual  Deferred  Variable   Annuity  Contracts  (the   "Individual
Contracts")  and Group  Deferred Variable Annuity  Contracts ("Group Contracts")
(collectively,  the  "Contracts")  described  in  this  Prospectus  provide  for
accumulation  of Contract  Values and payment  of monthly  annuity payments. The
Contracts may be used in retirement plans  which do not qualify for federal  tax
advantages  ("Non-Qualified Contracts")  or in connection  with retirement plans
which may qualify as Individual  Retirement Annuities ("IRA") under Section  408
of  the Internal Revenue Code of 1986, as amended (the "Code") or Section 403(b)
of the Code ("403(b) Plans"). The Contracts will not be available in  connection
with  retirement plans designed by American International Life Assurance Company
of New  York  (the "Company")  which  qualify  for the  federal  tax  advantages
available  under Sections 401 and  457 of the Code.  Purchasers intending to use
the Contracts in connection with an IRA or 403(b) Plan should seek competent tax
advice.
 
    Premiums  allocated  among  the  Subaccounts  of  Variable  Account  A  (the
"Variable  Account") will be  invested in shares  of corresponding portfolios as
selected by the Owner from the following 17 choices: the Conservative  Investors
Portfolio,  Growth Investors Portfolio,  Growth Portfolio, or  Growth and Income
Portfolio of the ALLIANCE VARIABLE PRODUCTS  SERIES FUND, INC.; the High  Income
Portfolio,  Growth Portfolio, Money Market  Portfolio, Overseas Portfolio, Asset
Manager  Portfolio,  or  Investment  Grade   Bond  Portfolio  of  the   FIDELITY
INVESTMENTS  VARIABLE  INSURANCE PRODUCTS  FUNDS; the  Dreyfus Zero  Coupon 2000
Portfolio of  the  DREYFUS  VARIABLE  INVESTMENT  FUND;  the  Gold  and  Natural
Resources  Portfolio or Worldwide  Balanced Portfolio, of  the VAN ECK WORLDWIDE
INSURANCE TRUST;  the DREYFUS  STOCK INDEX  FUND; or  the Short-Term  Retirement
Portfolio,   Medium-Term  Retirement  Portfolio   or  the  Long-Term  Retirement
Portfolio of the TOMORROW FUNDS RETIREMENT TRUST.
 
    Additional information  about  the Contracts  and  the Variable  Account  is
contained  in the "Statement of Additional  Information" which is available upon
request at no charge by calling or writing American International Life Assurance
Company of New York; Attention  Variable Products, One Alico Plaza,  Wilmington,
Delaware 19801, 1-800-340-2765 or call the service office at 1-800-255-8402. The
Statement  of Additional Information dated May 1,  1996, has been filed with the
Securities and Exchange Commission and is hereby incorporated by reference.  The
Table  of Contents for the  Statement of Additional Information  can be found on
page   of this Prospectus.
 
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.
 
    PLEASE READ  THIS  PROSPECTUS  CAREFULLY  AND  RETAIN  IT  FOR  YOUR  FUTURE
REFERENCE.
 
    THE CONTRACTS OFFERED BY THIS PROSPECTUS ARE NOT AVAILABLE IN ALL STATES.
 
                                                 Date of Prospectus: May 1, 1996
    

<PAGE>
   

                                 TABLE CONTENTS
 
<TABLE>
<CAPTION>
                                                                                                                PAGE
                                                                                                                -----
<S>                                                                                                          <C>
Definitions................................................................................................           3
Highlights.................................................................................................           4
Summary of Expenses........................................................................................           6
Condensed Financial Information............................................................................           8
  Calculation of Performance Data..........................................................................           8
The Company................................................................................................           9
The Variable Account.......................................................................................          10
The Funds..................................................................................................          11
The Contract...............................................................................................          14
  Parties to the Contract..................................................................................          15
  How to Purchase a Contract...............................................................................          15
  Discount Purchase Programs...............................................................................          15
  Distributor..............................................................................................          15
  Administration of the Contracts..........................................................................          16
  Premium and Allocation to Your Investment Options........................................................          16
  Right to Examine Contract Period.........................................................................          16
  Unit Value and Contract Value............................................................................          17
  Transfers................................................................................................          17
  Dollar Cost Averaging....................................................................................          18
  Asset Rebalancing Option.................................................................................          18
Charges and Deductions.....................................................................................          19
Annuity Benefits...........................................................................................          21
Death Benefit..............................................................................................          22
Distributions Under the Contract...........................................................................          23
Taxes......................................................................................................          26
Table of Contents of the Statement of Additional Information...............................................          30
Appendix -- General Account Option.........................................................................         A-1
  Guaranteed Account.......................................................................................         A-1
  Guarantee Periods........................................................................................         A-1
  Market Value Adjustment..................................................................................         A-2
</TABLE>
 
    

                                       2
<PAGE>
   

                                  DEFINITIONS
 
ACCUMULATION  UNIT  --  An accounting  unit  of  measure used  to  calculate the
Contract Value prior to the Annuity Date.
 
ADMINISTRATIVE OFFICE -- The Annuity Service Office of the Company: c/o Delaware
Valley Financial Services,  Inc., 300  Berwyn Park,  P.O. Box  3031, Berwyn,  PA
19312-0031.
 
ANNUITANT  -- The person designated by the Owner upon whose continuation of life
any annuity payment involving life contingencies depends.
 
ANNUITY DATE -- The date on which annuity payments are to commence.
 
ANNUITY OPTION --  An arrangement under  which annuity payments  are made  under
this Contract.
 
ANNUITY UNIT -- An accounting unit of measure used to calculate annuity payments
after the Annuity Date.
 
CONTRACT ANNIVERSARY -- An anniversary of the Effective Date of the Contract.
 
CONTRACT  VALUE --  The dollar  value as  of any  Valuation Date  of all amounts
accumulated under this Contract.
 
CONTRACT YEAR -- Each period of twelve (12) months commencing with the Effective
Date.
 
EFFECTIVE DATE -- The date on which the first Contract Year begins.
 
GUARANTEED ACCOUNT -- A  part of our General  Account, which earns a  Guaranteed
Rate of interest.
 
MARKET  VALUE ADJUSTMENT -- An  adjustment applied as a  result of a transfer or
surrender of an  amount allocated to  the Guaranteed Account  which occurs on  a
date prior to the end of an applicable Guarantee Period.
 
OWNER  -- The person named in the Contract Schedule, unless changed, and who has
all rights under the Contract.
 
PREMIUM -- Purchase payments for the Contract are referred to as Premium.
 
PREMIUM YEAR --  Any period of  twelve (12)  months commencing with  the date  a
Premium  payment is made and  ending on the same  date in each succeeding twelve
(12) month period thereafter.
 
SURRENDER CHARGE  --  Contingent  deferred  sales charges  are  referred  to  as
Surrender Charges.
 
VALUATION  DATE -- Each day that We and the New York Stock Exchange are open for
trading.
 
VALUATION PERIOD -- The  period between the close  of business on any  Valuation
Date and the close of business for the next succeeding Valuation Date.
 
WE, OUR, US -- American International Life Assurance Company of New York.
 
YOU, YOUR -- The Owner of this Contract.
 
    

                                       3
<PAGE>
   
                                   HIGHLIGHTS
 
    This  Prospectus  describes  the  Individual  Contracts  or  Group Contracts
(collectively, the "Contracts") and a segregated investment account of  American
International  Life Assurance Company of New  York (the "Company") which account
has been designated Variable Account  A (the "Variable Account"). The  Contracts
are  designed to assist in financial  planning by providing for the accumulation
of capital on a tax-deferred basis for retirement and other long-term  purposes,
and  providing  for the  payment  of monthly  annuity  income. Contracts  may be
purchased by  qualified retirement  plans  or with  the  intent to  qualify  for
special   Federal  income  tax  treatment  ("Qualified  Contracts"),  or  as  an
Individual Retirement Annuity ("IRA").  The Contract may  also be purchased  for
retirement  plans, deferred compensation  plans and other  purposes which do not
qualify  for  such   special  Federal  income   tax  treatment   ("Non-Qualified
Contracts"). (See "Taxes" on page   .)
 
    A  Contract  is  purchased with  a  minimum  initial premium  of  $5,000 for
Non-qualified Contracts and  $2,000 for a  Qualified Contract. If  you choose  a
flexible  premium Contract, additional premium is permitted at any time, subject
to certain limitations. (See "Premium and Allocation to Your Investment Options"
on page    .) You, as the  Owner of the Contract,  may allocate your premium  so
that it accumulates on a variable basis, a fixed basis or a combination of both.
 
    Premium  allocated  among  the  Subaccounts  of  the  Variable  Account will
accumulate on a variable basis and will be invested in shares of one or more  of
the  following 17  underlying portfolios: the  Conservative Investors Portfolio,
Growth Investors Portfolio, Growth Portfolio, or Growth and Income Portfolio  of
the  ALLIANCE VARIABLE PRODUCTS  SERIES FUND, INC.  ("Alliance Funds"); the High
Income Portfolio, Growth Portfolio, Money Market Portfolio, Overseas  Portfolio,
Asset  Manager Portfolio,  or Investment  Grade Bond  Portfolio of  the FIDELITY
INVESTMENTS VARIABLE INSURANCE  PRODUCTS FUNDS ("Fidelity  Funds"); the  Dreyfus
Zero  Coupon 2000  Portfolio of the  DREYFUS VARIABLE  INVESTMENT FUND ("Dreyfus
Fund");  the  Gold  and  Natural  Resources  Portfolio  or  Worldwide   Balanced
Portfolio,  of  the VAN  ECK WORLDWIDE  INSURANCE TRUST  ("Van Eck  Funds"); the
DREYFUS STOCK INDEX  FUND; or the  Short-Term Retirement Portfolio,  Medium-Term
Retirement Portfolio or the Long-Term Retirement Portfolio of the TOMORROW FUNDS
RETIREMENT  TRUST ("Tomorrow Funds"). Your value in any one of these Subaccounts
will vary according to  the investment performance  of the underlying  portfolio
chosen  by you. You bear the entire investment risk for all premium allocated to
the Variable Account.
 
    The Company  does  not  deduct  Sales Charges  from  any  premium  received.
However, the Contracts provide for a Surrender Charge (contingent deferred sales
charge)  that may  be assessed in  the event that  an Owner surrenders  all or a
portion of the Contract Value within  seven contract years following payment  of
any  premium. The maximum Surrender Charge is  6% of premium to which the charge
is applicable for flexible  premium contracts and 6%  of the Contract Value  for
single  premium contracts. (See "Summary  of Expenses" on page    , and "Charges
and Deductions -- Deduction for Surrender Charge"  on page   .) Withdrawals  and
Surrenders  from  the  Guaranteed  Account  may be  subject  to  a  Market Value
Adjustment (See "Market Value Adjustment," Appendix , page   .)
 
    A penalty free  withdrawal is  available. Generally, there  is no  Surrender
Charge  imposed on the greater  of the Contract Value  less premiums paid or the
portion of the withdrawal that does not exceed 10% of premium otherwise  subject
to the Surrender Charge. (See "Withdrawals" on page   .)
 
    Surrenders and Withdrawals may be taxable and subject to a penalty tax. (See
"Taxes" beginning on page   .)
 
    The Company deducts daily a Mortality and Expense Risk Charge which is equal
on an annual basis to 1.25% of the average daily net asset value of the Variable
Account. There are no Mortality and Expense Risk Charges deducted for amounts in
the  Guaranteed Account. (See "Charges and Deductions -- Deduction for Mortality
and Expense Risk Charge" on page   .)
 
    The Company deducts  daily an  Administrative Charge  which is  equal on  an
annual  basis to  0.15% of  the average  daily net  asset value  of the Variable
Account. The Administrative Charge is not assessed
 
                                       4
<PAGE>
to the Guaranteed Account. In addition,  the Company deducts, from the  Contract
Value,  an annual Contract Maintenance  Fee which is $30  per year. The Contract
Maintenance Fee is waived if the Contract  Value is greater than $50,000 on  the
date  of the  charge. These  Charges are designed  to reimburse  the Company for
administrative expenses relating to maintenance of the Contract and the Variable
Account. (See "Charges and Deductions -- Deduction for Administrative Charge and
Contract Maintenance Fee" on page   .)
 
    There are deductions  and expenses paid  out of  the assets of  each of  the
Funds which are described in the accompanying Prospectuses for the Funds.
 
    The  Owner  may return  the Contract  within  ten (10)  days (the  "Right to
Examine Contract Period") after it is received by returning it to the  Company's
Administrative Office. The return of the Contract by mail will be effective when
the  postmark is affixed  to a properly addressed  and postage prepaid envelope.
The Company will refund the Contract Value.  In the case of Contracts issued  in
connection  with an IRA the Company will  refund the greater of the Premium less
any withdrawals, or the Contract Value. However, if the laws of a state  require
that  the Company refund, during the Right to Examine Contract Period, an amount
equal to the premium paid less any withdrawals, the Company will refund such  an
amount.
 
                                   FEE TABLE
 
CONTRACT OWNER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
                                                    ALL
                                                    SUBACCOUNTS
                                                    -----
<S>                                                 <C>
Sales Load Imposed on Purchases...................   None
 
Surrender   Charge  (as  a  percentage  of  amount
 surrendered):
 
<CAPTION>
 
                                                    FLEXIBLE
                                                    PREMIUM
             SINGLE PREMIUM CONTRACTS               CONTRACTS
- --------------------------------------------------  -----
<S>                                                 <C>    <C>               <C>
Contract Year 1                       Premium Year 1                                      6%
Contract Year 2                       Premium Year 2                                      6%
Contract Year 3                       Premium Year 3                                      5%
Contract Year 4                       Premium Year 4                                      5%
Contract Year 5                       Premium Year 5                                      4%
Contract Year 6                       Premium Year 6                                      3%
Contract Year 7                       Premium Year 7                                      2%
Contract Year 8 and thereafter        Premium Year 8 and thereafter                     None
 
Exchange Fee:
  First 12 Per Contract Year...............................................             None
  Thereafter...............................................................              $10
 
Annual Contract Fee........................................................              $30
 
Separate Account Expenses
(as a percentage of average account value)
  Mortality and Expense Risk Fees..........................................            1.25%
  Account Fees and Expenses................................................            0.15%
Total Separate Account Annual Expenses.....................................            1.40%
</TABLE>
 
                                       5
<PAGE>
                              SUMMARY OF EXPENSES
 
ANNUAL FUND EXPENSES NET OF ANY EXPENSE REIMBURSEMENTS*
 
<TABLE>
<CAPTION>
                                                                                                                 TOTAL
                                                                                                    OTHER      PORTFOLIO
PORTFOLIO                                                                       MANAGEMENT FEE    EXPENSES     EXPENSES
- ------------------------------------------------------------------------------  ---------------  -----------  -----------
<S>                                                                             <C>              <C>          <C>
Alliance Conservative Investors...............................................          0.00%          0.95%        0.95%
Alliance Growth Investors.....................................................          0.00           0.95         0.95
Alliance Growth...............................................................          0.43           0.52         0.95
Alliance Growth and Income....................................................          0.63           0.16         0.79
Fidelity High Income..........................................................          0.60           0.11         0.71
Fidelity Growth...............................................................          0.61           0.09         0.70
Fidelity Money Market.........................................................          0.24           0.09         0.33
Fidelity Overseas.............................................................          0.76           0.15         0.91
Fidelity Asset Manager........................................................          0.71           0.08         0.79
Fidelity Investment Grade Bond................................................          0.45           0.14         0.59
Dreyfus Zero Coupon 2000......................................................          0.00           0.68         0.68
Van Eck Gold and Natural Resources............................................          0.96           0.00         0.96
Van Eck Worldwide Balanced....................................................          0.00           0.00         0.00
Dreyfus Stock Index...........................................................          0.30           0.09         0.39
Tomorrow Short-Term Retirement................................................          0.00           1.50         1.50
Tomorrow Medium-Term Retirement...............................................          0.00           1.50         1.50
Tomorrow Long-Term Retirement.................................................          0.00           1.50         1.50
</TABLE>
 
    The purpose  of  the  table set  forth  above  is to  assist  the  Owner  in
understanding the various costs and expenses that an Owner will bear directly or
indirectly.  The table reflects expenses of the  Variable Account as well as the
Funds. The  Annual Administrative  Charge  for purposes  of the  Expense  Table,
above,  was based  upon the assessment  of a $30  charge on a  Contract Value of
$5,000. (See "Charges  and Deductions" on  page    of this  Prospectus and  each
Fund's Prospectus for further information.)
 
    No deduction will be made for any premium or other taxes levied by any State
unless imposed by the State where you reside. Premium taxes currently imposed by
certain  states on the  Contracts range from  0% to 3.5%  of premiums paid. (See
"Charges and Deductions -- Deduction for Premium and Other Taxes" on page   .)
 
    "Other Expenses"  are based  upon the  expenses outlined  under the  section
discussing the management of a Fund in each Fund's attached Prospectus.
- ------------------------
    *Operating   expenses  for  the  following  Portfolios  in  the  absence  of
reimbursement by the relevant Fund's  investment adviser, for the period  ending
December  31, 1995, would have been as follows: Alliance Conservative Investors,
4.26%; Alliance  Growth  Investors,  6.17%;  Alliance  Growth,  1.27%;  Fidelity
Growth,  1.13%; Fidelity Asset Manager, 1.13%;  and, Van Eck Worldwide Balanced,
78.40%; of  the  average daily  net  assets.  Fund operating  expenses  for  the
following  Portfolios, before  reimbursement by  the relevant  Fund's investment
adviser, are estimated, for the period ending December 31, 1996, to be 2.51% for
the Short-Term Retirement, 2.70% for the Medium-Term and 3.71% for the Long-Term
Retirement Portfolios, of the average daily net assets. Voluntary reimbursements
by the  investment  advisers are  not  required to  be  continued  indefinitely;
however, reimbursements are expected to continue in 1996.
 
                                       6
<PAGE>
EXPENSES ON A HYPOTHETICAL $1,000 POLICY, ASSUMING 5% GROWTH:
<TABLE>
<CAPTION>
                                                                                 IF YOU SURRENDER
                                                                --------------------------------------------------
PORTFOLIO                                                         1 YEAR       3 YEARS      5 YEARS     10 YEARS
- --------------------------------------------------------------  -----------  -----------  -----------  -----------
<S>                                                             <C>          <C>          <C>          <C>
Alliance Conservative Investors...............................   $      80    $     124    $     169    $     275
Alliance Growth Investors.....................................          80          124          169          275
Alliance Growth...............................................          80          124          169          275
Alliance Growth and Income....................................          78          119          162          258
Fidelity High Income..........................................          78          117          158          250
Fidelity Growth...............................................          77          117          157          249
Fidelity Money Market.........................................          74          106          139          211
Fidelity Overseas.............................................          80          123          168          271
Fidelity Asset Manager........................................          78          119          162          258
Fidelity Investment Grade Bond................................          76          113          152          238
Dreyfus Zero Coupon 2000......................................          79          121          165          266
Van Eck Gold and Natural Resources............................          80          124          170          276
Van Eck Worldwide Balanced....................................          71           96          123          175
Dreyfus Stock Index...........................................          74          108          142          217
Tomorrow Short-Term Retirement................................          85          139          196          328
Tomorrow Medium-Term Retiremenet..............................          85          139          196          328
Tomorrow Long-Term Retirement.................................          85          139          196          328
 
<CAPTION>
 
                                                                               IF YOU ANNUITIZE OR
                                                                             IF YOU DO NOT SURRENDER
                                                                --------------------------------------------------
PORTFOLIO                                                         1 YEAR       3 YEARS      5 YEARS     10 YEARS
- --------------------------------------------------------------  -----------  -----------  -----------  -----------
<S>                                                             <C>          <C>          <C>          <C>
Alliance Conservative Investors...............................   $      24    $      75    $     129    $     275
Alliance Growth Investors.....................................          24           75          129          275
Alliance Growth...............................................          24           75          129          275
Alliance Growth and Income....................................          23           70          120          258
Fidelity High Income..........................................          22           68          116          250
Fidelity Growth...............................................          22           68          116          249
Fidelity Money Market.........................................          18           56           97          211
Fidelity Overseas.............................................          24           74          127          271
Fidelity Asset Manager........................................          23           70          120          258
Fidelity Investment Grade Bond................................          21           64          110          238
Dreyfus Zero Coupon 2000......................................          24           72          124          175
Van Eck Gold and Natural Resources............................          25           75          129          276
Van Eck Worldwide Balanced....................................          15           46           80          175
Dreyfus Stock Index...........................................          19           58          100          217
Tomorrow Short-Term Retirement................................          30           92          156          328
Tomorrow Medium-Term Retirement...............................          30           92          156          328
Tomorrow Long-Term Retirement.................................          30           92          156          328
</TABLE>
 
    The  Example should  not be  considered a  representation of  past or future
expenses and actual expenses may be greater or less than those shown.
 
                                       7
<PAGE>
                        CONDENSED FINANCIAL INFORMATION
                           ACCUMULATION UNIT VALUES*
 
<TABLE>
<CAPTION>
                                                              1995            1994          1993         1992
                                                         ---------------  -------------  -----------  ----------
<S>                                                      <C>              <C>            <C>          <C>
ALLIANCE CONSERVATIVE INVESTORS
  Accumulation Unit Value
    Beginning of Period................................            10.03           0.00          N/A         N/A
    End of Period......................................            11.59          10.03          N/A         N/A
  Accum Units o/s @ end of period......................       164,400.64       6,977.55          N/A         N/A
ALLIANCE GROWTH INVESTORS
  Accumulation Unit Value
    Beginning of Period................................             9.83           0.00          N/A         N/A
    End of Period......................................            11.70           9.83          N/A         N/A
  Accum Units o/s @ end of period......................        62,762.43       3,185.25          N/A         N/A
ALLIANCE GROWTH
  Accumulation Unit Value
    Beginning of Period................................            10.48          11.13        10.00       10.00
    End of Period......................................            13.99          10.48        11.13       10.00
  Accum Units o/s @ end of period......................       777,108.88      56,106.84    35,271.53    2,081.43
ALLIANCE GROWTH & INCOME
  Accumulation Unit Value
    Beginning of Period................................            11.57          11.73        10.66       10.00
    End of Period......................................            15.52          11.57        11.76       10.66
  Accum Units o/s @ end of period......................       502,667.80     179,245.69    37,573.04    7,731.36
</TABLE>
 
    Funds were first invested in the Portfolios as listed below:
 
<TABLE>
<S>                                         <C>
Growth and Income Portfolio                   April 17, 1992
Growth Investors Portfolio                   August 16, 1994
Growth (Alliance) Portfolio                  August 16, 1994
Conservative Investors Portfolio             August 24, 1994
</TABLE>
 
    No financial information has been provided for the Dreyfus Zero Coupon  2000
Portfolio,  Dreyfus  Stock  Index  Portfolio,  Money  Market  Portfolio,  Growth
(Fidelity) Portfolio, Overseas  Portfolio, Asset  Manager Portfolio,  Investment
Grade  Bond Portfolio,  High Income  Portfolio, Worldwide  Balance Portfolio, or
Gold  and  Natural   Resources  Portfolio,   Short-Term  Retirement   Portfolio,
Medium-Term Retirement Portfolio or Long-Term Retirement Portfolio, because, for
the fiscal year ending December 31, 1995, the Variable Account had not commenced
operations with respect to such Portfolios.
 
CALCULATION OF PERFORMANCE DATA
 
    The  Company may, from  time to time,  advertise certain performance related
information concerning one or more of the Subaccounts, including information  as
to  total return and yield. Performance  information about a Subaccount is based
on the Subaccount's past performance only  and is not intended as an  indication
of future performance.
 
    When the Company advertises the average annual total return of a Subaccount,
it  will usually be calculated  for one, five, and ten  year periods or, where a
Subaccount has been in existence for a period less than one, five or ten  years,
for such lesser period. Average annual total return is measured by comparing the
value  of the investment in a Subaccount at the beginning of the relevant period
to the value of the investment at the end of the period (assuming the  deduction
of  any Surrender Charge which would be  payable if the account were redeemed at
the end of the period) and calculating the
 
                                       8
<PAGE>
average annual compounded rate of return  necessary to produce the value of  the
investment  at the  end of  the period.  The Company  may simultaneously present
returns that  do  not assume  a  surrender and,  therefore,  do not  deduct  the
Surrender Charge.
 
    When  the Company advertises the yield of a Subaccount it will be calculated
based upon a given 30-day  period. The yield is  determined by dividing the  net
investment income earned per Accumulation Unit during the period by the value of
an Accumulation Unit on the last day of the period.
 
    When  the Company advertises the performance  of the Money Market Subaccount
it may  advertise in  addition  to the  total return  either  the yield  or  the
effective  yield. The yield of the Money  Market Subaccount refers to the income
generated by  an investment  in that  Subaccount over  a seven-day  period.  The
income  is  then  annualized  (i.e.,  the  amount  of  income  generated  by the
investment during that week is assumed to be generated each week over a  52-week
period  and is shown as a percentage  of the investment). The effective yield is
calculated similarly but when annualized the  income earned by an investment  in
the  Money Market  Subaccount is assumed  to be reinvested.  The effective yield
will be slightly higher than the yield because of the compounding effect of this
assumed reinvestment during a 52-week period.
 
    Total return  at the  Variable  Account level  is  reduced by  all  contract
charges:   sales  charges,   mortality  and   expense  risk   charges,  and  the
administrative charges, and is therefore lower  than the total return at a  Fund
level,  which has no comparable charges.  Likewise, yield and effective yield at
the Variable Account level take into account all recurring charges (except sales
charges), and are therefore lower than the  yield and effective yield at a  Fund
level, which has no comparable charges. Performance information for a Subaccount
may  be  compared to:  (i)  the Standard  & Poor's  500  Stock Index,  Dow Jones
Industrial  Average,  Donoghue  Money  Market  Institutional  Averages,  indices
measuring  corporate bond and  government security prices  as prepared by Lehman
Brothers, Inc. and Salomon Brothers or other indices measuring performance of  a
pertinent  group  of securities  so that  investors  may compare  a Subaccount's
results with those  of a  group of securities  widely regarded  by investors  as
representative of the securities markets in general; (ii) other variable annuity
separate  accounts  or other  investment products  tracked by  Lipper Analytical
Services, a widely used independent research  firm which ranks mutual funds  and
other  investment companies  by overall performance,  investment objectives, and
assets, or  tracked  by  other ratings  services,  companies,  publications,  or
persons  who  rank separate  accounts or  other  investment products  on overall
performance or  other criteria;  (iii)  the Consumer  Price Index  (measure  for
inflation) to assess the real rate of return from an investment in the Contract;
and  (iv) indices  or averages  of alternative  financial products  available to
prospective investors, including  the Bank Rate  Monitor which monitors  average
returns of various bank instruments.
 
FINANCIAL DATA
 
    Financial  Statements  of  the Company  may  be  found in  the  Statement of
Additional Information. No  financial statements for  the Variable Account  have
been  provided in  the Statement of  Additional Information, because,  as of the
date of this Prospectus, the Subaccounts  had not yet commenced operations  with
respect to the underlying Portfolios of the Funds and consequently had no assets
invested in such Portfolios.
 
                                  THE COMPANY
 
    American International Life Assurance Company of New York (the "Company") is
a  stock life insurance company which was  organized under the laws of the State
of New York in  1962. The Company  provides a full range  of life insurance  and
annuity  plans. The  Company is  a subsidiary  of American  International Group,
Inc., which serves as the holding company  for a number of companies engaged  in
the  international  insurance  business,  both life  and  general,  in  over 130
countries and jurisdictions around the world.
 
                                       9
<PAGE>
    The  Company  may  from   time-to-time  publish  in  advertisements,   sales
literature  and reports to Owners, the ratings and other information assigned to
it by one of more independent rating  organizations such as A. M. Best  Company,
Moody's,  and Standard &  Poor's. The purpose  of the ratings  is to reflect the
financial strength and/or claims-paying ability of the Company and should not be
considered as  bearing on  the  investment performance  of  assets held  in  the
separate  account. Each year the A. M. Best Company reviews the financial status
of thousands of insurers, culminating in the assignment of Best's Ratings. These
ratings reflect A. M. Best's current opinion of the relative financial  strength
and  operating performance of an insurance company in comparison to the norms of
the life/ health insurance industry.  In addition, the claims-paying ability  of
the Company as measured by Standard & Poor's Insurance Ratings Services, and the
financial strength of the Company as measured by Moody's Investors Services, may
be  referred to  in advertisements,  sales literature  or in  reports to Owners.
These ratings are their opinions  of an operating insurance company's  financial
capacity  to meet  the obligations  of its  life insurance  policies and annuity
contracts in accordance  with their  terms. In regard  to their  ratings of  the
Company,  these  ratings are  explicitly  based on  the  existence of  a Support
Agreement, dated as  of December 13,  1991, between the  Company and its  parent
American  International Group, Inc. ("AIG"), pursuant to which AIG has agreed to
cause the Company to maintain  a positive net worth  and to provide the  Company
with funds on a timely basis sufficient to meet the Company's obligations to its
policyholders.  The  Support Agreement  is not,  however,  a direct  or indirect
guarantee by  AIG  to  any  person  of the  payment  of  any  of  the  Company's
indebtedness,  liabilities or  other obligations  (including obligations  to the
Company's policyholders).
 
    The ratings are not recommendations to purchase the Company's life insurance
or annuity products, or to hold or  sell these products, and the ratings do  not
comment on the suitability of such products for a particular investor. There can
be  no assurance that any  rating will remain in effect  for any given period of
time or that any rating  will not be lowered or  withdrawn entirely by a  rating
organization  if, in such organization's judgment, future circumstances relating
to the Support Agreement, such as a lowering of AIG's long-term debt rating,  so
warrant.  The ratings do not reflect  the investment performance of the Variable
Account or the  degree of  risk associated with  an investment  in the  Variable
Account.
 
                              THE VARIABLE ACCOUNT
 
    The Company authorized the organization of the Variable Account in 1986. The
Variable  Account is maintained pursuant to  Delaware insurance law. The Company
has caused  the  Variable Account  to  be  registered with  the  Securities  and
Exchange Commission as a unit investment trust pursuant to the provisions of the
Investment  Company Act of 1940. The Variable  Account meets the definition of a
"Separate Account" under Federal securities laws. The SEC does not supervise the
management or the investment practices of the Variable Account.
 
    The Company owns the  assets in the Variable  Account and obligations  under
the  Contract are general  corporate obligations. The  Variable Account and each
Subaccount, however,  are separate  from the  Company's other  assets  including
those of the General Account and from any other separate accounts. The assets of
the  Variable Account, equal to the reserves and other contract liabilities with
respect to the Variable Account, are not chargeable with liabilities arising out
of any other  business the Company  may conduct. Investment  income, as well  as
both  realized  and unrealized  gains  and losses  are,  in accordance  with the
Contracts, credited to or charged against the Variable Account without regard to
income, gains or losses arising out of  any other business of the Company. As  a
result,  the investment performance of each  Subaccount and the Variable Account
is entirely independent of the investment performance of the General Account and
of any other separate account maintained by the Company.
 
    The Variable Account is  divided into Subaccounts, with  the assets of  each
Subaccount  invested in  shares of  a corresponding  portfolio of  the available
Funds. The Company may, from time to time, add additional portfolios of a  Fund,
and,  when appropriate, additional funds to act  as the funding vehicles for the
Contracts. If deemed to be in the best interests of persons having voting rights
under the
 
                                       10
<PAGE>
Contract, the Variable Account may be operated as a management company under the
Investment Company Act of 1940, may be deregistered under such Act in the  event
such  registration is no  longer required, or  may be combined  with one or more
other separate accounts. The Company may offer other variable annuity  contracts
which   also  invest  in  Variable  Account   A,  and  are  described  in  other
prospectuses.
 
                                   THE FUNDS
 
    Alliance Funds, Fidelity Funds,  Dreyfus Funds, Van  Eck Funds and  Tomorrow
Funds  (collectively,  the  "Funds")  are  each registered  with  the  SEC  as a
diversified open-end management investment company  under the 1940 Act. Each  is
made  up of  different series  funds or  Portfolios ("Portfolios").  The Dreyfus
Stock Index  Fund  (also  a  "Fund"  herein)  is  an  open-end,  non-diversified
management  investment company. A summary of  the investment objectives for each
portfolio is contained  in the  description of  the Funds  below. More  detailed
information,  including the  advisory fee  of each  portfolio and  other charges
assessed by  each Fund,  may be  found in  the relevant  Fund prospectus,  which
contains  a discussion  of the  risks involved  in investing  in such  Fund. The
prospectuses for each  Fund are  included with this  Prospectus. The  investment
objectives of the portfolios are as follows:
 
ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.
 
    CONSERVATIVE INVESTORS PORTFOLIO
 
    This  portfolio  seeks  the  highest  total  return  without  undue  risk to
principal by  investing in  a  diversified mix  of  publicly traded  equity  and
fixed-income securities.
 
    GROWTH INVESTORS PORTFOLIO
 
    This  portfolio seeks  the highest  total reaturn  available with reasonable
risk  by  investing  in  a  diversified  mix  of  publicly  traded  equity   and
fixed-income securities.
 
    GROWTH PORTFOLIO
 
    This  portfolio seeks the long term growth of capital by investing primarily
in comon stocks and other equity securities.
 
    GROWTH AND INCOME PORTFOLIO
 
    This portfolio seeks to balance the objectives of reasonable current  income
and   opportunities   for   appreciation   through   investments   primarily  in
dividend-paying common stocks of good quality.
 
    Alliance Variable Products Series Fund, Inc., is managed by Alliance Capital
Management L.P., ("Alliance"). The Fund also includes other portfolios which are
not available  for  use  by  the Separate  Account.  More  detailed  information
regarding  management of  the Fund,  investment objectives,  investment advisory
fees and other  charges, may be  found in the  current Alliance Fund  prospectus
which  contains a  discussion of the  risks involved in  investing. The Alliance
Fund prospectus is included with this Prospectus.
 
DREYFUS VARIABLE INVESTMENT FUND
 
    ZERO COUPON 2000 PORTFOLIO
 
    This portfolio  seeks  to  provide  as  high  an  investment  return  as  is
consistent with the preservation of capital. This portfolio invests primarily in
debt obligations of the U.S. Treasury that have been stripped of their unmatured
interest coupons, interest coupons that have been stripped from debt obligations
issued  by the U.S.  Treasury, receipts and certificates  for such stripped debt
obligations, and stripped coupons and zero coupon securities issued by  domestic
corporations.  This  portfolio's  assets  will  consist  primarily  of portfolio
securities which will mature on  or about December 31,  2000, at which time  the
portfolio  will be liquidated. Prior  to December 31, 2000,  you will be offered
the opportunity to exchange your  investment to another Subaccount. The  Dreyfus
Corporation serves as this portfolio's investment adviser.
 
                                       11
<PAGE>
DREYFUS STOCK INDEX FUND
 
    This  Fund seeks to provide investment  results that correspond to the price
and yield performance  of publicly  traded common  stocks in  the aggregate,  as
represented  by  the  Standard &  Poor's  500  Composite Stock  Price  Index. In
anticipation of taking a market position, the Fund is permitted to purchase  and
sell  stock index futures. The Fund is  neither sponsored by nor affiliated with
Standard & Poor's Corporation. Wells  Fargo Nikko Investment Advisers  ("WFNIA")
serves as the index fund manager of the Dreyfus Stock Index Fund.
 
FIDELITY INVESTMENT VARIABLE INSURANCE PRODUCTS FUNDS
 
    GROWTH PORTFOLIO
 
    This  portfolio seeks  to aggressively achieve  capital appreciation through
investments primarily in common stock.
 
    HIGH INCOME PORTFOLIO
 
    This portfolio seeks to obtain a  high level of current income by  investing
primarily  in  high-yielding,  high-risk,  lower-rated,  fixed-income securities
(commonly referred  to  as  "junk  bonds"), while  also  considering  growth  of
capital.  The potential for high yield is accompanied by higher risk. For a more
detailed discussion of  the investment  risks associated  with such  securities,
please refer to the Fidelity Fund's attached prospectus.
 
    OVERSEAS PORTFOLIO
 
    This  portfolio  seeks the  long-term  growth of  capital  primarily through
investments in securities of companies and economies outside the United States.
 
    MONEY MARKET PORTFOLIO
 
    This portfolio seeks  to obtain  as high  a level  of current  income as  is
consistent  with preserving capital and  providing liquidity. The portfolio will
invest only in high quality  U.S. dollar-denominated money market securities  of
domestic  and foreign  issuers. An investment  in the Money  Market Portfolio is
neither insured  nor guaranteed  by the  U.S. government,  and there  can be  no
assurance that the portfolio will maintain a stable $1.00 share price.
 
    ASSET MANAGER PORTFOLIO
 
    This  portfolio seeks to provide a high  total return with reduced risk over
the long term by allocating its assets among stocks, bonds and short-term income
instruments.
 
    INVESTMENT GRADE BOND PORTFOLIO
 
    This portfolio seeks as high a level of current income as is consistent with
the preservation of capital  by investing in a  broad range of  investment-grade
fixed-income  securities. The portfolio will  maintain a dollar-weighted average
portfolio maturity of ten years or less.
 
    Fidelity Management & Research Company ("FMR") is the investment advisor for
the Variable  Insurance Products  Funds.  FMR has  entered into  a  sub-advisory
agreement  with FRM  Texas, Inc.,  on behalf of  the Money  Market Portfolio. On
behalf of the Overseas Portfolio,  FMR has entered into sub-advisory  agreements
with Fidelity Management & Research (U.K.) Inc., (FMR U.K.), Fidelity Management
& Research (Far East) Inc. (FMR Far East), and Fidelity International Investment
Advisors  (FIIA). FMR U.K. and  FMR Far East also  are sub-advisors to the Asset
Manager Portfolio.  Fidelity  Funds  include  other  portfolios  which  are  not
available  under this  Prospectus as  funding vehicles  for the  Contracts. More
detailed information regarding management  of the funds, investment  objectives,
investment  advisory fees and  other charges assesed by  the Fidelity Funds, are
contained in  the  prospectuses  of  the  Fidelity  Funds,  included  with  this
Prospectus.
 
                                       12
<PAGE>
VAN ECK WORLDWIDE INSURANCE TRUST
 
    WORLDWIDE BALANCED FUND
 
    This  portfolio seeks long  term capital appreciation  together with current
income by  investing  its  assets  in the  United  States  and  other  countries
throughout  the world,  and by  allocating its  assets among  equity securities,
fixed-income securities and short-term instruments.
 
    GOLD AND NATURAL RESOURCES FUND
 
    This portfolio seeks long-term capital  appreciation by investing in  equity
and  debt  securities  of  companies engaged  in  the  exploration, development,
production and  distribution  of  gold  and other  natural  resources,  such  as
strategic  and other  metals, minerals,  forest products,  oil, natural  gas and
coal. Current income is not an investment objective.
 
    Van Eck Associates Corporation is the investment advisor and manager of  Van
Eck  Funds.  Van  Eck  Associates  Corporation  has  entered  into  sub-advisory
agreements to provide investment  advice for certain portfolios  of the Van  Eck
Funds.  Fiduciary  International Inc.  ("FII") serves  as  a sub-advisor  to the
Worldwide Balanced Fund. Van  Eck Funds include other  portfolios which are  not
available  under this  prospectus as  funding vehicles  for the  Contracts. More
detailed information regarding management  of the funds, investment  objectives,
investment  advisory fees and other  charges assessed by the  Van Eck Funds, are
contained in the relevant Fund prospectus included with this Prospectus.
 
TOMORROW FUNDS RETIREMENT TRUST
 
    SHORT-TERM RETIREMENT FUND
 
    This portfolio seeks to  satisfy the retirement goals  of investors who  are
currently  between 51  and 65 years  of age  and with an  average remaining life
expectancy in the range of 20-30 years.
 
    MEDIUM-TERM RETIREMENT FUND
 
    This portfolio seeks to  satisfy the retirement goals  of investors who  are
currently  between 36  and 50 years  of age  and with an  average remaining life
expectancy in the range of 35-50 years.
 
    LONG-TERM RETIREMENT FUND
 
    This portfolio seeks to  satisfy the retirement goals  of investors who  are
currently  between 22  and 35 years  of age  and with an  average remaining life
expectancy in the range of 50 years or more.
 
    Each Tomorrow  Funds portfolio  invests its  assets, in  varying amonts,  in
equity  and fixed-income securities of all types. The amount of assets allocated
to equity  securities is  currently invested,  in varying  amounts, among  large
capitalization stocks, medium capitalization stocks, small capitalization stocks
and,   indirectly  through  other   investment  companies,  foreign  securities.
Typically, the  longer  the average  life  expectancy  of the  target  class  of
investors in a Tomorrow Funds portfolio, the greater the allocation of assets of
that  portfolio to securities with higher growth potential and, correspondingly,
more risk,  such as  small capitalization  stocks. Conversely,  the shorter  the
average  life expectancy of  the target class  of investors in  a Tomorrow Funds
portfolio, the greater the emphasis  on current income and capital  preservation
of assets and, therefore, the greater the allocation of assets of that portfolio
to  fixed-income securities. Each Tomorrow Funds  portfolio will be managed more
conservatively as the average age of its target class of investors increases.
 
    Weiss, Peck & Greer, L.L.C. is the investment adviser for the Tomorrow Funds
portfolios. Tomorrow  Funds include  other portfolios  which are  not  available
under  this  Prospectus as  funding vehicles  for  the Contracts.  More detailed
information regarding management of the funds, investment objectives, investment
advisory fees and other charges assesed by the Tomorrow Funds, are contained  in
the prospectuses of the Tomorrow Funds, included with this Prospectus.
 
    THERE  IS NO ASSURANCE THAT ANY OF  THE PORTFOLIOS WILL ACHIEVE THEIR STATED
OBJECTIVES.
 
                                       13
<PAGE>
VOTING RIGHTS
 
    As previously  stated, all  of the  assets held  in the  Subaccounts of  the
Variable  Account will be invested in shares of a corresponding portfolio of the
relevant Fund. Based on  the Company's view of  present applicable law, we  will
vote  the  portfolio  shares  held  in  the  Variable  Account  at  meetings  of
shareholders in  accordance  with instructions  received  from Owners  having  a
voting  interest in the portfolio.  However, if the 1940  Act or its regulations
are amended, or if  our interpretation of  present law changes  to permit us  to
vote the portfolio shares in our own right, we may elect to do so.
 
    Prior  to  the Annuity  Date,  the Owner  holds  a voting  interest  in each
portfolio in which there is value in the corresponding Subaccount. The number of
portfolio shares which are attributable to  the Owner is determined by  dividing
the corresponding value in a particular Subaccount by the net asset value of one
portfolio  share. The number of  votes which an Owner will  have a right to cast
will be determined as of the record date established by each portfolio.
 
    We will  solicit  voting  instructions  by mail  prior  to  the  shareholder
meetings.  An Owner having a voting interest  in a Subaccount will be sent proxy
material, reports and other materials as provided by the relevant Fund, relating
to the appropriate portfolios. The Company  will vote shares in accordance  with
instructions  received from the Owner having  a voting interest. At the meeting,
the Company will vote shares for which  it has received no instructions and  any
shares  not attributable to Owners in the same proportion as it votes shares for
which it has received instructions from Owners.
 
    The voting rights relate only to  amounts invested in the Variable  Account.
There  are no voting  rights with respect  to funds allocated  to the Guaranteed
Account.
 
    Shares of  the Funds  may be  sold to  separate accounts  of life  insurance
companies.  The shares  of the Funds  will be  sold to separate  accounts of the
Company and its affiliate,  AIG Life Insurance Company,  as well as to  separate
accounts  of other affiliated  or unaffiliated life  insurance companies to fund
variable  annuity  contracts  and  variable  life  insurance  policies.  It   is
conceivable  that, in  the future, it  may be disadvantageous  for variable life
insurance separate accounts and variable annuity separate accounts to invest  in
the  Funds simultaneously. Although neither the  Company nor the Funds currently
foresee any such disadvantages, either  to variable life insurance  policyowners
or  to  variable annuity  Owners, each  Fund's Board  of Directors  will monitor
events in  order to  identify any  material irreconcilable  conflicts which  may
possibly arise and to determine what action, if any, should be taken in response
thereto.  If a  material irreconcilable conflict  were to occur,  each Fund will
take whatever steps it deems necessary,  at its expense, to remedy or  eliminate
the  irreconcilable material conflict. If such a  conflict were to occur, one or
more insurance company separate accounts might withdraw its investments in  such
Fund. This might force such Fund to sell securities at disadvantageous prices.
 
SUBSTITUTION OF SHARES
 
    If the shares of a Fund (or any portfolio within a Fund) should no longer be
available  for investment by the Variable Account  or if, in the judgment of the
Company, further investment in such  shares should become inappropriate in  view
of  the purpose of the  Contracts, the Company may  substitute shares of another
mutual fund (or portfolio within the fund) for Fund shares already purchased  or
to be purchased in the future under the Contracts. No substitution of securities
may  take  place  without any  required  prior  approval of  the  Securities and
Exchange Commission and under such requirements as it may impose.
 
                                  THE CONTRACT
 
    The Contract described in  this Prospectus is  a deferred variable  annuity.
Single  premium Contracts do not permit the payment of additional premiums after
the Contract Date. Flexible premium  Contracts permit the payment of  additional
Premiums at any time.
 
                                       14
<PAGE>
PARTIES TO THE CONTRACT
 
    OWNER
 
    As the purchaser of the Contract, You may exercise all rights and privileges
provided  in the Contract, subject to any  rights that You, as Owner, may convey
to an irrevocable beneficiary. As Owner, You will also be the Annuitant,  unless
You name in writing some other person as Annuitant.
 
    ANNUITANT
 
    The  Annuitant  is the  person who  receives annuity  payments and  upon the
continuance of whose life  these payments are based.  You may designate  someone
other  than yourself as Annuitant.  If the Annuitant is  a person other than the
Owner, and  the Annuitant  dies before  the Annuity  Date, You  will become  the
Annuitant unless you designate someone else as the new Annuitant.
 
    BENEFICIARY
 
    The  Beneficiary You  designate will receive  the death proceeds  if You die
prior to the Annuity Date. If no  Beneficiary is living at that time, the  death
proceeds  are payable to  Your estate. If  the Annuitant dies  after the Annuity
Date, the Beneficiary will  receive any remaining  guaranteed payments under  an
Annuity  Option.  If  no  Beneficiary  is living  at  that  time,  the remaining
guaranteed payments are payable to Your estate.
 
    CHANGE OF ANNUITANT AND BENEFICIARY
 
    Prior to the Annuity Date, You  may change the Annuitant and Beneficiary  by
making  a written request  to Our Administrative Office.  After the Annuity Date
only a change of  Beneficiary may be  made. Once We  have accepted Your  written
request,  any change will become  effective on the date  You signed it. However,
any change will be subject to any payment or other action taken by Us before  We
record  the change. If the Owner is  not a natural person, under current Federal
tax law, the Contract may be subject to unintended and adverse tax consequences.
For possible tax considerations of these changes, see FEDERAL TAX MATTERS,  page
  .
 
HOW TO PURCHASE A CONTRACT
 
    At  the time of application, the Owner must pay at least the minimum Premium
required and provide instructions regarding the allocation of the Premium  among
the Subaccounts. Acceptance of the Premium and form of application is subject to
Our  requirements  and  We reserve  the  right  to reject  any  Premium.  If the
application and Premium are accepted in  the form received, the Premium will  be
credited  and  allocated to  the  Subaccounts within  two  business days  of its
receipt. The date the Premium is credited to the Contract is the Effective Date.
 
    If within  five days  of the  receipt of  the initial  Premium We  have  not
received  sufficient information to issue a Contract, You will be contacted. The
reason for the delay will be explained to You. If You consent We will retain the
Premium until the necessary requirements  are fulfilled. Otherwise, the  Premium
will be immediately refunded to You.
 
DISCOUNT PURCHASE PROGRAMS
 
    Purchases  made by officers, directors and  employees of either the Company,
an affiliate of the Company or any individual, firm or company that has executed
the necessary agreements  to sell  the Contracts and  members of  each of  their
immediate  families will not be subject  to the Surrender Charge. Such purchases
include retirement  accounts  and  must be  for  accounts  in the  name  of  the
individual or qualifying family member.
 
DISTRIBUTOR
 
    AIG Equity Sales Corp. ("AESC"), 80 Pine Street, New York, New York, acts as
the  distributor of the Contracts. AESC is a wholly-owned subsidiary of AIG, and
an affiliate of the Company.  Commissions not to exceed  6% of Premiums will  be
paid  to entities which sell  the Contract. Additional payments  may be made for
other services not directly related to  the sale of the Contract, including  the
recruitment  and training of personnel, production of promotional literature and
similar services.
 
                                       15
<PAGE>
    Under the Glass-Steagall  Act and other  laws, certain banking  institutions
may  be prohibited from distributing variable  annuity contracts. If a bank were
to be prohibited from performing  certain agency or administrative services  and
receiving  fees from AESC, Owners who purchased Contracts through the bank would
be permitted to retain their Contracts  and alternate means for servicing  those
Owners  would be sought. It  is not expected, however,  that Owners would suffer
any loss of services  or adverse financial  consequences as a  result of any  of
these occurrences.
 
ADMINISTRATION OF THE CONTRACTS
 
    While  the Company has primary responsibility  for all administration of the
Contracts and the  Variable Account, it  has retained the  services of  Delaware
Valley   Financial  Services,  Inc.  ("DVFS")   pursuant  to  an  administrative
agreement. Such administrative  services include issuance  of the Contracts  and
maintenance  of Owners'  records. DVFS  serves as  the administrator  to various
insurance companies offering variable contracts.
 
PREMIUM AND ALLOCATION TO YOUR INVESTMENT OPTIONS
 
    The initial Premium must be at least $5,000 for Non-Qualified Contracts  and
$2,000 for a Contract purchased in connection with an IRA or 403(b) Plan. If you
chose  a Flexible Premium Contract, You  may make additional payments of Premium
prior to the Annuity  Date, in amounts  of at least $1000.  There is no  maximum
limit  on the  additional Premiums You  may pay  or on the  numbers of payments;
however, the Company reserves the right  to reject any Premium on any  Contract.
You specify at the time of issue or subsequently how the remaining amount, known
as Additional Premium will be allocated.
 
    Except  for any Contract issued as an  IRA, the initial Premium is allocated
among the Subaccounts and Guaranteed Account on the Effective Date. For IRAs the
initial Premium will be allocated to  the Money Market Subaccount until the  end
of  the Right to  Examine Contract Period,  after which Your  value in the Money
Market Subaccount will then be reallocated among the Subaccounts and  Guaranteed
Account  in accordance with Your allocation instructions. (See "Right to Examine
Contract Period" on Page , and "Individual Retirement Annuities" on page   .)
 
    Your allocation instructions  will specify what  percentage of Your  initial
Premium  is to  be credited  to each Subaccount  and to  the Guaranteed Account.
Allocation instructions must be expressed in whole percentages of not less  than
10%.  Allocations for additional Premium  will be made on  the same basis as the
initial Premium  unless  We receive  a  written notice  with  new  instructions.
Additional  Premium will be credited to the  Contract Value and allocated at the
close of the first Valuation  Date on or after  which the Additional Premium  is
received at Our Administrative Office.
 
    ALL   PREMIUM  TO  QUALIFIED  CONTRACTS  MUST  COMPLY  WITH  THE  APPLICABLE
PROVISIONS IN THE CODE  AND THE APPLICABLE PROVISIONS  OF YOUR RETIREMENT  PLAN.
ADDITIONAL  PREMIUM COMMINGLED IN AN IRA WITH A ROLLOVER CONTRIBUTION FROM OTHER
RETIREMENT PLANS MAY  RESULT IN  UNFAVORABLE TAX CONSEQUENCES.  YOU SHOULD  SEEK
LEGAL  COUNSEL AND TAX ADVICE REGARDING THE SUITABILITY OF THE CONTRACT FOR YOUR
SITUATION. (SEE "FEDERAL TAX MATTERS" ON PAGE   .)
 
RIGHT TO EXAMINE CONTRACT PERIOD
 
    The Contract provides a 10 day  Right to Examine Contract Period giving  You
the  opportunity  to cancel  the  Contract. You  must  return the  Contract with
written notice to Us. If We receive the Contract and Your written notice  within
10  days after  it is  received by You,  the Contract  will be  voided. With the
exception of Contracts issued in connection  with an IRA, in those states  whose
laws  do not require that We assume the  risk of market loss during the Right to
Examine Contract Period, should You decide  to cancel Your Contract, the  amount
to  be returned to  You will be  the Contract Value  (on the day  We receive the
Contract) plus any charges deducted for  State Taxes, without imposition of  the
Surrender  Charge.  The amount  returned to  you may  be more  or less  than the
initial Premium. (See "Charges and Deductions" on page   .) For Contracts issued
in those states that require we return the  premium, we will do so. In the  case
of  Contracts issued  in connection  with an  IRA, the  Company will  refund the
greater of the Premium, less any withdrawals, or the Contract Value.
    
 

                                       16
<PAGE>
   

    State  laws governing the  duration of the Right  to Examine Contract Period
may vary from state to state. We will comply with the laws of the state in which
the Owner  resides  at  the time  the  Contract  is applied  for.  Federal  laws
governing  IRAs require a minimum  seven day right of  revocation. We provide 10
days from the date the Contract was  mailed or otherwise delivered to you.  (See
"Individual Retirement Annuities" on page   .)
 
UNIT VALUE AND CONTRACT VALUE
 
    After  the  deduction of  certain charges  and  expenses, amounts  which You
allocate  to  a  Subaccount  of  the  Variable  Account  are  used  to  purchase
Accumulation Units in that Subaccount, not shares of the Portfolio in which that
Subaccount  invests.  The  number of  Accumulation  Units you  purchase  will be
determined by dividing the amount allocated to each Subaccount by the Unit Value
of the  Subaccount  for  the  Valuation  Period  during  which  the  amount  was
allocated.
 
    The  Unit Value for each  Subaccount will vary from  one Valuation Period to
the next,  based on  the investment  experience of  the Portfolio  in which  the
Subaccount  invests  and  the deduction  of  certain charges  and  expenses. The
Statement of  Additional  Information contains  a  detailed explanation  of  how
Accumulation Units are valued.
 
    Your  value in  any given Subaccount  is determined by  multiplying the Unit
Value for the Subaccount by the number  of Units You own. Your value within  the
Variable  Account is the  sum of your  values in all  the Subaccounts. The total
value of your Contract, known  as the Contract Value,  equals your Value in  the
Variable Account plus Your value in the Guaranteed Account.
 
TRANSFERS
 
    Prior  to the Annuity Date, You may make Transfers among the Subaccounts and
into and out of the Guaranteed Account subject to certain rules.
 
    At the present time there is no  limit on the number of transfers which  can
be  made among the  Subaccounts and the  Guaranteed Account in  any one Contract
Year. We reserve the right to limit  the number of transfers to 12 per  Contract
Year. There are no fees for the first 12 transfers in any one Contract Year. For
each transfer in excess of 12 within one Contract Year, We impose a transfer fee
of  $10.  A transfer  fee,  if any,  is  deducted from  the  amount transferred.
Transfers of Contract Value in the Guaranteed Account may be subject to a Market
Value Adjustment. (See Appendix , "Guaranteed Account Transfers," page   .)
 
    Transfers may be made by written request or by telephone as described in the
Contract or  specifically  authorized in  writing.  The Company  will  undertake
reasonable procedures to confirm that instructions communicated by telephone are
genuine.  All calls will be recorded. All transfers will be confirmed in writing
to the Owner.  The Company  is not  liable for any  loss, cost,  or expense  for
action  on telephone instructions which are believed to be genuine in accordance
with these procedures.
 
    After the Annuity Date, the Owner may transfer the Contract Value  allocated
to the Variable Account among the Subaccounts. However, the Company reserves the
right  to refuse any more  than one transfer per month.  The transfer fee is the
same as before the  Annuity Date. This  transfer fee, if  any, will be  deducted
from the next annuity payment after the transfer. If following the transfer, the
Annuity  Units  remaining in  the Subaccount  would  generate a  monthly annuity
payment of less than $100,  the Company will transfer  the entire amount in  the
Subaccount.
 
    Once  the transfer  is effected,  the Company  will recompute  the number of
Annuity Units  for  each  Subaccount.  The number  of  Annuity  Units  for  each
Subaccount  will remain the same for the  remainder of the payment period unless
the Owner requests another change.
 
    The minimum amount which may be transferred at any one time is the lesser of
$1,000 or  the  value of  the  Subaccount or  Guarantee  Period from  which  the
transfer  is made.  However, the minimum  amount for transfers  under our Dollar
Cost Averaging program is $100 per Subaccount. (See "Dollar Cost Averaging") For
additional limitations regarding  transfers out of  the Guaranteed Account,  see
"The Guaranteed Account" in the Appendix, page   .)
 
                                       17
<PAGE>
DOLLAR COST AVERAGING
 
    The  Company currently offers  an option under which  Owners may dollar cost
average their allocations in the  Subaccounts under the contract by  authorizing
the  Company  to  make  periodic  allocations of  Contract  Value  from  any one
Subaccount to one or more of the  other Subaccounts. Dollar cost averaging is  a
systematic  method of  investing in  which securities  are purchased  at regular
intervals in  fixed dollar  amounts so  that  the cost  of the  securities  gets
averaged  over time  and possibly  over various  market cycles.  The option will
result in the allocation of Contract Value to one or more Subaccounts, and these
amounts will be credited  at the Accumulation  Unit value as of  the end of  the
Valuation  Dates  on  which  the exchanges  are  effected.  Amounts periodically
transferred under this option are not included in the 12 transfers per  Contract
Year  discussed under "Transfers"  on page    . Since  the value of Accumulation
Units will  vary, the  amounts allocated  to  a Subaccount  will result  in  the
crediting  of a greater number of units  when the Accumulation Unit value is low
and a  lesser  number  of  units  when the  Accumulation  Unit  value  is  high.
Similarly,  the amounts exchanged from a Subaccount will result in a debiting of
a greater number of units when  the Subaccount's Accumulation Unit value is  low
and  a lesser number of  units when the Accumulation  Unit value is high. Dollar
cost averaging does not guarantee profits, nor does it assure that an Owner will
not have losses.
 
    A Dollar Cost Averaging  Request form is  available from the  Administrative
Office  upon request.  On the  form, the  Owner must  designate whether Contract
Value is to  be exchanged  on the  basis of a  specific dollar  amount, a  fixed
period  or earnings only,  the Subaccount or  Subaccounts to and  from which the
transfers will be made, the desired frequency of the transfers, which may be  on
a monthly, quarterly, semiannual, or annual basis, and the length of time during
which  the transfers  shall continue  or the total  amount to  be exchanged over
time. The Owner may specify that such transfers be made on any day of any  month
with the exception of the 29th, 30th or 31st of a month.
 
    To  elect the Dollar Cost Averaging  Option, the Owner's Contract Value must
be at least  $12,000 ($2,000 for  a Contract  funding a Qualified  Plan), and  a
Dollar  Cost Averaging Request in  proper form must be  received by the Company.
The Dollar Cost Averaging Request form will not be considered complete until the
Contract Value is at least the required amount. An Owner may not have in  effect
at the same time Dollar Cost Averaging and Asset Rebalancing Options.
 
    The  Dollar Cost  Averaging Option  may be canceled  at any  time by written
request or if the  Accumulation Unit value  is less than  $5,000, or such  lower
amount as the Company may determine.
 
ASSET REBALANCING OPTION
 
    The  Company currently offers an option under which Owners may authorize the
Company to  automatically exchange  Contract Value  each quarter  to maintain  a
particular percentage allocation among the Subaccounts as selected by the Owner.
The Contract Value allocated to each Subaccount will grow or decline in value at
different   rates  during  the  quarter,  and  Asset  Rebalancing  automatically
reallocates the Contract Value in the Subaccounts each quarter to the allocation
selected by the Owner. Asset Rebalancing is intended to exchange Contract  Value
from  those Subaccounts that  have increased in value  to those Subaccounts that
have declined in value. Over  time, this method of  investing may help an  Owner
buy  low  and  sell  high,although  there can  be  no  assurance  of  this. This
investment method does not guarantee profits,  nor does it assure that an  Owner
will not have losses.
 
    To  elect the Asset  Rebalancing Option, the Contract  Value in the Contract
must be at least $12,000 ($2,000 for a Contract funding a Qualified Plan) and an
Asset Rebalancing Request  in proper form  must be received  by the Company.  An
Owner  may not have in  effect at the same time  Dollar Cost Averaging and Asset
Rebalancing Options.  An  Asset  Rebalancing  Request  form  is  available  upon
request. On the form, the Owner must indicate the applicable Subaccounts and the
percentage of Contract Value which should be allocated to each of the applicable
Subaccounts  each  quarter  under the  Asset  Rebalancing Option.  If  the Asset
Rebalancing Option is elected, all  Contract Value allocated to the  Subaccounts
must be included in the Asset Rebalancing Option.
 
                                       18
<PAGE>
    This  option will result in the transfer of Contract Value to one or more of
the Subaccounts on the date specified by the Owner or, if no date is  specified,
on  the date of the Company's receipt of the Asset Rebalancing Request in proper
form and on each  quarterly anniversary of the  applicable date thereafter.  The
amounts  transferred will be credited  to the Accumulation Unit  Value as of the
end of  the  Valuation  Dates  on which  the  transfers  are  effected.  Amounts
periodically  transferred under this option are not included in the 12 transfers
per Contract Year discussed under "Transfers" on page   .
 
    An Owner may instruct the  Company at any time  to terminate this option  by
written  request. Once terminated, this option  may not be reselected during the
same Contract Year.
 
                             CHARGES AND DEDUCTIONS
 
    Various charges and deductions are made from Premium, the Contract Value and
the Variable Account. These charges and deductions are as follows:
 
DEDUCTION FOR PREMIUM AND OTHER STATE TAXES
 
    We do not deduct premium taxes unless assessed by the state of residence  of
the  Owner. Any premium  or other taxes  levied by any  governmental entity with
respect to  the Contracts  will  be charged  at  Our discretion  against  either
Premium  or Contract Value. Premium taxes currently imposed by certain states on
the Contracts range  typically from  0% to 3.5%  of premiums  paid. Some  states
assess  premium taxes  at the  time Premium  is received;  others assess premium
taxes at the time of annuitization.  Premium taxes are subject to being  changed
or  amended by  state legislatures,  administrative interpretations  or judicial
acts.
 
    The Company will also deduct from any amount payable under the Contracts any
income taxes  a governmental  authority requires  the Company  to withhold  with
respect to that amount.
 
DEDUCTION FOR MORTALITY AND EXPENSE RISK CHARGE
 
    The  Company deducts for each Valuation  Period a Mortality and Expense Risk
Charge which is equal on an annual basis to 1.25% of the average daily net asset
value of the Variable Account. The mortality risks assumed by the Company  arise
from  its contractual obligation to make annuity payments after the Annuity Date
for the life of the Annuitant, to waive the Surrender Charge in the event of the
death of the Owner prior to the  Annuity Date and to provide the death  benefit.
The  expense risk assumed by the Company  is that the costs of administering the
Contracts and  the  Variable  Account  will  exceed  the  amount  received  from
Administrative and Contract Maintenance Charges.
 
    If the Mortality and Expense Risk Charge is insufficient to cover the actual
costs, the loss will be borne by the Company. Conversely, if the amount deducted
proves  more than  sufficient, the  excess will  be profit  to the  Company. The
Mortality and Expense  Risk Charge is  guaranteed by the  Company and cannot  be
increased.  The  Mortality  and  Expense  Risk  Charge  is  deducted  during the
Accumulation Period and after the Annuity Date.
 
    The Company currently  offers annuity payment  options that are  based on  a
life  contingency. (See  "Annuity Period --  Annuity Options"  on page    .) The
Company in its  discretion may offer  additional payment options  which are  not
based  on a life contingency. If this should occur and if a Owner should elect a
payment option not based on a  life contingency, the Mortality and Expense  Risk
Charge  is still deducted but the Owner receives no benefit from that portion of
the charge attributable to mortality risk.
 
DEDUCTION FOR ACCIDENTAL DEATH BENEFIT
 
    If the Owner has elected the  Accidental Death Benefit, the Company  deducts
for each Valuation Period, an Accidental Death Benefit Charge equal on an annual
basis to 0.10% of the average daily net asset value in the Variable Account.
 
                                       19
<PAGE>
DEDUCTION FOR SURRENDER (DEFERRED SALES) CHARGES
 
    In  the event that an  Owner makes a withdrawal  from or surrenders Contract
Value in  excess  of the  Free  Withdrawal Amount,  a  Surrender Charge  may  be
imposed.  The Free Withdrawal Amount  for a single premium  Contract is equal to
10% of the Contract  Value at the  time of the  withdrawal. The Free  Withdrawal
Amount  for a flexible premium Contract is  equal to the greater of the Contract
Value less premiums paid or the portion  of the withdrawal that does not  exceed
10%  of the total Premium otherwise subject  to the Surrender Charge paid to the
time of withdrawal, less any prior withdrawals. In the case of flexible  premium
Contracts,  the Surrender Charge applies only to Premium received by the Company
within six (6)  years of  the date  of the withdrawal  and will  vary in  amount
depending  upon the time which has elapsed  since the date Premium was received.
In calculating  the  Surrender  Charge,  Premium  is  allocated  to  the  amount
surrendered  on  a first-in,  first out  basis.  In the  case of  single premium
Contracts, the Surrender Charge will vary  in amount, depending upon the  number
of  Contract  Years  that a  Contract  has been  in  effect. The  amount  of any
withdrawal which  exceeds the  Free Withdrawal  Amount will  be subject  to  the
following charges:
 
<TABLE>
<CAPTION>
                                                                             APPLICABLE SURRENDER
      SINGLE PREMIUM CONTRACTS             FLEXIBLE PREMIUM CONTRACTS          CHARGE PERCENTAGE
- ------------------------------------  -------------------------------------  ---------------------
<S>                                   <C>                                    <C>
Contract Year 1                       Premium Year 1                                      6%
Contract Year 2                       Premium Year 2                                      6%
Contract Year 3                       Premium Year 3                                      5%
Contract Year 4                       Premium Year 4                                      5%
Contract Year 5                       Premium Year 5                                      4%
Contract Year 6                       Premium Year 6                                      4%
Contract Year 7                       Premium Year 7                                      2%
Contract Year 8 and thereafter        Premium Year 8 and thereafter                     None
</TABLE>
 
    No  Surrender Charge  is imposed  against: (1)  Transfers of  Contract Value
under  Dollar  Cost  Averaging,  Asset  Rebalancing,  or  Systematic  Withdrawal
options; (2) Contract Value upon Annuitization; (3) a Death Benefit.
 
    The  Surrender  Charge is  intended to  reimburse  the Company  for expenses
incurred which are related  to Contract sales. The  Company does not expect  the
proceeds  from  the Surrender  Charge to  cover all  distribution costs.  To the
extent such charge is insufficient to cover all distribution costs, the  Company
may  use any of its corporate assets, including potential profit which may arise
from the Mortality and Expense Risk Charge, to make up any difference.
 
    Certain restrictions  on  surrenders  are imposed  on  Contracts  issued  in
connection  with retirement  plans which  qualify under  Code Section  403(b) (a
"403(b) Plan"). (See "Taxes -- 403(b) Plans" on page   .)
 
DEDUCTION FOR ADMINISTRATIVE CHARGES
 
    The Company deducts for each Valuation Period a daily Administrative  Charge
which  is equal on an annual basis to  .15% of the average daily net asset value
of  the  Variable  Account.  This  charge  is  intended  to  reimburse  Us   for
administrative  expenses, both during the  accumulation period and following the
Annuity Date. We do not expect to recover an amount in excess of our accumulated
expenses through the deduction of the Administrative Charge.
 
DEDUCTION FOR CONTRACT MAINTENANCE CHARGE
 
    The Company also deducts  an annual Contract Maintenance  Charge of $30  per
year,  from  the  Contract  Value on  each  Contract  Anniversary.  The Contract
Maintenance Fee is waived if the Contract  Value is greater than $50,000 on  the
date  of deduction of  the charge. These  charges are designed  to reimburse the
Company for the  costs it incurs  relating to maintenance  of the Contract,  the
Variable Account, and the Guaranteed Account. If the Contract is surrendered, we
will  deduct the Contract Maintenance Charge at the time of surrender, pro-rata,
for the current Contract Year. The  deduction will be made proportionally  based
on    your   value   in   each    Subaccount   and   the   Guaranteed   Account.
 
                                       20
<PAGE>
After the  Annuity  Date, the  Contract  Maintenance  Charge is  deducted  on  a
pro-rata  basis from each annuity income payment  and is guaranteed to remain at
the same amount as at the Annuity Date. This charge is not expected to result in
a profit to the Company.
 
DEDUCTION FOR INCOME TAXES
 
    The Company deducts from the Contract Value and/or the Variable Account  any
Federal  income taxes resulting from the  operation of the Variable Account. The
Company does not currently anticipate incurring any Federal income taxes.
 
OTHER EXPENSES
 
    There are deductions from and expenses paid  out of the assets of the  Funds
which are described in the accompanying Prospectuses for each Fund.
 
GROUP AND GROUP SPONSORED ARRANGEMENTS
 
    In   certain  instances,  we  may  reduce   the  Surrender  Charge  and  the
Administrative Charge or change the minimum premium requirements for the sale of
Contracts to certain groups, including those in which a trustee or an  employer,
for  example, purchases  Contracts covering  a group  of individuals  on a group
basis.
 
    Our costs for sales, administration,  and mortality generally vary with  the
size  and stability of the group among  other factors. We take all these factors
into account when reducing charges. To  qualify for reduced charges, a group  or
similar  arrangement must meet certain  requirements, including our requirements
for size and number of years in existence. Group or group sponsored arrangements
that have been set  up solely to  buy Contracts or that  have been in  existence
less than six months will not qualify for reduced charges.
 
    We  will  make any  reductions  according to  our  rules in  effect  when an
application or enrollment form for a  Contract is approved. We may change  these
rules from time to time. Any variation in the Surrender Charge or Administrative
Charge  will reflect differences in  costs or services and  will not be unfairly
discriminatory.
 
                                ANNUITY BENEFITS
 
ANNUITIZATION
 
    Annuitization is an  election you  make to apply  the Contract  Value to  an
Annuity  Option in order to  provide a series of  annuity payments. The date the
Annuity Option becomes effective is the Annuity Date.
 
ANNUITY DATE
 
    The latest Annuity Date is: the later  of (a) the first day of the  calendar
month  following the later of the Annuitant's 90th birthday; or (b) such earlier
date as may be set by applicable law.
 
    The Owner may designate an  earlier date or may  change the Annuity Date  by
making  a written request  at least thirty  (30) days prior  to the Annuity Date
being changed. However, any Annuity Date must be no later than the date  defined
above; and, the first day of a calendar month.
 
    Without  the approval of the Company, the new Annuity Date cannot be earlier
than one year after  the Effective Date. In  addition, for Qualified  Contracts,
certain provisions of your retirement plan or the Code may further restrict your
choice of an Annuity Date. (See "Federal Tax Matters," page   ).
 
ANNUITY OPTIONS
 
    The Owner may choose annuity payments which are fixed, or which are based on
the  Variable Account, or a combination of the two. The Owner may, upon at least
30 days prior  written notice  to us,  at any time  prior to  the Annuity  Date,
select  or change an Annuity Option. If  the Owner elects annuity payments which
are based on the Variable Account, the amount of the payments will be  variable.
The  amount  of  the annuity  payment  based on  the  value of  a  Subaccount is
determined through  a  calculation  described in  the  Statement  of  Additional
Information, under the caption "Annuity Provisions".
 
                                       21
<PAGE>
The  Owner may not  transfer Contract Values between  the Guaranteed Account and
the Variable  Account  after the  Annuity  Date,  but may,  subject  to  certain
conditions,  transfer Contract Values from one Subaccount to another Subaccount.
(See " Transfer of Contract Values" on page   .)
 
    If the  Owner has  not made  any  annuity payment  option selection  at  the
Annuity  Date, the  Contract Value  will be applied  to purchase  Option 2 fixed
basis annuity  payments  and  Option  2  variable  basis  annuity  payments,  in
proportion  to the amount  of Contract Value  in the Guaranteed  Account and the
Variable Account, respectively.
 
    The annuity payment options are:
 
    OPTION 1:  LIFE INCOME.  The  Company will make annuity payments during  the
lifetime of the Annuitant.
 
    OPTION  2:  LIFE INCOME  WITH 10 YEARS OF  PAYMENTS GUARANTEED.  The Company
will make monthly annuity payments during the lifetime of the Annuitant. If,  at
the  death of  the Annuitant, payments  have been  made for less  than 10 years,
payments  will  be  continued  during  the  remainder  of  the  period  to   the
Beneficiary.
 
    OPTION  3:  JOINT AND  LAST SURVIVOR INCOME.   The Company will make annuity
payments for as long as either the Annuitant or a Contingent Annuitant is alive.
In the event that the Contract is issued in connection with an IRA, the payments
in this Option  will be  made only  to the Owner  as Annuitant  and the  Owner's
spouse.
 
    The  annuity payment  options are more  fully explained in  the Statement of
Additional Information. The Company may also offer additional options at its own
discretion.
 
ANNUITY PAYMENTS
 
    If the  Contract Value  applied  to annuity  payment  options is  less  than
$2,000,  the Company reserves the right to pay  the amount in a lump sum in lieu
of annuity  payments. The  Company  makes all  other annuity  payments  monthly.
However,  if  the total  monthly annuity  payment  would be  less than  $100 the
Company reserves the right to make payments semi-annually or annually.
 
    If fixed annuity payments are selected, the amount of each fixed payment  is
determined by multiplying the Contract Value allocated to purchase fixed annuity
payments  by the factor shown in the annuity table specified in the Contract for
the option selected, divided by 1,000.
 
    If variable annuity payments are selected, the Annuitant receives the  value
of  a fixed  number of  Annuity Units  each month.  The actual  dollar amount of
variable annuity payments is dependent upon: (i) the Contract Value at the  time
of  annuitization; (ii) the  annuity table specified in  the Contract; (iii) the
Annuity Option  selected;  (iv) the  investment  performance of  the  Subaccount
selected; and (v) the pro-rata portion of the Contract Maintenance charge.
 
    The  annuity tables  contained in  the Contract  are based  on a  5% assumed
investment rate. If  the actual net  investment rate exceeds  5%, payments  will
increase.  Conversely,  if the  actual rate  is less  than 5%,  variable annuity
payments will decrease.
 
                                 DEATH BENEFIT
 
PRIOR TO THE ANNUITY DATE
 
    In the event of  Your death prior  to the Annuity Date,  a death benefit  is
payable to the Beneficiary. The value of the death benefit will be determined as
of  the date We receive proof of death in  a form acceptable to Us. If there has
been a  change  of Owner,  the  death benefit  will  equal the  Contract  Value.
Otherwise, We will pay the death benefit equal to the greatest of: (a) the total
of  all Premium, reduced proportionately by  withdrawals and surrenders; (b) the
Contract Value; (c) the greatest of  the Contract Value at the seventh  Contract
Anniversary  if attained  prior to  Owner's attained age  76 or  at the Contract
Anniversary every seven  years thereafter, plus  any Premium paid  and less  any
surrenders subsequent to that Contract Anniversary.
 
                                       22
<PAGE>
    The  Beneficiary may  elect the  death benefit  to be  paid as  follows: (a)
payment of the entire death  benefit within 5 years of  the date of the  Owner's
death;  or  (b) payment  over the  lifetime of  the designated  Beneficiary with
distribution beginning within 1 year of the  date of death of the Owner; or  (c)
if  the designated Beneficiary is Your  spouse, he/she can continue the contract
in his/her own name.
 
    If no payment option is elected, a single sum settlement will be made at the
end of the sixty (60) day period following receipt of proof of death.
 
AFTER THE ANNUITY DATE
 
    If the Owner is a person other than the Annuitant, and if the Owner's  death
occurs on or after the Annuity Date, no death benefit will be payable under this
contract,  except that any guaranteed payments remaining unpaid will continue to
be paid to the Annuitant pursuant to the Annuity Option in force at the date  of
the Owner's death.
 
ACCIDENTAL DEATH BENEFIT
 
    If  an Accidental Death Benefit  has been elected, the  cost of this benefit
will be equal on an annual basis to 0.10% of the average daily net assets in the
Variable Account.
 
    The Accidental Death Benefit, if any, is equal to the lesser of the Contract
Value as of the date the death benefit is determined or $250,000. The Accidental
Death Benefit is payable if the death  of the primary Owner occurs prior to  the
Contract  Anniversary next following his 75th birthday as a result of an Injury.
The death must also  occur before the  Annuity Date and within  365 days of  the
date  of the accident which  caused the Injury. The  Accidental Death Benefit is
paid to the Beneficiary.
 
    The Accidental Death Benefit  will not be  paid for any  death caused by  or
resulting (in whole or in part) from the following:
 
    (a)  suicide  or  attempted  suicide  while  sane  or  insane; intentionally
       self-inflicted injuries;
 
    (b) sickness, disease or  bacterial infection of  any kind, except  pyogenic
       infections  which occur as a result  of an injury or bacterial infections
       which result from the accidental ingestion of contaminated substances;
 
    (c) hernia;
 
    (d) injury sustained as  a consequence of riding  in, including boarding  or
       alighting  from, any vehicle or device  used for aerial navigation except
       if  the  Owner  is  a  passenger   on  any  aircraft  licensed  for   the
       transportation of passengers;
 
    (e) declared or undeclared war or any act thereof; or
 
    (f) service in the military, naval or air service of any country.
 
DEATH OF THE ANNUITANT
 
    If the Annuitant is a person other than the Owner, and if the Annuitant dies
before  the Annuity Date, a new  Annuitant may be named by  the Owner. If no new
Annuitant is  named within  sixty  (60) days  of Our  receipt  of proof  of  the
Annuitant's  death, the Owner will be deemed  the new Annuitant. If an Annuitant
dies after  the  Annuity  Date, the  remaining  payments,  if any,  will  be  as
specified  in  the  Annuity  Option  elected.  We  will  require  proof  of  the
Annuitant's death.  Death benefits,  if  any, will  be  paid to  the  designated
Beneficiary at least as rapidly as under the method of distribution in effect at
the Annuitant's death.
 
                        DISTRIBUTIONS UNDER THE CONTRACT
 
WITHDRAWALS
 
    The  Owner  may withdraw  Contract  Values prior  to  the Annuity  Date. Any
withdrawal is subject to the following conditions:
 
    (a) the Company must receive a written request;
 
                                       23
<PAGE>
    (b) the amount requested must be at least $500;
 
    (c) any applicable Surrender Charge will be deducted;
 
    (d) the Contract Value will  be reduced by the  sum of the amount  requested
       plus the amount of any applicable Surrender Charge;
 
    (e)  the Company will deduct the  amount requested plus any Surrender Charge
       from each  Subaccount of  the Variable  Account and  from the  Guaranteed
       Account either as specified or in the proportion that each Subaccount and
       the Guaranteed Account bears to the Contract Value; and
 
    We  reserve the right  to consider any withdrawal  request that would reduce
the Value of the Accumulation  Account to less than $2,000  to be a request  for
Surrender.  In  this event,  the Surrender  Value will  be paid  to You  and the
Contract will terminate.
 
    Each withdrawal is subject to Federal  income taxes on the taxable  portion.
Unless  otherwise directed  by You, We  must withhold federal  income taxes from
each withdrawal. In addition, a 10%  penalty tax may be assessed on  withdrawals
if  You are  under age  59 1/2. This  includes withdrawals  under the Systematic
Withdrawal program (described below) and withdrawals You may make to pay fees to
Your investment advisor, if any.
 
SYSTEMATIC WITHDRAWAL
 
    The  systematic  withdrawal  program  involves  making  regularly  scheduled
withdrawals  from Your value in the Contract.  In order to initiate the program,
your total Contract Value must  be at least $24,000.  The program allows You  to
prearrange  the withdrawal  of a  specified dollar amount  of at  least $200 per
withdrawal, on a monthly  or quarterly payment  basis. A maximum  of 10% of  the
Contract  Value may be withdrawn  in a Contract Year.  Surrender Charges are not
imposed on withdrawals under this program.  If you elect this program  Surrender
Charges  will be  imposed on any  withdrawal, other than  withdrawals made under
Your systematic withdrawal program, when the withdrawal is from Premium paid  in
the  last six years.  You may not elect  this program if you  have taken a prior
withdrawal during the same  Contract Year. (See  "Withdrawals" on page    ,  and
"Surrender Charges" on page   .)
 
    Systematic  withdrawals will  begin on  the first  scheduled withdrawal date
selected by You  following the  date We  process Your  request. If  the day  You
designate  is not a Valuation Date, the withdrawal will be made on the following
Valuation Date. In the event  that Your value in  a specified Subaccount or  the
Guaranteed  Account is not sufficient to deduct  a withdrawal or if Your request
for systematic withdrawal does not specify the Guaranteed Account or from  which
Subaccounts  withdrawals  are  to  be  deducted,  withdrawals  will  be deducted
proportionally based  on  Your  value  in each  Subaccount  and  the  Guaranteed
Account.
 
    All  parties to the Contract are cautioned  that the rights of any person to
implement the systematic  withdrawal program  under Qualified  Contracts may  be
subject  to the terms and  conditions of the retirement  plan, regardless of the
terms and conditions of the Qualified Contract issued in connection with such  a
retirement plan. (See "Federal Tax Matters" on page   .)
 
    The  systematic withdrawal  program may be  canceled at any  time by written
request or automatically by Us should  the Contract Value fall below $1,000.  In
the event the systematic withdrawal program is canceled, the Owner may not elect
to participate in such program until the next Contract Anniversary.
 
    An  Owner  may change  once per  Contract  Year the  amount or  frequency of
withdrawals on a systematic basis.
 
                                       24
<PAGE>
    The Free Withdrawal  Amount (see  "Charges and Deductions  -- Deduction  for
Surrender  Charge" on  page    ) is  not available  while an  Owner is receiving
systematic withdrawals. An Owner will be entitled to the free withdrawal  amount
on  and after  the Contract  Anniversary next  following the  termination of the
systematic withdrawal program.
 
    Implementation of the systematic withdrawal program may subject an Owner  to
adverse  tax consequences, including a 10%  tax penalty. (See "Taxes -- Taxation
of Annuities in General" on page    for a discussion of the tax consequences  of
withdrawals.)
 
    THE COMPANY RESERVES THE RIGHT TO DISCONTINUE THIS PROGRAM AT ANY TIME.
 
SURRENDER
 
    Prior  to the Annuity Date you may  Surrender the Contract for the Surrender
Value by  withdrawing the  entire  Contract Value.  You  must submit  a  written
request for Surrender and return the Contract to Us. The Surrender Value will be
based  on the Contract Value at the end of the Valuation Period during which the
Surrender request  is received  as  described below.  The  Contract may  not  be
surrendered after the Annuity Date.
 
SURRENDER VALUE
 
    The  Surrender  Value  of the  Contract  varies  each day  depending  on the
investment results of the Subaccounts selected  by the Owner. Contract Value  in
the Guaranteed Account may be subject to a Market Value Adjustment. (See "Market
Value Adjustment", Appendix   .) The Surrender Value will be the Contract Value,
subject  to any applicable Market  Value Adjustment, as of  the date the Company
receives Your surrender request,  reduced by the  following: (1) any  applicable
taxes  not  previously  deducted; (2)  any  applicable portion  of  the Contract
Maintenance Charge; and (3) any applicable Surrender Charge.
 
PAYMENT OF WITHDRAWALS AND SURRENDER VALUES
 
    Payments of Withdrawals and Surrender Values will ordinarily be sent to  the
Owner  within seven  (7) days  of receipt  of the  written request,  but see the
Deferment of  Payment  discussion  below.  (Also  see  Statement  of  Additional
Information -- "Delay of Payments.")
 
    The Company reserves the right to ensure that an Owner's check or other form
of  Premium has been cleared  for payment prior to  processing any withdrawal or
redemption request occurring shortly after a Premium payment.
 
    If, at the time You make a request for a Withdrawal or a Surrender, You have
not provided  Us  with a  written  election not  to  have Federal  income  taxes
withheld,  We must by law  withhold such taxes from  the taxable portion of Your
payment and remit that amount to  the IRS. Mandatory withholding rules apply  to
distributions   from  qualified   plans  and  Code   section  403(b)  annuities.
Additionally, the Code provides that a 10% penalty tax may be imposed on certain
early Withdrawals and Surrenders.  (See "Federal Tax  Matters" on page    ,  and
"Qualified Contracts" on page   .)
 
DEFERRAL OF PAYMENT
 
    Payment  of any Withdrawal,  Surrender, or lump sum  death proceeds from the
Variable Account will usually  occur within seven days.  We may be permitted  to
defer  such payment if: (1) the New York Stock Exchange is closed for other than
usual weekends or holidays, or trading on the Exchange is otherwise  restricted;
(2)  an emergency exists as defined by the  SEC or the SEC requires that trading
be restricted; (3) the SEC permits a delay for protection of Owners; or (4)  the
check  used to pay any Premium has  not cleared through the banking system (this
may take up to 15 days).
 
    We may defer  payment of  any Withdrawal  or Surrender  from the  Guaranteed
Account for up to six months from the date we receive Your written request.
 
                                       25
<PAGE>
                                     TAXES
 
INTRODUCTION
 
    The  Contracts  are designed  to accumulate  Contract Values  for retirement
plans which, except for IRAs and  403(b) Plans, are generally not  tax-qualified
plans  ("Qualified Plans"). The  ultimate effect of Federal  income taxes on the
amounts held under a Contract, on annuity payments, and on the economic benefits
to the Owner, Annuitant  or Beneficiary depend on  the Company's tax status  and
upon  the tax  status of the  individual concerned.  Accordingly, each potential
Owner should consult a competent tax  adviser regarding the tax consequences  of
purchasing a Contract.
 
    The  following discussion is  general in nature  and is not  intended as tax
advice. No attempt is made to consider  any applicable state or other tax  laws.
Moreover,  the  discussion  is based  upon  the Company's  understanding  of the
Federal income tax laws as they are currently interpreted. No representation  is
made  regarding the likelihood  of continuation of the  Federal income tax laws,
the Treasury Regulations, or the current interpretations by the Internal Revenue
Service (the "Service"). For a discussion of Federal income taxes as they relate
to the Funds, please see the accompanying relevant Fund Prospectus.
 
COMPANY TAX STATUS
 
    The Company is taxed as a life insurance company under the Internal  Revenue
Code  of 1986,  as amended  (the "Code").  Since the  Variable Account  is not a
separate entity from the Company and its operations form a part of the  Company,
it  will  not be  taxed  separately as  a  "regulated investment  company" under
Subchapter M of the  Code. Investment income and  realized capital gains on  the
assets  of  the  Variable  Account  are reinvested  and  taken  into  account in
determining the  Contract Value.  Under  existing Federal  income tax  law,  the
Variable  Account's investment income, including  realized net capital gains, is
not taxed to the Company. The Company reserves the right to make a deduction for
taxes from  the assets  of the  Variable  Account should  they be  imposed  with
respect to such items in the future.
 
TAXATION OF ANNUITIES IN GENERAL -- NON-QUALIFIED PLANS
 
    Code  Section 72 governs the taxation of  annuities. In general, an Owner is
not taxed on increases in value under  a Contract until some form of  withdrawal
or   distribution   is  made   under  the   Contract.  However,   under  certain
circumstances, the  increase in  value may  be subject  to tax  currently.  (See
"Contracts Owned by Non-Natural Persons," and "Diversification Standards".)
 
    WITHDRAWALS PRIOR TO THE ANNUITY DATE
 
    Code  Section 72 provides that a total or partial withdrawal from a Contract
prior to the Annuity Date  will be treated as taxable  income to the extent  the
amounts held under the Contract on the date of withdrawal exceed the "investment
in the contract," as that term is defined under the Code. The "investment in the
contract"  can generally be described as the  cost of the Contract. It generally
constitutes the sum  of all  purchase payments made  for the  contract less  any
amounts  received under  the Contract that  are excluded from  gross income. The
taxable portion is taxed as ordinary income. For purposes of this rule, a pledge
or assignment of a  Contract is treated  as a payment received  on account of  a
partial withdrawal of a Contract.
 
    WITHDRAWALS ON OR AFTER THE ANNUITY DATE
 
    Upon receipt of a lump sum payment or an annuity payment under the Contract,
the recipient is taxed on the portion of the payment that exceeds the investment
in  the Contract. Ordinarily, the taxable portion of payments under the Contract
will be taxed as ordinary income.
 
    For fixed annuity payments, the taxable portion of each payment is generally
determined by using a formula known as the "exclusion ratio", which  establishes
the ratio that the investment in the Contract bears to the total expected amount
of  annuity payments for the term of the Contract. That ratio is then applied to
each payment to determine the nontaxable  portion of the payment. The  remaining
portion  of  each payment  is  taxed as  ordinary  income. For  variable annuity
payments, the
 
                                       26
<PAGE>
taxable portion is determined by a  formula which establishes a specific  dollar
amount  of each payment  that is not  taxed. The dollar  amount is determined by
dividing the investment in the Contract by the total number of expected periodic
payments. The remaining portion of each payment is taxed as ordinary income.
 
    The Company  is obligated  to  withhold Federal  income taxes  from  certain
payments  unless the recipient elects otherwise. Prior to the first payment, the
Company will notify the payee of the right to elect out of withholding and  will
furnish a form on which the election may be made. The payee must properly notify
the  Company  of that  election  in advance  of the  payment  in order  to avoid
withholding.
 
    PENALTY TAX ON CERTAIN WITHDRAWALS
 
    With respect to amounts withdrawn or distributed before the taxpayer reaches
age 59 1/2, a 10% penalty tax is  imposed upon the portion of such amount  which
is  includable  in gross  income. However,  the  penalty tax  will not  apply to
withdrawals: (i) made on or after the death of the Owner (or where the Owner  is
not  an individual, the death of the  "primary annuitant", who is defined as the
individual, the  events  in  the life  of  whom  are of  primary  importance  in
affecting  the  timing  or  amount  of  the  payout  under  the  Contract); (ii)
attributable to the taxpayer's becoming  totally disabled within the meaning  of
Code  Section 72(m)(7); (iii) which are part  of a series of substantially equal
periodic payments (not less frequently than annually) made for the life (or life
expectancy) of the taxpayer, or the joint lives (or joint life expectancies)  of
the  taxpayer and his beneficiary; (iv)  allocable to investment in the Contract
before August 14, 1982; (v) under a qualified funding asset (as defined in  Code
Section  130(d)); (vi)  under an immediate  annuity contract; or  (vii) that are
purchased by an employer on termination of certain types of qualified plans  and
which are held by the employer until the employee separates from service.
 
    If  the  penalty tax  does not  apply to  a  withdrawal as  a result  of the
application of item  (iii) above, and  the series of  payments are  subsequently
modified  (other than by reason  of death or disability),  the tax for the first
year in which the modification  occurs will be increased  by an amount equal  to
the  tax that  would have been  imposed but  for item (iii)  above as determined
under Treasury Regulations, plus interest for the deferral period. The foregoing
rule applies if the modification takes place: (a) before the close of the period
which is five years from  the date of the first  payment and after the  taxpayer
attains age 59 1/2; or (b) before the taxpayer reaches age 59 1/2.
 
    ASSIGNMENTS
 
    Any assignment or pledge of the Contract as collateral for a loan may result
in  a taxable event and the excess of the Contract Value over total Premium will
be taxed to  the assignor as  ordinary income. Please  consult your tax  adviser
prior to making an assignment of the Contract.
 
    DISTRIBUTION-AT-DEATH RULES
 
    In  order  to be  treated  as an  annuity  contract for  Federal  income tax
purposes, a Contract must generally  provide for the following two  distribution
rules: (i) if the Owner dies on or after the Annuity Date, and before the entire
interest  in the  Contract has been  distributed, the remaining  portion of such
interest will be distributed at least as quickly as the method in effect on  the
Owner's  death; and  (ii) if a  Owner dies  before the Annuity  Date, the entire
interest must  generally be  distributed within  five years  after the  date  of
death.  To  the extent  such interest  is payable  to a  designated Beneficiary,
however, such interest may  be annuitized over the  life of that Beneficiary  or
over  a period not extending beyond the  life expectancy of that Beneficiary, so
long as distributions commence within one year  after the date of death. If  the
Beneficiary  is the spouse of the Owner, the Contract may be continued unchanged
in the name of the spouse as Owner.
 
    If the Owner is not an individual, the "primary annuitant" (as defined under
the Code)  is considered  the  Owner. In  addition, when  the  Owner is  not  an
individual,  a change in  the primary annuitant  is treated as  the death of the
Owner.
 
                                       27
<PAGE>
    GIFTS OF CONTRACTS
 
    Any transfer of a Contract prior to the Annuity Date for less than full  and
adequate  consideration will generally trigger tax  on the gain in the Contract.
The transferee will receive a  step-up in basis for  the amount included in  the
transferor's  income. This provision, however, does not apply to those transfers
between spouses or  incident to  a divorce which  are governed  by Code  Section
1041(a).
 
    CONTRACTS OWNED BY NON-NATURAL PERSONS
 
    If  the Contract is held by a non-natural person (for example, a corporation
or trust)  the Contract  is generally  not treated  as an  annuity contract  for
Federal  income  tax purposes,  and the  income on  the Contract  (generally the
excess of the Contract Value over the purchase payments) is includable in income
each year. The  rule does not  apply where  the non-natural person  is only  the
nominal  owner such as a trust or other  entity acting as an agent for a natural
person. The rule also does not apply when the Contract is acquired by the estate
of a decedent, when the Contract is held under certain qualified plans, when the
Contract is  a qualified  funding  asset for  structured settlements,  when  the
Contract  is purchased on behalf of an  employee upon termination of a qualified
plan, and in the case of an immediate annuity.
 
    SECTION 1035 EXCHANGES
 
    Code Section 1035 provides that no gain  or loss shall be recognized on  the
exchange  of an  annuity contract  for another  annuity contract.  A replacement
contract obtained in a tax-free exchange of contracts succeeds to the status  of
the  surrendered contract.  Special rules and  procedures apply  to Code Section
1035 transactions. Prospective owners wishing to take advantage of Code  Section
1035 should consult their tax advisers.
 
    MULTIPLE CONTRACTS
 
    Annuity  contracts that are issued by the Company (or affiliate) to the same
Owner during  any calendar  year will  be  treated as  one annuity  contract  in
determining  the amount  includable in  the taxpayer's  gross income.  Thus, any
amount received under any such contract prior to the contract's annuity starting
date will be taxable (and possibly subject to the 10% penalty tax) to the extent
of the combined income in all such contracts. The Treasury has broad  regulatory
authority  to prevent avoidance of the purposes  of this aggregation rule. It is
possible that, under  this authority, Treasury  may apply this  rule to  amounts
that  are  paid as  annuities  (on or  after  the starting  date)  under annuity
contracts issued by the same company to the same Owner during any calendar  year
period.  In this  case, annuity  payments could  be fully  taxable (and possibly
subject to the 10% penalty tax) to the extent of the combined income in all such
contracts and  regardless  of  whether  any amount  would  otherwise  have  been
excluded from income. Owners should consult a tax adviser before purchasing more
than one Contract or other annuity contracts.
 
DIVERSIFICATION STANDARDS
 
    To  comply  with  the  diversification  regulations  promulgated  under Code
Section 817(h)  (the "Diversification  Regulations"), after  a start-up  period,
each  Subaccount is required  to diversify its  investments. The Diversification
Regulations generally require that on the last day of each quarter of a calendar
year no more than 55% of the value of the assets of a Subaccount is  represented
by  any one investment, no more than  70% is represented by any two investments,
no more than 80% is represented by  any three investments, and no more than  90%
is represented by any four investments. A "look-through" rule applies so that an
investment  in a  Fund is  not treated as  one investment  but is  treated as an
investment in a  pro-rata portion  of each underlying  asset of  such Fund.  All
securities of the same issuer are treated as a single investment. In the case of
government securities, each Government agency or instrumentality is treated as a
separate issuer.
 
                                       28
<PAGE>
    In connection with the issuance of the Diversification Regulations, Treasury
announced that such regulations do not provide guidance concerning the extent to
which  Owners may direct their investments to particular divisions of a separate
account. It  is  possible  that  if  and  when  additional  regulations  or  IRS
pronouncements  are issued, the Contract may need  to be modified to comply with
such rules. For  these reasons,  the Company reserves  the right  to modify  the
Contract,  as necessary, to prevent the Owner from being considered the owner of
the assets of the Variable Account.
 
    The Company intends to comply with the Diversification Regulations to assure
that the  Contracts continue  to be  treated as  annuity contracts  for  Federal
income tax purposes.
 
QUALIFIED PLANS
 
    The Contracts may be used to create an IRA. The Contracts are also available
for  use in connection with a previously  established 403(b) Plan. No attempt is
made herein  to provide  more than  general  information about  the use  of  the
Contracts  with IRAs or 403(b) Plans. The  information herein is not intended as
tax advice. A prospective Owner considering use of the Contract to create an IRA
or in connection with a 403(b) Plan should first consult a competent tax adviser
with regard to  the suitability  of the Contract  as an  investment vehicle  for
their qualified plan.
 
    A  Contract  may be  used  as the  investment  medium for  several  types of
retirement plans. Under  amendments to  the Internal Revenue  Code which  became
effective  in 1993, distributions from a  qualified plan (other than non-taxable
distributions representing  a  return  of  capital,  distributions  meeting  the
minimum  distribution requirement, distributions for the life or life expectancy
of the recipient(s) or distributions that are made over a period of more than 10
years) are  eligible  for  tax-free rollover  within  60  days of  the  date  of
distribution,  but are also subject  to federal income tax  withholding at a 20%
rate unless paid directly to another qualified plan. If the recipient is  unable
to take full advantage of the tax-free rollover provisions, there may be taxable
income,  and  the imposition  of a  10% penalty  if the  recipient is  under age
59 1/2. We make no attempt to provide more than general information about use of
Qualified Contracts  with the  various  types of  retirement plans.  Owners  and
participants  under retirement plans as well as Annuitants and Beneficiaries are
cautioned that  the  rights  of  any person  to  any  benefits  under  Qualified
Contracts  may be subject  to the terms  and conditions of  the retirement plan,
regardless of  the terms  and conditions  of the  Qualified Contract  issued  in
connection  with such a  retirement plan. Purchasers  of Qualified Contracts for
use with any retirement plan should consult their legal counsel and tax  adviser
regarding the suitability of a Qualified Contract for their retirement plan.
 
INDIVIDUAL RETIREMENT ANNUITIES
 
    Section  408 of  the Code permits  eligible individuals to  contribute to an
IRA. Contracts issued in  connection with an IRA  are subject to limitations  on
eligibility, maximum contributions, and time of distribution. Distributions from
certain  retirement plans  qualifying for federal  tax advantages  may be rolled
over into  an IRA.  Sales of  the Contracts  for use  with IRAs  are subject  to
special  requirements  imposed by  the Service,  including the  requirement that
informational disclosure be given to each  person desiring to establish an  IRA.
The IRAs offered by this Prospectus are not available in all states.
 
403(B) PLANS
 
    Code  Section 403(b)(11) imposes certain  restrictions on an Owner's ability
to make partial withdrawals from Code Section 403(b) Contracts, if  attributable
to  Premium paid under a salary  reduction agreement. Specifically, Code Section
403(b)(11) allows an Owner  to make a surrender  or partial withdrawal only  (a)
when  the employee attains age 59 1/2,  separates from service, dies, or becomes
disabled (as defined in the Code), or (b)  in the case of hardship. In the  case
of  hardship, only an amount equal to the purchase payments may be withdrawn. In
addition, under  Code  Section 403(b)  the  employer must  comply  with  certain
non-discrimination  requirements.  Owners  should  consult  their  employers  to
determine whether the employer  has complied with these  rules. The 403(b)  Plan
offered by this Prospectus is not available in all states.
    
 

                                       29
<PAGE>
   

          TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
 
<TABLE>
<CAPTION>
                                                                                                               PAGE
                                                                                                             ---------
<S>                                                                                                          <C>
General Information........................................................................................
  The Company..............................................................................................
  Independent Accountants..................................................................................
  Legal Counsel............................................................................................
  Distributor..............................................................................................
  Calculation of Performance Related Information...........................................................
  Delay of Payments........................................................................................
  Transfers................................................................................................
Method of Determining Contract Values......................................................................
Annuity Provisions.........................................................................................
Annuity Benefits...........................................................................................
  Annuity Options..........................................................................................
  Variable Annuity Payment Values..........................................................................
  Annuity Unit.............................................................................................
  Net Investment Factor....................................................................................
  Additional Provisions....................................................................................
Financial Statements.......................................................................................
</TABLE>
    
 
                                       30
<PAGE>
   

                                    APPENDIX
 
GUARANTEED ACCOUNT OPTION
 
    Under  this  Guaranteed  Account option,  Contract  Values are  held  in the
Company's General  Account. The  General  Account includes  all of  Our  assets,
except  those assets segregated  in Our separate  accounts. Because of exemptive
and exclusionary  provisions, interests  in the  General Account  have not  been
registered  under  the  Securities  Act  of  1933  nor  is  the  General Account
registered as an investment  company under the Investment  Company Act of  1940.
The Company understands that the staff of the Securities and Exchange Commission
has  not reviewed the disclosures in  this Prospectus relating to the Guaranteed
Account portion of  the Contract. Disclosures  regarding the Guaranteed  Account
may,  however,  be subject  to certain  generally  applicable provisions  of the
federal securities laws relating to the accuracy and completeness of  statements
made in prospectuses.
 
    During  the  Accumulation  Period  the Owner  may  allocate  amounts  to the
Guaranteed Account.  The initial  Premium  will be  invested in  the  Guaranteed
Account  if selected by the Owner at the time of application. Additional Premium
will be allocated in  accordance with the selection  made in the application  or
the  most recent instruction received at the Company Office. If the Owner elects
to withdraw  amounts from  the Guaranteed  Account, such  withdrawal, except  as
otherwise  provided in this Appendix, will be  subject to the same conditions as
imposed on withdrawals from the Variable Account. The Company reserves the right
to delay any payment from the Guaranteed  Account for up to six (6) months  from
the date it receives such request at its Office.
 
GUARANTEE PERIODS
 
    The  period(s) for which a guaranteed interest  rate is credited is called a
Guarantee Period. Guarantee Periods may be offered or withdrawn at the Company's
discretion. The initial guarantee period(s) and the guaranteed interest  rate(s)
applicable to the initial Premium are as shown in the Contract. At least 15 days
but  no more  than 75 days  prior to the  expiration of a  Guarantee Period, the
Owner will be mailed a  notice of the guaranteed  interest rate applicable to  a
renewal  of  the Guarantee  Period. At  the expiration  of any  Guarantee Period
applicable to any portion  of the Contract Value,  that portion of the  Contract
Value  will be automatically  renewed for another Guarantee  Period for the same
duration as  the  expired  Guarantee  Period and  will  receive  the  guaranteed
interest  rate then in effect for  that Guarantee Period, unless other Guarantee
Periods or one or more  Subaccounts are requested in  writing by the Owner.  All
requests to change a Guarantee Period at the end of an existing Guarantee Period
must  be received in writing at the Company's Office within 30 days prior to the
end of that Guarantee Period.
 
ALLOCATIONS TO THE GUARANTEED ACCOUNT
 
    The minimum amount that may be allocated to a Guarantee Period, either  from
the  initial  or  a  subsequent  Premium, is  $3,000.  Amounts  invested  in the
Guaranteed Account  are credited  with interest  on a  daily basis  at the  then
applicable  effective guarantee rate. The effective  guarantee rate is that rate
in effect  when the  Owner  allocates or  transfers  amounts to  the  Guaranteed
Account. If the Owner has allocated or transferred amounts at different times to
the  Guaranteed Account, each allocation or transfer may have a unique effective
guarantee rate and Guarantee Period  associated with that amount. The  effective
guarantee  rate will not be changed more than once per year and the minimum rate
will not be less than 3%.
 
GUARANTEED ACCOUNT TRANSFERS
 
    During the accumulation period the Owner may transfer, by written request or
telephone authorization, Contract Values to or from a subaccount of the Variable
Account to or from  a Guarantee Period  of the Guaranteed  Account at any  time,
subject to the conditions set out under Transfer of Contract Values Section.
 
    Prior  to  the  end  of  a  Guarantee  Period  the  Owner  may  specify  the
Subaccount(s) of the Variable Account or the applicable Guarantee Period of  the
Guaranteed  Account to  which the  Owner wants  the amounts  from the Guaranteed
Account  transferred  at  the  end  of  the  Guarantee  Period.  If  the   Owner
 
                                      A-1
<PAGE>
does  not notify us  prior to the end  of the Guarantee  Period, we will reapply
that amount to  a new  Guarantee Period  of the  same duration,  provided it  is
available. If a new Guarantee Period of the same duration is not available, that
portion of Your Contract Value shall be transferred to the Guarantee Period next
shortest  in  duration.  The amount  so  applied  is then  subject  to  the same
conditions as the original  Guarantee Period, including  the condition that  the
amount  may not be  transferred until the  end of that  Guarantee Period. In the
event of a  non-specified renewal, there  is a  grace period of  30 days  within
which  the Owner can have transferred amounts reapplied. The effective guarantee
rate applicable to the new Guarantee Period may be different from the  effective
guaranteed  rate applicable  to the  original Guarantee  Period. These transfers
will be handled at no charge to the Owner.
 
MARKET VALUE ADJUSTMENT
 
    Unless accomplished on the expiration date  of a Guarantee Period or  during
the  grace period, a transfer, withdrawal, surrender or annuitization of amounts
allocated to the Guaranteed Account may be subject to a Market Value Adjustment.
The adjusted value is  determined by multiplying the  amount to be  transferred,
withdrawn,  surrendered or annuitized  from a Guarantee  Period by the following
formula:
 
    .75 X (A - B) X [N/12], where:
 
<TABLE>
<S>        <C>        <C>
A          =          The guaranteed interest rate applicable to a Guarantee Period for that portion of
                      proceeds being transferred, withdrawn, surrendered or annuitized.
B          =          The guaranteed interest rate currently available for the same length of Guarantee
                      Period as that  remaining in the  period applicable to  that portion of  proceeds
                      being  transferred, withdrawn,  surrendered or  annuitized. If  no such Guarantee
                      Period is  then offered,  the  guaranteed interest  rate  will be  calculated  by
                      straight  line  interpolation  of  the  guaranteed  interest  rates  of available
                      Guarantee Periods.
N          =          The number of complete and partial months  remaining to the end of the  Guarantee
                      Period  applicable  to that  portion  of proceeds  being  transferred, withdrawn,
                      surrendered or annuitized.
</TABLE>
 
    The Market Value Adjustment is not applicable on the date a Guarantee Period
expires; however, a Withdrawal or Surrender  on such date may remain subject  to
Surrender Charges. Applicable Surrender Charges will be applied after any Market
Value Adjustment to Guaranteed Account values.
 
MINIMUM SURRENDER VALUE
 
    The  minimum Surrender Value for amounts allocated to the Guaranteed Account
equals the  amounts  so allocated  less  withdrawals, with  interest  compounded
annually at the rate of 3%, reduced by any applicable Surrender Charge.
    
 

                                      A-2
<PAGE>

   












                                    PART B











<PAGE>

                                        PART B
                         STATEMENT OF ADDITIONAL INFORMATION


                         DEFERRED VARIABLE ANNUITY CONTRACTS



                                      issued by



                                  VARIABLE ACCOUNT A



                                         and



            AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK



         THIS IS NOT A PROSPECTUS.  THIS STATEMENT OF ADDITIONAL INFORMATION
SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS FOR THE  DEFERRED VARIABLE
ANNUITY CONTRACTS WHICH ARE REFERRED TO HEREIN.

         THE PROSPECTUS CONCISELY SETS FORTH INFORMATION THAT A PROSPECTIVE 
INVESTOR OUGHT TO KNOW BEFORE INVESTING.  FOR A COPY OF THE PROSPECTUS DATED 
MAY 1, 1996 CALL OR WRITE:  American International Life Assurance Company of 
New York; Attention: Variable Products, One Alico Plaza, Wilmington, Delaware 
19801, 1-800-340-2765.

DATE OF STATEMENT OF ADDITIONAL INFORMATION:  May 1, 1996







<PAGE>


                                  TABLE OF CONTENTS

                                                                            PAGE
                                                                            ----

General Information.........................................................
    The Company.............................................................
    Independent Accountants.................................................
    Legal Counsel...........................................................
    Distributor.............................................................
    Calculation of Performance Related Information..........................
    Delay of Payments.......................................................
    Transfers...............................................................
Method of Determining Contract Values.......................................
Annuity Provisions..........................................................
    Annuity Benefits........................................................
    Annuity Options.........................................................
    Variable Annuity Payment Values.........................................
    Annuity Unit............................................................
    Net Investment Factor...................................................
    Additional Provisions...................................................
Financial Statements........................................................


                                        B - 2


<PAGE>


                                 GENERAL INFORMATION


THE COMPANY

         A description of American Life Assurance Company of New York (the 
"Company"), and its ownership is contained in the Prospectus.  The Company 
will provide for the safekeeping of the assets of Variable Account A (the 
"Variable Account").

INDEPENDENT ACCOUNTANTS

         The audited financial statements of the Company have been audited by
Coopers and Lybrand, L.L.P., independent certified public accountants, whose
offices are located in Philadelphia, Pennsylvania.

LEGAL COUNSEL

         Legal matters relating to the Federal securities laws in connection
with the Contracts described herein and in the Prospectus are being passed upon
by the law firm of Jorden Burt Berenson & Johnson LLP, Washington, D.C..

DISTRIBUTOR

    AIG Equity Sales Corp. ("AESC"), a wholly owned subsidiary of American
International Group, Inc. and an affiliate of the Company, acts as the
distributor.  The offering is on a continuous basis.  Commissions in the amount
of $27,878 were retained by the Distributor.  

CALCULATION OF PERFORMANCE RELATED INFORMATION

         A.   YIELD AND EFFECTIVE YIELD QUOTATIONS FOR THE MONEY MARKET
              SUBACCOUNT
         
         The yield quotation for the Money Market Subaccount to be set forth in
the Prospectus will be for the seven days ended on the date of the most recent
balance sheet of the Variable Account included in the registration statement,
and will be computed by determining the net change, exclusive of capital
changes, in the value of a hypothetical pre-existing account having a balance of
one Accumulation Unit in the Money Market Subaccount at the beginning of the
period, subtracting a hypothetical charge reflecting deductions from Owner
accounts, and dividing the difference by the value of the account at the
beginning of the base period to obtain the base period return, and multiplying
the base period return by (365/7) with the resulting figure carried to at least
the nearest hundredth of one percent.

         Any effective yield quotation for the Money Market Subaccount to be
set forth in the Prospectus will be for the seven days ended on the date of the
most recent balance sheet of the Variable Account included in the registration
statement, and will be carried at least to the nearest hundredth of one percent,
and will be computed by determining the net change, exclusive of capital
changes, in the value of a hypothetical pre-existing account having a balance of
one Accumulation Unit in the Money Market Subaccount at the beginning of the
period, subtracting a hypothetical charge reflecting deductions from Owner
accounts, and dividing the difference by the value of the account at the
beginning of the base period to obtain the base period return, and then
compounding the base period return by adding 1, raising the sum to a power equal
to 365 divided by 7 and subtracting 1 from the result, according to the
following formula:
   
         EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1)365/7]-1.


                                        B - 3

<PAGE>


         For purposes of the yield and effective yield computations, the
hypothetical charge reflects all deductions that are charged to all Owner
accounts in proportion to the length of the base period.  For any fees that vary
with the size of the account, the account size is assumed to be the Money Market
Subaccount's mean account size.  The yield and effective yield quotations do not
reflect the Surrender Charge that may be assessed at the time of withdrawal in
an amount ranging up to 6% of the requested withdrawal amount, with the specific
percentage applicable to a particular withdrawal depending on the length of time
the purchase payment was held under the Contract and whether withdrawals had
been previously made during that Contract Year.  (See "Charges and Deductions -
Deduction for Surrender Charge" on page    of the Prospectus)  No deductions or
sales loads are assessed upon annuitization under the Contracts.  Realized gains
and losses from the sale of securities and unrealized appreciation and
depreciation of the Money Market Subaccount and the Fund are excluded from the
calculation of yield.

    B.   TOTAL RETURN QUOTATIONS

         The total return quotations for all of the Subaccounts to be set forth
in the Prospectus will be average annual total return quotations for the one,
five, and ten year periods (or, where a Subaccount has been in existence for a
period of less than one, five or ten years, for such lesser period) ended on the
date of the most recent balance sheet of the Variable Account and for the period
from the date monies were first placed into the Subaccounts until the aforesaid
date.  The quotations are computed by finding the average annual compounded
rates of return over the relevant periods that would equate the initial amount
invested to the ending redeemable value, according to the following formula:

                             P(1+T)to the power of n = ERV

         Where:    P = a hypothetical initial payment of $1,000

                   T = average annual total return

                   n = number of years

                   ERV = ending redeemable value of a hypothetical $1,000
                   payment made at the beginning of the particular period at
                   the end of the particular period.

         For the purposes of the total return quotations for all of the 
Subaccounts, the calculations take into effect all fees that are charged to all
Owner accounts.  For any fees that vary with the size of the account, the
account size is assumed to be the respective Subaccount's mean account size. 
The calculations also assume a total withdrawal as of the end of the particular
period.

    No standardized or non-standardized total return quotations have been
provided for the Zero Coupon 2000, Dreyfus Stock Index, Money Market, Growth,
Overseas, Asset Manager, Investment Grade Bond, High Income, Worldwide Balance,
Gold and Natural Resources, Short-Term Retirement, Medium-Term Retirement, or
Long-Term Retirement Portfolios, because, for the fiscal year ending December
31, 1995, such portfolios were not yet in operation.


                                        B - 4

<PAGE>


Annualized total return for certain Subaccounts as of December 31, 1995, were as
follows:  

<TABLE>
<CAPTION>
                                One Year      Three Years      Inception to Date
                                --------      -----------      -----------------
     <S>                        <C>           <C>              <C>
     Conservative Investors     10.05%        N/A              3.21%
     Growth Investors           13.36%        N/A              3.73%
     Growth                     27.91%        N/A              19.96%
     Growth and Income          28.44%        11.93%           10.09%

</TABLE>

*Funds were first invested in the Portfolios as listed below:

     Conservative Investors  August 24, 1994
     Growth Investors        August 16, 1994
     Growth                  August 16, 1994
     Growth and Income       July 8, 1992

    C.   YIELD QUOTATIONS FOR EACH SUBACCOUNT OTHER THAN THE MONEY MARKET
         SUBACCOUNT

    The yield quotations for each Subaccount other than the Money Market
Subaccount will be based on a thirty-day period. The computation is made by
dividing the net investment income per Accumulation Unit earned during the 
period by the Unit Value on the last day of the period, according to the
following formula:  

                     Yield = 2[(a - b + 1)(to the power of 6 - 1]
                                 -----
                                   cd

         Where:         a =  net investment income earned during the period by
                             the corresponding portfolios of the Funds
                             attributable to shares owned by the Subaccount.

                        b =  expenses accrued for the period (net of
                             reimbursements).

                        c =  the average daily number of Accumulation Units
                             outstanding during the period.

                        d =  the maximum offering price per Accumulation Unit
                             on the last day of the period.

    For the purposes of the yield quotations for the Subaccounts, the
calculations take into effect all fees that are charged to all Owner accounts. 
For any fees that vary with the size of the account, the account size is assumed
to be the respective Subaccount's mean account size.  The calculations do not
take into account the Deferred Sales Charge or any transfer charges.

         A Surrender Charge may be assessed at the time of withdrawal in an
amount ranging up to 6% of the requested withdrawal amount, with the specific
percentage applicable to a particular withdrawal depending on the length of time
the purchase payment was held under the Contract, and whether withdrawals had
been previously made during that Contract Year.  (See "Charges and Deductions -
Deduction for Surrender Charge" on page ___ of the Prospectus)  There is
currently a transfer charge of $10 per transfer after a specified number of
transfers in each Contract Year.  (See Transfer of Contract Values" on page 15
of the Prospectus)


                                        B - 5

<PAGE>


    D.   NON - STANDARDIZED PERFORMANCE DATA

         1.   Total Return Quotations

         The total return quotations for all of the Subaccounts to be set forth
in the Prospectus will be average annual total return quotations for the one,
five, and ten year periods (or, where a Subaccount has been in existence for a
period of less than one, five or ten years, for such lesser period) ended on the
date of the most recent balance sheet of the Variable Account and for the period
from the date monies were first placed into the Subaccounts until the aforesaid
date.  The quotations are computed by finding the average annual compounded
rates of return over the relevant periods that would equate the initial amount
invested to the ending redeemable value, according to the following formula:

                                P(1+T)to the power of n = ERV

              Where:    P = a hypothetical initial payment of $1,000

                        T = average annual total return

                        n = number of years

                        ERV = ending redeemable value of a hypothetical $1,000
                        payment made at the beginning of the particular period
                        at the end of the particular period.
 
    For the purposes of the total return quotations, the calculations take into
effect all fees that are charged to all Owner accounts.  For any fees that vary
with the size of the account, the account size is assumed to be the respective 
Subaccount's mean account size.  The calculations do not, however, assume a
total withdrawal as of the end of the particular period and, therefore, no
Surrender Charge is reflected.

    Annualized total return quotations for certain Subaccounts as of December
31, 1995, were as follows:

<TABLE>
<CAPTION>

                          One Year      Three Years       Inception to Date
                          --------      -----------       -----------------
<S>                      <C>           <C>               <C> 
Conservative Investors   15.51%        N/A               11.46%
Growth Investors         18.82%        N/A               11.82%
Growth                   33.37%        N/A               27.65%
Growth and Income        33.90%        13.16%            13.69%

</TABLE>

    2.   Tax Deferred Accumulation

    In reports or other communications to You or in advertising or sales
materials, the Company may also describe the effects of tax-deferred compounding
on the Variable Account's investment returns or upon returns in general.  These
effects may be illustrated in charts or graphs and may include comparisons at
various points in time of returns under the Contract or in general on a tax-
deferred basis with the returns on a taxable basdis.  Different tax rates may be
assumed.

    In general, individuals who own annuity contracts are not taxed on inreases
in the value under the annuity contract until some form of distribution is made
from the contract.  Thus, the annuity contract will benefit from tax deferral
during the accumulation period, which generally will have the effect of
permitting an investment in an annuity contract to grow more rapidly than a
comparable investment under which increases in value are taxed on a current
basis.  The following chart illustrates this benefit by comparing accumulation
under the Contract with accumulations from an investment on 


                                        B - 6

<PAGE>



which gains are taxed on a current basis.  The chart shows accumulations on an
initial investment or Premium payment of $25,000, assuming hypothetical gross
annual return of 0%, 4% and 8%, compounded annually, and a tax rate of 31%.  The
values shown for the taxable investment do not include any deduction for
management fees or other expenses but assume that taxes are deducted annually
from investment returns.  The values shown for the Contract reflect the
deduction of contractual expenses such as the 1.25% mortality and expense risk
charge, the 0.15% Administrative Charge and the $30 Contract Maintenance Charge,
but not the expenses of an underlying investment vehicle, such as the Fund.  In
addition, these values assume that the Owner does not surrender the Contract or
make any withdrawals until the end of the period shown.  The chart assumes a
full withdrawal, at the end of the period shown, of all contract value and the
payment of taxes at the 31% rate on the amount in excess of the Premium payment.

    The rates of return illustrated are hypothetical and are not an estimate or
guaranty of performance.  Actual tax rates may vary for different taxpayers from
that illustrated and withdrawals by Owners who have not reached age 59 1/2 may
be subject to a tax penalty of 10%.



                                    [INSERT CHART]



                                        B - 7

<PAGE>


DELAY OF PAYMENTS

         Any payments due under the Contracts will generally be sent to the
Owner within seven (7) days of a completed request for payment.  However, the
Company has reserved the right to postpone any type of payment from the Variable
Account for any period when:

              (a)  the New York Stock Exchange is closed for other than
                   customary weekends and holidays, or trading on the Exchange
                   is otherwise restricted;

              (b)  an emergency exists as a result of which it is not
                   reasonably practicable to dispose of securities held in the
                   Variable Account or determine their value;

              (c)  an order of the Securities and Exchange Commission permits
                   delay for the protection of security holders; or

              (d)  the check used to pay any Premium has not cleared through
                   the banking system (this may take up to 15 days).

         The applicable rules of the Securities and Exchange Commission shall
govern as to whether the conditions in (a) and (b) exist.


                        METHOD OF DETERMINING CONTRACT VALUES

         The Contract Value will fluctuate in accordance with the investment
results of the underlying Portfolio of the Fund held within the Subaccount.  In
order to determine how these fluctuations affect Contract Values, Accumulation
Units are utilized.  The value of an Accumulation Unit applicable during any
Valuation Period is determined at the end of that period.

         When the first shares of the respective Portfolios of the Funds were
purchased for the Subaccounts, the Accumulation Units for the Subaccounts were
valued at $10.  The value of an Accumulation Unit for a Subaccount on any
Valuation Date thereafter is determined by dividing (a) by (b), where:

         (a)   is equal to:

              (i)  the total value of the net assets attributable to
                   Accumulation Units in the Subaccount, minus

              (ii) the daily charge for assuming the risk of guaranteeing
                   mortality factors and expense charges which is equal on an
                   annual basis to 1.25% multiplied by the daily net asset
                   value of the Subaccount; minus

              (iii)the daily charge for providing certain
                   administrative functions which is equal on an annual basis
                   to 0.15% multiplied by the daily net asset value of the
                   Subaccount; minus or plus


                                        B - 8

<PAGE>


              (iv) a charge or credit for any tax provision established for the
                   Subaccount.  The Company is not currently making any
                   provision for taxes.

         (b)  is the total number of Accumulation Units applicable to that
              Subaccount at the end of the Valuation Period.

         The resulting value of each Subaccount Accumulation Unit is multiplied
by the respective number of Subaccount Accumulation Units for a Contract.  The
Contract Value of the Variable Account is the sum of all Subaccount 
values for the Contract.

         An Accumulation Unit may increase or decrease in value from Valuation
Date to Valuation Date.


                                  ANNUITY PROVISIONS

ANNUITY BENEFITS

         A description of the Annuity Benefits and Annuity Options is provided
in the prospectus

VARIABLE ANNUITY PAYMENT VALUES

         A Variable Annuity is an annuity with payments which (1) are not
predetermined as to dollar amount and (2) will vary in amount with the net
investment results of the applicable Subaccount(s) of the Variable Account.  At
the Annuity Date the Contract Value in each Subaccount will be applied to the
applicable Annuity Tables contained in the Contract.  The Annuity Table used
will depend upon the payment option chosen.  The same Contract Value amount
applied to each payment option may produce a different initial annuity payment. 
If, as of the Annuity Date, the then current annuity rates applicable to  this
class of contracts will provide a larger income than that guaranteed for the
same form of annuity under the Contracts described herein, the larger amount
will be paid.

         The first annuity payment for each Subaccount is determined by
multiplying the amount of the Contract Value allocated to that Subaccount by the
factor shown in the table for the option selected, divided by 1000.

         The dollar amount of Subaccount annuity payments after the first is
determined as follows:

              (a)  The dollar amount of the first annuity payment is divided by
                   the value for the Subaccount Annuity Unit as of the Annuity
                   Date.  This establishes the number of Annuity Units for each
                   monthly payment.  The number of Annuity Units remains fixed
                   during the Annuity payment period, subject to any transfers.

              (b)  The fixed number of Annuity Units is multiplied by the
                   Annuity Unit value for the Valuation Period 14 days prior to
                   the date of payment.

         The total dollar amount of each Variable Annuity payment is the sum of
all Subaccount variable annuity payments less the pro-rata amount of the annual
Administrative Charge.

ANNUITY UNIT


                                        B - 9

<PAGE>


         The value of an Annuity Unit for each Subaccount was arbitrarily set
initially at $10.  This was done when the first Fund shares were purchased.  The
Subaccount Annuity Unit value at the end of any subsequent Valuation Period is
determined by multiplying the Subaccount Annuity Unit value for the immediately
preceding Valuation Period by the quotient of (a) and (b) where:

         (a)  is the net investment factor for the Valuation Period for which
              the Subaccount Annuity Unit value is being determined; and

         (b)  is the assumed investment factor for such Valuation Period.  The
              assumed investment factor adjusts for the interest assumed in
              determining the first variable annuity payment.  Such factor for
              any Valuation Period shall be the accumulated value, at the end
              of such period, of $1.00 deposited at the beginning of such
              period at the assumed investment rate of 5%.

NET INVESTMENT FACTOR

         The net investment factor is used to determine how investment results
of a Fund affect the Subaccount Annuity Unit value from one Valuation Period to
the next.  The net investment factor for each Subaccount for any Valuation
Period is determined by dividing (a) by (b) and subtracting (c) from the result,
where:

         (a)   is equal to:

               (i) the net asset value per share of the relevant Fund held in
                   the Subaccount determined at the end of that Valuation
                   Period; plus

              (ii) the per share amount of any dividend or capital gain
                   distribution made by such Fund held in the Subaccount if the
                   "ex-dividend" date occurs during that same Valuation Period;
                   plus or minus

              (iii)a per share charge or credit, which is determined by the
                   Company, for changes in tax reserves resulting from
                   investment operations of the Subaccount.

         (b)  is equal to:

              (i)  the net asset value per share of the relevant Fund held in
                   the Subaccount determined as of the end of the prior
                   Valuation Period; plus or minus

              (ii) the per share charge or credit for any change in tax
                   reserves for the prior Valuation Period.

         (c)  is equal to:

              (i)  the percentage factor representing the Mortality and Expense
                   Risk Charge, plus 

              (ii) the percentage factor representing the daily Administrative
                   Charge.

The net investment factor may be greater or less than the assumed investment
factor; therefore, the Subaccount Annuity Unit value may increase or decrease
from Valuation Period to Valuation Period.


                                        B - 10

<PAGE>


ADDITIONAL PROVISIONS

         The Company may require proof of the age of the Annuitant before
making any life annuity payment provided for by the Contract.  If the age of the
Annuitant has been misstated the Company will compute the amount payable based
on the correct age.  If annuity payments have begun, any underpayments that may
have been made will be paid in full with the next annuity payment, including
interest at the annual rate of 5%.  Any overpayments, including interest at the
annual rate of 5%, unless repaid to the Company in one sum, will be deducted
from future annuity payments until the Company is repaid in full.

         If a Contract provision requires that a person be alive, the Company
may require due proof that the person is alive before the Company acts under
that provision.

         The Company will give the payee under an annuity payment option a
settlement contract for the payment option.

         You may assign this Contract prior to the Annuity Date.  A written
request, dated and signed by you must be sent to our Administrative Office.  A
duly executed copy of any assignment must be filed with our Administrative
Office.  We are not responsible for the validity of any assignment.


                                 FINANCIAL STATEMENTS

         The financial statements of the Company included herein shall be 
considered only as bearing upon the ability of the Company to meet its 
obligations under the Contracts.
    


                                     B-11


<PAGE>
                     AMERICAN INTERNATIONAL LIFE ASSURANCE
                              COMPANY OF NEW YORK
                         (A WHOLLY-OWNED SUBSIDIARY OF
                      AMERICAN INTERNATIONAL GROUP, INC.)
 
                    REPORT ON AUDITS OF FINANCIAL STATEMENTS
 
              FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
 
                                      F-1
<PAGE>
                 (This page has been left blank intentionally.)
 
                                      F-2
<PAGE>
                       REPORT OF INDEPENDENT ACCOUNTANTS
 
To the Stockholders and Board of Directors
American International Life Assurance Company of New York:
 
    We  have audited the  accompanying balance sheets  of American International
Life Assurance  Company  of New  York  (a wholly-owned  subsidiary  of  American
International  Group, Inc.) as  of December 31,  1995 and 1994,  and the related
statements of income, stockholders' equity and cash flows for each of the  three
years  in the period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express  an
opinion on these financial statements based on our audits.
 
    We  conducted  our audits  in  accordance with  generally  accepted auditing
standards. Those standards require that we plan and perform the audit to  obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also  includes
assessing  the  accounting principles  used  and significant  estimates  made by
management, as well as evaluating the overall financial statement  presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
    In  our opinion, the financial statements  referred to above present fairly,
in all material respects, the financial position of American International  Life
Assurance  Company of New York as of December 31, 1995 and 1994, and the results
of its operations and its cash flows for  each of the three years in the  period
ended  December  31,  1995,  in conformity  with  generally  accepted accounting
principles.
 
    As discussed in Note 1 (h) to the financial statements, the Company  changed
in  1993, its  method of  accounting for  investments in  certain fixed maturity
securities.
 
                                          COOPERS & LYBRAND L.L.P.
 
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 22, 1996
 
                                      F-3
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                                 BALANCE SHEETS
                                 (IN THOUSANDS)
 
                                     ASSETS
 
<TABLE>
<CAPTION>
                                                                                           DECEMBER 31,
                                                                                   ----------------------------
                                                                                       1995           1994
                                                                                   -------------  -------------
<S>                                                                                <C>            <C>
Investments and cash:
  Fixed maturities:
    Bonds available for sale, at market value (cost: 1995-$4,139,170: 1994 --
     $3,807,500).................................................................  $   4,434,329  $   3,700,640
  Equity securities:
    Common stock (cost: 1995-$8,540: 1994 -- $8,382..............................         17,703         17,201
    Non-redeemable preferred stocks (cost: 1995 -- $4,564; 1994 -- $5,027).......          4,570          4,701
Mortgage loans on real estate, net...............................................        448,700        399,695
Real estate, net of accumulated depreciation of $6,009 in 1995; and $4,861 in
 1994............................................................................         33,029         34,155
Policy loans.....................................................................         10,991         10,317
Other invested assets............................................................         69,360         63,941
Short-term investments...........................................................        103,040        130,415
Cash.............................................................................          2,460          5,363
                                                                                   -------------  -------------
      Total investments and cash.................................................      5,124,182      4,366,428
Amounts due from related parties.................................................          1,186          2,304
Investment income due and accrued................................................         74,355         67,623
Premium and insurance balances receivable -- net.................................         13,289         14,536
Reinsurance assets...............................................................         22,552         26,313
Deferred policy acquisition cost.................................................         31,225         29,626
Deferred incomes taxes...........................................................       --               44,926
Separate and variable accounts...................................................         68,151         27,630
Other assets.....................................................................         16,814          1,800
                                                                                   -------------  -------------
      Total assets...............................................................  $   5,351,754  $   4,581,186
                                                                                   -------------  -------------
                                                                                   -------------  -------------
</TABLE>
 
                See accompanying notes to financial statements.
 
                                      F-4
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
                           BALANCE SHEETS (CONTINUED)
                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
 
                                  LIABILITIES
 
<TABLE>
<CAPTION>
                                                                                           DECEMBER 31,
                                                                                   ----------------------------
                                                                                       1995           1994
                                                                                   -------------  -------------
<S>                                                                                <C>            <C>
Policyholders' funds on deposit..................................................  $   3,060,581  $   2,742,412
Future policy benefits...........................................................      1,561,760      1,446,327
Reserve for unearned premiums....................................................         10,808         13,099
Policy and contract claims.......................................................         37,201         37,092
Reserve for commissions, expenses and taxes......................................          4,433          3,077
Insurance balances payable.......................................................          7,771          9,128
Federal income tax payable.......................................................          3,477          1,353
Deferred income taxes............................................................         62,252       --
Amounts due to related parties...................................................          5,260          7,654
Separate and variable accounts...................................................         68,151         27,468
Other liabilities................................................................         23,553         26,640
                                                                                   -------------  -------------
    Total Liabilities............................................................      4,845,247      4,314,250
                                                                                   -------------  -------------
 
Commitments and contingencies (See Note 6)
 
STOCKHOLDERS' EQUITY
Common stock, $200 par value; 16,125 shares authorized, issued and outstanding...          3,225          3,225
Additional paid-in capital.......................................................        197,025        197,025
Unrealized appreciation (depreciation) of investments, net of future policy
 benefits and taxes of $82,352 in 1995 and $(32,471) in 1994;....................        152,941        (60,305)
Retained Earnings................................................................        153,316        126,991
                                                                                   -------------  -------------
      Total stockholders' equity.................................................        506,507        266,936
                                                                                   -------------  -------------
Total liabilities and stockholders' equity.......................................  $   5,351,754  $   4,581,186
                                                                                   -------------  -------------
                                                                                   -------------  -------------
</TABLE>
 
                See accompanying notes to financial statements.
 
                                      F-5
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                              STATEMENTS OF INCOME
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                                   YEARS ENDED DECEMBER 31,
                                                                             -------------------------------------
                                                                                1995         1994         1993
                                                                             -----------  -----------  -----------
<S>                                                                          <C>          <C>          <C>
Revenues:
  Premiums.................................................................  $    84,357  $    71,826  $    76,045
  Net investment income....................................................      386,666      335,823      308,089
  Realized capital gains...................................................        1,436        1,932       18,767
                                                                             -----------  -----------  -----------
    Total revenues.........................................................      472,459      409,581      402,901
                                                                             -----------  -----------  -----------
Benefits and expenses:
  Benefits to policyholders................................................      167,319      163,585      156,707
  Increase in future policy benefits and policyholders' funds on deposit...      209,512      165,291      155,434
  Acquisition and insurance expenses.......................................       54,808       62,759       57,758
                                                                             -----------  -----------  -----------
    Total benefits and expenses............................................      431,639      391,635      369,899
                                                                             -----------  -----------  -----------
Income before income taxes.................................................       40,820       17,946       33,002
                                                                             -----------  -----------  -----------
Income taxes (benefits):
  Current..................................................................       22,142       18,986       19,330
  Deferred.................................................................       (7,647)     (12,152)      (9,007)
                                                                             -----------  -----------  -----------
    Total income taxes.....................................................       14,495        6,834       10,323
                                                                             -----------  -----------  -----------
Net income.................................................................  $    26,325  $    11,112  $    22,679
                                                                             -----------  -----------  -----------
                                                                             -----------  -----------  -----------
</TABLE>
 
                See accompanying notes to financial statements.
 
                                      F-6
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                       STATEMENTS OF STOCKHOLDERS' EQUITY
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                                  YEARS ENDED DECEMBER 31,
                                                                           ---------------------------------------
                                                                               1995          1994         1993
                                                                           ------------  ------------  -----------
<S>                                                                        <C>           <C>           <C>
COMMON STOCK
Balance at beginning of year.............................................  $      3,225  $      3,225  $     3,225
                                                                           ------------  ------------  -----------
Balance at end of year...................................................         3,225         3,225        3,225
                                                                           ------------  ------------  -----------
ADDITIONAL PAID-IN CAPITAL
Balance at beginning of year:............................................       197,025       197,025      119,025
Capital contribution.....................................................       --            --            78,000
                                                                           ------------  ------------  -----------
Balance at end of year...................................................       197,025       197,025      197,025
                                                                           ------------  ------------  -----------
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENTS, NET
Balance at beginning of year.............................................       (60,305)       58,102        1,887
Change during year.......................................................       404,070      (182,164)       6,497
Changes due to deferred income tax benefit (expense) and future policy
 benefits................................................................      (190,824)       63,757       (2,302)
Cumulative effect of accounting change, net of taxes of $28,011..........       --            --            52,020
                                                                           ------------  ------------  -----------
Balance at end of year...................................................       152,941       (60,305)      58,102
                                                                           ------------  ------------  -----------
RETAINED EARNINGS
Balance at beginning of year.............................................       126,991       115,879       93,200
Net income...............................................................        26,325        11,112       22,679
                                                                           ------------  ------------  -----------
Balance at end of year...................................................       153,316       126,991      115,879
                                                                           ------------  ------------  -----------
    Total stockholders' equity...........................................  $    506,507  $    266,936  $   374,231
                                                                           ------------  ------------  -----------
                                                                           ------------  ------------  -----------
</TABLE>
 
                See accompanying notes to financial statements.
 
                                      F-7
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                            STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                                 YEARS ENDED DECEMBER 31,
                                                                         -----------------------------------------
                                                                            1995          1994           1993
                                                                         -----------  ------------  --------------
<S>                                                                      <C>          <C>           <C>
Cash flows from operating activities:
    Net income.........................................................  $    26,325  $     11,112  $       22,679
                                                                         -----------  ------------  --------------
Adjustments to reconcile net income to net cash provided by operating
 activities:
  Non-cash revenues, expenses, gains and losses included in income:
    Change in insurance reserves.......................................       37,251        45,554          44,151
    Change in premiums and insurance balances receivable and payable --
     net...............................................................         (110)         (138)          2,251
    Change in reinsurance assets.......................................        3,761         5,570           5,240
    Change in deferred policy acquisition costs........................       (1,599)         (213)          1,632
    Change in investment income due and accrued........................       (6,732)       (8,153)         (7,937)
    Realized capital gains.............................................       (1,436)       (1,932)        (18,767)
    Change in current and deferred income taxes -- net.................       (5,523)       (6,895)        (21,332)
    Change in reserves for commissions, expenses and taxes.............        1,356           149           1,054
    Change in other assets and liabilities -- net......................      (33,021)        7,526          (1,568)
                                                                         -----------  ------------  --------------
      Total adjustments................................................       (6,053)       41,468           4,724
                                                                         -----------  ------------  --------------
    Net cash provided by operating activities..........................       20,272        52,580          27,403
                                                                         -----------  ------------  --------------
Cash flows from investing activities:
  Cost of fixed maturities, at market sold.............................       65,623        63,695         309,595
  Cost of fixed maturities, at market matured or redeemed..............      247,551       255,229         341,223
  Cost of equity securities sold.......................................        1,310           958           6,738
  Realized capital gains...............................................        3,436         4,715          24,542
  Purchase of fixed maturities.........................................     (627,188)     (837,973)     (1,050,415)
  Purchase of equity securities........................................       (1,005)         (137)         (4,449)
  Mortgage loans granted...............................................     (111,402)      (77,824)        (61,932)
  Repayments of mortgage loans.........................................       60,476         9,621          20,397
  Change in policy loans...............................................         (674)          601             870
  Change in short-term investments.....................................       27,375        (7,485)        (59,065)
  Change in other invested assets......................................       (4,083)       (6,479)         (7,164)
  Other -- net.........................................................       (2,763)       (1,086)        (17,821)
                                                                         -----------  ------------  --------------
    Net cash used in investing activities..............................     (341,344)     (596,165)       (497,481)
                                                                         -----------  ------------  --------------
Cash flows from financing activities:
  Change in policyholders' funds on deposit............................      318,169       542,729         395,889
  Proceeds from capital contribution...................................      --            --               78,000
                                                                         -----------  ------------  --------------
    Net cash provided by financing activities..........................      318,169       542,729         473,889
                                                                         -----------  ------------  --------------
Change in cash.........................................................       (2,903)         (856)          3,811
Cash at beginning of year..............................................        5,363         6,219           2,408
                                                                         -----------  ------------  --------------
Cash at end of year....................................................  $     2,460  $      5,363  $        6,219
                                                                         -----------  ------------  --------------
                                                                         -----------  ------------  --------------
</TABLE>
 
           See accompanying notes to statutory financial statements.
 
                                      F-8
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                         NOTES TO FINANCIAL STATEMENTS
 
1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
    (a)   BASIS OF PRESENTATION:   American International Life Assurance Company
of New York (the Company) is a wholly-owned subsidiary of American International
Group, Inc. (the  Parent). The  financial statements  of the  Company have  been
prepared  on the basis  of generally accepted  accounting principles (GAAP). The
preparation of financial statements in conformity with GAAP requires  management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities  and disclosure of contingent assets  and liabilities at the date of
the financial  statements and  the  reported amounts  of revenues  and  expenses
during  the reporting periods. Actual results could differ from those estimates.
The Company is  licensed to sell  life and  accident & health  insurance in  the
District of Columbia and all states except Arizona, Conneticut and Maryland. The
Company is also licensed in America Samoa, Virgin Islands and Guam.
 
    The  Company  also files  financial statements  prepared in  accordance with
statutory practices prescribed or permitted  by the Insurance Department of  the
State  of New York.  Financial statements prepared  in accordance with generally
accepted accounting principles  differ in  certain respects  from the  practices
prescribed  or permitted by regulatory  authorities. The significant differences
are:  (1)  statutory  financial  statements  do  not  reflect  fixed  maturities
available  for  sale  at market  value;  (2) policy  acquisition  costs, charged
against operations as incurred for  regulatory purposes, have been deferred  and
are  being amortized over the anticipated  life of the contracts; (3) individual
life and  annuity policy  reserves  based on  statutory requirements  have  been
adjusted  based  upon mortality,  lapse and  interest assumptions  applicable to
these coverages, including provisions  for reasonable adverse deviations;  these
assumptions  reflect  the  Company's  experience  and  industry  standards;  (4)
deferred income taxes not recognized for regulatory purposes have been  provided
for  temporary  differences  between the  bases  of assets  and  liabilities for
financial reporting  purposes and  tax purposes;  (5) for  regulatory  purposes,
future  policy benefits,  policyholders' funds  on deposit,  policy and contract
claims and reserve for unearned premiums are presented net of ceded reinsurance;
and (6)  an  asset valuation  reserve  and interest  maintenance  reserve  using
National  Association of Insurance Commissioners (NAIC)  formulas are set up for
regulatory purposes.
 
    (b)  INVESTMENTS:   Fixed maturities available for  sale, where the  company
may  not have  the ability  or positive  intent to  hold these  securities until
maturity, are carried at  market value. Included  in fixed maturities  available
for sale are collateralized mortgage obligations (CMO's). Premiums and discounts
arising  from the purchase  of CMO'S are  treated as yield  adjustments over the
estimated life.  Common  stocks and  preferred  stocks available  for  sale  are
carried  at  market value.  Short-term investments  are  carried at  cost, which
approximates market.
 
    Unrealized gains and losses from  investment in equity securities and  fixed
maturities  available for  sale are  reflected in  stockholders' equity,  net of
amounts recorded  as future  policy  benefits and  any related  deferred  income
taxes.
 
    Realized  capital gains  and losses  are determined  principally by specific
identification. Where declines in values  of securities below cost or  amortized
cost  are considered to be other than temporary, a charge is reflected in income
for the difference between cost or  amortized cost and estimated net  realizable
value.
 
    Mortgage  loans on real estate are  carried at unpaid principal balance less
unamortized loan origination fees and costs less an allowance for  uncollectible
loans.
 
    Real  estate  is  carried  at  depreciated  cost  and  is  depreciated  on a
straight-line basis over  31.5 years. Expenditures  for maintenance and  repairs
are  charged to income as incurred; expenditures for betterments are capitalized
and depreciated over their estimated lives.
 
                                      F-9
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    Policy loans are carried at the aggregate unpaid principal balance.
 
    Other invested  assets consist  primarily of  limited partnership  interests
which  are  carried  at  market  value. Unrealized  gains  and  losses  from the
revaluation of these investments are  reflected in stockholders' equity, net  of
any  related  taxes. Also  included in  this  category is  an interest  rate cap
agreement, which is carried at its amortized cost. The cost of the cap is  being
amortized  against investment income on  a straight line basis  over the life of
the cap.
 
    (c)  INCOME TAXES:  The Company  joins in a consolidated federal income  tax
return with the Parent and its domestic subsidiaries. The Company and the Parent
have  a written tax allocation agreement whereby the Parent agrees not to charge
the Company a greater portion of the consolidated tax liability than would  have
been  paid by the Company  if it had filed  a separate return. Additionally, the
Parent agrees to reimburse the Company for  any tax benefits arising out of  its
net  losses within ninety days after the  filing of that consolidated tax return
for the year in which these  losses are utilized. Deferred federal income  taxes
are  provided  for  temporary differences  related  to the  expected  future tax
consequences of  events that  have been  recognized in  the Company's  financial
statements or tax returns.
 
    (d)   PREMIUM  RECOGNITION AND RELATED  BENEFITS AND EXPENSES:   Premiums on
traditional life insurance and life contingent annuity contracts are  recognized
when  due. Revenues for  universal life and  investment-type products consist of
policy charges for the cost of insurance, administration, and surrenders  during
the  period. Premiums  on accident and  health insurance are  reported as earned
over the contract term. The portion of accident and health premiums which is not
earned at  the end  of a  reporting  period is  recorded as  unearned  premiums.
Estimates of premiums due but not yet collected are accrued. Policy benefits and
expenses   are  associated  with  earned  premiums  on  long-duration  contracts
resulting in a  level recognition of  profits over the  anticipated life of  the
contracts.
 
    Policy  acquisition  costs  for  traditional  life  insurance  products  are
generally deferred and amortized over the  premium paying period of the  policy.
Deferred  policy  acquisition  costs  and  policy  initiation  costs  related to
universal life  and  investment-type  products  are  amortized  in  relation  to
expected gross profits over the life of the policies (see Note 3).
 
    The  liability  for  future  policy  benefits  and  policyholders'  contract
deposits is established using assumptions described in Note 4.
 
    (e)  POLICY AND CONTRACT CLAIMS:  Policy and contract claims include amounts
representing: (1) the actual  in-force amounts for reported  life claims and  an
estimate  of incurred  but unreported  claims; and  (2) an  estimate, based upon
prior experience, for accident and  health reported and incurred but  unreported
losses.  The methods  of making  such estimates  and establishing  the resulting
reserves are  continually reviewed  and updated  and any  adjustments  resulting
therefrom are reflected in income currently.
 
    (f)   SEPARATE  AND VARIABLE ACCOUNTS:   These accounts  represent funds for
which investment income and investment gains  and losses accrue directly to  the
policyholders.  Each account has specific  investment objectives, and the assets
are carried at  market value. These  assets are legally  segregated and are  not
subject to claims which arise out of any other business of the Company.
 
    (g)   REINSURANCE ASSETS:  Reinsurance  assets include the balances due from
both reinsurance  and  insurance companies  under  the terms  of  the  Company's
reinsurance arrangements for ceded unearned premiums, future policy benefits for
life  and  accident  and  health insurance  contracts,  policyholders'  funds on
deposit and  policy and  contract  claims. It  also  includes funds  held  under
reinsurance treaties.
 
                                      F-10
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    (h)    ACCOUNTING  STANDARDS:    In  March  1995,  the  Financial Accounting
Standards Board (FASB)  issued Statement of  Financial Accounting Standards  No.
121  "Accounting  for the  Impairment of  Long-lived  Assets and  for Long-lived
Assets to Be Disposed  Of" (FASB 121). This  statement requires that  long-lived
assets  and certain identifiable intangibles be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable and an impairment loss must be recognized.
 
    FASB 121  is effective  for  the Company  commencing  January 1,  1996.  The
Company  believes  that the  adoption of  this  statement in  1996 will  have an
immaterial  impact  on  the  results  of  operations,  financial  condition  and
liquidity.
 
    In December 1995, FASB issued "Special Report, a Guide to the Implementation
of  Statement No. 115 on  Accounting for Certain Investments  in Debt and Equity
Securities". Among other things, this guide provided for a transition  provision
permitting  a one-time  transfer of  debt securities  from the  held to maturity
classification to the  available for  sale classification. The  Company did  not
transfer  any securities from  the held to  maturity classification to available
for sale classification.
 
    In 1994,  the American  Institute of  Certified Public  Accountants  (AICPA)
issued  a Statement  of Position (SOP)  94-6 "Disclosure  of Certain Significant
Risks and Uncertainties" (SOP 94-6). Pursuant to SOP 94-6, the Company has  made
certain  disclosures as to the nature of the Company's operations and the use of
estimates in the  preparation of  its 1995 financial  statements. Certain  other
disclosures  were  not  necessary  as  the Company  did  not  meet  the required
criteria.
 
    In November of 1992, FASB issued Statement of Financial Accounting Standards
No. 112 "Employers' Accounting for Postemployment Benefits" (FASB 112). FASB 112
established accounting standards for employers who provide benefits to former or
inactive employees after employment but before retirement. FASB 112 was  adopted
effective  January  1, 1994,  and  had no  significant  effect on  the Company's
results of operations, financial condition or liquidity.
 
    In October 1994, FASB issued Statement of Financial Accounting Standards No.
118 "Accounting by  Creditors for  Impairment of a  Loan-Income Recognition  and
Disclosures"  (FASB 118). FASB  118 amends FASB  114 to allow  a creditor to use
existing methods to recognize interest income on an impaired loan. FASB 118 also
amends certain disclosure requirements of FASB 114. The Company adopted FASB 114
and FASB 118 effective December 31,  1994. The adoption of these statements  did
not  cause  any  significant  impact on  the  Company's  results  of operations,
financial condition or liquidity.
 
    In October 1994, FASB issued  Statement of Financial Accounting Standard  No
119  "Disclosure  about  Derivative  Financial  Instruments  and  Fair  Value of
Financial Instruments" (FASB 119). FASB 119 requires disclosure about derivative
financial instruments  and  amends FASB  105  "Disclosure of  Information  about
Financial Instruments with Off-Balance Sheet Risk and Financial Instruments with
Concentrations  of Credit Risk" (FASB 105) and Statement of Financial Accounting
Standards No. 107 "Disclosure about Fair Value of Financial Instruments".
 
    FASB 119  requires  disclosure  about  the  amounts,  nature  and  terms  of
derivatives that are not subject to FASB 105. Also, FASB 119 requires disclosure
about  financial instruments  held or issued  for trading  purposes and purposes
other than trading. This statement was adopted by the Company effective December
31, 1994.
 
    In May  1993, the  FASB issued  Statement of  Accounting Standards  No.  115
"Accounting  for Certain Investments  on Debt and  Equity Securities" (FASB 115)
and the Company adopted this standard at December 31, 1993. The pretax  increase
in carrying value of fixed maturities available for
 
                                      F-11
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
sale  as a result of marking to  market was $242,000,000. A portion was recorded
as a component of future policy  benefits. Thus, the unrealized appreciation  of
investments increased $52,020,000, net of taxes of $28,011,000.
 
    (i)  Certain amounts  in the  1994 balance  sheet have  been reclassified to
conform to the 1995 presentation.
 
2.  INVESTMENT INFORMATION
 
    (a)  STATUTORY DEPOSITS:  Securities with a carrying value of $9,381,000 and
$8,289,000 were  deposited  by  the Company  under  requirements  of  regulatory
authorities as of December 31, 1995 and 1994, respectively.
 
    (b)   NET  INVESTMENT INCOME:   An analysis  of net investment  income is as
follows (in thousands):
 
<TABLE>
<CAPTION>
                                                               YEARS ENDED DECEMBER 31,
                                                         -------------------------------------
                                                            1995         1994         1993
                                                         -----------  -----------  -----------
<S>                                                      <C>          <C>          <C>
Fixed maturities.......................................  $   334,828  $   289,374  $   271,962
Equity securities......................................        1,006        1,156        1,190
Mortgage loans.........................................       40,383       33,251       29,163
Real estate............................................        3,446        3,771        3,305
Policy loans...........................................          733          764          846
Cash and short-term investments........................        4,124        6,839        3,593
Other invested assets..................................        6,381        4,465        1,661
                                                         -----------  -----------  -----------
    Total investment income............................      390,901      339,620      311,720
Investment expenses....................................        4,235        3,797        3,631
                                                         -----------  -----------  -----------
    Net investment income..............................  $   386,666  $   335,823  $   308,089
                                                         -----------  -----------  -----------
                                                         -----------  -----------  -----------
</TABLE>
 
    (c)  INVESTMENT GAINS AND LOSSES:   The net realized capital gains  (losses)
and  change in unrealized  appreciation (depreciation) of  investments for 1995,
1994 and 1993 are summarized below (in thousands):
 
<TABLE>
<CAPTION>
                                                               YEARS ENDED DECEMBER 31,
                                                         ------------------------------------
                                                            1995          1994        1993
                                                         -----------  ------------  ---------
<S>                                                      <C>          <C>           <C>
Net realized gains (losses) on investments:
  Fixed maturities.....................................  $      (115) $        (75) $  20,106
  Equity securities....................................        3,515         2,046     (2,415)
  Mortgage loans.......................................       (2,000)       (2,783)    (5,775)
  Other invested assets................................           36         2,744      6,851
                                                         -----------  ------------  ---------
  Net realized gains...................................  $     1,436  $      1,932  $  18,767
                                                         -----------  ------------  ---------
                                                         -----------  ------------  ---------
Change in unrealized appreciation (depreciation) of
 investments:
  Fixed maturities.....................................  $   402,020  $   (186,892) $  --
  Equity securities....................................          677          (853)     6,499
  Other invested assets................................        1,373         5,581         (2)
  Cumulative effect of accounting change...............      --            --          80,031
                                                         -----------  ------------  ---------
  Change in unrealized appreciation (depreciation) of
   investments.........................................  $   404,070  $   (182,164) $  86,528
                                                         -----------  ------------  ---------
                                                         -----------  ------------  ---------
</TABLE>
 
                                      F-12
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
2.  INVESTMENT INFORMATION (CONTINUED)
    Proceeds from the sale of investments in fixed maturities during 1995,  1994
and 1993 were $80,003,000, $79,504,000 and $59,251,000, respectively.
 
    During  1995,  1994  and  1993,  gross  gains  of  $624,000,  $4,861,000 and
$30,195,000,  respectively,  and  gross  losses  of  $739,000,  $4,936,000   and
$10,089,000, respectively, were realized on dispositions of fixed maturities.
 
    During  1995,  1994  and 1993,  gross  gains of  $3,516,000,  $2,047,000 and
$516,000, respectively,  and  gross losses  of  $1,000, $1,000  and  $2,931,000,
respectively, were realized on dispositions of equity securities.
 
    (d)    MARKET  VALUE  OF FIXED  MATURITIES  AND  UNREALIZED  APPRECIATION OF
INVESTMENTS:   At  December  31,  1995  and  1994,  unrealized  appreciation  of
investments  in equity securities (before applicable taxes) included gross gains
of $9,650,000  and  $9,341,000  and  gross  losses  of  $480,000  and  $848,000,
respectively.
 
    The  amortized  cost and  estimated market  values  of investments  in fixed
maturities at December 31, 1995 and 1994 are as follows (in thousands):
<TABLE>
<CAPTION>
                                                                             GROSS        GROSS
                                                             AMORTIZED    UNREALIZED   UNREALIZED
1995                                                           COST          GAINS       LOSSES     MARKET VALUE
- ---------------------------------------------------------  -------------  -----------  -----------  -------------
<S>                                                        <C>            <C>          <C>          <C>
Fixed maturities:
  U.S. Government and government agencies and
   authorities...........................................  $      84,063  $    19,982  $        39  $     104,006
  States, municipalities and political subdivisions......        883,646       56,568           89        940,125
  Foreign governments....................................         33,927        5,291           75         39,143
  All other corporate....................................      3,137,534      224,452       10,931      3,351,055
                                                           -------------  -----------  -----------  -------------
    Total fixed maturities...............................  $   4,139,170  $   306,293  $    11,134  $   4,434,329
                                                           -------------  -----------  -----------  -------------
                                                           -------------  -----------  -----------  -------------
 
<CAPTION>
 
                                                                             GROSS        GROSS
                                                             AMORTIZED    UNREALIZED   UNREALIZED
1994                                                           COST          GAINS       LOSSES     MARKET VALUE
- ---------------------------------------------------------  -------------  -----------  -----------  -------------
<S>                                                        <C>            <C>          <C>          <C>
Fixed maturities:
  U.S. Government and government agencies and
   authorities...........................................  $      89,861  $     4,381  $     3,235  $      91,007
  States, municipalities and political subdivisions......        819,297        7,687       46,602        780,382
  Foreign governments....................................         34,230        1,481        2,310         33,401
  All other corporate....................................      2,886,112       36,160      104,422      2,795,850
                                                           -------------  -----------  -----------  -------------
    Total fixed maturities...............................  $   3,807,500  $    49,709  $   156,569  $   3,700,640
                                                           -------------  -----------  -----------  -------------
                                                           -------------  -----------  -----------  -------------
</TABLE>
 
                                      F-13
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
2.  INVESTMENT INFORMATION (CONTINUED)
    The amortized cost and estimated market value of fixed maturities  available
for  sale at  December 31,  1995, by contractual  maturity, are  shown below (in
thousands). Actual maturities could  differ from contractual maturities  because
certain  borrowers have the right to call  or prepay obligations with or without
call or prepayment penalties.
 
<TABLE>
<CAPTION>
                                                                 AMORTIZED      ESTIMATED
                                                                   COST       MARKET VALUE
                                                               -------------  -------------
<S>                                                            <C>            <C>
Due in one year or less......................................  $     310,922  $     326,318
Due after one year through five years........................      1,110,307      1,172,894
Due after five years through ten years.......................      1,632,691      1,759,253
Due after ten years..........................................      1,085,250      1,175,864
                                                               -------------  -------------
                                                               $   4,139,170  $   4,434,329
                                                               -------------  -------------
                                                               -------------  -------------
</TABLE>
 
    (e)   CMO'S:   CMOs are  U.S. Government  and Government  agency backed  and
triple  A-rated securities. In the preceding  table, CMO's are included in other
corporate fixed maturities. At December 31,  1995 and 1994, the market value  of
the  CMO  portfolio  was  $1,114,196,000  and  $967,179,000,  respectively;  the
estimated  amortized  cost   was  approximately  $1,049,450,000   in  1995   and
$989,346,000  in 1994. The Company's CMO  portfolio is readily marketable. There
were no derivative  (high risk)  CMO securities  contained in  the portfolio  at
December 31, 1995.
 
    (f)   FIXED  MATURITIES BELOW  INVESTMENT GRADE:   At December  31, 1995 and
1994, the fixed maturities held by the Company that were below investment  grade
had  an aggregate amortized cost of $204,254,000 and $205,986,000, respectively,
and an aggregate market value of $206,442,000 and $195,443,000, respectively.
 
    (g)    NON-INCOME  PRODUCING  ASSETS:    Non-income  producing  assets  were
insignificant.
 
    (h)   INVESTMENTS GREATER THAN 10% EQUITY:   The market value of investments
in the following companies and institutions exceeded 10% of the Company's  total
stockholders' equity at December 31, 1995 (in thousands):
 
<TABLE>
<S>                                                        <C>
Fixed Maturities:
  Standard Credit Card...................................  $ 113,683
  Morgan Stanley Mortgage Trust..........................  $  80,482
  General Motors Acceptance Corporation..................  $  71,742
  Transamerica Finance...................................  $  57,329
</TABLE>
 
3.  DEFERRED POLICY ACQUISITION COSTS
    The  following reflects the policy  acquisition costs deferred (commissions,
direct solicitation  and other  costs) which  will be  amortized against  future
income and the related current amortization charged to income, excluding certain
amounts deferred and amortized in the same period (in thousands):
 
<TABLE>
<CAPTION>
                                                                YEARS ENDED DECEMBER 31,
                                                             -------------------------------
                                                               1995       1994       1993
                                                             ---------  ---------  ---------
<S>                                                          <C>        <C>        <C>
Balance at beginning of year...............................  $  29,626  $  29,413  $  31,045
Acquisition costs deferred.................................      5,933      3,286      2,157
Amortization charged to income.............................     (4,334)    (3,073)    (3,789)
                                                             ---------  ---------  ---------
Balance at end of year.....................................  $  31,225  $  29,626  $  29,413
                                                             ---------  ---------  ---------
                                                             ---------  ---------  ---------
</TABLE>
 
                                      F-14
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
4.  FUTURE POLICY BENEFITS AND POLICYHOLDERS' FUNDS ON DEPOSIT
 
    (a)  The analysis of the future  policy benefits and policyholders' funds on
deposit liabilities as at December 31, 1995 and 1994 follows (in thousands):
 
<TABLE>
<CAPTION>
                                                                   1995           1994
                                                               -------------  -------------
<S>                                                            <C>            <C>
Future policy benefits:
  Long duration contracts....................................  $   1,549,758  $   1,436,875
                                                               -------------  -------------
  Short duration contracts...................................         12,002          9,452
                                                               -------------  -------------
                                                               $   1,561,760  $   1,446,327
                                                               -------------  -------------
                                                               -------------  -------------
Policyholder funds on deposit:
  Annuities..................................................  $   2,131,609  $   1,974,234
  Guaranteed investment contracts (GICs).....................        739,947        667,968
  Universal life.............................................         84,741         94,998
  Other investment contracts.................................        104,284          5,212
                                                               -------------  -------------
                                                               $   3,060,581  $   2,742,412
                                                               -------------  -------------
                                                               -------------  -------------
</TABLE>
 
    (b) Long duration contract liabilities  included in future policy  benefits,
as  presented in the  table above, result from  traditional life products. Short
duration contract liabilities  are primarily accident  and health products.  The
liability  for  future  policy  benefits has  been  established  based  upon the
following assumptions:
 
        (i) Interest  rates  for traditional  life  insurance products  are  9.5
    percent graded to 7.0 percent over 30 years. The liability for future policy
    benefits for universal life insurance has been established using FASB 97 and
    assumes  a  1.0  percent  investment margin.  Interest  rates  (exclusive of
    immediate/terminal funding annuities),  which vary by  year of issuance  and
    products,  range  from  3.0  percent  to  10.0  percent.  Interest  rates on
    immediate/terminal funding annuities are  at a maximum  of 12.2 percent  and
    grade to not greater than 7.5 percent.
 
        (ii)  Mortality and  withdrawal rates  are based  upon actual experience
    modified to allow for variations in policy form. The weighted average  lapse
    rate, including surrenders, for individual life approximated 14.8 percent.
 
    (c)  The liability for  policyholders' fund on  deposit has been established
based on the following assumptions:
 
        (i) Interest  rates  credited on  deferred  annuities vary  by  year  of
    issuance  and range from 4.0 percent  to 8.3 percent. Credited interest rate
    guarantees are  generally  for a  period  of one  year.  Withdrawal  charges
    generally  range from  6.0 percent  to 10.0 percent  grading to  zero over a
    period of 6 to 10 years.
 
        (ii)  GICs  have  market  value  withdrawal  provisions  for  any  funds
    withdrawn  other than  benefit responsive payments.  Interest rates credited
    generally range from 4.7 percent to 9.1 percent and maturities range from  2
    to 7 years.
 
       (iii)  The  universal  life funds  have  credited interest  rates  of 6.1
    percent to  7.0 percent  and  guarantees ranging  from  4.0 percent  to  5.5
    percent  depending on the year of  issue. Additionally, universal life funds
    are subject to  surrender charges  that amount to  7.5 percent  of the  fund
    balance and grade to zero over a period not longer than 20 years.
 
                                      F-15
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
5.  INCOME TAXES
 
    (a)  The Federal income  tax rate applicable  to ordinary income  is 35% for
1995, 1994 and 1993. Actual tax  expense on income from operations differs  from
the  "expected" amount computed by applying  the Federal income tax rate because
of the following (in thousands except percentages):
 
<TABLE>
<CAPTION>
                                                              YEARS ENDED DECEMBER 31,
                                     --------------------------------------------------------------------------
                                               1995                      1994                     1993
                                     ------------------------  ------------------------  ----------------------
                                                 PERCENT OF                PERCENT OF               PERCENT OF
                                                   PRE-TAX                   PRE-TAX                  PRE-TAX
                                                  OPERATING                 OPERATING                OPERATING
                                      AMOUNT       INCOME       AMOUNT       INCOME       AMOUNT      INCOME
                                     ---------  -------------  ---------  -------------  ---------  -----------
<S>                                  <C>        <C>            <C>        <C>            <C>        <C>
"Expected" income tax expense......  $  14,288        35.0%    $   6,281        35.0%    $  11,551      135.0%
Prior year federal income tax
 benefit...........................     --           --           --           --           (1,954)      (5.9)
State income tax...................        627         1.5           714         4.0           758        2.3
Other..............................       (420)       (1.0)         (161)       (0.9)          (32)      (0.1)
                                     ---------         ---     ---------         ---     ---------      -----
Actual income tax expense..........  $  14,495        35.5%    $   6,834        38.1%    $  10,323       31.3%
                                     ---------         ---     ---------         ---     ---------      -----
                                     ---------         ---     ---------         ---     ---------      -----
</TABLE>
 
    (b) The components  of the net  deferred tax liability  were as follows  (in
thousands):
 
<TABLE>
<CAPTION>
                                                                     YEARS ENDED DECEMBER
                                                                              31,
                                                                     ---------------------
                                                                       1995        1994
                                                                     ---------  ----------
<S>                                                                  <C>        <C>
Deferred tax assets:
  Adjustments to mortgage loans and investment income..............  $   5,420  $    4,672
  Unrealized depreciation on investments...........................     --          32,471
  Adjustment to life reserves......................................     23,835      13,752
                                                                     ---------  ----------
  Other............................................................      1,571       2,336
                                                                        30,826      53,231
                                                                     ---------  ----------
Deferred tax liabilities:
  Deferred policy acquisition costs................................  $   1,637  $    2,501
  Fixed maturities discount........................................      8,745       5,497
  Unrealized appreciation on investments...........................     82,352      --
  Other............................................................        344         307
                                                                     ---------  ----------
                                                                        93,078       8,305
                                                                     ---------  ----------
Net deferred tax liability (asset).................................  $  62,252  $  (44,926)
                                                                     ---------  ----------
                                                                     ---------  ----------
</TABLE>
 
    (c)  At December 31,  1995, accumulated earnings of  the Company for Federal
income tax purposes include approximately $2,879,000 of "Policyholders' Surplus"
as defined  under  the  Code.  Under provisions  of  the  Code,  "Policyholders'
Surplus"  has not been  currently taxed but  would be taxed  at current rates if
distributed  to  the  Parent.  There  is  no  present  intention  to  make  cash
distributions  from "Policyholders'  Surplus" and accordingly,  no provision has
been made for taxes on this amount.
 
    (d) Income  taxes paid  in 1995,  1994, and  1993 amounted  to  $19,056,000,
$13,537,000, and $23,984,000, respectively.
 
6.  COMMITMENTS AND CONTINGENT LIABILITIES
    The Company, in common with the insurance industry in general, is subject to
litigation, including claims for punitive damages, in the normal course of their
business. The Company does not believe that such litigation will have a material
effect on its operating results and financial condition.
 
                                      F-16
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
7.  FAIR VALUE OF FINANCIAL INSTRUMENTS
 
    (a)  Statement of Financial Accounting  Standards No. 107 "Disclosures about
Fair Value  of Financial  Instruments" (FASB  107) requires  disclosure of  fair
value  information about  financial instruments for  which it  is practicable to
estimate such  fair  value.  These  financial instruments  may  or  may  not  be
recognized in the balance sheet. In the measurement of the fair value of certain
of  the financial instruments, quoted market prices were not available and other
valuation techniques  were  utilized. These  derived  fair value  estimates  are
significantly  affected  by  the  assumptions used.  FASB  107  excludes certain
financial instruments, including those related to insurance contracts.
 
    The following methods and assumptions were used by the Company in estimating
the fair value of the financial instruments presented:
 
        CASH AND SHORT TERM INVESTMENTS:   The carrying amounts reported in  the
    balance sheet for these instruments approximate fair value.
 
        FIXED  MATURITIES:  Fair values for fixed maturity securities carried at
    market value  are generally  based upon  quoted market  prices. For  certain
    fixed  maturities for which  market prices were  not readily available, fair
    values  were  estimated  using  values  obtained  from  independent  pricing
    services.
 
        EQUITY  SECURITIES:  Fair  values for equity  securities were based upon
    quoted market prices.
 
        MORTGAGE AND POLICY LOANS:  Where practical, the fair values of loans on
    real estate were  estimated using  discounted cash  flow calculations  based
    upon the Company's current incremental lending rates for similar type loans.
    The  fair values of policy loans were not calculated as the Company believes
    it would have to expend excessive costs for the benefits derived. Therefore,
    the fair value of policy loans was estimated at carrying value.
 
        INTEREST RATE CAP:  Fair values for the interest rate cap were estimated
    using values obtained from an independent pricing service.
 
        POLICYHOLDERS' FUNDS ON DEPOSIT:   Fair values of policyholder  contract
    deposits  were estimated using discounted  cash flow calculations based upon
    interest rates currently being offered for similar contracts consistent with
    those remaining for the contracts being valued.
 
                                      F-17
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
7.  FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
    (b) The  fair value  and carrying  amounts of  financial instruments  is  as
follows (in thousands):
<TABLE>
<CAPTION>
                                                                                          CARRYING
1995                                                                      FAIR VALUE       AMOUNT
- -----------------------------------------------------------------------  -------------  -------------
<S>                                                                      <C>            <C>
Cash and short-term investments........................................  $     105,500  $     105,500
Fixed maturities.......................................................      4,434,329      4,434,329
Equity securities......................................................         22,273         22,273
Mortgage and policy loans..............................................        489,768        459,691
Interest rate cap......................................................            433            510
                                                                         -------------  -------------
Policyholders' funds on deposit........................................  $   3,125,730  $   3,060,581
                                                                         -------------  -------------
                                                                         -------------  -------------
 
<CAPTION>
 
                                                                                          CARRYING
1994                                                                      FAIR VALUE       AMOUNT
- -----------------------------------------------------------------------  -------------  -------------
<S>                                                                      <C>            <C>
Cash and short-term investments........................................  $     135,778  $     135,778
Fixed maturities.......................................................      3,700,640      3,700,640
Equity securities......................................................         21,902         21,902
Mortgage and policy loans..............................................        414,354        410,012
Interest rate cap......................................................          1,567            736
                                                                         -------------  -------------
Policyholders' funds on deposit........................................  $   2,755,594  $   2,742,412
                                                                         -------------  -------------
                                                                         -------------  -------------
</TABLE>
 
8.  STOCKHOLDERS' EQUITY
 
    (a)  The Company  may not distribute  dividends to the  Parent without prior
approval of  regulatory agencies.  Generally, this  limits the  payment of  such
dividends  to an  amount which,  in the opinion  of the  regulatory agencies, is
warranted by the financial condition of the Company.
 
    (b) The  Company's stockholders'  equity as  determined in  accordance  with
statutory  accounting  practices  was  $257,910,000  at  December  31,  1995 and
$214,273,000 at December 31, 1994. Statutory net income amounted to $49,059,000,
$21,226,000, and $2,298,000 for 1995, 1994 and 1993, respectively.
 
9.  EMPLOYEE BENEFITS
 
    (a)  The  Company   participates  with  its   affiliates  in  a   qualified,
non-contributory,  defined  benefit pension  plan which  is administered  by the
Parent. All qualified employees  who have attained age  21 and completed  twelve
months  of  continuous service  are  eligible to  participate  in this  plan. An
employee with  5  or more  years  of service  is  entitled to  pension  benefits
beginning  at normal retirement age 65. Benefits  are based upon a percentage of
average final compensation multiplied by years of credited service limited to 44
years  of  credited  service.  Prior  to  January  1,  1996  the  average  final
compensation  is subject to certain limitations. Annual funding requirements are
determined based on the "projected unit  credit" cost method which attributes  a
pro  rata portion of the total projected benefit payable at normal retirement to
each year  of  credited service.  Pension  expense for  current  service  costs,
retirement  and termination benefits for the years ended December 31, 1995, 1994
and 1993 were approximately $225,000,  $190,000 and $323,000, respectively.  The
Parent's plans do not separately identify projected benefit obligations and plan
assets  attributable  to employees  of  participating affiliates.  The projected
benefit  obligations  exceeded  the  plan   assets  at  December  31,  1995   by
$59,620,000.
 
    (b) The Parent also sponsors a voluntary savings plan for domestic employees
(a  401(k) plan), which during  the two years ended  December 31, 1994, provided
for salary reduction contributions by
 
                                      F-18
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
9.  EMPLOYEE BENEFITS (CONTINUED)
employees and matching  contributions by the  Parent up to  2 percent of  annual
salary.  Commencing  January  1, 1995,  the  401(k) plan  provided  for matching
contributions by the Parent of up to 6 percent of annual salary depending on the
employee's years of service.
 
    (c) On April 1, 1985, the  Parent terminated and replaced its then  existing
U.S.  pension  plan, a  contributory qualified  defined  benefit plan,  with the
current non-contributory  qualified  defined  benefit plan.  Settlement  of  the
obligations of the prior plan was accomplished through the purchase of annuities
from  the Company  for accrued  benefits as of  the date  of termination. Future
policy benefits reserves in the accompanying balance sheet that relate to  these
annuity  contracts  are  $73,171,000 at  December  31, 1995  and  $70,791,000 at
December 31, 1994.
 
    (d) In addition to the Parent's defined benefit pension plan, the Parent and
its subsidiaries provide a post-retirement benefit program for medical care  and
life  insurance.  Eligibility  in  the various  plans  is  generally  based upon
completion of a specified  period of eligible service  and reaching a  specified
age.
 
    (e)  Employees of the Company participate  in certain stock option and stock
purchase plans of the Parent. In general, under the stock option plans, officers
and other key employees are  granted options to purchase  AIG common stock at  a
price  not less  than fair market  value at the  date of grant.  In general, the
stock purchase plans  provide for  eligible employees to  receive privileges  to
purchase  AIG common stock at a  price equal to 85% of  the fair market value on
the date of grant of the purchase privilege.
 
10. LEASES
 
    (a) The  Company  occupies leased  space  in many  locations  under  various
long-term  leases and has entered into various leases covering the long-term use
of data processing  equipment. At December  31, 1995, the  future minimum  lease
payments under operating leases were as follows:
 
<TABLE>
<CAPTION>
YEAR                                                                        PAYMENT
- -------------------------------------------------------------------------  ---------
<S>                                                                        <C>
1996.....................................................................  $     583
1997.....................................................................        463
1998.....................................................................        368
1999.....................................................................        153
2000.....................................................................         54
Remaining years after 2000...............................................     --
                                                                           ---------
    Total................................................................  $   1,621
                                                                           ---------
                                                                           ---------
</TABLE>
 
    Rent  expense  approximated $661,000,  $801,000 and  $657,000 for  the years
ended December 31, 1995, 1994 and 1993, respectively.
 
    (b) Sublease  Income  --  The  Company  does  not  participate  in  sublease
agreements.
 
11. REINSURANCE
 
    (a)  The  Company reinsures  portions of  its life  and accident  and health
insurance risks with unaffiliated companies. Life insurance risks are  reinsured
primarily  under coinsurance  and yearly  renewable term  treaties. Accident and
health insurance risks are reinsured primarily under coinsurance, excess of loss
and quota share treaties. Amounts recoverable from reinsurers are estimated in a
manner consistent with the assumptions  used for the underlying policy  benefits
and  are presented as a component  of reinsurance assets. A contingent liability
exists with respect to reinsurance ceded to
 
                                      F-19
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
11. REINSURANCE (CONTINUED)
the extent that any  reinsurer is unable to  meet the obligations assumed  under
the  reinsurance agreements. The Company also reinsures portions of its life and
accident and health insurance risks with affiliated companies (see Note 12).
 
    The effect of all reinsurance  contracts, including reinsurance assumed,  is
as follows (in thousands, except percentages):
<TABLE>
<CAPTION>
                                                                                            PERCENTAGE OF
                                                                                               AMOUNT
                                                                                               ASSUMED
DECEMBER 31, 1995                         GROSS         CEDED      ASSUMED        NET          TO NET
- ------------------------------------  -------------  -----------  ---------  -------------  -------------
<S>                                   <C>            <C>          <C>        <C>            <C>
Life Insurance in Force.............  $   4,415,460  $   711,025  $   3,574  $   3,708,009         0.2%
                                      -------------  -----------  ---------  -------------
                                      -------------  -----------  ---------  -------------
  Premiums:
    Life............................         25,939        3,368          6         22,577         0.0%
    Accident and Health.............         22,136        8,034     20,822         34,924        59.6%
    Annuity.........................         27,496          639     --             26,857       --
                                      -------------  -----------  ---------  -------------
                                      -------------  -----------  ---------  -------------
      Total Premiums................  $      75,571  $    12,041  $  20,828  $      84,358        24.7%
                                      -------------  -----------  ---------  -------------
                                      -------------  -----------  ---------  -------------
 
<CAPTION>
 
                                                                                            PERCENTAGE OF
                                                                                               AMOUNT
                                                                                               ASSUMED
DECEMBER 31, 1994                         GROSS         CEDED      ASSUMED        NET          TO NET
- ------------------------------------  -------------  -----------  ---------  -------------  -------------
<S>                                   <C>            <C>          <C>        <C>            <C>
Life Insurance in Force.............  $   4,241,039  $   512,028  $   3,980  $   3,732,991         0.1%
  Premiums:
    Life............................         26,345        3,677         13         22,681         0.1%
    Accident and Health.............         23,622        9,520     20,612         34,714        59.4%
    Annuity.........................         14,892          461     --             14,431       --
                                      -------------  -----------  ---------  -------------
      Total Premiums................  $      64,859  $    13,658  $  20,625  $      71,826        28.7%
                                      -------------  -----------  ---------  -------------
                                      -------------  -----------  ---------  -------------
<CAPTION>
 
                                                                                            PERCENTAGE OF
                                                                                               AMOUNT
                                                                                               ASSUMED
DECEMBER 31, 1993                         GROSS         CEDED      ASSUMED        NET          TO NET
- ------------------------------------  -------------  -----------  ---------  -------------  -------------
<S>                                   <C>            <C>          <C>        <C>            <C>
Life Insurance in Force.............  $   3,726,676  $   667,040  $   4,177  $   3,063,813         0.1%
                                      -------------  -----------  ---------  -------------
                                      -------------  -----------  ---------  -------------
  Premiums:
    Life............................         28,098        3,943        594         24,749         2.4%
    Accident and Health.............         23,625        9,285     18,482         32,822        56.3%
    Annuity.........................         19,679        1,205     --             18,474       --
                                      -------------  -----------  ---------  -------------
      Total Premiums................  $      71,402  $    14,433  $  19,076  $      76,045        25.1%
                                      -------------  -----------  ---------  -------------
                                      -------------  -----------  ---------  -------------
</TABLE>
 
    (b) The maximum amount retained on any one life by the Company is $500,000.
 
    (c)   Reinsurance  recoveries,  which  reduced  death  and  other  benefits,
approximated $7,667,000, $6,720,000 and $8,477,000 respectively, for each of the
years ended December 31, 1995, 1994 and 1993.
 
    The Company's reinsurance  arrangements do  not relieve it  from its  direct
obligation to its insureds.
 
                                      F-20
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
12. TRANSACTIONS WITH RELATED PARTIES
 
    (a)  The  Company  is  party  to  several  reinsurance  agreements  with its
affiliates covering  certain  life  and accident  and  health  insurance  risks.
Premium  income  and commission  ceded to  affiliates  amounted to  $800,000 and
$(3,000), respectively, for the year ended December 31, 1995. Premium income and
commission ceded  for  1994 amounted  to  $574,000 and  $(3,000),  respectively.
Premium  income and commission ceded for 1993 amounted to $849,000 and $(2,000),
respectively.  Premium  income  and  ceding  commission  expense  assumed   from
affiliates  aggregated  $19,679,000  and  $(141,000),  respectively,  for  1995,
compared to $19,331,000 and $98,000, respectively, for 1994, and $17,189,000 and
$5,000, respectively, for 1993.
 
    (b) The Company provides life insurance coverage to employees of the  Parent
and  its domestic subsidiaries in connection  with the Parent's employee benefit
plans. The statement of income includes $4,080,000 in premiums relating to  this
business for 1995, $3,952,000 for 1994, and $3,908,000 for 1993.
 
    (c)  The  Company  is party  to  several  cost sharing  agreements  with its
affiliates. Generally, these agreements provide for the allocation of costs upon
either the specific identification basis or a proportional cost allocation basis
which management believes  to be reasonable.  For the years  ended December  31,
1995,  1994  and 1993,  the Company  was  charged $19,148,000,  $17,401,000, and
$14,907,000, respectively, for expenses attributed  to the Company but  incurred
by  affiliates. During the same period, the Company received reimbursements from
affiliates aggregating $20,920,000,  $19,505,000 and $18,579,000,  respectively,
for costs incurred by the Company but attributable to affiliates.
 
    (d)  The Company received cash surplus  contributions of $78,000,000 in 1993
from AIG, Inc., the  Parent and American Home  Assurance Company, an  affiliated
insurer.
 
    (e)  During 1993, the Company  sold a mortgage loan  to Atlanta 17th Street,
Inc., for the aggregate unpaid principal balance of $17,500,000.
 
    (f) During  1995,  the Company  sold  a mortgage  loan  to AIG  Real  Estate
Investment  and Management Company for the aggregate unpaid principal balance of
$5,000,000.
 
                                      F-21
<PAGE>
   

                 AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY
                                  OF NEW YORK
                                 80 PINE STREET
                            NEW YORK, NEW YORK 10005
                  INDIVIDUAL SINGLE PURCHASE PAYMENT DEFERRED
                           VARIABLE ANNUITY CONTRACTS
                                   ISSUED BY
                               VARIABLE ACCOUNT A
                                      AND
                 AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY
                                  OF NEW YORK
 
    The  Individual Single Purchase Payment  Deferred Variable Annuity Contracts
(the "Contracts")  described  in this  Prospectus  provide for  accumulation  of
Contract  Values and payment  of monthly annuity payments.  The Contracts may be
used by individuals  in retirement plans  which do not  qualify for federal  tax
advantages  ("Non-Qualified Contracts")  or in connection  with retirement plans
which may qualify as Individual  Retirement Annuities ("IRA") under Section  408
of  the Internal Revenue Code of 1986, as amended (the "Code") or Section 403(b)
of the Code ("403(b) Plan"). The  Contracts will not be available in  connection
with  retirement plans designed by American International Life Assurance Company
of New  York  (the "Company")  which  qualify  for the  federal  tax  advantages
available  under Sections 401 & 457 of the Code. Purchasers intending to use the
Contracts in connection with an IRA or  a 403(b) Plan should seek competent  tax
advice.
 
    Purchase  payments  for  the Contracts  will  be allocated  to  a segregated
investment account of  the Company  which account has  been designated  Variable
Account  I (the "Variable  Account"). The assets of  each sub-account within the
Variable Account are invested  in a corresponding portfolio  as selected by  the
Owner  from  the following  17  choices: the  Conservative  Investors Portfolio,
Growth Investors Portfolio, Growth Portfolio, or Growth and Income Portfolio  of
the  ALLIANCE VARIABLE PRODUCTS  SERIES FUND, INC.  ("Alliance Funds"); the High
Income Portfolio, Growth Portfolio, Money Market Portfolio, Overseas  Portfolio,
Asset  Manager Portfolio,  or Investment  Grade Bond  Portfolio of  the FIDELITY
INVESTMENTS VARIABLE  INSURANCE  PRODUCTS  FUNDS ("Fidelity  Funds");  the  Zero
Coupon  Portfolio of the DREYFUS VARIABLE  INVESTMENT FUND ("Dreyfus Fund"); the
Gold and Natural Resources Portfolio, or Worldwide Balanced Portfolio of the VAN
ECK WORLDWIDE INSURANCE TRUST ("Van Eck  Funds"); the DREYFUS STOCK INDEX  FUND;
or  the Short-Term Retirement Portfolio, Medium-Term Retirement Portfolio or the
Long-Term Retirement  Portfolio or  the Long-Term  Retirement Portfolio  of  the
TOMORROW FUNDS RETIREMENT TRUST ("Tomorrow Funds").
 
    This  Prospectus concisely sets forth the information a prospective investor
ought to know before  investing. Additional information  about the Contracts  is
contained  in the "Statement of Additional Information" which is available at no
charge. The  Statement  of  Additional  Information  has  been  filed  with  the
Securities  and Exchange Commission and is hereby incorporated by reference. The
Table of Contents  of the Statement  of Additional Information  can be found  on
page   of this Prospectus. For the Statement of Additional Information dated MAY
1,  1995, call  or write  American International  Life Assurance  Company of New
York; Attention: Variable Products, 80 Pine  Street, New York, New York,  10005,
1-800-340-2765.
 
    INQUIRIES:   Contract  Owner inquiries  can be  made by  calling the service
office at 1-800-255-8402 (in New York, 1-800-544-6511).
 
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.
 
    PLEASE READ  THIS  PROSPECTUS  CAREFULLY  AND  RETAIN  IT  FOR  YOUR  FUTURE
REFERENCE.
 
    THE CONTRACTS OFFERED BY THIS PROSPECTUS ARE NOT AVAILABLE IN ALL STATES.
 
                                                Date of Prospectus:  May 1, 1996

    

<PAGE>
                                 TABLE CONTENTS
 
<TABLE>
<CAPTION>
                                                                                                                PAGE
                                                                                                                -----
<S>                                                                                                          <C>
Definitions................................................................................................           3
Highlights.................................................................................................           4
Summary of Expenses........................................................................................           6
  Calculation of Performance Data..........................................................................           8
The Company................................................................................................           9
The Variable Account.......................................................................................           9
The Funds..................................................................................................          10
  Voting Rights............................................................................................          13
  Substitution of Shares...................................................................................          14
  Allocation of Purchase Payment to Sub-accounts...........................................................          14
  Transfer of Contract Values..............................................................................          14
Charges and Deductions.....................................................................................          15
  Deduction for Premium and Other Taxes....................................................................          15
  Deduction for Mortality and Expense Risk Charge..........................................................          15
  Deduction for Deferred Sales Charge......................................................................          16
  Deduction for Administrative Charge......................................................................          17
  Deduction for Income Taxes...............................................................................          17
  Other Expenses...........................................................................................          17
Administration of the Contracts............................................................................          17
Rights under the Contracts.................................................................................          17
Annuity Period.............................................................................................          18
  Annuity Benefits.........................................................................................          18
  Annuity Date.............................................................................................          18
  Annuity Options..........................................................................................          18
  Annuity Payments.........................................................................................          19
Death Benefit..............................................................................................          19
  Death Benefit............................................................................................          19
  Death of the Contract Owner..............................................................................          20
Purchasing a Contract......................................................................................          20
  Application..............................................................................................          20
  Minimum Purchase Payment.................................................................................          20
  Distributor..............................................................................................          20
Contract Value.............................................................................................          21
Withdrawals................................................................................................          21
  Partial Withdrawal.......................................................................................          21
  Systematic Withdrawal Program............................................................................          21
  Total Withdrawal.........................................................................................          22
  Payment of Withdrawals...................................................................................          22
Taxes......................................................................................................          22
  Introduction.............................................................................................          22
  Company Tax Status.......................................................................................          22
  Taxation of Annuities In General.........................................................................          22
  Diversification Standards................................................................................          25
  Qualified Plans..........................................................................................          25
  Individual Retirement Annuities..........................................................................          26
  403(b) Plans.............................................................................................          26
Appendix -- General Account Option.........................................................................         A-1
Table of Contents of the Statement of Additional Information...............................................         A-3
</TABLE>
 
                                       2
<PAGE>

                                  DEFINITIONS
 
ACCUMULATION PERIOD -- The period prior to the Annuity Date.
 
ACCUMULATION  UNIT -- Accounting unit of  measure used to calculate the Contract
Value prior to the Annuity Date.
 
AGE -- Age means age last birthday.
 
ANNUITANT -- The  person upon  whose continuation  of life  any annuity  payment
involving life contingencies depends. The Annuitant is named in the application.
 
ANNUITY DATE -- The date at which annuity payments are to begin.
 
ANNUITY  UNIT -- Accounting  unit of measure used  to calculate variable annuity
payments.
 
BENEFICIARY -- The person or persons  named in the application who will  receive
any  benefit upon the death  of the Contract Owner  (or Annuitant as applicable)
prior to the Annuity Date.
 
CONTINGENT OWNER --  The Contingent Owner,  if any,  must be the  spouse of  the
Contract Owner as named in the application, unless changed.
 
CONTRACT  ANNIVERSARY -- The  same month and date  as the Date  of Issue in each
subsequent year of the Contract.
 
CONTRACT OWNER -- The  person designated as Contract  Owner in the  application,
unless changed.
 
CONTRACT VALUE -- The value of all amounts accumulated under the Contract.
 
CONTRACT  YEAR -- Any period  of twelve (12) months  commencing with the Date of
Issue and each Contract Anniversary thereafter.
 
DATE OF ISSUE -- The date when the purchase payment was invested.
 
DEFERRED SALES CHARGE --  The sales charge that  may be applied against  amounts
withdrawn  prior to the  Annuity Date if  withdrawal is within  six years of the
Date of Issue.
 
GENERAL ACCOUNT --  All of the  Company's assets  other than the  assets of  the
Variable Account and any other separate accounts of the Company.

   
OFFICE  --  The  Annuity Service  Office  of  the Company:  c/o  Delaware Valley
Financial Services, Inc., 300 Berwyn  Park, P.O. Box 3031, Berwyn,  Pennsylvania
19312-0031.
    
 
VALUATION DATE -- Each day that the New York Stock Exchange is open for trading.
 
VALUATION  PERIOD -- The period commencing as of the close of the New York Stock
Exchange (presently 4 P.M., New York time) on each Valuation Date and ending  as
of  the close of  the New York  Stock Exchange on  the next succeeding Valuation
Date.
 
VARIABLE ACCOUNT --  A separate  investment account of  the Company,  designated
Variable Account A, into which purchase payments will be allocated.
 
                                       3
<PAGE>
                                   HIGHLIGHTS
 
   

    Purchase  payments  for  the Contracts  will  be allocated  to  a segregated
investment account of American International Life Assurance Company of New  York
(the  "Company")  which  account has  been  designated Variable  Account  A (the
"Variable Account"). The Variable Account invests in shares of the Portfolios of
the available Funds.
    
 
    The Contracts provide that in the event that a Contract Owner withdraws  all
or  a portion  of the  Contract Value  within six  Contract Years  there will be
assessed a Deferred Sales Charge. The Deferred Sales Charge is based on a  table
of  charges, of which the  maximum charge is currently  6% of the Contract Value
subject to  a  maximum  of 8.5%  of  the  purchase payment.  (See  "Charges  and
Deductions -- Deduction for Deferred Sales Charge" on page   .)
 
    Any premium or other taxes levied by any governmental entity with respect to
the  Contracts  will be  charged against  the purchase  payment or  the Contract
Value. Premium taxes currently imposed by certain states on the Contracts  range
from  0% to 3.5%. The Company will also deduct from any amount payable under the
Contracts any  income taxes  a governmental  authority requires  the Company  to
withhold  with respect to that amount. (See "Charges and Deductions -- Deduction
for Premium and Other Taxes" on page   .)
 
    The Company deducts from the Contract Value and/or the Variable Account  any
Federal  income taxes resulting from the  operation of the Variable Account. The
Company does not currently anticipate incurring any income taxes. (See  "Charges
and Deductions -- Deduction for Income Taxes" on page   .)

   
 
    The  Company deducts for each Valuation  Period a Mortality and Expense Risk
Charge which is equal on an annual basis to 1.25% of the average daily net asset
value of the  Variable Account. (See  "Charges and Deductions  -- Deduction  for
Mortality and Expense Risk Charge" on page   .)
    
 
    The  Company deducts an annual Administrative Charge, which is currently $30
per year, from the  Contract Value to reimburse  it for administrative  expenses
relating  to maintenance of  the Contract and the  Variable Account. The Company
may increase this charge to an amount not to exceed $100 per year. (See "Charges
and Deductions -- Deduction for Administrative Charge" on page   .)
 
    There are deductions and expenses paid out  of the assets of the Fund  which
are described in the accompanying Prospectus for the Fund.
 
    There  is a 10% tax  penalty applied to the  income portion of any premature
distribution from the Contracts. However, the penalty is not imposed on  amounts
received:  (a) after the taxpayer reaches age 59 1/2; (b) after the death of the
Annuitant (or Contract  Owner, as applicable);  (c) if the  taxpayer is  totally
disabled;  (d) in a series of substantially equal periodic payments made for the
life of the taxpayer or for the joint lives of the taxpayer and his beneficiary;
(e) under an immediate annuity; or (f) which are allocable to purchase  payments
made   prior  to  August   14,  1982.  Withdrawals   are  deemed  to   be  on  a
last-in-first-out basis. (See  "Taxes --  Taxation of Annuities  in General"  on
page   )

   
    The  Contract Owner may return the Contract  within ten (10) days (the "Free
Look Period") after it is received by delivering or mailing it to the  Company's
Office.  If the Contract is  purchased in Kansas or  South Carolina and replaces
any existing life insurance policy or annuity, the Contract Owner will be  given
a  twenty (20) day Free Look Period. The  return of the Contract by mail will be
effective when  the postmark  is affixed  to a  properly addressed  and  postage
prepaid  envelope. The Company  will refund the Contract  Value. However, if the
laws of a state require that the Company refund, during the Free Look Period, an
amount equal to the purchase payment paid less any withdrawals, the Company will
refund such an amount. In the case of Contracts issued in connection with an IRA
the  Company  will  refund  the  greater  of  the  purchase  payment,  less  any
withdrawals, or the Contract Value.

    

 
                                       4
<PAGE>
                                   FEE TABLE
 
OWNER TRANSACTION EXPENSES
 
<TABLE>
<CAPTION>
                                                    ALL
                                                    SUB-ACCOUNTS
                                                    -----
<S>                                                 <C>
Sales Load Imposed on Purchases...................  None
</TABLE>
 
        Surrender Charge (as a percentage of amount surrendered):
 
<TABLE>
<CAPTION>
      SINGLE PREMIUM CONTRACTS             FLEXIBLE PREMIUM CONTRACTS
- ------------------------------------  -------------------------------------
<S>                                   <C>                                    <C>
Contract Year 1                       Premium Year 1                                   6%
Contract Year 2                       Premium Year 2                                   5%
Contract Year 3                       Premium Year 3                                   4%
Contract Year 4                       Premium Year 4                                   3%
Contract Year 5                       Premium Year 5                                   2%
Contract Year 6                       Premium Year 6                                   1%
Contract Year 7 and thereafter        Premium Year 7 and thereafter                  None
 
Sales Loan Imposed on Purchases............................................          None
 
Deferred Sales Load (as a percentage of amount surrendered):
 
Exchange Fee Currently:
  First 12 Per Contract Year...............................................          None
  Thereafter...............................................................     $      10
 
Annual Contract Fee........................................................     $      30
 
Separate Account Expenses
(as a percentage of average account value)
  Mortality and Expense Risk Fees..........................................         1.25%
  Account Fees and Expenses................................................         0.15%
Total Separate Account Annual Expenses.....................................         1.40%
</TABLE>
 
                                       5
<PAGE>
                              SUMMARY OF EXPENSES
   
 
ANNUAL FUND EXPENSES AFTER EXPENSE REIMBURSEMENTS*
 
<TABLE>
<CAPTION>
                                                                                                                 TOTAL
                                                                                                    OTHER      PORTFOLIO
PORTFOLIO                                                                       MANAGEMENT FEE    EXPENSES     EXPENSES
- ------------------------------------------------------------------------------  ---------------  -----------  -----------
<S>                                                                             <C>              <C>          <C>
Alliance Conservative Investors...............................................          0.00          0.95         0.95
Alliance Growth Investors.....................................................          0.00          0.95         0.95
Alliance Growth...............................................................          0.43          0.52         0.95
Alliance Growth and Income....................................................          0.63          0.16         0.79
Fidelity High Income..........................................................          0.60          0.11         0.71
Fidelity Growth...............................................................          0.61          0.09         0.70
Fidelity Money Market.........................................................          0.24          0.09         0.33
Fidelity Overseas.............................................................          0.76          0.15         0.91
Fidelity Asset Manager........................................................          0.71          0.08         0.79
Fidelity Investment Grade Bond................................................          0.45          0.14         0.59
Dreyfus Zero Coupon...........................................................          0.00          0.00         0.00
Van Eck Gold and Natural Resources............................................          0.96          0.00         0.96
Van Eck Worldwide Balanced....................................................          0.00          0.00         0.00
Dreyfus Stock Index...........................................................          0.30          0.10         0.40
Tomorrow Short-Term Retirement................................................          0.00          1.50         1.50
Tomorrow Medium-Term Retirement...............................................          0.00          1.50         1.50
Tomorrow Long-Term Retirement.................................................          0.00          1.50         1.50
</TABLE>
 
EXPENSES ON A HYPOTHETICAL $1,000 POLICY, ASSUMING 5% GROWTH:

<TABLE>
<CAPTION>
                                                                                           IF YOU SURRENDER
                                                                          --------------------------------------------------
PORTFOLIO                                                                   1 YEAR       3 YEARS      5 YEARS     10 YEARS
- ------------------------------------------------------------------------  -----------  -----------  -----------  -----------
<S>                                                                       <C>          <C>          <C>          <C>
Alliance Conservative Investors.........................................          80          114          150          276
Alliance Growth Investors...............................................          80          114          150          276
Alliance Growth.........................................................          80          114          150          276
Alliance Growth and Income..............................................          78          110          142          260
Fidelity High Income....................................................          78          107          137          250
Fidelity Growth.........................................................          77          106          137          249
Fidelity Money Market...................................................          73           94          118          211
Fidelity Overseas.......................................................          80           11          147          271
Fidelity Asset Manager..................................................          78          110          141          258
Fidelity Investment Grade Bond..........................................          77          106          131          238
Dreyfus Zero Coupon.....................................................          71           86          101          175
Van Eck Gold and Natural Resources......................................          80          114          149          276
Van Eck Worldwide Balanced..............................................          71           86          101          175
Dreyfus Stock Index.....................................................          75           98          122          218
Tomorrow Short-Term Retirement..........................................          84          128          176          328
Tomorrow Medium-Term Retirement.........................................          84          128          176          328
Tomorrow Long-Term Retirement...........................................          84          128          176          328
</TABLE>
 
                                       6
<PAGE>
 
<TABLE>
<CAPTION>
                                                                             IF YOU ANNUITIZE OR IF YOU DO NOT SURRENDER
                                                                          --------------------------------------------------
PORTFOLIO                                                                   1 YEAR       3 YEARS      5 YEARS     10 YEARS
- ------------------------------------------------------------------------  -----------  -----------  -----------  -----------
<S>                                                                       <C>          <C>          <C>          <C>
Alliance Conservative Investors.........................................          25           75          129          276
Alliance Growth Investors...............................................          25           75          129          276
Alliance Growth.........................................................          25           75          129          276
Alliance Growth and Income..............................................          23           71          121          260
Fidelity High Income....................................................          22           68          116          250
Fidelity Growth.........................................................          22           67          116          249
Fidelity Money Market...................................................          18           54           97          211
Fidelity Overseas.......................................................          24           74          127          271
Fidelity Asset Manager..................................................          23           71          120          258
Fidelity Investment Grade Bond..........................................          22           67          110          238
Dreyfus Zero Coupon.....................................................          15           46           80          175
Van Eck Gold and Natural Resources......................................          25           75          129          276
Van Eck Worldwide Balanced..............................................          15           46           80          175
Dreyfus Stock Index.....................................................          19           58          101          218
Tomorrow Short-Term Retirement..........................................          30           92          156          328
Tomorrow Medium-Term Retirement.........................................          30           92          156          328
Tomorrow Long-Term Retirement...........................................          30           92          156          328
</TABLE>
    
 
    The  purpose of the table set forth above is to assist the Contract Owner in
understanding the various  costs and expenses  that a Contract  Owner will  bear
directly  or indirectly. The table reflects  expenses of the Variable Account as
well as the Fund.  The Annual Contract  fee for purposes  of the Expense  Table,
above,  was based  upon the assessment  of a $30  charge on a  Contract Value of
$5,000. (See  "Charges  and  Deductions"  on  page     of  this  Prospectus  and
"Management of the Fund" in the Fund Prospectus.)
 
    Any premium or other taxes levied by any governmental entity with respect to
the Contracts will be charged against the purchase payment or the Contract Value
based  on  a percentage  of premiums  paid. Premium  taxes currently  imposed by
certain states on the  Contracts range from  0% to 3.5%  of premiums paid.  (See
"Charges and Deductions -- Deduction for Premium and Other Taxes" on page   .)
 
    "Other  Expenses" are estimated  based upon the  expenses outlined under the
section entitled "Management of the Fund" in the Fund Prospectus.
   

- ------------------------
    *Operating Expenses for the following Portfolios before reimbursement by the
relevant Fund's investment  adviser, for  the period ending  December 31,  1995,
were  as  follows:  Alliance  Conservative  Investors,  4.26%;  Alliance  Growth
Investors, 6.17%; Alliance Growth, 1.27%; Fidelity Growth, 1.13%; Fidelity Asset
Manager, 1.13%; and, Van  Eck Worldwide Balanced, 78.40%;  of the average  daily
net  assets.  Fund  operating  expenses  for  the  following  Portfolios, before
reimbursement by the relevant Fund's investment adviser, are estimated, for  the
period  ending December  31, 1996,  to be  2.51% for  the Short-Term Retirement,
2.70% for  the Medium-Term  Retirement and  3.71% for  the Long-Term  Retirement
Portfolios,  of the  average daily net  assets. Voluntary  reimbursements by the
investment advisers  are not  required to  be continued  indefinitely;  however,
reimbursements are expected to continue in 1996.
    
 
    In  the  event that  a  Contract Owner  withdraws all  or  a portion  of the
Contract Value in excess of the Free Withdrawal Amount for the first  withdrawal
in  a  Contract Year,  or makes  subsequent  withdrawals in  a Contract  Year, a
Deferred Sales Charge may be imposed. The Free Withdrawal Amount is equal to 10%
of the Contract Value at the time of withdrawal. (See "Charges and Deductions --
Deduction for Deferred Sales Charge" on page   .)
 
    THE EXAMPLE SHOULD  NOT BE  CONSIDERED A  REPRESENTATION OF  PAST OR  FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
 
                                       7
<PAGE>
                        CONDENSED FINANCIAL INFORMATION
                           ACCUMULATION UNIT VALUES*
 
   
<TABLE>
<CAPTION>
                                                              1995           1994          1993         1992
                                                          -------------  -------------  -----------  -----------
<S>                                                       <C>            <C>            <C>          <C>
ALLIANCE CONSERVATIVE INVESTORS
  Accumulation Unit Value
    Beginning of Period.................................          10.03           0.00          N/A          N/A
    End of Period.......................................          11.59          10.03          N/A          N/A
  Accum Units o/s @ end of period.......................     164,400.64       6,977.55          N/A          N/A
ALLIANCE GROWTH INVESTORS
  Accumulation Unit Value
    Beginning of Period.................................           9.83           0.00          N/A          N/A
    End of Period.......................................          11.70           9.83          N/A          N/A
  Accum Units o/s @ end of period.......................      62,762.43       3,185.25          N/A          N/A
ALLIANCE GROWTH
  Accumulation Unit Value
    Beginning of Period.................................          10.48          11.13        10.00        10.00
    End of Period.......................................          13.99          10.48        11.13        10.00
  Accum Units o/s @ end of period.......................     777,108.88      56,106.84    35,271.53     2,081.43
ALLIANCE GROWTH & INCOME
  Accumulation Unit Value
    Beginning of Period.................................          11.57          11.73        10.66        10.00
    End of Period.......................................          15.52          11.57        11.76        10.66
  Accum Units o/s @ end of period.......................     502,667.80     179,245.69    37,573.04     7,731.36
</TABLE>
    
 
    Funds were first invested in the Portfolios as listed below:
 
<TABLE>
<S>                                         <C>
Growth and Income Portfolio                   April 17, 1992
Growth Investors Portfolio                   August 16, 1994
Growth (Alliance) Portfolio                  August 16, 1994
Conservative Investors Portfolio             August 24, 1994
</TABLE>
   
 
    No  financial  information  has  been  provided  for  the  Zero  Coupon 2000
Portfolio,  Dreyfus  Stock  Index  Portfolio,  Money  Market  Portfolio,  Growth
(Fidelity)  Portfolio, Overseas  Portfolio, Asset  Manager Portfolio, Investment
Grade Bond Portfolio,  High Income  Portfolio, Worldwide  Balance Portfolio,  or
Gold   and  Natural   Resources  Portfolio,   Short-Term  Retirement  Portfolio,
Medium-Term Retirement Portfolio or Long-Term Retirement Portfolio, because, for
the fiscal year ending December 31, 1995, the Variable Account had not commenced
operations with respect to such Portfolios.
    
 
CALCULATION OF PERFORMANCE DATA
 
    The Company may, from  time to time,  advertise certain performance  related
information concerning one or more of the Sub-accounts, including information as
to  total return and yield. PERFORMANCE INFORMATION ABOUT A SUB-ACCOUNT IS BASED
ON THE SUB-ACCOUNT'S PAST PERFORMANCE ONLY AND IS NOT INTENDED AS AN  INDICATION
OF FUTURE PERFORMANCE.
 
    When   the  Company  advertises  the  average   annual  total  return  of  a
Sub-account, it will usually be calculated  for one, five, and ten year  periods
or,  where a Sub-account has been in existence  for a period less than one, five
or ten years, for such lesser period. Average annual total return is measured by
comparing the value of the investment in  a Sub-account at the beginning of  the
relevant  period  to  the value  of  the investment  at  the end  of  the period
(assuming the deduction of any Deferred  Sales Charge which would be payable  if
the  account were redeemed at the end of the period) and calculating the average
annual compounded  rate  of  return  necessary  to  produce  the  value  of  the
investment  at the  end of  the period.  The Company  may simultaneously present
returns that  do  not assume  a  surrender and,  therefore,  do not  deduct  the
Deferred Sales Charge.
 
                                       8
<PAGE>
    When the Company advertises the yield of a Sub-account it will be calculated
based upon a 30-day period ended on the date of the most recent balance sheet of
the  Company included in its registration  statement. The yield is determined by
dividing the  net investment  income  per Accumulation  Unit earned  during  the
period by the maximum offering price per unit on the last day of the period.
 
    When  the Company advertises the performance of the Money Market Sub-account
it may  advertise in  addition  to the  total return  either  the yield  or  the
effective  yield. The yield of the Money Market Sub-account refers to the income
generated by an investment in that  Sub-account over a 7-day period. The  income
is  then  annualized (i.e.,  the amount  of income  generated by  the investment
during that week is assumed to be generated each week over a 52-week period  and
is  shown as a percentage of the  investment). The effective yield is calculated
similarly but when annualized  the income earned by  an investment in the  Money
Market  Sub-account is  assumed to  be reinvested.  The effective  yield will be
slightly higher than the yield because of the compounding effect of this assumed
reinvestment during a 52-week period.
 
    Total return  at the  Variable  Account level  is  reduced by  all  contract
charges:   sales  charges,   mortality  and   expense  risk   charges,  and  the
administrative charge, and is therefore lower than the total return at the  Fund
level,  which has no comparable charges.  Likewise, yield and effective yield at
the Variable Account level take into account all recurring charges (except sales
charges), and are therefore lower than the yield and effective yield at the Fund
level, which has no comparable charges.
 
    Performance information  for  a Sub-account  may  be compared  to:  (i)  the
Standard  & Poor's 500 Stock Index, Dow Jones Industrial Average, Donoghue Money
Market Institutional Averages, indices  measuring corporate bond and  government
security  prices as prepared  by Shearson Lehman Hutton  and Salomon Brothers or
other indices measuring performance of a  pertinent group of securities so  that
investors  may  compare  a  Sub-account's  results  with  those  of  a  group of
securities widely  regarded by  investors as  representative of  the  securities
markets  in  general; (ii)  other variable  annuity  separate accounts  or other
investment products  tracked  by  Lipper  Analytical  Services,  a  widely  used
independent  research  firm  which  ranks  mutual  funds  and  other  investment
companies by overall performance, investment objectives, and assets, or  tracked
by other ratings services, companies, publications, or persons who rank separate
accounts  or other investment products on overall performance or other criteria;
(iii) the Consumer Price Index (measure  for inflation) to assess the real  rate
of  return from an investment  in the Contract; and  (iv) indices or averages of
alternative financial products available to prospective investors, including the
BANK RATE MONITOR which monitors average returns of various bank instruments.
 
FINANCIAL DATA
   
 
    Financial Statements  of  the Company  may  be  found in  the  Statement  of
Additional  Information. No financial  statements for the  Variable Account have
been provided in  the Statement of  Additional Information, because,  as of  the
date  of this Prospectus, the Subaccounts  had not yet commenced operations with
respect to the underlying Portfolios of the Funds and consequently had no assets
invested in such Portfolios.
    
 
                                  THE COMPANY
 
    American International Life Assurance Company of New York (the "Company") is
a stock life insurance company which was  organized under the laws of the  State
of  New York in  1962. The Company provides  a full range  of life insurance and
annuity plans.  The Company  is a  subsidiary of  American International  Group,
Inc.,  which serves as the holding company  for a number of companies engaged in
the international  insurance  business,  both  life and  general,  in  over  130
countries and jurisdictions around the world.
 
                              THE VARIABLE ACCOUNT
 
    The  Board of Directors of  the Company adopted a  resolution to establish a
segregated asset account  pursuant to New  York insurance law  on June 5,  1986.
This segregated asset account has been
 
                                       9
<PAGE>
designated  Variable Account A (the "Variable  Account"). The Company has caused
the  Variable  Account  to  be  registered  with  the  Securities  and  Exchange
Commission  as  a  unit  investment  trust pursuant  to  the  provisions  of the
Investment Company Act of 1940.
 
    The assets of the Variable Account are the property of the Company. However,
the assets of  the Variable Account,  equal to the  reserves and other  contract
liabilities  with  respect  to the  Variable  Account, are  not  chargeable with
liabilities arising out of any other  business the Company may conduct.  Income,
gains  and  losses,  whether  or  not  realized,  are,  in  accordance  with the
Contracts, credited to or charged against the Variable Account without regard to
other income, gains or losses of the Company. The Company's obligations  arising
under  the  Contracts  are general  corporate  obligations of  the  Company. The
Variable Account may be subject  to liabilities arising from Sub-accounts  whose
assets  are attributable to other variable annuity contracts offered by Variable
Account A which are not described in this Prospectus.
 
    The Variable Account is divided into  Sub-accounts, with the assets of  each
Sub-account invested in one Portfolio of the Fund. The Company may, from time to
time,  add additional portfolios to the  Fund, and, when appropriate, additional
mutual funds to act as the funding vehicles for the Contracts.
 
                                   THE FUNDS
   
 
    Alliance Funds, Fidelity Funds, Dreyfus  Funds, Van Eck Funds, and  Tomorrow
Funds  (collectively,  the  "Funds")  are  each registered  with  the  SEC  as a
diversified open-end  management investment  company under  the 1940  Act.  Each
includes  different series funds or Portfolios ("Portfolios"). The Dreyfus Stock
Index Fund (also  a "Fund"  herein) is an  open-end, non-diversified  management
investment  company, intended to  be a funding vehicle  for separate accounts of
life insurance companies. Shares of the  Funds are sold to separate accounts  of
life insurance companies and may also be sold to qualified plans. The investment
objectives  of each of the Portfolios in  which Subaccounts invest are set forth
below. There is, of course, no assurance that these objectives will be met.  The
Fund prospectuses may include series or Portfolios which are not available under
this Contract.
    
 
ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.
 
    CONSERVATIVE INVESTORS PORTFOLIO
 
    This  Portfolio  seeks  the  highest  total  return  without  undue  risk to
principal by  investing in  a  diversified mix  of  publicly traded  equity  and
fixed-income securities.
 
    GROWTH INVESTORS PORTFOLIO
 
    This Portfolio seeks the highest total return available with reasonable risk
by  investing in  a diversified mix  of publicly traded  equity and fixed-income
securities.
 
    GROWTH PORTFOLIO
 
    This Portfolio seeks the long term growth of capital by investing  primarily
in common stocks and other equity securities.
 
    GROWTH AND INCOME PORTFOLIO
 
    This  Portfolio seeks to balance the objectives of reasonable current income
and  opportunities   for   appreciation   through   investments   primarily   in
dividend-paying common stocks of good quality.
 
    Alliance Variable Products Series Fund, Inc., is managed by Alliance Capital
Management L.P., ("Alliance"). The fund also includes other portfolios which are
not  available  for  use  by the  Separate  Account.  More  detailed information
regarding management of  the funds, investment  objectives, investment  advisory
fees  and other charges, may  be found in the  current Alliance Funds Prospectus
which contains a  discussion of the  risks involved in  investing. The  Alliance
Funds Prospectus is included with this Prospectus.
 
                                       10
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
 
    ZERO COUPON 2000 PORTFOLIO
 
    This  Portfolio  seeks  to  provide  as  high  an  investment  return  as is
consistent with the preservation of capital. This portfolio invests primarily in
debt obligations of the U.S. Treasury that have been stripped of their unmatured
interest coupons, interest coupons that have been stripped from debt obligations
issued by the U.S.  Treasury, receipts and certificates  for such stripped  debt
obligations,  and stripped coupons and zero coupon securities issued by domestic
corporations. This  portfolio's  assets  will  consist  primarily  of  portfolio
securities  which will mature on  or about December 31,  2000, at which time the
portfolio will be liquidated.  Prior to December 31,  2000, you will be  offered
the opportunity to exchange your investment to another Subaccount.
 
DREYFUS STOCK INDEX FUND
 
    This  Fund seeks to provide investment  results that correspond to the price
and yield performance  of publicly  traded common  stocks in  the aggregate,  as
represented  by  the  Standard &  Poor's  500  Composite Stock  Price  Index. In
anticipation of taking a market position, the fund is permitted to purchase  and
sell  stock index futures. The Fund is  neither sponsored by nor affiliated with
Standard & Poor's Corporation.
 
    The Dreyfus Corporation serves as the investment advisor for the Zero Coupon
2000 Portfolio  which  is  the  available  portfolio  of  the  Dreyfus  Variable
Investment Fund. The fund also includes other portfolios which are not available
under  this prospectus as  funding vehicles for the  Contract. Wells Fargo Nikko
Investment Advisers ("WFNIA") serves  as the index fund  manager of the  Dreyfus
Stock  Index Fund. More detailed information  regarding management of the funds,
investment objectives, investment  advisory fees and  other charges assessed  by
the  funds, are contained in the prospectuses of the Dreyfus Variable Investment
Fund and of the Dreyfus  Stock Index Fund, each of  which is included with  this
Prospectus.
 
FIDELITY INVESTMENT VARIABLE INSURANCE PRODUCTS FUNDS
 
    GROWTH PORTFOLIO
 
    This  Portfolio seeks  to aggressively achieve  capital appreciation through
investments primarily in common stock.
 
    HIGH INCOME PORTFOLIO
 
    This Portfolio seeks to obtain a  high level of current income by  investing
primarily  in  high-yielding,  high-risk,  lower-rated,  fixed-income securities
(commonly referred to as "junk bonds"), while also considering the potential for
growth of capital. The potential for high yield is accompanied by a higher risk.
For a more  detailed discussion  of the  investment risks  associated with  such
securities, please refer to the relevant Fund's attached prospectus.
 
    OVERSEAS PORTFOLIO
 
    This  Portfolio  seeks the  long-term  growth of  capital  primarily through
investments in securities of companies and economies outside the United States.
 
    MONEY MARKET PORTFOLIO
 
    This Portfolio seeks  to obtain  as high  a level  of current  income as  is
consistent with preserving capital and providing liquidity. The fund will invest
only in high quality U.S. dollar-denominated money market securities of domestic
and  foreign issuers. An investment in Money Market Portfolio is neither insured
nor guaranteed by the U.S.  government, and there can  be no assurance that  the
fund will maintain a stable $1.00 share price.
 
    ASSET MANAGER PORTFOLIO
 
    This  Portfolio seeks to provide a high  total return with reduced risk over
the long term by allocating its assets among stocks, bonds and short-term income
instruments.
 
                                       11
<PAGE>
    INVESTMENT GRADE BOND PORTFOLIO
 
    This Portfolio seeks as high a level of current income as is consistent with
the preservation of capital  by investing in a  broad range of  investment-grade
fixed-income  securities. The Portfolio will  maintain a dollar-weighted average
portfolio maturity of ten years or less.
 
    Fidelity Management & Research Company ("FMR") is the investment advisor for
the Variable  Insurance Products  Funds.  FMR has  entered into  a  sub-advisory
agreement  with FMR  Texas, Inc.,  on behalf of  the Money  Market Portfolio. On
behalf of the Overseas Portfolio,  FMR has entered into sub-advisory  agreements
with Fidelity Management & Research (U.K.) Inc., (FMR U.K.), Fidelity Management
& Research (Far East) Inc. (FMR Far East), and Fidelity International Investment
Advisors  (FIIA). FMR U.K. and  FMR Far East also  are sub-advisors to the Asset
Manager Portfolio.  Fidelity  Funds  include  other  portfolios  which  are  not
available  under this  prospectus as  funding vehicles  for the  Contracts. More
detailed information regarding management  of the funds, investment  objectives,
investment  advisory fees and other charges  assessed by the Fidelity Funds, are
contained in the prospectuses of the funds, included with this Prospectus.
 
VAN ECK WORLDWIDE INSURANCE TRUST
 
    WORLDWIDE BALANCED FUND
 
    This Portfolio seeks  long term capital  appreciation together with  current
income  by  investing  its  assets  in the  United  States  and  other countries
throughout the  world, and  by allocating  its assets  among equity  securities,
fixed-income securities and short-term instruments.
 
    GOLD AND NATURAL RESOURCES FUND
 
    This  Portfolio seeks long-term capital  appreciation by investing in equity
and debt  securities  of  companies engaged  in  the  exploration,  development,
production  and  distribution  of  gold and  other  natural  resources,  such as
strategic and  other metals,  minerals, forest  products, oil,  natural gas  and
coal. Current income is not an investment objective.
 
    Van  Eck Associates Corporation is the investment advisor and manager of The
Van Eck  Worldwide  Insurance  Trust  ("Van  Eck  Funds").  Van  Eck  Associates
Corporation serves as investment advisor to the Gold and Natural Resources Fund,
and  has entered into  sub-advisory agreements to  provide investment advice for
certain portfolios. Fiduciary International Inc. ("FII") serves as a sub-advisor
to the Worldwide Balanced Fund. Van Eck Funds include other portfolios which are
not available under this prospectus as funding vehicles for the Contracts.  More
detailed  information regarding management of  the funds, investment objectives,
investment advisory fees and  other charges assessed by  the Van Eck Funds,  are
contained in the prospectus for the funds included with this Prospectus.
 
   

TOMORROW FUNDS RETIREMENT TRUST
 
    SHORT-TERM RETIREMENT FUND
 
    This  portfolio seeks to  satisfy the retirement goals  of investors who are
currently between 51  and 65 years  of age  and with an  average remaining  life
expectancy in the range of 20-30 years.
 
    MEDIUM-TERM RETIREMENT FUND
 
    This  portfolio seeks to  satisfy the retirement goals  of investors who are
currently between 36  and 50 years  of age  and with an  average remaining  life
expectancy in the range of 35-50 years.
 
    LONG-TERM RETIREMENT FUND
 
    This  portfolio seeks to  satisfy the retirement goals  of investors who are
currently between 22  and 35 years  of age  and with an  average remaining  life
expectancy in the range of 50 years or more.
 
    Each  Tomorrow Funds  portfolio invests  its assets,  in varying  amonts, in
equity and fixed-income securities of all types. The amount of assets  allocated
to  equity securities  is currently  invested, in  varying amounts,  among large
capitalization stocks, medium capitalization stocks, small capitalization stocks
and,  indirectly  through  other   investment  companies,  foreign   securities.
Typically, the
 
                                       12
<PAGE>
longer  the  average life  expectancy  of the  target  class of  investors  in a
Tomorrow Funds portfolio, the greater the allocation of assets of that portfolio
to securities with higher growth potential and, correspondingly, more risk, such
as small  capitalization  stocks.  Conversely,  the  shorter  the  average  life
expectancy  of the target class of investors  in a Tomorrow Funds portfolio, the
greater the emphasis on current income  and capital preservation of assets  and,
therefore,   the  greater  the  allocation  of   assets  of  that  portfolio  to
fixed-income securities.  Each Tomorrow  Funds portfolio  will be  managed  more
conservatively as the average age of its target class of investors increases.
 
    Weiss, Peck & Greer, L.L.C. is the investment adviser for the Tomorrow Funds
portfolios.  Tomorrow  Funds include  other portfolios  which are  not available
under this  Prospectus as  funding  vehicles for  the Contracts.  More  detailed
information regarding management of the funds, investment objectives, investment
advisory  fees and other charges assesed by the Tomorrow Funds, are contained in
the prospectuses of the Tomorrow Funds, included with this Prospectus.
    

 
THERE IS NO ASSURANCE THAT THE INVESTMENT OBJECTIVE OF THE PORTFOLIOS WILL BE
MET.
 
   

    The shares  of Alliance  Funds, Fidelity  Funds, Dreyfus  Fund, the  Dreyfus
Stock Index Fund, the Tomorrow Funds, and Van Eck Funds are sold not only to the
Variable Account, but may be sold to other separate accounts of the Company that
fund  benefits under variable annuity and  variable life policies. The shares of
the Funds are also sold to separate accounts of other insurance companies. It is
conceivable that in the future it  may become disadvantageous for variable  life
and  variable annuity separate accounts to  invest in the same underlying mutual
fund. Although neither we nor Alliance Funds, Fidelity Funds, Dreyfus Fund,  the
Dreyfus  Stock  Index Fund,  the  Tomorrow Funds,  and  Van Eck  Funds currently
perceive or anticipate any such disadvantage,  the Funds will monitor events  to
determine  whether any material conflict  exists between variable annuity Owners
and variable life Owners.
    

 
    Material conflicts could  result from  such occurrences as:  (1) changes  in
state  insurance laws; (2) changes in federal income tax law; (3) changes in the
investment  management  of   any  Fund;  or   (4)  differences  between   voting
instructions  given by variable annuity Owners  and those given by variable life
Owners. In the  event of a  material irreconcilable conflict,  we will take  the
steps  necessary to protect our variable  annuity and variable life Owners. This
could include discontinuance of investment in a Fund.
 
    Each Fund sells and redeems its shares at Net Asset Value without any  sales
charge.  Any dividends or distributions from security transactions of a Fund are
reinvested at Net Asset  Value in shares of  the same Portfolio; however,  there
are sales and additional charges associated with the purchase of the Contracts.
 
    Further  information about  the Funds and  the managers is  contained in the
accompanying prospectuses,  which  You  should read  in  conjunction  with  this
prospectus.
 
VOTING RIGHTS
 
    The  Fund does not  hold regular meetings of  shareholders. The Directors of
the Fund may  call Special Meetings  of Shareholders for  action by  shareholder
vote as may be required by the Investment Company Act of 1940 or the Articles of
Incorporation  of the  Fund. In accordance  with its view  of present applicable
law, the Company will vote the shares  of the Fund held in the Variable  Account
at  special  meetings  of  the  shareholders  of  the  Fund  in  accordance with
instructions received from persons  having the voting  interest in the  Variable
Account. The Company will vote shares for which it has not received instructions
from Contract Owners and those shares which it owns in the same proportion as it
votes shares for which it has received instructions from Contract Owners.
 
    The  number of shares which a person has  a right to vote will be determined
as of a date to be chosen by the Company not more than sixty (60) days prior  to
the  meeting  of the  Fund.  Voting instructions  will  be solicited  by written
communication at least  fourteen (14)  days prior  to such  meeting. The  person
having  such voting rights will be the Contract Owner before the Annuity Date or
 
                                       13
<PAGE>
the death of the Annuitant (or  Contract Owner, as applicable), and  thereafter,
the  payee entitled to  receive payments under the  Contract. During the Annuity
Period, voting rights attributable to a Contract will generally decrease as  the
Contract Value attributable to an Annuitant decreases.
 
    The  voting rights relate only to  amounts invested in the Variable Account.
There are  no  voting rights  with  respect to  funds  invested in  the  General
Account.
 
    Shares  of the  Fund are  sold only to  separate accounts  of life insurance
companies. The shares  of the  Fund will  be sold  to separate  accounts of  the
Company,  its  affiliate,  AIG  Life  Insurance  Company  and  unaffiliated life
insurance companies  to fund  variable annuity  contracts and/or  variable  life
insurance   policies.  It  is  conceivable  that,  in  the  future,  it  may  be
disadvantageous for  variable  life  insurance separate  accounts  and  variable
annuity separate accounts to invest in the Fund simultaneously. Although neither
the  Company nor the  Fund currently foresees any  such disadvantages, either to
variable life insurance policyowners or to variable annuity Contract Owners, the
Fund's Board of Directors will monitor events in order to identify any  material
irreconcilable  conflicts which may possibly arise and to determine what action,
if any,  should be  taken  in response  thereto.  If a  material  irreconcilable
conflict were to occur, the relevant participating life insurance companies will
under  their agreements governing participation in  the Fund take whatever steps
are necessary,  at their  expense,  to remedy  or eliminate  the  irreconcilable
material  conflict. If  such a  conflict were  to occur,  one or  more insurance
company separate accounts might withdraw its investments in the Fund. This might
force the Fund to sell securities at disadvantageous prices.
 
SUBSTITUTION OF SHARES
 
    If the shares  of the  Fund (or  any Portfolio  within the  Fund) should  no
longer  be  available for  investment  by the  Variable  Account or  if,  in the
judgment of  the  Company,  further  investment in  such  shares  should  become
inappropriate  in  view  of  the  purpose  of  the  Contracts,  the  Company may
substitute shares of another mutual fund (or Portfolio within the Fund) for Fund
shares already purchased or to be  purchased in the future by purchase  payments
under  the Contracts. No  substitution of securities may  take place without any
required prior approval of the Securities and Exchange Commission and under such
requirements as it may impose.
 
ALLOCATION OF PURCHASE PAYMENT TO SUB-ACCOUNTS
 
    The purchase  payment is  allocated to  the Sub-account(s)  selected by  the
Contract  Owner in the application except that in those states which require the
Company to pay a premium tax upon receipt of a purchase payment the Company will
deduct the  premium  tax  prior  to allocating  the  purchase  payment  to  such
Sub-account(s).  The selection  must specify  a percentage  for each Sub-account
that is a whole number, and  must be either 0% or  a number equal to or  greater
than  10%. At the time of the allocation  the purchase payment is divided by the
value of the Accumulation Unit for the particular Sub-account for the  Valuation
Period   during  which  such  allocation  occurs  to  determine  the  number  of
Accumulation Units attributable to the purchase payment.
 
    The purchase payment under an IRA plan will be allocated to the Money Market
Sub-account until the expiration of fifteen (15) days from the day the  Contract
is  mailed from  the Company's office.  Thereafter, the Contract  Value shall be
reallocated in accordance with instructions specified in the application.
 
TRANSFER OF CONTRACT VALUES
 
    Before the Annuity Date, the Contract Owner may transfer, by written request
or telephone  authorization, Contract  Values from  one Sub-account  to  another
Sub-account, subject to the following conditions:
 
(a)  the amount transferred from any Sub-account must be at least $1,000 (or the
    entire Sub-account value, if less);
 
(b) if less than $1,000 would remain in the Sub-account after the transfer,  the
    Company will transfer the entire amount in the Sub-account;
 
                                       14
<PAGE>
(c)  the Company  may reject  any more  than twelve  (12) transfer  requests per
    Contract Year; and
 
(d) the Company will deduct any transfer charge assessed on the transaction. The
    Company is currently not assessing a transfer fee for the first twelve  (12)
    transfers  per Contract Year. The Company is assessing a transfer fee of $10
    per transfer thereafter.  The Company may  increase the transfer  fee to  an
    amount  not to exceed  $30 per transfer.  The transfer fee  will be deducted
    from either the Sub-account which is the source of the transfer or from  the
    amount transferred if the entire value in the Sub-account is transferred.
 
    Transfer by telephone authorization is available to a Contract Owner only by
prior  election. A Contract Owner must complete, sign, and file with the Company
a Telephone Transfer  Authorization Form  for each Contract  owned. The  Company
will  undertake reasonable procedures to  confirm that instructions communicated
by telephone are genuine. All calls will be recorded. All transfers performed by
telephone authorization will be confirmed in writing to the Contract Owner.  The
Company  is not liable  for any loss,  cost, or expense  for action on telephone
instructions  which  are  believed  to  be  genuine  in  accordance  with  these
procedures.
 
    Transfer  privileges are  further explained  in the  Statement of Additional
Information.
 
    After the Annuity Date, the payee  of the annuity payments may transfer  the
Contract Value allocated to the Variable Account from one Sub-account to another
Sub-account. However, the Company reserves the right to refuse any more than one
transfer  per month. The  transfer fee is  the same as  before the Annuity Date.
This transfer  fee will  be deducted  from the  next annuity  payment after  the
transfer.  If following  the transfer,  the units  remaining in  the Sub-account
would generate  a  monthly payment  of  less than  $100,  then the  Company  may
transfer the entire amount in the Sub-account.
 
    Once  the transfer  is effected,  the Company  will recompute  the number of
Annuity Units  for  each Sub-account.  The  number  of Annuity  Units  for  each
Sub-account  will remain the same for the remainder of the payment period unless
the payee requests another change.
 
                             CHARGES AND DEDUCTIONS
 
    Various charges  and  deductions  are  made from  Contract  Values  and  the
Variable Account. These charges and deductions are:
 
DEDUCTION FOR PREMIUM AND OTHER TAXES
 
    Any premium or other taxes levied by any governmental entity with respect to
the Contracts will be charged against the purchase payment or the Contract Value
  .  Premium taxes  currently imposed by  certain states on  the Contracts range
from 0% to 3.5% of premiums paid.  Some states assess premium taxes at the  time
purchase  payments  are  made;  others  assess  premium  taxes  at  the  time of
annuitization. The Company currently intends to advance any premium taxes due at
the time  purchase payments  are made  and then  deduct premium  taxes from  the
Contract  Value at  the time  annuity payments  begin or  upon surrender  if the
Company is unable  to obtain  refund of  or otherwise  obtain a  credit for  any
excess  premium taxes  paid. The  Company reserves  the right  to deduct premium
taxes when incurred. Premium  taxes are subject to  being changed or amended  by
state legislatures, administrative interpretations or judicial acts.
 
    The Company will also deduct from any amount payable under the Contracts any
income  taxes a  governmental authority  requires the  Company to  withhold with
respect to that amount.
 
DEDUCTION FOR MORTALITY AND EXPENSE RISK CHARGE
 
    The Company deducts for each Valuation  Period a Mortality and Expense  Risk
Charge which is equal on an annual basis to 1.25% of the average daily net asset
value  of the Variable  Account (consisting of  approximately .90% for mortality
risks and approximately .35% for expense risks). The mortality risks assumed  by
the Company arise from its contractual obligation to make annuity payments after
the  Annuity Date  for the life  of the  Annuitant, to waive  the Deferred Sales
Charge in
 
                                       15
<PAGE>
the event of the death of the  Annuitant and to provide the death benefit  prior
to  the Annuity Date. The expense risk assumed  by the Company is that the costs
of administering the Contracts and the  Variable Account will exceed the  amount
received from the Administrative Charge.
 
    If the Mortality and Expense Risk Charge is insufficient to cover the actual
costs, the loss will be borne by the Company. Conversely, if the amount deducted
proves more than sufficient, the excess will be profit to the Company.
 
    The  Mortality  and Expense  Risk Charge  is guaranteed  by the  Company and
cannot be increased.
 
    The Mortality and Expense  Risk Charge is  deducted during the  Accumulation
Period and after the Annuity Date.
 
    The  Company currently  offers annuity payment  options that are  based on a
life contingency. (See "Annuity  Period -- Annuity  Options" on page    ) It  is
possible  that in  the future the  Company may offer  additional payment options
which are  not based  on a  life  contingency. If  this should  occur and  if  a
Contract  Owner should elect a  payment option not based  on a life contingency,
the Mortality and Expense Risk Charge  is still deducted but the Contract  Owner
receives no benefit from it.
 
DEDUCTION FOR DEFERRED SALES CHARGE
 
    In  the  event that  a  Contract Owner  withdraws all  or  a portion  of the
Contract Value in excess of the Free Withdrawal Amount for the first  withdrawal
in  a Contract Year other  than by way of  the Systematic Withdrawal Program, or
makes subsequent withdrawals in a Contract Year, a Deferred Sales Charge may  be
imposed. The Free Withdrawal Amount is equal to 10% of the Contract Value at the
time of withdrawal.
 
    The  Deferred  Sales  Charge is  deducted  based  upon a  percentage  of the
Contract Value which includes the purchase payment and earnings. Since  earnings
are  included it is possible that the actual amount of the Deferred Sales Charge
may increase even though the percentage may go down.
 
    The Deferred Sales Charge will vary in amount depending upon the time  which
has  elapsed since the Date of Issue. The amount of any withdrawal which exceeds
the Free Withdrawal Amount will be subject to the following charge:
 
<TABLE>
<CAPTION>
                                                        APPLICABLE DEFERRED
CONTRACT YEAR                                         SALES CHARGE PERCENTAGE
- --------------------------------------------------  ---------------------------
<S>                                                 <C>
1.................................................                  6%
2.................................................                  5%
3.................................................                  4%
4.................................................                  3%
5.................................................                  2%
6.................................................                  1%
7 and thereafter..................................                  0%
</TABLE>
 
    The aggregate Deferred Sales Charges paid  with respect to a Contract  shall
not exceed 8.5% of the purchase payment for such Contract.
 
    The  Deferred Sales Charge is intended to reimburse the Company for expenses
incurred which are related  to Contract sales. The  Company does not expect  the
proceeds  from the Deferred Sales Charge to cover all distribution costs. To the
extent such charge is insufficient to cover all distribution costs, the  Company
may  use any of its corporate assets, including potential profit which may arise
from the Mortality and Expense Risk Charge, to make up any difference.
 
    Certain restrictions  on  surrenders  are imposed  on  Contracts  issued  in
connection  with retirement  plans which  qualify under  Code Section  403(b) (a
"403(b) Plan"). (See "Taxes -- 403(b) Plans" on page   .)
 
                                       16
<PAGE>
DEDUCTION FOR ADMINISTRATIVE CHARGE
 
    The Company deducts an annual Administrative Charge, which is currently  $30
per  year,  from the  Contract Value  to reimburse  it for  the costs  it incurs
relating to maintenance of  the Contract and the  Variable Account. The  Company
may  increase  this  charge  to an  amount  not  to exceed  $100  per  year. The
Administrative Charge is  designed to  reimburse the  Company for  the costs  it
incurs relating to the maintenance of the Contract and the Variable Account.
 
    Prior  to the Annuity  Date, the Administrative Charge  is deducted from the
Contract Value on each Contract Anniversary. If the Annuity Date is a date other
than a Contract Anniversary, the Company will also deduct a pro-rata portion  of
the  Administrative  Charge from  the  Contract Value  for  the fraction  of the
Contract Year preceding the Annuity Date.
 
    This charge is also deducted  in full on the  date of any total  withdrawal.
The charge will be deducted from each Sub-account of the Variable Account in the
proportion that the value of each Sub-account attributable to the Contract bears
to the total Contract Value.
 
    After  the Annuity Date,  this charge is  deducted on a  pro-rata basis from
each annuity payment and is  guaranteed to remain at the  same amount as at  the
Annuity Date.
 
DEDUCTION FOR INCOME TAXES
 
    The  Company deducts from the Contract Value and/or the Variable Account any
Federal income taxes resulting from the  operation of the Variable Account.  The
Company does not currently anticipate incurring any income taxes.
 
OTHER EXPENSES
 
    There  are deductions from and  expenses paid out of  the assets of the Fund
which are described in the accompanying Prospectus for the Fund.
 
                        ADMINISTRATION OF THE CONTRACTS
 
    While the Company has primary  responsibility for all administration of  the
Contracts  and the  Variable Account, it  has retained the  services of Delaware
Valley  Financial  Services,  Inc.   ("DVFS")  pursuant  to  an   administrative
agreement.  Such administrative services  include issuance of  the Contracts and
maintenance of Contract  Owner's records.  DVFS serves as  the administrator  to
various insurance companies offering variable contracts .
 
                           RIGHTS UNDER THE CONTRACTS
 
    The  Contract Owner has  all rights and  may receive all  benefits under the
Contract. The  Contract Owner  is named  in the  application. Ownership  may  be
changed prior to the Annuity Date through the submission of written notification
of  the change to the Company on a  form acceptable to the Company. On and after
the Annuity Date,  the Annuitant and  Contract Owner  shall be one  in the  same
person  unless  otherwise  provided for.  In  the  case of  Contracts  issued in
connection with an IRA, the Contract Owner must be the Annuitant.
 
    The Contract Owner's spouse is the only person eligible to be the Contingent
Owner. (See "Death  Benefit --  Death of Contract  Owner" on  page    ) Any  new
choice of Contingent Owner will automatically revoke any prior choices.
 
    The  Contract  Owner  may,  except  in the  case  of  a  Contract  issued in
connection with either an IRA  or a 403(b) Plan, assign  a Contract at any  time
before  the  Annuity  Date and  while  the Annuitant  is  alive. A  copy  of any
assignment must be filed  with the Company. The  Company is not responsible  for
the  validity of any assignment. If the  Contract is assigned, the rights of the
Contract Owner and  those of any  revocable Beneficiary will  be subject to  the
assignment.  An assignment will not affect any  payments the Company may make or
action it may take before it is recorded. In as much as an assignment or  change
of  ownership may be  a taxable event, Contract  Owners should consult competent
tax advisers should they wish to assign their Contracts.
 
                                       17
<PAGE>
    The Contract may be  modified only with the  consent of the Contract  Owner,
except as may be required by applicable law.
 
                                 ANNUITY PERIOD
 
ANNUITY BENEFITS
 
    If  the Annuitant  and Contract  Owner are  alive on  the Annuity  Date, the
Company will begin making payments to the Annuitant under the annuity option  or
options the Contract Owner has chosen.
 
    The  Contract Owner may choose or change an annuity payment option by making
a written request at least thirty (30) days prior to the Annuity Date.
 
    The amount of the payments will be determined by applying the Contract Value
on the Annuity Date. The amount of  the annuity payments will depend on the  age
or  sex of  the payee  at the  time the  settlement contract  is issued.  At the
Annuity Date  the Contract  Value in  each Sub-account  will be  applied to  the
applicable  annuity  tables  contained  in  the  Contract.  The  amount  of  the
Sub-account annuity payments are determined  through a calculation described  in
the  Section  captioned  "Annuity  Provisions" in  the  Statement  of Additional
Information.
 
ANNUITY DATE
 
    The Annuity Date for the Annuitant is:
 
(a) the first day of the calendar  month following the later of the  Annuitant's
    85th birthday or the 10th Contract Anniversary; or
 
(b) such earlier date as may be set by applicable law.
 
    The  Contract Owner may designate an earlier  date in the application or may
change the Annuity Date by  making a written request  at least thirty (30)  days
prior to the Annuity Date being changed. However, any Annuity Date must be:
 
(a) no later than the date defined in (a) above; and
 
(b) the first day of a calendar month.
 
ANNUITY OPTIONS
 
    The  Contract Owner may choose to  receive annuity payments which are fixed,
or which are based on the Variable Account, or a combination of the two. If  the
Contract  Owner elects annuity payments which are based on the Variable Account,
the amount of the payments will be variable. The Contract Owner may not transfer
Contract Values between the General Account  and the Variable Account after  the
Annuity  Date, but may, subject to  certain conditions, transfer Contract Values
from one Sub-account  to another Sub-account.  (See "Alliance Variable  Products
Series Fund, Inc. -- Transfer of Contract Values" on page   .)
 
    If  the Contract Owner has not made  any annuity payment option selection at
the Annuity Date, the Contract Value will be applied to purchase Option 2  fixed
basis  annuity  payments  and  Option  2  variable  basis  annuity  payments, in
proportion to  the amount  of Contract  Value  in the  General Account  and  the
Variable Account, respectively.
 
    The annuity payment options are:
 
    OPTION  1: LIFE INCOME. The Company will  pay an annuity during the lifetime
of the payee.
 
    OPTION 2: LIFE INCOME WITH 10 YEARS OF PAYMENTS GUARANTEED. The Company will
pay an annuity during the lifetime of the payee. If, at the death of the  payee,
payments have been made for less than 10 years:
 
(a)  payments  will be  continued  during the  remainder  of the  period  to the
    successor payee;
 
                                       18
<PAGE>
(b)  the successor payee may elect to receive in a lump sum the present value of
    the remaining payments,  commuted at the  interest rate used  to create  the
    annuity factor for this Option; or
 
(c) the guaranteed period will not in the case of Contracts issued in connection
    with  an IRA  exceed the life  expectancy of  the Annuitant at  the time the
    first payment is due.
 
    OPTION 3: JOINT AND  LAST SURVIVOR INCOME. The  Company will pay an  annuity
for  as long as either the payee or  a designated second person is alive. In the
event that the Contract  is issued in  connection with an  IRA, the payments  in
this Option will be made only to the Annuitant and the Annuitant's spouse.
 
    The  annuity payment  options are more  fully explained in  the Statement of
Additional Information. The Company may also offer additional options at its own
discretion.
 
ANNUITY PAYMENTS
 
    If the  Contract Value  applied  to annuity  payment  options is  less  than
$2,000,  the Company has the  right to pay the  amount in a lump  sum in lieu of
annuity payments. The Company makes all other annuity payments monthly. However,
if the total monthly annuity payment would be less than $100 the Company has the
right to make payments semi-annually or annually.
 
    If fixed annuity payments are selected, the amount of each fixed payment  is
determined by multiplying the Contract Value allocated to purchase fixed annuity
payments  by the factor shown in the annuity table specified in the Contract for
the option selected, divided by 1,000.
 
    If variable annuity payments are selected, the Annuitant receives the  value
of  a fixed  number of  Annuity Units  each month.  The actual  dollar amount of
variable annuity payments is dependent upon: (i) the Contract Value at the  time
of  annuitization; (ii) the  annuity table specified in  the Contract; (iii) the
Annuity Option  selected; (iv)  the investment  performance of  the  Sub-account
selected; and (v) the pro-rata portion of the Administrative Charge.
 
    The  annuity tables  contained in  the Contract  are based  on a  5% assumed
investment rate. If  the actual net  investment rate exceeds  5%, payments  will
increase.  Conversely, if the actual rate is less than 5%, annuity payments will
decrease.
 
                                 DEATH BENEFIT
 
DEATH BENEFIT
 
    If the Annuitant (or Contract Owner, if applicable) dies before the  Annuity
Date,  the Company will pay a death benefit equal to the greater of the purchase
payment paid less partial withdrawals or the Contract Value.
 
    Before the Company will pay any death benefit, the Company will require  due
proof  of death. The Company will determine the value of the death benefit as of
the Valuation Period following receipt of  due proof of death. The Company  will
pay  the death benefit to the Beneficiary in accordance with any applicable laws
governing the payment of death proceeds.
 
    Payment of the death benefit  may be made in one  lump sum or applied  under
one  of the annuity payment options. (See "Annuity Period -- Annuity Options" on
page   .) The Contract Owner may by written request elect that any death benefit
of at  least $2,000  be received  by the  Beneficiary under  an annuity  payment
option. (See "Annuity Period -- Annuity Options" on page   .) The Contract Owner
may  choose or  change a  payment option  at any  time prior  to the Annuitant's
death. If at the time the Annuitant dies, the Contract Owner has made no request
for a payment option,  the Beneficiary has  sixty (60) days in  which to make  a
written  request  to elect  either a  lump  sum payment  or any  annuity payment
option. Any  lump sum  payment will  be made  within seven  (7) days  after  the
Company  has  received  due proof  of  death  and the  written  election  of the
Beneficiary, unless a delay of payments  provision is in effect. (See  Statement
of Additional Information -- "General Information -- Delay of Payments.")
 
                                       19
<PAGE>
    In  the  event  that the  Annuitant  and  the Contract  Owner  are  the same
individual, the death of that individual will  be treated by the Company as  the
death of the Annuitant.
 
DEATH OF THE CONTRACT OWNER
 
    If  a Contract Owner dies before the Annuity Date, the entire Contract Value
must be distributed within five (5) years of the date of death, unless:
 
(a)  it  is  payable  over  the  lifetime  of  a  designated  Beneficiary   with
    distributions beginning within one (1) year of the date of death; or
 
(b) the Contingent Owner, if any, continues the Contract in his or her own name.
 
    In  the case of Contracts issued in  connection with an IRA, the Beneficiary
or Contingent  Owner may  elect  to accelerate  these  payments. Any  method  of
acceleration chosen must be approved by the Company.
 
    If  the Contract Owner dies after the  Annuity Date, distribution will be as
provided in the annuity payment option selected.
 
                             PURCHASING A CONTRACT
 
APPLICATION
 
    In order to acquire a Contract, an application provided by the Company  must
be  completed and submitted to the Company for acceptance. The Company must also
receive the purchase  payment. Upon acceptance,  the Contract is  issued to  the
Contract Owner and the Purchase Payment is then credited to the Variable Account
and  converted  into  Accumulation  Units,  except  in  those  states  where the
applicable premium tax  is deducted  from the purchase  payment. (See  "Alliance
Variable  Products  Series  Fund,  Inc. --  Allocation  of  Purchase  Payment to
Sub-accounts" on page   .) If the  application for a Contract is in good  order,
the  Company will apply the purchase payment  to the Variable Account and credit
the Contract with Accumulation Units within two (2) business days of receipt. In
addition to the underwriting requirements of the Company, good order means  that
the Company has received federal funds (monies credited to a bank's account with
its  regional Federal Reserve Bank). If the application for a Contract is not in
good order, the Company  will attempt to  get it in good  order within five  (5)
business  days  or the  Company  will return  the  application and  the purchase
payment, unless the prospective purchaser specifically consents to the Company's
retaining them until the application is made complete.
 
   

MINIMUM PURCHASE PAYMENT
 
    The Contracts are offered  on a single purchase  payment basis. The  minimum
purchase payment the Company will accept is $5,000.
    

 
DISTRIBUTOR
 
    AIG  Equity Sales Corp.  ("AESC"), formerly known  as American International
Fund Distributors,  Inc.,  80 Pine  Street,  New York,  New  York, acts  as  the
distributor  of the  Contracts. AESC  is a  wholly-owned subsidiary  of American
International Group, Inc. and an affiliate of the Company.
   
 
    Commissions not to exceed 3.5% of purchase payments will be paid to entities
which sell the Contracts. In  addition, expense reimbursement allowances may  be
paid. Additional payments may be made for other services not directly related to
the sale of the Contracts.
    
 
    Under  the Glass-Steagall Act  and other laws,  certain banking institutions
may be prohibited from distributing variable  annuity contracts. If a bank  were
prohibited  from  performing  certain  agency  or  administrative  services  and
receiving fees from AESC,  Contract Owners who  purchased Contracts through  the
bank  would  be permitted  to  retain their  Contracts  and alternate  means for
servicing those Contract Owners  would be sought. It  is not expected,  however,
that  Contract Owners  would suffer  any loss  of services  or adverse financial
consequences as a result of any of these occurrences.
 
                                       20
<PAGE>
                                 CONTRACT VALUE
 
    The Contract Value is the sum  of the value of all Sub-account  Accumulation
Units  attributable to the Contract. The value of an Accumulation Unit will vary
from Valuation Period to Valuation Period. The value of an Accumulation Unit  is
determined  at  the end  of  the Valuation  Period  and reflects  the investment
earnings, or loss, and the deductions for the Valuation Period.
 
                                  WITHDRAWALS
 
PARTIAL WITHDRAWAL
 
    The Contract Owner may partially withdraw Contract Values from the  Contract
prior  to the Annuity Date.  Any partial withdrawal is  subject to the following
conditions:
 
(a) the Company must receive a written request;
 
(b) the amount requested must be at least $500;
 
(c) any applicable Deferred Sales Charge will be deducted;
 
(d) the amount withdrawn will be the sum of the amount requested and the  amount
    of any applicable Deferred Sales Charge; and
 
(e)  the Company will deduct the amount requested plus any Deferred Sales Charge
    from each Sub-account of the Variable Account either as specified or in  the
    proportion that the Sub-account bears to the total Contract Value.
 
SYSTEMATIC WITHDRAWAL PROGRAM
 
    During  the Accumulation Period a  Contract Owner may at  any time elect, in
writing, to take systematic withdrawals from one or more of the Sub-accounts for
a period of time not to exceed 12 months. In order to initiate this program, the
amount to be  systematically withdrawn  must be equal  to or  greater than  $200
provided  that the Contract  Value is equal  to or greater  than $24,000 and the
amount to be withdrawn  does not exceed the  Free Withdrawal Amount.  Systematic
withdrawals will be made without the imposition of the Deferred Sales Charge.
 
    Systematic withdrawals may occur monthly or quarterly.
 
    The  systematic withdrawal program  may be cancelled at  any time by written
request or automatically  should the Contract  Value fall below  $1,000. In  the
event the systematic withdrawal program is cancelled, the Contract Owner may not
elect to participate in such program until the next Contract Anniversary.
 
    A  Contract Owner may change once per  calendar year the amount or frequency
subject to be withdrawn on a systematic basis.
 
    The program is annually renewable, although the limitations set forth  above
shall continue to apply.
 
    The  Free Withdrawal  Amount (See "Charges  and Deductions  -- Deduction for
Deferred Sales Charge" on page    ) and Dollar Cost Averaging (See Statement  of
Additional  Information -- "General Information -- Transfers") are not available
while a Contract  Owner is  receiving systematic withdrawals.  A Contract  Owner
will  be entitled to the Free Withdrawal Amount and Dollar Cost Averaging on and
after the Contract Anniversary next following the termination of the  systematic
withdrawal program.
 
    Implementation  of the systematic withdrawal  program may subject a Contract
Owner to adverse tax consequences, including  a 10% tax penalty. (See "Taxes  --
Taxation  of  Annuities in  General"  on page     for  a  discussion of  the tax
consequences of withdrawals.)
 
                                       21
<PAGE>
TOTAL WITHDRAWAL
 
    The Contract  Owner may  withdraw the  entire Contract  Value prior  to  the
Annuity  Date. A total withdrawal will cancel the Contract. The total withdrawal
value is  equal to  the Contract  Value  next calculated  after receipt  of  the
written  withdrawal request, less any applicable Deferred Sales Charge, less the
Administrative Charge and less any  applicable premium taxes. (See "Charges  and
Deductions" on page   .)
 
PAYMENT OF WITHDRAWALS
 
    Any  Contract Values  withdrawn will be  sent to the  Contract Owners within
seven (7) days of receipt of the  written request, unless the Delay of  Payments
provision  is  in effect.  (See Statement  of Additional  Information --"General
Information -- Delay  of Payments.")  (See "Taxes  -- Taxation  of Annuities  in
General" on page   for a discussion of the tax consequences of withdrawals.)
 
    The  Company reserves the right  to ensure that a  Contract Owner's check or
other form of purchase payment has been cleared for payment prior to  processing
any withdrawal or redemption request occurring shortly after a purchase payment.
 
    Certain  restrictions  on withdrawals  are  imposed on  Contracts  issued in
connection with 403(b) Plans. (See "Taxes -- 403(b) Plans" on page   .)
 
                                     TAXES
 
INTRODUCTION
 
    The Contracts are  designed for  use by individuals  to accumulate  Contract
Values  with  retirement plans  which,  except for  IRAs  and 403(b)  Plans, are
generally not tax-qualified  plans ("Qualified Plans").  The ultimate effect  of
Federal  income taxes on the amounts held under a Contract, on annuity payments,
and on the  economic benefits to  the Contract Owner,  Annuitant or  Beneficiary
depend on the Company's tax status and upon the tax and employment status of the
individual  concerned. Accordingly, each  person should consult  a competent tax
adviser regarding the tax consequences of purchasing a Contract.
 
    The following discussion  is general in  nature and is  not intended as  tax
advice.  No attempt is made to consider  any applicable state or other tax laws.
Moreover, the  discussion  is based  upon  the Company's  understanding  of  the
Federal  income tax laws as they are currently interpreted. No representation is
made regarding the likelihood  of continuation of the  Federal income tax  laws,
the Treasury Regulations, or the current interpretations by the Internal Revenue
Service (the "Service"). For a discussion of Federal income taxes as they relate
to the Fund, please see the accompanying Prospectus for the Fund.
 
COMPANY TAX STATUS
 
    The  Company is taxed as a life insurance company under Part I of Subchapter
L of the  Internal Revenue  Code of  1986, as  amended (the  "Code"). Since  the
Variable  Account is not a  separate entity from the  Company and its operations
form a part  of the Company,  it will not  be taxed separately  as a  "regulated
investment  company"  under  Subchapter M  of  the Code.  Investment  income and
realized capital gains on the assets of the Variable Account are reinvested  and
taken  into account  in determining the  Contract Value.  Under existing Federal
income tax law, the Variable Account's investment income, including realized net
capital gains, is not taxed  to the Company. The  Company reserves the right  to
make  a deduction for taxes from the  assets of the Variable Account should they
be imposed with respect to such items in the future.
 
TAXATION OF ANNUITIES IN GENERAL -- NON-QUALIFIED PLANS
 
    Code Section 72 governs  the taxation of annuities.  In general, a  Contract
Owner  is not taxed  on increases in value  under a Contract  until some form of
withdrawal or distribution is made under the
 
                                       22
<PAGE>
Contract. However, under  certain circumstances,  the increase in  value may  be
subject  to  tax  currently.  (See  "Taxes  --  Contracts  Owned  by Non-Natural
Persons," on page   and "Taxes -- Diversification Standards" on .)
 
    WITHDRAWALS PRIOR TO THE ANNUITY DATE
 
    Code Section 72 provides that a total or partial withdrawal from a  Contract
prior  to the Annuity Date  will be treated as taxable  income to the extent the
amounts held under the Contract exceed the "investment in the contract," as that
term is defined under the Code.  The "investment in the contract" can  generally
be  described as the cost  of the Contract. It  generally constitutes the sum of
all purchase payments made for the contract less any amounts received under  the
Contract  that are excluded from  gross income. The taxable  portion is taxed as
ordinary income. For purposes of this rule, a pledge or assignment of a Contract
is treated  as a  payment  received on  account of  a  partial withdrawal  of  a
Contract.
 
    WITHDRAWALS ON OR AFTER THE ANNUITY DATE
 
    Upon receipt of a lump sum payment or an annuity payment under the Contract,
the recipient is taxed on the portion of the payment that exceeds the investment
in  the Contract. Ordinarily, the taxable portion of payments under the Contract
will be taxed as ordinary income.
 
    For fixed annuity payments, the taxable portion of each payment is generally
determined by using a formula known as the "exclusion ratio", which  establishes
the ratio that the investment in the Contract bears to the total expected amount
of  annuity payments for the term of the Contract. That ratio is then applied to
each payment to determine the nontaxable  portion of the payment. The  remaining
portion  of  each payment  is  taxed as  ordinary  income. For  variable annuity
payments, the taxable  portion is determined  by a formula  which establishes  a
specific  dollar amount of each payment that  is not taxed. The dollar amount is
determined by dividing  the investment in  the Contract by  the total number  of
expected  periodic payments. The  remaining portion of each  payment is taxed as
ordinary income.
 
    The Company  is obligated  to  withhold Federal  income taxes  from  certain
payments  unless the recipient elects otherwise. Prior to the first payment, the
Company will notify the payee of the right to elect out of withholding and  will
furnish a form on which the election may be made. The payee must properly notify
the  Company  of that  election  in advance  of the  payment  in order  to avoid
withholding.
 
    PENALTY TAX ON CERTAIN WITHDRAWALS
 
    With respect to amounts withdrawn or distributed before the taxpayer reaches
age 59 1/2, a 10% penalty tax is  imposed upon the portion of such amount  which
is  includable  in gross  income. However,  the  penalty tax  will not  apply to
withdrawals: (i) made on or after the death of the Contract Owner (or where  the
Contract  Owner is not an individual, the  death of the "primary annuitant", who
is defined as  the individual, the  events in the  life of whom  are of  primary
importance  in affecting the timing or amount of the payout under the Contract);
(ii) attributable to the taxpayer's becoming totally disabled within the meaning
of Code Section  72(m)(7); (iii)  which are part  of a  series of  substantially
equal  periodic payments (not  less frequently than annually)  made for the life
(or life  expectancy)  of  the taxpayer,  or  the  joint lives  (or  joint  life
expectancies)  of the taxpayer and his beneficiary; (iv) allocable to investment
in the Contract before August 14, 1982; (v) under a qualified funding asset  (as
defined  in Code Section  130(d)); (vi) under an  immediate annuity contract; or
(vii) that  are purchased  by an  employer on  termination of  certain types  of
qualified  plans and which are held by the employer until the employee separates
from service.
 
    If the  penalty tax  does not  apply  to a  withdrawal as  a result  of  the
application  of item  (iii) above, and  the series of  payments are subsequently
modified (other than by reason  of death or disability),  the tax for the  first
year  in which the modification  occurs will be increased  by an amount equal to
the tax that  would have been  imposed but  for item (iii)  above as  determined
under Treasury Regulations, plus
 
                                       23
<PAGE>
interest for the deferral period. The foregoing rule applies if the modification
takes  place: (a) before  the close of the  period which is  five years from the
date of the  first payment and  after the taxpayer  attains age 59  1/2; or  (b)
before the taxpayer reaches age 59 1/2.
 
    ASSIGNMENTS
 
    Any assignment or pledge of the Contract as collateral for a loan may result
in  a taxable event and the excess  of the Contract Value over purchase payments
will be  taxed to  the assignor  as  ordinary income.  Please consult  your  tax
adviser prior to making an assignment of the Contract.
 
    DISTRIBUTION-AT-DEATH RULES
 
    In  order  to be  treated  as an  annuity  contract for  Federal  income tax
purposes, a Contract must generally  provide for the following two  distribution
rules:  (i) if the Contract Owner dies on  or after the Annuity Date, and before
the entire interest in the Contract has been distributed, the remaining  portion
of such interest will be distributed at least as quickly as the method in effect
on  the Contract  Owner's death; and  (ii) if  a Contract Owner  dies before the
Annuity Date,  the entire  interest must  generally be  distributed within  five
years  after the  date of  death. To the  extent such  interest is  payable to a
designated Beneficiary, however, such interest  may be annuitized over the  life
of that Beneficiary or over a period not extending beyond the life expectancy of
that  Beneficiary, so long  as distributions commence within  one year after the
date of death.  If the  Beneficiary is  the spouse  of the  Contract Owner,  the
Contract may be continued unchanged in the name of the spouse as Contract Owner.
 
    If  the Contract  Owner is  not an  individual, the  "primary annuitant" (as
defined under the Code) is considered the Contract Owner. In addition, when  the
Contract  Owner  is not  an individual,  a  change in  the primary  annuitant is
treated as the death of the Contract Owner.
 
    GIFTS OF CONTRACTS
 
    Any transfer of a Contract prior to the Annuity Date for less than full  and
adequate  consideration will generally trigger tax  on the gain in the Contract.
The transferee will receive a  step-up in basis for  the amount included in  the
transferor's  income. This provision, however, does not apply to those transfers
between spouses or  incident to  a divorce which  are governed  by Code  Section
1041(a).
 
    CONTRACTS OWNED BY NON-NATURAL PERSONS
 
    If  the Contract is held by a non-natural person (for example, a corporation
or trust)  the Contract  is generally  not treated  as an  annuity contract  for
Federal  income  tax purposes,  and the  income on  the Contract  (generally the
excess of the Contract Value over the purchase payments) is includable in income
each year. The  rule does not  apply where  the non-natural person  is only  the
nominal  owner such as a trust or other  entity acting as an agent for a natural
person. The rule also does not apply when the Contract is acquired by the estate
of a decedent, when the Contract is held under certain qualified plans, when the
Contract is  a qualified  funding  asset for  structured settlements,  when  the
Contract  is purchased on behalf of an  employee upon termination of a qualified
Plan, and in the case of an immediate annuity.
 
    SECTION 1035 EXCHANGES
 
    Code Section 1035 provides that no gain  or loss shall be recognized on  the
exchange  of an  annuity contract  for another  annuity contract.  A replacement
contract obtained in a tax-free exchange of contracts succeeds to the status  of
the  surrendered contract.  Special rules and  procedures apply  to Code Section
1035 transactions.  Prospective purchasers  wishing to  take advantage  of  Code
Section 1035 should consult their tax advisers.
 
    MULTIPLE CONTRACTS
 
    Annuity  contracts that are issued by the same company (or affiliate) to the
same policy  owner during  any calendar  year  will be  treated as  one  annuity
contract  in determining the  amount includable in  the taxpayer's gross income.
Thus, any  amount received  under  any such  contract  prior to  the  contract's
annuity  starting date will be taxable (and  possibly subject to the 10% penalty
tax) to the extent of  the combined income in  all such contracts. The  Treasury
has broad regulatory authority to
 
                                       24
<PAGE>
prevent avoidance of the purposes of this aggregation rule. It is possible that,
under  this authority, Treasury may apply this  rule to amounts that are paid as
annuities (on or after the starting date) under annuity contracts issued by  the
same  company to the same policy owner  during any calendar year period. In this
case, annuity payments could be fully  taxable (and possibly subject to the  10%
penalty  tax) to  the extent of  the combined  income in all  such contracts and
regardless of whether any amount would otherwise have been excluded from income.
Contract Owners should  consult a tax  adviser before purchasing  more than  one
Contract or other annuity contracts.
 
DIVERSIFICATION STANDARDS
 
    To  comply  with  the  diversification  regulations  promulgated  under Code
Section 817(h)  (the "Diversification  Regulations"), after  a start-up  period,
each  Sub-account is required to  diversify its investments. The Diversification
Regulations generally require that on the last day of each quarter of a calendar
year no more than 55% of the value of the assets of a Sub-account is represented
by any one investment, no more than  70% is represented by any two  investments,
no  more than 80% is represented by any  three investments, and no more than 90%
is represented by any four investments. A "look-through" rule applies so that an
investment in the Fund  is not treated  as one investment but  is treated as  an
investment  in a  pro-rata portion  of each  underlying asset  of the  Fund. All
securities of the same issuer are treated as a single investment. In the case of
government securities, each Government agency or instrumentality is treated as a
separate issuer.
 
    In connection with the issuance of the proposed and temporary version of the
Diversification Regulations,  Treasury announced  that such  regulations do  not
provide guidance concerning the extent to which Contract Owners may direct their
investments  to particular divisions of a  separate account. It is possible that
if and  when  additional  regulations  or IRS  pronouncements  are  issued,  the
Contract  may need to be modified to  comply with such rules. For these reasons,
the Company reserves the right to modify the Contract, as necessary, to  prevent
the Contract Owner from being considered the owner of the assets of the Variable
Account.
 
    The Company intends to comply with the Diversification Regulations to assure
that  the  Contracts continue  to be  treated as  annuity contracts  for Federal
income tax purposes.
 
QUALIFIED PLANS
 
    The Contracts may be used to create an IRA. The Contracts are also available
for use in connection with a  previously established 403(b) Plan. No attempt  is
made  herein  to provide  more than  general  information about  the use  of the
Contracts with IRAs or 403(b) Plans.  The information herein is not intended  as
tax  advice. A  prospective Contract  Owner considering  use of  the Contract to
create an  IRA or  in  connection with  a 403(b)  Plan  should first  consult  a
competent  tax adviser  with regard  to the  suitability of  the Contract  as an
investment vehicle for their qualified plan.
 
    While the Contract will not be available in connection with retirement plans
designed by the Company which qualify  for the federal tax advantages  available
under Sections 401 and 457 of the Code, a Contract can be used as the investment
medium  for an individual Contract Owner's separately qualified retirement plan.
Under amendments to the  Internal Revenue Code which  became effective in  1993,
distributions  for  a  qualified  plan  (other  than  non-taxable  distributions
representing a return of capital, distributions meeting the minimum distribution
requirement, distributions for the life  or life expectancy of the  recipient(s)
or distributions that are made over a period of more than 10 years) are eligible
for  tax-free rollover within 60 days of  the date of distribution, but are also
subject to federal income tax withholding at a 20% rate unless paid directly  to
another qualified plan. If the recipient is unable to take full advantage of the
tax-free rollover provisions, there may be taxable income, and the imposition of
a  10% penalty tax if the recipient is  under age 59 1/2. A prospective Contract
Owner considering use of the Contract in this manner should consult a  competent
tax  adviser with regard to the suitability of the Contract for this purpose and
for information concerning the  provisions of the  Code applicable to  qualified
plans.
 
                                       25
<PAGE>
INDIVIDUAL RETIREMENT ANNUITIES
 
    Section  408 of  the Code permits  eligible individuals to  contribute to an
IRA. Contracts issued in  connection with an IRA  are subject to limitations  on
eligibility, maximum contributions, and time of distribution. Distributions from
certain  retirement plans  qualifying for federal  tax advantages  may be rolled
over into  an IRA.  Sales of  the Contracts  for use  with IRAs  are subject  to
special  requirements  imposed by  the Service,  including the  requirement that
informational disclosure be given to each  person desiring to establish an  IRA.
The IRAs offered by this Prospectus are not available in all states.
 
403(B) PLANS
 
    Code  Section 403(b)(11) imposes certain  restrictions on a Contract Owner's
ability to  make partial  withdrawals  from Code  Section 403(b)  Contracts,  if
attributable  to  purchase payments  made  under a  salary  reduction agreement.
Specifically, Code  Section  403(b)(11)  allows  a  Contract  Owner  to  make  a
surrender  or partial withdrawal only (a) when  the employee attains age 59 1/2,
separates from service, dies, or becomes  disabled (as defined in the Code),  or
(b)  in the case of hardship.  In the case of hardship,  only an amount equal to
the purchase payments may be withdrawn.  In addition, under Code Section  403(b)
the  employer must  comply with certain  non-discrimination requirements. Owners
should consult their employers  to determine whether  the employer has  complied
with these rules. The 403(b) Plan offered by this Prospectus is not available in
all states.
 
                                       26
<PAGE>
                                    APPENDIX
 
GENERAL ACCOUNT OPTION
 
    Under  the General Account option, Contract Values are held in the Company's
General Account. Because of exemptive and exclusionary provisions, interests  in
the  General Account have not  been registered under the  Securities Act of 1933
nor is  the  General Account  registered  as  an investment  company  under  the
Investment  Company Act of 1940.  The Company understands that  the staff of the
Securities and  Exchange Commission  has not  reviewed the  disclosures in  this
Prospectus  relating to the General Account portion of the Contract. Disclosures
regarding the  General Account  may, however,  be subject  to certain  generally
applicable  provisions of the  federal securities laws  relating to the accuracy
and completeness of statements made in prospectuses. The General Account  option
is not available in all states.
 
    Contract  Owners  may  elect  to allocate  amounts  to  the  General Account
provided that the Contract Owner specifies  a percentage that is a whole  number
and  is equal to  0 or equal  to or greater  than 10%. Contract  Owners may also
transfer amounts to the General Account. Amounts allocated or transferred to the
General Account  are  credited  with interest  on  a  daily basis  at  the  then
applicable  effective guarantee rate. The effective  guarantee rate is that rate
declared for the calendar month in which amounts are allocated or transferred to
the  General  Account.  Therefore,  if  the  Contract  Owner  has  allocated  or
transferred  amounts at different times to  the General Account, each allocation
or transfer may  have a  unique effective  guarantee rate  and guarantee  period
associated with that amount. The Company guarantees that the effective guarantee
rate  will not be changed more  than once per year and  will not be less than 4%
per annum.
 
    The Contract Owner may transfer amounts to the General Account prior to  the
Annuity  Date by  written request or  telephone authorization.  However, no more
than four transfers may be made to the General Account per Contract Year and the
amount transferred to the General Account must  be at least 25% of the  Contract
Value,  or the entire  amount in the  Variable Account, if  less. (See "Alliance
Variable Products Series Fund, Inc. -- Transfer of Contract Values" on page   .)
 
    The Contract Owner may transfer amounts  out of the General Account only  at
the end of the guarantee period associated with that amount. Prior to the end of
the  guarantee period  the Contract  Owner may  specify the  Sub-accounts of the
Variable Account to which the Contract  Owner wants amounts transferred. If  the
Contract  Owner does not  notify the Company  prior to the  end of the guarantee
period, the Company  will apply that  amount to  a new guarantee  period in  the
General  Account, which is then  subject to the same  conditions as the original
guarantee period. The guarantee  rate associated with  the new guarantee  period
may  be different from  the effective guarantee rate  applicable to the previous
guarantee period. These transfers will be  handled at no charge to the  Contract
Owner. All other provisions which apply to transfers among the Sub-accounts (See
"Alliance Variable Products Series Fund, Inc. -- Transfer of Contract Values" on
page    )  and which do  not conflict with  the provisions set  forth above will
continue to apply.
 
    Contract Owners may not make a  partial withdrawal from the General  Account
prior to the Annuity Date unless:
 
(a) all of the Contract Owner's funds are in the General Account; or
 
(b)  the Contract Owner does not specify from which funds the partial withdrawal
    is to be deducted. In  that event, the Company  will deduct the amount  from
    each  Sub-account of the Variable Account  and each amount allocated to each
    guarantee period of the General Account in the proportion that each bears to
    the Contract Value.
 
    The Deferred  Sales Charge  (See "Charges  and Deductions  -- Deduction  for
Deferred Sales Charge" on page   ) will be deducted from the Sub-accounts of the
Variable  Account and from each amount allocated to each guarantee period of the
General Account  in the  proportion  that the  withdrawal  was made  from  these
accounts.
 
                                      A-1
<PAGE>
    The  Administrative Charge  (See "Charges  and Deductions  -- Deductions for
Administrative Charge"  on page     )  and Premium  Taxes, if  applicable,  (See
"Charges  and Deductions -- Deduction  for Premium and Other Taxes"  on page   )
will be deducted proportionately from  each Sub-account of the Variable  Account
and from each amount in each guarantee period of the General Account.
 
    If  the Contract  Owner has  not made  any annuity  option selection  at the
Annuity Date, the  Contract Value  will be applied  to purchase  Option 2  fixed
basis  annuity  payments  and  Option  2  variable  basis  annuity  payments, in
proportion to  the amount  of Contract  Value  in the  General Account  and  the
Variable Account, respectively. (See "Annuity Period -- Annuity Options" on page
  .)
 
                                      A-2
<PAGE>
          TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
 
<TABLE>
<CAPTION>
                                                                                                               PAGE
                                                                                                             ---------
<S>                                                                                                          <C>
General Information........................................................................................
  The Company..............................................................................................
  Independent Accountants..................................................................................
  Legal Counsel............................................................................................
  Distributor..............................................................................................
  Calculation of Performance Related Information...........................................................
  Delay of Payments........................................................................................
  Transfers................................................................................................
Method of Determining Contract Values......................................................................
Annuity Provisions.........................................................................................
  Annuity Benefits.........................................................................................
  Annuity Options..........................................................................................
  Variable Annuity Payment Values..........................................................................
  Annuity Unit.............................................................................................
  Net Investment Factor....................................................................................
  Additional Provisions....................................................................................
Financial Statements.......................................................................................
</TABLE>
 
                                      A-3
<PAGE>


                                        PART B
                         STATEMENT OF ADDITIONAL INFORMATION



                              INDIVIDUAL SINGLE PURCHASE
                     PAYMENT DEFERRED VARIABLE ANNUITY CONTRACTS



                                      ISSUED BY



                                  VARIABLE ACCOUNT A



                                         AND



              AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK



         THIS IS NOT A PROSPECTUS.  THIS STATEMENT OF ADDITIONAL INFORMATION
SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS FOR THE VARIABLE ANNUITY
CONTRACTS WHICH ARE REFERRED TO HEREIN.

   

         THE PROSPECTUS CONCISELY SETS FORTH INFORMATION THAT A PROSPECTIVE
INVESTOR OUGHT TO KNOW BEFORE INVESTING.  FOR A COPY OF THE PROSPECTUS DATED
May 1, 1996,  CALL OR WRITE: American International Life Assurance Company of
New York; Attention:  Variable Products, 80 Pine Street, New York, New York,
10005, 1-800-340-2765.

DATE OF STATEMENT OF ADDITIONAL INFORMATION:     May 1, 1996
    


<PAGE>

                                   TABLE OF CONTENTS


                                                                     PAGE
General Information. . . . . . . . . . . . . . . . . . . . . . .
    The Company. . . . . . . . . . . . . . . . . . . . . . . . .
    Independent Accountants. . . . . . . . . . . . . . . . . . .
    Legal Counsel. . . . . . . . . . . . . . . . . . . . . . . .
    Distributor. . . . . . . . . . . . . . . . . . . . . . . . .
    Calculation of Performance Related Information . . . . . . .
    Delay of Payments. . . . . . . . . . . . . . . . . . . . . .
    Transfers. . . . . . . . . . . . . . . . . . . . . . . . . .
Method of Determining Contract Values. . . . . . . . . . . . . .
Annuity Provisions . . . . . . . . . . . . . . . . . . . . . . .
    Annuity Benefits . . . . . . . . . . . . . . . . . . . . . .
    Annuity Options. . . . . . . . . . . . . . . . . . . . . . .
    Variable Annuity Payment Values. . . . . . . . . . . . . . .
    Annuity Unit . . . . . . . . . . . . . . . . . . . . . . . .
    Net Investment Factor. . . . . . . . . . . . . . . . . . . .
    Additional Provisions. . . . . . . . . . . . . . . . . . . .

Financial Statements . . . . . . . . . . . . . . . . . . . . . .


                                         B-2

<PAGE>

GENERAL INFORMATION
THE COMPANY
          A description of American International Life Assurance Company of New
York (the "Company"), and its ownership is contained in the Prospectus.  The
Company will provide for the safekeeping of the assets of the Variable Account.

INDEPENDENT ACCOUNTANTS
          The audited financial statements of the Company and Variable Account A
have been audited by Coopers and Lybrand, independent certified public
accountants, whose offices are located in Philadelphia, Pennsylvania.

LEGAL COUNSEL
          Legal matters relating to the Federal securities laws in connection
with the Contracts described herein and in the Prospectus are being passed upon
by the law firm of Jorden Burt Berenson & Johnson, Washington,D.C.

DISTRIBUTOR
     AIG Equity Sales Corp. ("AESC"), formerly known as American International
Fund Distributors, Inc., a wholly owned subsidiary of American International
Group, Inc. and an affiliate of the Company, acts as the distributor.  The
offering is on a continuous basis.  Commissions in the amount of $6,829 were
retained by the Distributor in 1995.

CALCULATION OF PERFORMANCE RELATED INFORMATION

          A.   YIELD AND EFFECTIVE YIELD QUOTATIONS FOR THE MONEY MARKET
               SUB-ACCOUNT
          The yield quotation for the Money Market Sub-account to be set forth
in the Prospectus will be for the seven days ended on the date of the most
recent balance sheet of the Variable Account included in the registration
statement, and will be computed by determining the net change, exclusive of
capital changes, in the value of a hypothetical preexisting account having a
balance of one Accumulation Unit in the Money Market Sub-account at the
beginning of the period, subtracting a hypothetical charge reflecting deductions
from Contract Owner accounts, and dividing the difference by the value of the
account at the beginning of the base period to obtain the base period return,
and multiplying the base period return by (365/7) with the resulting figure
carried to at least the nearest hundredth of one percent.

          Any effective yield quotation for the Money Market Sub-account to be
set forth in the Prospectus will be for the seven days ended on the date of the
most recent balance sheet of the Variable Account included in the registration
statement, and will be carried at least to the nearest hundredth of one percent,
and will be computed by determining the net change, exclusive of capital
changes, in the value of a hypothetical preexisting account having a balance of
one Accumulation Unit in the Money Market Sub-account at the beginning of the
period, subtracting a hypothetical charge reflecting deductions from Contract
Owner accounts, and dividing the difference by the value of the account at the
beginning of the base period to obtain the base period return, and then
compounding the base period return by adding 1, raising the sum to a power equal
to 365 divided by 7 and subtracting 1 from the result, according to the
following formula:
                                                     365/7
          EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1)      ]-1.

     For purposes of the yield and effective yield computations, the
hypothetical charge reflects all deductions that are charged to all Contract
Owner accounts in proportion to the length of the base period.  For any fees
that vary with the size of the account, the account size is assumed to be the
Money Market Sub-account's mean account size.  The yield and effective yield
quotations do not reflect the Deferred Sales Charge that may be assessed at the
time of withdrawal in an amount ranging up to 6% of the requested withdrawal
amount, with the specific percentage applicable to a particular withdrawal
depending on the length of time the purchase payment was held under the Contract
and whether withdrawals had been previously made during that Contract Year.
(See "Charges and Deductions - Deduction for Deferred Sales Charge" on page 17
of the Prospectus)  No deductions or sales loads are assessed upon annuitization
under the Contracts.  Realized gains and losses from the sale of securities and


                                         B-3

<PAGE>

unrealized appreciation and depreciation of the Money Market Sub-account and the
Fund are excluded from the calculation of yield.

          B.   TOTAL RETURN QUOTATIONS
     The total return quotations for all the Sub-accounts set forth in the
Prospectus will be average annual total return quotations for the one, five, and
ten year periods (or, where a Sub-account has been in existence for a period of
less than one, five or ten years, for such lesser period) ended on the date of
the most recent balance sheet of the Variable Account and for the period from
the date monies were first placed into the Sub-accounts until the aforesaid
date.  The quotations are computed by finding the average annual compounded
rates of return over the relevant periods that would equate the initial amount
invested to the ending redeemable value, according to the following formula:

                                  n
                            P(1+T)  = ERV

          Where:  P = a hypothetical initial payment of $1,000

                  T = average annual total return

                  n = number of years

                ERV = ending redeemable value of a hypothetical $1,000
                      payment made at the beginning of the particular
                      period at the end of the particular period.

          For the purposes of the total return quotations , the calculations
take into effect all fees that are charged to all Contract Owner accounts.  For
any fees that vary with the size of the account, the account size is assumed to
be the respective Sub-account's mean account size.  The calculations also assume
a total withdrawal as of the end of the particular period.

   
Annualized total return for certain Sub-accounts as of December 29, 1995, were
as follows:

                               One Year       Three Years   Inception to Date
                               --------       -----------   -----------------

    Conservative Investors     15.51%                 N/A           11.93%
    Growth Investors           18.95%                 N/A           13.78%
    Growth                     33.52%                 N/A           27.53%
    Growth and Income          34.05%              13.32%           12.59%


    
*Funds were first invested in the Portfolios as listed below:

Conservative Investors        September 9, 1994
Growth Investors              October 12, 1994
Growth                        August 12, 1994
Growth and Income             April 16, 1992

     C.   YIELD QUOTATIONS FOR THE SHORT-TERM MULTI-MARKET, U.S. GOVERNMENT/HIGH
          GRADE SECURITIES AND GLOBAL BOND SUB-ACCOUNTS

     The yield quotations for the Short-Term Multi-Market, U.S. Government/High
Grade Securities and Global Bond Sub-accounts that will be set forth in the
Prospectus will be based on the thirty-day period ended on the date of the most
recent balance sheet of the Variable Account included in the registration
statement, and are computed by dividing the net investment income per
Accumulation Unit earned during the period bythe maximum offering price per unit
on the last day of the period, according to the following formula:


                                         B-4

<PAGE>

                                                6
                           Yield = 2[(a - b + 1) - 1]
                                      -----
                                        cd

     Where:         a =  net investment income earned during the period by the
                         corresponding Portfolio of the Fund attributable to
                         shares owned by the Sub-account.

                    b =  expenses accrued for the period (net of
                         reimbursements).

                    c =  the average daily number of Accumulation Units
                         outstanding during the period.

                    d =  the maximum offering price per Accumulation Unit on the
                         last day of the period.


          For the purposes of the yield quotations for the Short-Term
Multi-Market, U.S. Government/High Grade Securities and Global Bond
Sub-accounts, the calculations take into effect all fees that are charged to all
Contract Owner accounts.  For any fees that vary with the size of the account,
the account size is assumed to be the respective Sub-account's mean account
size.  The calculations do not take into account the Deferred Sales Charge or
any transfer charges.

          A Deferred Sales Charge may be assessed at the time of withdrawal in
an amount ranging up to 6% of the requested withdrawal amount, with the specific
percentage applicable to a particular withdrawal depending on the length of time
the purchase payment was held under the Contract, and whether withdrawals had
been previously made during that Contract Year.  (See "Charges and Deductions -
Deduction for Deferred Sales Charge" on page __ of the Prospectus)  There is
currently a transfer charge of $10 per transfer after a specified number of
transfers in each Contract Year.  (See "Alliance Variable Products Series Fund,
Inc. - Transfer of Contract Values" on page __ of the Prospectus)




     D.   Non- Standardized Performance Data

          1.   TOTAL RETURN QUOTATIONS
          The total return quotations for all the Sub-accounts set forth in the
Prospectus will be average annual total return quotations for the one, five, and
ten year periods (or, where a Sub-account has been in existence for a period of
less than one, five or ten years, for such lesser period) ended on the date of
the most recent balance sheet of the Variable Account and for the period from
the date monies were first placed into the Sub-accounts until the aforesaid
date.  The quotations are computed by finding the average annual compounded
rates of return over the relevant periods that would equate the initial amount
invested to the ending redeemable value, according to the following formula:

                                         n
                                   P(1+T)  = ERV

               Where:    P =  a hypothetical initial payment of $1,000

                         T =  average annual total return

                         n =  number of years

                       ERV =  ending redeemable value of a hypothetical $1,000
                              payment made at the beginning of the particular
                              period at the end of the particular period.



                                         B-5

<PAGE>

     For the purposes of the total return quotations, the calculations take into
effect all fees that are charged to all Contract Owner accounts.  For any fees
that vary with the size of the account, the account size is assumed to be the
respective Sub-account's mean account size.  The calculations do not, however,
assume a total withdrawal as of the end of the particular period.

   
          Annualized total return quotations for certain Sub-accounts as of
December 29, 1995, were as follows:

                               One Year       Three Years   Inception to Date
                               --------       -----------   -----------------
    Conservative Investors     9.22%                  N/A               3.55%
    Growth Investors           12.47%                 N/A               4.68%
    Growth                     26.25%                 N/A              19.31%
    Growth and Income          26.75%              11.89%               9.29%


    
          2.   Tax Deferred Accumulation

     In reports or other communications to You or in advertising or sales
materials, the Company may also describe the effects of tax-deferred compounding
on the Variable Account's investment returns or upon returns in general.  These
effects may be illustrated in charts or graphs and may include comparisons at
various points in time of returns under the Contract or in general on a tax-
deferred basis with the returns on a taxable basis.  Different tax rates may be
assumed.

     In general, individuals who own annuity contracts are not taxed on inreases
in the value under the annuity contract until some form of distribution is made
from the contract.  Thus, the annuity contract will benefit from tax deferral
during the accumulation period, which generally will have the effect of
permitting an investment in an annuity contract to grow more rapidly than a
comparable investment under which increases in value are taxed on a current
basis.  The following chart illustrates this benefit by comparing accumulation
under the contract with accumulations from an investment on which gains are
taxed on a current basis.  The chart shows accumulations on an initial
investment or Purchase Payment of $25,000, assuming hypothetical gross annual
return of 0%, 4% and 8%, compounded annually, and a tax rate of 31%.  The values
shown for the taxable investment do not include any deduction for management
fees or other expenses but assume that taxes are deducted annually from
investment returns.  The values shown for the contract reflect the deduction of
contractual expenses such as the 1.25% mortality and expense risk charge, the
0.15% Administrative Charge and the $30 Contract Maintenance Charge, but not the
expenses of an underlying investment vehicle, such as the Fund.  In addition,
these values assume that the Owner does not surrender the Contract or make any
withdrawals until the end of the period shown.  The chart assumes a full
withdrawal, at the end of the period shown, of all contract value and the
payment of taxes at the 31% rate on the amount in excess of the Purchase
Payment.

     The rates of return illustrated are hypothetical and are not an estimate or
guaranty of performance.  Actual tax rates may vary for different taxpayers from
that illustrated and withdrawals by Owners who have not reached age 59 1/2 may
be subject to a tax penalty of 10%.



                                    [INSERT CHART]






                                         B-6

<PAGE>

DELAY OF PAYMENTS
          Any payments due under the Contracts will generally be sent to the
Contract Owner within seven (7) days of a completed request for payment.
However, the Company has reserved the right to postpone any type of payment from
the Variable Account for any period when:

               (a)   the New York Stock Exchange is closed for other than
          customary weekends and holidays;
               (b)   trading on the Exchange is restricted;
               (c)   an emergency exists as a result of which it is not
          reasonably practicable to dispose of securities held in the Variable
          Account or determine their value; or
               (d)   an order of the Securities and Exchange Commission permits
          delay for the protection of security holders.

          The applicable rules of the Securities and Exchange Commission shall
govern as to whether the conditions in (b) and (c) exists.

     TRANSFERS
     A Contract Owner may deposit prior to the Annuity Date, all or part of his
Contract Value into either the Money Market or Short-Term Multi-Market
Sub-account (the "Sending Sub-account"), and then automatically transfer those
assets into one or more of the other Sub-accounts on a systematic basis.  The
amount transferred to the Sending Sub-account must be at least $12,000 in order
to initiate this option.  This process is called Automatic Dollar Cost
Averaging.

     The Automatic Dollar Cost Averaging option is available for use with any of
the investment options, other than the General Account.

     Automatic Dollar Cost Averaging transfers may occur monthly or quarterly.
The Contract Owner may designate the dollar amount to be transferred each month
or elect to have a percentage transferred each month, up to a maximum of 60
months.

     The Company will make all Automatic Dollar Cost Averaging transfers on the
15th calendar day of each month, or the next day the New York Stock Exchange is
open for business if the 15th calendar day of the month should fall on a day the
New York Stock Exchange is closed.  In order to process an Automatic Dollar Cost
Averaging transfer, the Company must have received a request in writing by no
later than the 6th calendar day of the month.

     The Automatic Dollar Cost Averaging option may be cancelled at any time by
written request or automatically if the value of the Sending Sub-account subject
to the Automatic Dollar Cost Averaging option is less than $1,000.

     A Contract Owner may change his Automatic Dollar Cost Averaging investment
allocation only once during any 12 month period.

     Any transfers made under this section are subject to the conditions of the
section entitled "Alliance Variable Products Series Fund, Inc. - Transfer of
Contract Values" on page 12 of the Prospectus, except that the Company will not
deem the election of the Automatic Dollar Cost Averaging option to count towards
a Contract Owner's twelve (12) free transfers.


                                         B-7

<PAGE>


                        METHOD OF DETERMINING CONTRACT VALUES
          The Contract Value will fluctuate in accordance with the investment
results of the underlying Portfolios of the Fund held within the Sub-account.
In order to determine how these fluctuations affect Contract Values,
Accumulation Units are utilized.  The value of an Accumulation Unit applicable
during any Valuation Period is determined at the end of that period.

          When the first shares of the respective Portfolios of the Fund were
purchased for the Sub-accounts, the Accumulation Units for the Sub-accounts were
valued at $10.  The value of an Accumulation Unit for a Sub-account on any
Valuation Date thereafter is determined by dividing (a) by (b), where:

          (a)  is equal to:

                (i)  the total value of the net assets attributable to
               Accumulation Units in the Sub-account, minus
               (ii)  the daily charge for assuming the risk of guaranteeing
               mortality factors and expense charges, which is equal on an
               annual basis to 1.25% multiplied by the daily net asset value of
               the Sub-account; minus
               (iii) in California and New York only, the daily charge for
               providing certain administrative functions which is equal on an
               annual basis to 0.15% multiplied by the daily net asset value of
               the Sub-Account, minus or plus
               (iv)  a charge or credit for any tax provision established for
               the Sub-account.  The Company is not currently making any
               provision for taxes.

          (b)  is the total number of Accumulation Units applicable to that
          Sub-account at the end of the Valuation Period.

          The resulting value of each Sub-account Accumulation Unit is
multiplied by the respective number of Sub-account Accumulation Units for a
Contract.  The Contract Value is the sum of all Sub-account values for the
Contract.

          An Accumulation Unit may increase or decrease in value from Valuation
Date to Valuation Date.


                                  ANNUITY PROVISIONS
ANNUITY BENEFITS
          If the Annuitant is alive on the Annuity Date the Company will begin
making payments to the Annuitant under the payment option or options selected.
The amount of the annuity payments will depend on the age or sex of the payee at
the time the settlement contract is issued.

ANNUITY OPTIONS
          The annuity options are as follows:

          OPTION 1:  LIFE INCOME.  The Company will pay an annuity during the
          lifetime of the payee.

          OPTION 2:  INCOME WITH 10 YEARS OF PAYMENTS GUARANTEED.  The Company
          will pay an annuity during the lifetime of the payee.  If, at the
          death of the payee, payments have been made for less than 10 years:

               (a)  payments will be continued during the remainder of the
               period to the successor payee; or


                                         B-8

<PAGE>

               (b)  the successor payee may elect to receive in a lump sum the
               present value of the remaining payments, commuted at the interest
               rate used to create the annuity factor for this Option.

          OPTION 3:  JOINT AND LAST SURVIVOR INCOME.  The Company will pay an
          annuity for as long as either payee or a designated second person is
          alive.

          Annuity options are available on a fixed and/or a variable basis.  The
Contract Owner may allocate Contract Values to purchase only fixed annuity
payments, or to purchase only variable annuity payments, or to purchase a
combination of the two.  Contract Values which purchase fixed annuity payments
will be invested in the General Account.  Contract Values which purchase
variable annuity payments will be invested in the Variable Account.  The
Contract Owner may make no transfers between the General Account and the
Variable Account after the Annuity Date.  The Company also may offer additional
options at its discretion.

VARIABLE ANNUITY PAYMENT VALUES
          A Variable Annuity is an annuity with payments which (1) are not
predetermined as to dollar amount; and (2) will vary in amount with the net
investment results of the applicable Sub-account(s) of the Variable Account.  At
the Annuity Date the Contract Value in each Sub-account will be applied to the
applicable Annuity Tables contained in the Contract.  The Annuity Table used
will depend upon the payment option chosen.  The same Contract Value amount
applied to each payment option may produce a different initial annuity payment.
If, as of the Annuity Date, the then current annuity rates applicable to  this
class of contracts will provide a larger income than that guaranteed for the
same form of annuity under the Contracts described herein, the larger amount
will be paid.

          The first annuity payment for each Sub-account is determined by
multiplying the amount of the Contract Value allocated to that Sub-account by
the factor shown in the table for the option selected, divided by 1000.

          The dollar amount of Sub-account annuity payments after the first is
determined as follows:

               (a)  The dollar amount of the first annuity payment is divided by
               the value for the Sub-account Annuity Unit as of the Annuity
               Date.  This establishes the number of Annuity Units for each
               monthly payment.  The number of Annuity Units remains fixed
               during the Annuity payment period, subject to any transfers.
               (b)  The fixed number of Annuity Units is multiplied by the
               Annuity Unit value for the Valuation Period 14 days prior to the
               date of payment.

          The total dollar amount of each Variable Annuity payment is the sum of
all Sub-account variable annuity payments less the pro-rata amount of the
Administrative Charge.

ANNUITY UNIT
          The value of an Annuity Unit for each Sub-account was arbitrarily set
initially at $10.  This was done when the first Fund shares were purchased.  The
Sub-account Annuity Unit value at the end of any subsequent Valuation Period is
determined by multiplying the Sub-account Annuity Unit value for the immediately
preceding Valuation Period by the quotient of (a) and (b) where:

               (a)  is the net investment factor for the Valuation Period for
               which the Sub-account Annuity Unit value is being determined; and
               (b)  is the assumed investment factor for such Valuation Period.
               The assumed investment factor adjusts for the interest assumed in
               determining the first variable annuity payment.  Such factor for
               any Valuation Period shall be the accumulated


                                         B-9

<PAGE>

value, at the end of such period, of $1.00 deposited at the beginning of such
period at the assumed investment rate of 5%.

NET INVESTMENT FACTOR
          The net investment factor is used to determine how investment results
of the Fund affect Variable Account Values within the Sub-accounts from one
Valuation Period to the next.  The net investment factor for each Sub-account
for any Valuation Period is determined by dividing (a) by (b) and subtracting
(c) from the result, where:

          (a)  is equal to:

                (i)  the net asset value per share of the Fund held in the
          Sub-account determined at the end of that Valuation Period; plus
               (ii)  the per share amount of any dividend or capital gain
          distribution made by the Fund held in the Sub-account if the
          "ex-dividend" date occurs during that same Valuation Period; plus or
          minus
               (iii)  a per share charge or credit, which is determined by the
          Company, for changes in tax reserves resulting from investment
          operations of the Sub-account.

          (b)  is equal to:

                (i)  the net asset value per share of the Fund held in the
          Sub-account determined as of the end of the prior Valuation Period;
          plus or minus
               (ii)  the per share charge or credit for any change in tax
          reserves for the prior Valuation Period.

          (c)  is the percentage factor representing the Mortality and Expense
          Risk Charge.

The net investment factor may be greater or less than the assumed investment
factor; therefore, the Annuity Unit value may increase or decrease from
Valuation Period to Valuation Period.

ADDITIONAL PROVISIONS
          The Company may require proof of the age or sex of the Annuitant
before making any life annuity payment provided for by the Contract.  If the age
or sex of the Annuitant has been misstated the Company will compute the amount
payable based on the correct age or sex.  If annuity payments have begun, any
underpayments that may have been made will be paid in full with the next annuity
payment.  Any overpayments, unless repaid to the Company in one sum, will be
deducted from future annuity payments until the Company is repaid in full.

          If a Contract provision requires that a person be alive, the Company
may require proof that the person is alive before the Company acts under that
provision.

          The Company will give the payee under an annuity payment option a
settlement contract for the payment option.


                                 FINANCIAL STATEMENTS
          The financial statements of the Company included herein should be
considered only as bearing upon the ability of the Company to meet its
obligations under the Contracts.


                                         B-10

<PAGE>
                     AMERICAN INTERNATIONAL LIFE ASSURANCE
                              COMPANY OF NEW YORK
                         (A WHOLLY-OWNED SUBSIDIARY OF
                      AMERICAN INTERNATIONAL GROUP, INC.)
 
                    REPORT ON AUDITS OF FINANCIAL STATEMENTS
 
              FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
 
                                      F-1
<PAGE>
                 (This page has been left blank intentionally.)
 
                                      F-2
<PAGE>
                       REPORT OF INDEPENDENT ACCOUNTANTS
 
To the Stockholders and Board of Directors
American International Life Assurance Company of New York:
 
    We  have audited the  accompanying balance sheets  of American International
Life Assurance  Company  of New  York  (a wholly-owned  subsidiary  of  American
International  Group, Inc.) as  of December 31,  1995 and 1994,  and the related
statements of income, stockholders' equity and cash flows for each of the  three
years  in the period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express  an
opinion on these financial statements based on our audits.
 
    We  conducted  our audits  in  accordance with  generally  accepted auditing
standards. Those standards require that we plan and perform the audit to  obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also  includes
assessing  the  accounting principles  used  and significant  estimates  made by
management, as well as evaluating the overall financial statement  presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
    In  our opinion, the financial statements  referred to above present fairly,
in all material respects, the financial position of American International  Life
Assurance  Company of New York as of December 31, 1995 and 1994, and the results
of its operations and its cash flows for  each of the three years in the  period
ended  December  31,  1995,  in conformity  with  generally  accepted accounting
principles.
 
    As discussed in Note 1 (h) to the financial statements, the Company  changed
in  1993, its  method of  accounting for  investments in  certain fixed maturity
securities.
 
                                          COOPERS & LYBRAND L.L.P.
 
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 22, 1996
 
                                      F-3
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                                 BALANCE SHEETS
                                 (IN THOUSANDS)
 
                                     ASSETS
 
<TABLE>
<CAPTION>
                                                                                           DECEMBER 31,
                                                                                   ----------------------------
                                                                                       1995           1994
                                                                                   -------------  -------------
<S>                                                                                <C>            <C>
Investments and cash:
  Fixed maturities:
    Bonds available for sale, at market value (cost: 1995-$4,139,170: 1994 --
     $3,807,500).................................................................  $   4,434,329  $   3,700,640
  Equity securities:
    Common stock (cost: 1995-$8,540: 1994 -- $8,382..............................         17,703         17,201
    Non-redeemable preferred stocks (cost: 1995 -- $4,564; 1994 -- $5,027).......          4,570          4,701
Mortgage loans on real estate, net...............................................        448,700        399,695
Real estate, net of accumulated depreciation of $6,009 in 1995; and $4,861 in
 1994............................................................................         33,029         34,155
Policy loans.....................................................................         10,991         10,317
Other invested assets............................................................         69,360         63,941
Short-term investments...........................................................        103,040        130,415
Cash.............................................................................          2,460          5,363
                                                                                   -------------  -------------
      Total investments and cash.................................................      5,124,182      4,366,428
Amounts due from related parties.................................................          1,186          2,304
Investment income due and accrued................................................         74,355         67,623
Premium and insurance balances receivable -- net.................................         13,289         14,536
Reinsurance assets...............................................................         22,552         26,313
Deferred policy acquisition cost.................................................         31,225         29,626
Deferred incomes taxes...........................................................       --               44,926
Separate and variable accounts...................................................         68,151         27,630
Other assets.....................................................................         16,814          1,800
                                                                                   -------------  -------------
      Total assets...............................................................  $   5,351,754  $   4,581,186
                                                                                   -------------  -------------
                                                                                   -------------  -------------
</TABLE>
 
                See accompanying notes to financial statements.
 
                                      F-4
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
                           BALANCE SHEETS (CONTINUED)
                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
 
                                  LIABILITIES
 
<TABLE>
<CAPTION>
                                                                                           DECEMBER 31,
                                                                                   ----------------------------
                                                                                       1995           1994
                                                                                   -------------  -------------
<S>                                                                                <C>            <C>
Policyholders' funds on deposit..................................................  $   3,060,581  $   2,742,412
Future policy benefits...........................................................      1,561,760      1,446,327
Reserve for unearned premiums....................................................         10,808         13,099
Policy and contract claims.......................................................         37,201         37,092
Reserve for commissions, expenses and taxes......................................          4,433          3,077
Insurance balances payable.......................................................          7,771          9,128
Federal income tax payable.......................................................          3,477          1,353
Deferred income taxes............................................................         62,252       --
Amounts due to related parties...................................................          5,260          7,654
Separate and variable accounts...................................................         68,151         27,468
Other liabilities................................................................         23,553         26,640
                                                                                   -------------  -------------
    Total Liabilities............................................................      4,845,247      4,314,250
                                                                                   -------------  -------------
 
Commitments and contingencies (See Note 6)
 
STOCKHOLDERS' EQUITY
Common stock, $200 par value; 16,125 shares authorized, issued and outstanding...          3,225          3,225
Additional paid-in capital.......................................................        197,025        197,025
Unrealized appreciation (depreciation) of investments, net of future policy
 benefits and taxes of $82,352 in 1995 and $(32,471) in 1994;....................        152,941        (60,305)
Retained Earnings................................................................        153,316        126,991
                                                                                   -------------  -------------
      Total stockholders' equity.................................................        506,507        266,936
                                                                                   -------------  -------------
Total liabilities and stockholders' equity.......................................  $   5,351,754  $   4,581,186
                                                                                   -------------  -------------
                                                                                   -------------  -------------
</TABLE>
 
                See accompanying notes to financial statements.
 
                                      F-5
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                              STATEMENTS OF INCOME
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                                   YEARS ENDED DECEMBER 31,
                                                                             -------------------------------------
                                                                                1995         1994         1993
                                                                             -----------  -----------  -----------
<S>                                                                          <C>          <C>          <C>
Revenues:
  Premiums.................................................................  $    84,357  $    71,826  $    76,045
  Net investment income....................................................      386,666      335,823      308,089
  Realized capital gains...................................................        1,436        1,932       18,767
                                                                             -----------  -----------  -----------
    Total revenues.........................................................      472,459      409,581      402,901
                                                                             -----------  -----------  -----------
Benefits and expenses:
  Benefits to policyholders................................................      167,319      163,585      156,707
  Increase in future policy benefits and policyholders' funds on deposit...      209,512      165,291      155,434
  Acquisition and insurance expenses.......................................       54,808       62,759       57,758
                                                                             -----------  -----------  -----------
    Total benefits and expenses............................................      431,639      391,635      369,899
                                                                             -----------  -----------  -----------
Income before income taxes.................................................       40,820       17,946       33,002
                                                                             -----------  -----------  -----------
Income taxes (benefits):
  Current..................................................................       22,142       18,986       19,330
  Deferred.................................................................       (7,647)     (12,152)      (9,007)
                                                                             -----------  -----------  -----------
    Total income taxes.....................................................       14,495        6,834       10,323
                                                                             -----------  -----------  -----------
Net income.................................................................  $    26,325  $    11,112  $    22,679
                                                                             -----------  -----------  -----------
                                                                             -----------  -----------  -----------
</TABLE>
 
                See accompanying notes to financial statements.
 
                                      F-6
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                       STATEMENTS OF STOCKHOLDERS' EQUITY
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                                  YEARS ENDED DECEMBER 31,
                                                                           ---------------------------------------
                                                                               1995          1994         1993
                                                                           ------------  ------------  -----------
<S>                                                                        <C>           <C>           <C>
COMMON STOCK
Balance at beginning of year.............................................  $      3,225  $      3,225  $     3,225
                                                                           ------------  ------------  -----------
Balance at end of year...................................................         3,225         3,225        3,225
                                                                           ------------  ------------  -----------
ADDITIONAL PAID-IN CAPITAL
Balance at beginning of year:............................................       197,025       197,025      119,025
Capital contribution.....................................................       --            --            78,000
                                                                           ------------  ------------  -----------
Balance at end of year...................................................       197,025       197,025      197,025
                                                                           ------------  ------------  -----------
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENTS, NET
Balance at beginning of year.............................................       (60,305)       58,102        1,887
Change during year.......................................................       404,070      (182,164)       6,497
Changes due to deferred income tax benefit (expense) and future policy
 benefits................................................................      (190,824)       63,757       (2,302)
Cumulative effect of accounting change, net of taxes of $28,011..........       --            --            52,020
                                                                           ------------  ------------  -----------
Balance at end of year...................................................       152,941       (60,305)      58,102
                                                                           ------------  ------------  -----------
RETAINED EARNINGS
Balance at beginning of year.............................................       126,991       115,879       93,200
Net income...............................................................        26,325        11,112       22,679
                                                                           ------------  ------------  -----------
Balance at end of year...................................................       153,316       126,991      115,879
                                                                           ------------  ------------  -----------
    Total stockholders' equity...........................................  $    506,507  $    266,936  $   374,231
                                                                           ------------  ------------  -----------
                                                                           ------------  ------------  -----------
</TABLE>
 
                See accompanying notes to financial statements.
 
                                      F-7
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                            STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                                 YEARS ENDED DECEMBER 31,
                                                                         -----------------------------------------
                                                                            1995          1994           1993
                                                                         -----------  ------------  --------------
<S>                                                                      <C>          <C>           <C>
Cash flows from operating activities:
    Net income.........................................................  $    26,325  $     11,112  $       22,679
                                                                         -----------  ------------  --------------
Adjustments to reconcile net income to net cash provided by operating
 activities:
  Non-cash revenues, expenses, gains and losses included in income:
    Change in insurance reserves.......................................       37,251        45,554          44,151
    Change in premiums and insurance balances receivable and payable --
     net...............................................................         (110)         (138)          2,251
    Change in reinsurance assets.......................................        3,761         5,570           5,240
    Change in deferred policy acquisition costs........................       (1,599)         (213)          1,632
    Change in investment income due and accrued........................       (6,732)       (8,153)         (7,937)
    Realized capital gains.............................................       (1,436)       (1,932)        (18,767)
    Change in current and deferred income taxes -- net.................       (5,523)       (6,895)        (21,332)
    Change in reserves for commissions, expenses and taxes.............        1,356           149           1,054
    Change in other assets and liabilities -- net......................      (33,021)        7,526          (1,568)
                                                                         -----------  ------------  --------------
      Total adjustments................................................       (6,053)       41,468           4,724
                                                                         -----------  ------------  --------------
    Net cash provided by operating activities..........................       20,272        52,580          27,403
                                                                         -----------  ------------  --------------
Cash flows from investing activities:
  Cost of fixed maturities, at market sold.............................       65,623        63,695         309,595
  Cost of fixed maturities, at market matured or redeemed..............      247,551       255,229         341,223
  Cost of equity securities sold.......................................        1,310           958           6,738
  Realized capital gains...............................................        3,436         4,715          24,542
  Purchase of fixed maturities.........................................     (627,188)     (837,973)     (1,050,415)
  Purchase of equity securities........................................       (1,005)         (137)         (4,449)
  Mortgage loans granted...............................................     (111,402)      (77,824)        (61,932)
  Repayments of mortgage loans.........................................       60,476         9,621          20,397
  Change in policy loans...............................................         (674)          601             870
  Change in short-term investments.....................................       27,375        (7,485)        (59,065)
  Change in other invested assets......................................       (4,083)       (6,479)         (7,164)
  Other -- net.........................................................       (2,763)       (1,086)        (17,821)
                                                                         -----------  ------------  --------------
    Net cash used in investing activities..............................     (341,344)     (596,165)       (497,481)
                                                                         -----------  ------------  --------------
Cash flows from financing activities:
  Change in policyholders' funds on deposit............................      318,169       542,729         395,889
  Proceeds from capital contribution...................................      --            --               78,000
                                                                         -----------  ------------  --------------
    Net cash provided by financing activities..........................      318,169       542,729         473,889
                                                                         -----------  ------------  --------------
Change in cash.........................................................       (2,903)         (856)          3,811
Cash at beginning of year..............................................        5,363         6,219           2,408
                                                                         -----------  ------------  --------------
Cash at end of year....................................................  $     2,460  $      5,363  $        6,219
                                                                         -----------  ------------  --------------
                                                                         -----------  ------------  --------------
</TABLE>
 
           See accompanying notes to statutory financial statements.
 
                                      F-8
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                         NOTES TO FINANCIAL STATEMENTS
 
1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
    (a)   BASIS OF PRESENTATION:   American International Life Assurance Company
of New York (the Company) is a wholly-owned subsidiary of American International
Group, Inc. (the  Parent). The  financial statements  of the  Company have  been
prepared  on the basis  of generally accepted  accounting principles (GAAP). The
preparation of financial statements in conformity with GAAP requires  management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities  and disclosure of contingent assets  and liabilities at the date of
the financial  statements and  the  reported amounts  of revenues  and  expenses
during  the reporting periods. Actual results could differ from those estimates.
The Company is  licensed to sell  life and  accident & health  insurance in  the
District of Columbia and all states except Arizona, Conneticut and Maryland. The
Company is also licensed in America Samoa, Virgin Islands and Guam.
 
    The  Company  also files  financial statements  prepared in  accordance with
statutory practices prescribed or permitted  by the Insurance Department of  the
State  of New York.  Financial statements prepared  in accordance with generally
accepted accounting principles  differ in  certain respects  from the  practices
prescribed  or permitted by regulatory  authorities. The significant differences
are:  (1)  statutory  financial  statements  do  not  reflect  fixed  maturities
available  for  sale  at market  value;  (2) policy  acquisition  costs, charged
against operations as incurred for  regulatory purposes, have been deferred  and
are  being amortized over the anticipated  life of the contracts; (3) individual
life and  annuity policy  reserves  based on  statutory requirements  have  been
adjusted  based  upon mortality,  lapse and  interest assumptions  applicable to
these coverages, including provisions  for reasonable adverse deviations;  these
assumptions  reflect  the  Company's  experience  and  industry  standards;  (4)
deferred income taxes not recognized for regulatory purposes have been  provided
for  temporary  differences  between the  bases  of assets  and  liabilities for
financial reporting  purposes and  tax purposes;  (5) for  regulatory  purposes,
future  policy benefits,  policyholders' funds  on deposit,  policy and contract
claims and reserve for unearned premiums are presented net of ceded reinsurance;
and (6)  an  asset valuation  reserve  and interest  maintenance  reserve  using
National  Association of Insurance Commissioners (NAIC)  formulas are set up for
regulatory purposes.
 
    (b)  INVESTMENTS:   Fixed maturities available for  sale, where the  company
may  not have  the ability  or positive  intent to  hold these  securities until
maturity, are carried at  market value. Included  in fixed maturities  available
for sale are collateralized mortgage obligations (CMO's). Premiums and discounts
arising  from the purchase  of CMO'S are  treated as yield  adjustments over the
estimated life.  Common  stocks and  preferred  stocks available  for  sale  are
carried  at  market value.  Short-term investments  are  carried at  cost, which
approximates market.
 
    Unrealized gains and losses from  investment in equity securities and  fixed
maturities  available for  sale are  reflected in  stockholders' equity,  net of
amounts recorded  as future  policy  benefits and  any related  deferred  income
taxes.
 
    Realized  capital gains  and losses  are determined  principally by specific
identification. Where declines in values  of securities below cost or  amortized
cost  are considered to be other than temporary, a charge is reflected in income
for the difference between cost or  amortized cost and estimated net  realizable
value.
 
    Mortgage  loans on real estate are  carried at unpaid principal balance less
unamortized loan origination fees and costs less an allowance for  uncollectible
loans.
 
    Real  estate  is  carried  at  depreciated  cost  and  is  depreciated  on a
straight-line basis over  31.5 years. Expenditures  for maintenance and  repairs
are  charged to income as incurred; expenditures for betterments are capitalized
and depreciated over their estimated lives.
 
                                      F-9
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    Policy loans are carried at the aggregate unpaid principal balance.
 
    Other invested  assets consist  primarily of  limited partnership  interests
which  are  carried  at  market  value. Unrealized  gains  and  losses  from the
revaluation of these investments are  reflected in stockholders' equity, net  of
any  related  taxes. Also  included in  this  category is  an interest  rate cap
agreement, which is carried at its amortized cost. The cost of the cap is  being
amortized  against investment income on  a straight line basis  over the life of
the cap.
 
    (c)  INCOME TAXES:  The Company  joins in a consolidated federal income  tax
return with the Parent and its domestic subsidiaries. The Company and the Parent
have  a written tax allocation agreement whereby the Parent agrees not to charge
the Company a greater portion of the consolidated tax liability than would  have
been  paid by the Company  if it had filed  a separate return. Additionally, the
Parent agrees to reimburse the Company for  any tax benefits arising out of  its
net  losses within ninety days after the  filing of that consolidated tax return
for the year in which these  losses are utilized. Deferred federal income  taxes
are  provided  for  temporary differences  related  to the  expected  future tax
consequences of  events that  have been  recognized in  the Company's  financial
statements or tax returns.
 
    (d)   PREMIUM  RECOGNITION AND RELATED  BENEFITS AND EXPENSES:   Premiums on
traditional life insurance and life contingent annuity contracts are  recognized
when  due. Revenues for  universal life and  investment-type products consist of
policy charges for the cost of insurance, administration, and surrenders  during
the  period. Premiums  on accident and  health insurance are  reported as earned
over the contract term. The portion of accident and health premiums which is not
earned at  the end  of a  reporting  period is  recorded as  unearned  premiums.
Estimates of premiums due but not yet collected are accrued. Policy benefits and
expenses   are  associated  with  earned  premiums  on  long-duration  contracts
resulting in a  level recognition of  profits over the  anticipated life of  the
contracts.
 
    Policy  acquisition  costs  for  traditional  life  insurance  products  are
generally deferred and amortized over the  premium paying period of the  policy.
Deferred  policy  acquisition  costs  and  policy  initiation  costs  related to
universal life  and  investment-type  products  are  amortized  in  relation  to
expected gross profits over the life of the policies (see Note 3).
 
    The  liability  for  future  policy  benefits  and  policyholders'  contract
deposits is established using assumptions described in Note 4.
 
    (e)  POLICY AND CONTRACT CLAIMS:  Policy and contract claims include amounts
representing: (1) the actual  in-force amounts for reported  life claims and  an
estimate  of incurred  but unreported  claims; and  (2) an  estimate, based upon
prior experience, for accident and  health reported and incurred but  unreported
losses.  The methods  of making  such estimates  and establishing  the resulting
reserves are  continually reviewed  and updated  and any  adjustments  resulting
therefrom are reflected in income currently.
 
    (f)   SEPARATE  AND VARIABLE ACCOUNTS:   These accounts  represent funds for
which investment income and investment gains  and losses accrue directly to  the
policyholders.  Each account has specific  investment objectives, and the assets
are carried at  market value. These  assets are legally  segregated and are  not
subject to claims which arise out of any other business of the Company.
 
    (g)   REINSURANCE ASSETS:  Reinsurance  assets include the balances due from
both reinsurance  and  insurance companies  under  the terms  of  the  Company's
reinsurance arrangements for ceded unearned premiums, future policy benefits for
life  and  accident  and  health insurance  contracts,  policyholders'  funds on
deposit and  policy and  contract  claims. It  also  includes funds  held  under
reinsurance treaties.
 
                                      F-10
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    (h)    ACCOUNTING  STANDARDS:    In  March  1995,  the  Financial Accounting
Standards Board (FASB)  issued Statement of  Financial Accounting Standards  No.
121  "Accounting  for the  Impairment of  Long-lived  Assets and  for Long-lived
Assets to Be Disposed  Of" (FASB 121). This  statement requires that  long-lived
assets  and certain identifiable intangibles be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable and an impairment loss must be recognized.
 
    FASB 121  is effective  for  the Company  commencing  January 1,  1996.  The
Company  believes  that the  adoption of  this  statement in  1996 will  have an
immaterial  impact  on  the  results  of  operations,  financial  condition  and
liquidity.
 
    In December 1995, FASB issued "Special Report, a Guide to the Implementation
of  Statement No. 115 on  Accounting for Certain Investments  in Debt and Equity
Securities". Among other things, this guide provided for a transition  provision
permitting  a one-time  transfer of  debt securities  from the  held to maturity
classification to the  available for  sale classification. The  Company did  not
transfer  any securities from  the held to  maturity classification to available
for sale classification.
 
    In 1994,  the American  Institute of  Certified Public  Accountants  (AICPA)
issued  a Statement  of Position (SOP)  94-6 "Disclosure  of Certain Significant
Risks and Uncertainties" (SOP 94-6). Pursuant to SOP 94-6, the Company has  made
certain  disclosures as to the nature of the Company's operations and the use of
estimates in the  preparation of  its 1995 financial  statements. Certain  other
disclosures  were  not  necessary  as  the Company  did  not  meet  the required
criteria.
 
    In November of 1992, FASB issued Statement of Financial Accounting Standards
No. 112 "Employers' Accounting for Postemployment Benefits" (FASB 112). FASB 112
established accounting standards for employers who provide benefits to former or
inactive employees after employment but before retirement. FASB 112 was  adopted
effective  January  1, 1994,  and  had no  significant  effect on  the Company's
results of operations, financial condition or liquidity.
 
    In October 1994, FASB issued Statement of Financial Accounting Standards No.
118 "Accounting by  Creditors for  Impairment of a  Loan-Income Recognition  and
Disclosures"  (FASB 118). FASB  118 amends FASB  114 to allow  a creditor to use
existing methods to recognize interest income on an impaired loan. FASB 118 also
amends certain disclosure requirements of FASB 114. The Company adopted FASB 114
and FASB 118 effective December 31,  1994. The adoption of these statements  did
not  cause  any  significant  impact on  the  Company's  results  of operations,
financial condition or liquidity.
 
    In October 1994, FASB issued  Statement of Financial Accounting Standard  No
119  "Disclosure  about  Derivative  Financial  Instruments  and  Fair  Value of
Financial Instruments" (FASB 119). FASB 119 requires disclosure about derivative
financial instruments  and  amends FASB  105  "Disclosure of  Information  about
Financial Instruments with Off-Balance Sheet Risk and Financial Instruments with
Concentrations  of Credit Risk" (FASB 105) and Statement of Financial Accounting
Standards No. 107 "Disclosure about Fair Value of Financial Instruments".
 
    FASB 119  requires  disclosure  about  the  amounts,  nature  and  terms  of
derivatives that are not subject to FASB 105. Also, FASB 119 requires disclosure
about  financial instruments  held or issued  for trading  purposes and purposes
other than trading. This statement was adopted by the Company effective December
31, 1994.
 
    In May  1993, the  FASB issued  Statement of  Accounting Standards  No.  115
"Accounting  for Certain Investments  on Debt and  Equity Securities" (FASB 115)
and the Company adopted this standard at December 31, 1993. The pretax  increase
in carrying value of fixed maturities available for
 
                                      F-11
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
sale  as a result of marking to  market was $242,000,000. A portion was recorded
as a component of future policy  benefits. Thus, the unrealized appreciation  of
investments increased $52,020,000, net of taxes of $28,011,000.
 
    (i)  Certain amounts  in the  1994 balance  sheet have  been reclassified to
conform to the 1995 presentation.
 
2.  INVESTMENT INFORMATION
 
    (a)  STATUTORY DEPOSITS:  Securities with a carrying value of $9,381,000 and
$8,289,000 were  deposited  by  the Company  under  requirements  of  regulatory
authorities as of December 31, 1995 and 1994, respectively.
 
    (b)   NET  INVESTMENT INCOME:   An analysis  of net investment  income is as
follows (in thousands):
 
<TABLE>
<CAPTION>
                                                               YEARS ENDED DECEMBER 31,
                                                         -------------------------------------
                                                            1995         1994         1993
                                                         -----------  -----------  -----------
<S>                                                      <C>          <C>          <C>
Fixed maturities.......................................  $   334,828  $   289,374  $   271,962
Equity securities......................................        1,006        1,156        1,190
Mortgage loans.........................................       40,383       33,251       29,163
Real estate............................................        3,446        3,771        3,305
Policy loans...........................................          733          764          846
Cash and short-term investments........................        4,124        6,839        3,593
Other invested assets..................................        6,381        4,465        1,661
                                                         -----------  -----------  -----------
    Total investment income............................      390,901      339,620      311,720
Investment expenses....................................        4,235        3,797        3,631
                                                         -----------  -----------  -----------
    Net investment income..............................  $   386,666  $   335,823  $   308,089
                                                         -----------  -----------  -----------
                                                         -----------  -----------  -----------
</TABLE>
 
    (c)  INVESTMENT GAINS AND LOSSES:   The net realized capital gains  (losses)
and  change in unrealized  appreciation (depreciation) of  investments for 1995,
1994 and 1993 are summarized below (in thousands):
 
<TABLE>
<CAPTION>
                                                               YEARS ENDED DECEMBER 31,
                                                         ------------------------------------
                                                            1995          1994        1993
                                                         -----------  ------------  ---------
<S>                                                      <C>          <C>           <C>
Net realized gains (losses) on investments:
  Fixed maturities.....................................  $      (115) $        (75) $  20,106
  Equity securities....................................        3,515         2,046     (2,415)
  Mortgage loans.......................................       (2,000)       (2,783)    (5,775)
  Other invested assets................................           36         2,744      6,851
                                                         -----------  ------------  ---------
  Net realized gains...................................  $     1,436  $      1,932  $  18,767
                                                         -----------  ------------  ---------
                                                         -----------  ------------  ---------
Change in unrealized appreciation (depreciation) of
 investments:
  Fixed maturities.....................................  $   402,020  $   (186,892) $  --
  Equity securities....................................          677          (853)     6,499
  Other invested assets................................        1,373         5,581         (2)
  Cumulative effect of accounting change...............      --            --          80,031
                                                         -----------  ------------  ---------
  Change in unrealized appreciation (depreciation) of
   investments.........................................  $   404,070  $   (182,164) $  86,528
                                                         -----------  ------------  ---------
                                                         -----------  ------------  ---------
</TABLE>
 
                                      F-12
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
2.  INVESTMENT INFORMATION (CONTINUED)
    Proceeds from the sale of investments in fixed maturities during 1995,  1994
and 1993 were $80,003,000, $79,504,000 and $59,251,000, respectively.
 
    During  1995,  1994  and  1993,  gross  gains  of  $624,000,  $4,861,000 and
$30,195,000,  respectively,  and  gross  losses  of  $739,000,  $4,936,000   and
$10,089,000, respectively, were realized on dispositions of fixed maturities.
 
    During  1995,  1994  and 1993,  gross  gains of  $3,516,000,  $2,047,000 and
$516,000, respectively,  and  gross losses  of  $1,000, $1,000  and  $2,931,000,
respectively, were realized on dispositions of equity securities.
 
    (d)    MARKET  VALUE  OF FIXED  MATURITIES  AND  UNREALIZED  APPRECIATION OF
INVESTMENTS:   At  December  31,  1995  and  1994,  unrealized  appreciation  of
investments  in equity securities (before applicable taxes) included gross gains
of $9,650,000  and  $9,341,000  and  gross  losses  of  $480,000  and  $848,000,
respectively.
 
    The  amortized  cost and  estimated market  values  of investments  in fixed
maturities at December 31, 1995 and 1994 are as follows (in thousands):
<TABLE>
<CAPTION>
                                                                             GROSS        GROSS
                                                             AMORTIZED    UNREALIZED   UNREALIZED
1995                                                           COST          GAINS       LOSSES     MARKET VALUE
- ---------------------------------------------------------  -------------  -----------  -----------  -------------
<S>                                                        <C>            <C>          <C>          <C>
Fixed maturities:
  U.S. Government and government agencies and
   authorities...........................................  $      84,063  $    19,982  $        39  $     104,006
  States, municipalities and political subdivisions......        883,646       56,568           89        940,125
  Foreign governments....................................         33,927        5,291           75         39,143
  All other corporate....................................      3,137,534      224,452       10,931      3,351,055
                                                           -------------  -----------  -----------  -------------
    Total fixed maturities...............................  $   4,139,170  $   306,293  $    11,134  $   4,434,329
                                                           -------------  -----------  -----------  -------------
                                                           -------------  -----------  -----------  -------------
 
<CAPTION>
 
                                                                             GROSS        GROSS
                                                             AMORTIZED    UNREALIZED   UNREALIZED
1994                                                           COST          GAINS       LOSSES     MARKET VALUE
- ---------------------------------------------------------  -------------  -----------  -----------  -------------
<S>                                                        <C>            <C>          <C>          <C>
Fixed maturities:
  U.S. Government and government agencies and
   authorities...........................................  $      89,861  $     4,381  $     3,235  $      91,007
  States, municipalities and political subdivisions......        819,297        7,687       46,602        780,382
  Foreign governments....................................         34,230        1,481        2,310         33,401
  All other corporate....................................      2,886,112       36,160      104,422      2,795,850
                                                           -------------  -----------  -----------  -------------
    Total fixed maturities...............................  $   3,807,500  $    49,709  $   156,569  $   3,700,640
                                                           -------------  -----------  -----------  -------------
                                                           -------------  -----------  -----------  -------------
</TABLE>
 
                                      F-13
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
2.  INVESTMENT INFORMATION (CONTINUED)
    The amortized cost and estimated market value of fixed maturities  available
for  sale at  December 31,  1995, by contractual  maturity, are  shown below (in
thousands). Actual maturities could  differ from contractual maturities  because
certain  borrowers have the right to call  or prepay obligations with or without
call or prepayment penalties.
 
<TABLE>
<CAPTION>
                                                                 AMORTIZED      ESTIMATED
                                                                   COST       MARKET VALUE
                                                               -------------  -------------
<S>                                                            <C>            <C>
Due in one year or less......................................  $     310,922  $     326,318
Due after one year through five years........................      1,110,307      1,172,894
Due after five years through ten years.......................      1,632,691      1,759,253
Due after ten years..........................................      1,085,250      1,175,864
                                                               -------------  -------------
                                                               $   4,139,170  $   4,434,329
                                                               -------------  -------------
                                                               -------------  -------------
</TABLE>
 
    (e)   CMO'S:   CMOs are  U.S. Government  and Government  agency backed  and
triple  A-rated securities. In the preceding  table, CMO's are included in other
corporate fixed maturities. At December 31,  1995 and 1994, the market value  of
the  CMO  portfolio  was  $1,114,196,000  and  $967,179,000,  respectively;  the
estimated  amortized  cost   was  approximately  $1,049,450,000   in  1995   and
$989,346,000  in 1994. The Company's CMO  portfolio is readily marketable. There
were no derivative  (high risk)  CMO securities  contained in  the portfolio  at
December 31, 1995.
 
    (f)   FIXED  MATURITIES BELOW  INVESTMENT GRADE:   At December  31, 1995 and
1994, the fixed maturities held by the Company that were below investment  grade
had  an aggregate amortized cost of $204,254,000 and $205,986,000, respectively,
and an aggregate market value of $206,442,000 and $195,443,000, respectively.
 
    (g)    NON-INCOME  PRODUCING  ASSETS:    Non-income  producing  assets  were
insignificant.
 
    (h)   INVESTMENTS GREATER THAN 10% EQUITY:   The market value of investments
in the following companies and institutions exceeded 10% of the Company's  total
stockholders' equity at December 31, 1995 (in thousands):
 
<TABLE>
<S>                                                        <C>
Fixed Maturities:
  Standard Credit Card...................................  $ 113,683
  Morgan Stanley Mortgage Trust..........................  $  80,482
  General Motors Acceptance Corporation..................  $  71,742
  Transamerica Finance...................................  $  57,329
</TABLE>
 
3.  DEFERRED POLICY ACQUISITION COSTS
    The  following reflects the policy  acquisition costs deferred (commissions,
direct solicitation  and other  costs) which  will be  amortized against  future
income and the related current amortization charged to income, excluding certain
amounts deferred and amortized in the same period (in thousands):
 
<TABLE>
<CAPTION>
                                                                YEARS ENDED DECEMBER 31,
                                                             -------------------------------
                                                               1995       1994       1993
                                                             ---------  ---------  ---------
<S>                                                          <C>        <C>        <C>
Balance at beginning of year...............................  $  29,626  $  29,413  $  31,045
Acquisition costs deferred.................................      5,933      3,286      2,157
Amortization charged to income.............................     (4,334)    (3,073)    (3,789)
                                                             ---------  ---------  ---------
Balance at end of year.....................................  $  31,225  $  29,626  $  29,413
                                                             ---------  ---------  ---------
                                                             ---------  ---------  ---------
</TABLE>
 
                                      F-14
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
4.  FUTURE POLICY BENEFITS AND POLICYHOLDERS' FUNDS ON DEPOSIT
 
    (a)  The analysis of the future  policy benefits and policyholders' funds on
deposit liabilities as at December 31, 1995 and 1994 follows (in thousands):
 
<TABLE>
<CAPTION>
                                                                   1995           1994
                                                               -------------  -------------
<S>                                                            <C>            <C>
Future policy benefits:
  Long duration contracts....................................  $   1,549,758  $   1,436,875
                                                               -------------  -------------
  Short duration contracts...................................         12,002          9,452
                                                               -------------  -------------
                                                               $   1,561,760  $   1,446,327
                                                               -------------  -------------
                                                               -------------  -------------
Policyholder funds on deposit:
  Annuities..................................................  $   2,131,609  $   1,974,234
  Guaranteed investment contracts (GICs).....................        739,947        667,968
  Universal life.............................................         84,741         94,998
  Other investment contracts.................................        104,284          5,212
                                                               -------------  -------------
                                                               $   3,060,581  $   2,742,412
                                                               -------------  -------------
                                                               -------------  -------------
</TABLE>
 
    (b) Long duration contract liabilities  included in future policy  benefits,
as  presented in the  table above, result from  traditional life products. Short
duration contract liabilities  are primarily accident  and health products.  The
liability  for  future  policy  benefits has  been  established  based  upon the
following assumptions:
 
        (i) Interest  rates  for traditional  life  insurance products  are  9.5
    percent graded to 7.0 percent over 30 years. The liability for future policy
    benefits for universal life insurance has been established using FASB 97 and
    assumes  a  1.0  percent  investment margin.  Interest  rates  (exclusive of
    immediate/terminal funding annuities),  which vary by  year of issuance  and
    products,  range  from  3.0  percent  to  10.0  percent.  Interest  rates on
    immediate/terminal funding annuities are  at a maximum  of 12.2 percent  and
    grade to not greater than 7.5 percent.
 
        (ii)  Mortality and  withdrawal rates  are based  upon actual experience
    modified to allow for variations in policy form. The weighted average  lapse
    rate, including surrenders, for individual life approximated 14.8 percent.
 
    (c)  The liability for  policyholders' fund on  deposit has been established
based on the following assumptions:
 
        (i) Interest  rates  credited on  deferred  annuities vary  by  year  of
    issuance  and range from 4.0 percent  to 8.3 percent. Credited interest rate
    guarantees are  generally  for a  period  of one  year.  Withdrawal  charges
    generally  range from  6.0 percent  to 10.0 percent  grading to  zero over a
    period of 6 to 10 years.
 
        (ii)  GICs  have  market  value  withdrawal  provisions  for  any  funds
    withdrawn  other than  benefit responsive payments.  Interest rates credited
    generally range from 4.7 percent to 9.1 percent and maturities range from  2
    to 7 years.
 
       (iii)  The  universal  life funds  have  credited interest  rates  of 6.1
    percent to  7.0 percent  and  guarantees ranging  from  4.0 percent  to  5.5
    percent  depending on the year of  issue. Additionally, universal life funds
    are subject to  surrender charges  that amount to  7.5 percent  of the  fund
    balance and grade to zero over a period not longer than 20 years.
 
                                      F-15
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
5.  INCOME TAXES
 
    (a)  The Federal income  tax rate applicable  to ordinary income  is 35% for
1995, 1994 and 1993. Actual tax  expense on income from operations differs  from
the  "expected" amount computed by applying  the Federal income tax rate because
of the following (in thousands except percentages):
 
<TABLE>
<CAPTION>
                                                              YEARS ENDED DECEMBER 31,
                                     --------------------------------------------------------------------------
                                               1995                      1994                     1993
                                     ------------------------  ------------------------  ----------------------
                                                 PERCENT OF                PERCENT OF               PERCENT OF
                                                   PRE-TAX                   PRE-TAX                  PRE-TAX
                                                  OPERATING                 OPERATING                OPERATING
                                      AMOUNT       INCOME       AMOUNT       INCOME       AMOUNT      INCOME
                                     ---------  -------------  ---------  -------------  ---------  -----------
<S>                                  <C>        <C>            <C>        <C>            <C>        <C>
"Expected" income tax expense......  $  14,288        35.0%    $   6,281        35.0%    $  11,551      135.0%
Prior year federal income tax
 benefit...........................     --           --           --           --           (1,954)      (5.9)
State income tax...................        627         1.5           714         4.0           758        2.3
Other..............................       (420)       (1.0)         (161)       (0.9)          (32)      (0.1)
                                     ---------         ---     ---------         ---     ---------      -----
Actual income tax expense..........  $  14,495        35.5%    $   6,834        38.1%    $  10,323       31.3%
                                     ---------         ---     ---------         ---     ---------      -----
                                     ---------         ---     ---------         ---     ---------      -----
</TABLE>
 
    (b) The components  of the net  deferred tax liability  were as follows  (in
thousands):
 
<TABLE>
<CAPTION>
                                                                     YEARS ENDED DECEMBER
                                                                              31,
                                                                     ---------------------
                                                                       1995        1994
                                                                     ---------  ----------
<S>                                                                  <C>        <C>
Deferred tax assets:
  Adjustments to mortgage loans and investment income..............  $   5,420  $    4,672
  Unrealized depreciation on investments...........................     --          32,471
  Adjustment to life reserves......................................     23,835      13,752
                                                                     ---------  ----------
  Other............................................................      1,571       2,336
                                                                        30,826      53,231
                                                                     ---------  ----------
Deferred tax liabilities:
  Deferred policy acquisition costs................................  $   1,637  $    2,501
  Fixed maturities discount........................................      8,745       5,497
  Unrealized appreciation on investments...........................     82,352      --
  Other............................................................        344         307
                                                                     ---------  ----------
                                                                        93,078       8,305
                                                                     ---------  ----------
Net deferred tax liability (asset).................................  $  62,252  $  (44,926)
                                                                     ---------  ----------
                                                                     ---------  ----------
</TABLE>
 
    (c)  At December 31,  1995, accumulated earnings of  the Company for Federal
income tax purposes include approximately $2,879,000 of "Policyholders' Surplus"
as defined  under  the  Code.  Under provisions  of  the  Code,  "Policyholders'
Surplus"  has not been  currently taxed but  would be taxed  at current rates if
distributed  to  the  Parent.  There  is  no  present  intention  to  make  cash
distributions  from "Policyholders'  Surplus" and accordingly,  no provision has
been made for taxes on this amount.
 
    (d) Income  taxes paid  in 1995,  1994, and  1993 amounted  to  $19,056,000,
$13,537,000, and $23,984,000, respectively.
 
6.  COMMITMENTS AND CONTINGENT LIABILITIES
    The Company, in common with the insurance industry in general, is subject to
litigation, including claims for punitive damages, in the normal course of their
business. The Company does not believe that such litigation will have a material
effect on its operating results and financial condition.
 
                                      F-16
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
7.  FAIR VALUE OF FINANCIAL INSTRUMENTS
 
    (a)  Statement of Financial Accounting  Standards No. 107 "Disclosures about
Fair Value  of Financial  Instruments" (FASB  107) requires  disclosure of  fair
value  information about  financial instruments for  which it  is practicable to
estimate such  fair  value.  These  financial instruments  may  or  may  not  be
recognized in the balance sheet. In the measurement of the fair value of certain
of  the financial instruments, quoted market prices were not available and other
valuation techniques  were  utilized. These  derived  fair value  estimates  are
significantly  affected  by  the  assumptions used.  FASB  107  excludes certain
financial instruments, including those related to insurance contracts.
 
    The following methods and assumptions were used by the Company in estimating
the fair value of the financial instruments presented:
 
        CASH AND SHORT TERM INVESTMENTS:   The carrying amounts reported in  the
    balance sheet for these instruments approximate fair value.
 
        FIXED  MATURITIES:  Fair values for fixed maturity securities carried at
    market value  are generally  based upon  quoted market  prices. For  certain
    fixed  maturities for which  market prices were  not readily available, fair
    values  were  estimated  using  values  obtained  from  independent  pricing
    services.
 
        EQUITY  SECURITIES:  Fair  values for equity  securities were based upon
    quoted market prices.
 
        MORTGAGE AND POLICY LOANS:  Where practical, the fair values of loans on
    real estate were  estimated using  discounted cash  flow calculations  based
    upon the Company's current incremental lending rates for similar type loans.
    The  fair values of policy loans were not calculated as the Company believes
    it would have to expend excessive costs for the benefits derived. Therefore,
    the fair value of policy loans was estimated at carrying value.
 
        INTEREST RATE CAP:  Fair values for the interest rate cap were estimated
    using values obtained from an independent pricing service.
 
        POLICYHOLDERS' FUNDS ON DEPOSIT:   Fair values of policyholder  contract
    deposits  were estimated using discounted  cash flow calculations based upon
    interest rates currently being offered for similar contracts consistent with
    those remaining for the contracts being valued.
 
                                      F-17
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
7.  FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
    (b) The  fair value  and carrying  amounts of  financial instruments  is  as
follows (in thousands):
<TABLE>
<CAPTION>
                                                                                          CARRYING
1995                                                                      FAIR VALUE       AMOUNT
- -----------------------------------------------------------------------  -------------  -------------
<S>                                                                      <C>            <C>
Cash and short-term investments........................................  $     105,500  $     105,500
Fixed maturities.......................................................      4,434,329      4,434,329
Equity securities......................................................         22,273         22,273
Mortgage and policy loans..............................................        489,768        459,691
Interest rate cap......................................................            433            510
                                                                         -------------  -------------
Policyholders' funds on deposit........................................  $   3,125,730  $   3,060,581
                                                                         -------------  -------------
                                                                         -------------  -------------
 
<CAPTION>
 
                                                                                          CARRYING
1994                                                                      FAIR VALUE       AMOUNT
- -----------------------------------------------------------------------  -------------  -------------
<S>                                                                      <C>            <C>
Cash and short-term investments........................................  $     135,778  $     135,778
Fixed maturities.......................................................      3,700,640      3,700,640
Equity securities......................................................         21,902         21,902
Mortgage and policy loans..............................................        414,354        410,012
Interest rate cap......................................................          1,567            736
                                                                         -------------  -------------
Policyholders' funds on deposit........................................  $   2,755,594  $   2,742,412
                                                                         -------------  -------------
                                                                         -------------  -------------
</TABLE>
 
8.  STOCKHOLDERS' EQUITY
 
    (a)  The Company  may not distribute  dividends to the  Parent without prior
approval of  regulatory agencies.  Generally, this  limits the  payment of  such
dividends  to an  amount which,  in the opinion  of the  regulatory agencies, is
warranted by the financial condition of the Company.
 
    (b) The  Company's stockholders'  equity as  determined in  accordance  with
statutory  accounting  practices  was  $257,910,000  at  December  31,  1995 and
$214,273,000 at December 31, 1994. Statutory net income amounted to $49,059,000,
$21,226,000, and $2,298,000 for 1995, 1994 and 1993, respectively.
 
9.  EMPLOYEE BENEFITS
 
    (a)  The  Company   participates  with  its   affiliates  in  a   qualified,
non-contributory,  defined  benefit pension  plan which  is administered  by the
Parent. All qualified employees  who have attained age  21 and completed  twelve
months  of  continuous service  are  eligible to  participate  in this  plan. An
employee with  5  or more  years  of service  is  entitled to  pension  benefits
beginning  at normal retirement age 65. Benefits  are based upon a percentage of
average final compensation multiplied by years of credited service limited to 44
years  of  credited  service.  Prior  to  January  1,  1996  the  average  final
compensation  is subject to certain limitations. Annual funding requirements are
determined based on the "projected unit  credit" cost method which attributes  a
pro  rata portion of the total projected benefit payable at normal retirement to
each year  of  credited service.  Pension  expense for  current  service  costs,
retirement  and termination benefits for the years ended December 31, 1995, 1994
and 1993 were approximately $225,000,  $190,000 and $323,000, respectively.  The
Parent's plans do not separately identify projected benefit obligations and plan
assets  attributable  to employees  of  participating affiliates.  The projected
benefit  obligations  exceeded  the  plan   assets  at  December  31,  1995   by
$59,620,000.
 
    (b) The Parent also sponsors a voluntary savings plan for domestic employees
(a  401(k) plan), which during  the two years ended  December 31, 1994, provided
for salary reduction contributions by
 
                                      F-18
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
9.  EMPLOYEE BENEFITS (CONTINUED)
employees and matching  contributions by the  Parent up to  2 percent of  annual
salary.  Commencing  January  1, 1995,  the  401(k) plan  provided  for matching
contributions by the Parent of up to 6 percent of annual salary depending on the
employee's years of service.
 
    (c) On April 1, 1985, the  Parent terminated and replaced its then  existing
U.S.  pension  plan, a  contributory qualified  defined  benefit plan,  with the
current non-contributory  qualified  defined  benefit plan.  Settlement  of  the
obligations of the prior plan was accomplished through the purchase of annuities
from  the Company  for accrued  benefits as of  the date  of termination. Future
policy benefits reserves in the accompanying balance sheet that relate to  these
annuity  contracts  are  $73,171,000 at  December  31, 1995  and  $70,791,000 at
December 31, 1994.
 
    (d) In addition to the Parent's defined benefit pension plan, the Parent and
its subsidiaries provide a post-retirement benefit program for medical care  and
life  insurance.  Eligibility  in  the various  plans  is  generally  based upon
completion of a specified  period of eligible service  and reaching a  specified
age.
 
    (e)  Employees of the Company participate  in certain stock option and stock
purchase plans of the Parent. In general, under the stock option plans, officers
and other key employees are  granted options to purchase  AIG common stock at  a
price  not less  than fair market  value at the  date of grant.  In general, the
stock purchase plans  provide for  eligible employees to  receive privileges  to
purchase  AIG common stock at a  price equal to 85% of  the fair market value on
the date of grant of the purchase privilege.
 
10. LEASES
 
    (a) The  Company  occupies leased  space  in many  locations  under  various
long-term  leases and has entered into various leases covering the long-term use
of data processing  equipment. At December  31, 1995, the  future minimum  lease
payments under operating leases were as follows:
 
<TABLE>
<CAPTION>
YEAR                                                                        PAYMENT
- -------------------------------------------------------------------------  ---------
<S>                                                                        <C>
1996.....................................................................  $     583
1997.....................................................................        463
1998.....................................................................        368
1999.....................................................................        153
2000.....................................................................         54
Remaining years after 2000...............................................     --
                                                                           ---------
    Total................................................................  $   1,621
                                                                           ---------
                                                                           ---------
</TABLE>
 
    Rent  expense  approximated $661,000,  $801,000 and  $657,000 for  the years
ended December 31, 1995, 1994 and 1993, respectively.
 
    (b) Sublease  Income  --  The  Company  does  not  participate  in  sublease
agreements.
 
11. REINSURANCE
 
    (a)  The  Company reinsures  portions of  its life  and accident  and health
insurance risks with unaffiliated companies. Life insurance risks are  reinsured
primarily  under coinsurance  and yearly  renewable term  treaties. Accident and
health insurance risks are reinsured primarily under coinsurance, excess of loss
and quota share treaties. Amounts recoverable from reinsurers are estimated in a
manner consistent with the assumptions  used for the underlying policy  benefits
and  are presented as a component  of reinsurance assets. A contingent liability
exists with respect to reinsurance ceded to
 
                                      F-19
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
11. REINSURANCE (CONTINUED)
the extent that any  reinsurer is unable to  meet the obligations assumed  under
the  reinsurance agreements. The Company also reinsures portions of its life and
accident and health insurance risks with affiliated companies (see Note 12).
 
    The effect of all reinsurance  contracts, including reinsurance assumed,  is
as follows (in thousands, except percentages):
<TABLE>
<CAPTION>
                                                                                            PERCENTAGE OF
                                                                                               AMOUNT
                                                                                               ASSUMED
DECEMBER 31, 1995                         GROSS         CEDED      ASSUMED        NET          TO NET
- ------------------------------------  -------------  -----------  ---------  -------------  -------------
<S>                                   <C>            <C>          <C>        <C>            <C>
Life Insurance in Force.............  $   4,415,460  $   711,025  $   3,574  $   3,708,009         0.2%
                                      -------------  -----------  ---------  -------------
                                      -------------  -----------  ---------  -------------
  Premiums:
    Life............................         25,939        3,368          6         22,577         0.0%
    Accident and Health.............         22,136        8,034     20,822         34,924        59.6%
    Annuity.........................         27,496          639     --             26,857       --
                                      -------------  -----------  ---------  -------------
                                      -------------  -----------  ---------  -------------
      Total Premiums................  $      75,571  $    12,041  $  20,828  $      84,358        24.7%
                                      -------------  -----------  ---------  -------------
                                      -------------  -----------  ---------  -------------
 
<CAPTION>
 
                                                                                            PERCENTAGE OF
                                                                                               AMOUNT
                                                                                               ASSUMED
DECEMBER 31, 1994                         GROSS         CEDED      ASSUMED        NET          TO NET
- ------------------------------------  -------------  -----------  ---------  -------------  -------------
<S>                                   <C>            <C>          <C>        <C>            <C>
Life Insurance in Force.............  $   4,241,039  $   512,028  $   3,980  $   3,732,991         0.1%
  Premiums:
    Life............................         26,345        3,677         13         22,681         0.1%
    Accident and Health.............         23,622        9,520     20,612         34,714        59.4%
    Annuity.........................         14,892          461     --             14,431       --
                                      -------------  -----------  ---------  -------------
      Total Premiums................  $      64,859  $    13,658  $  20,625  $      71,826        28.7%
                                      -------------  -----------  ---------  -------------
                                      -------------  -----------  ---------  -------------
<CAPTION>
 
                                                                                            PERCENTAGE OF
                                                                                               AMOUNT
                                                                                               ASSUMED
DECEMBER 31, 1993                         GROSS         CEDED      ASSUMED        NET          TO NET
- ------------------------------------  -------------  -----------  ---------  -------------  -------------
<S>                                   <C>            <C>          <C>        <C>            <C>
Life Insurance in Force.............  $   3,726,676  $   667,040  $   4,177  $   3,063,813         0.1%
                                      -------------  -----------  ---------  -------------
                                      -------------  -----------  ---------  -------------
  Premiums:
    Life............................         28,098        3,943        594         24,749         2.4%
    Accident and Health.............         23,625        9,285     18,482         32,822        56.3%
    Annuity.........................         19,679        1,205     --             18,474       --
                                      -------------  -----------  ---------  -------------
      Total Premiums................  $      71,402  $    14,433  $  19,076  $      76,045        25.1%
                                      -------------  -----------  ---------  -------------
                                      -------------  -----------  ---------  -------------
</TABLE>
 
    (b) The maximum amount retained on any one life by the Company is $500,000.
 
    (c)   Reinsurance  recoveries,  which  reduced  death  and  other  benefits,
approximated $7,667,000, $6,720,000 and $8,477,000 respectively, for each of the
years ended December 31, 1995, 1994 and 1993.
 
    The Company's reinsurance  arrangements do  not relieve it  from its  direct
obligation to its insureds.
 
                                      F-20
<PAGE>
           AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
12. TRANSACTIONS WITH RELATED PARTIES
 
    (a)  The  Company  is  party  to  several  reinsurance  agreements  with its
affiliates covering  certain  life  and accident  and  health  insurance  risks.
Premium  income  and commission  ceded to  affiliates  amounted to  $800,000 and
$(3,000), respectively, for the year ended December 31, 1995. Premium income and
commission ceded  for  1994 amounted  to  $574,000 and  $(3,000),  respectively.
Premium  income and commission ceded for 1993 amounted to $849,000 and $(2,000),
respectively.  Premium  income  and  ceding  commission  expense  assumed   from
affiliates  aggregated  $19,679,000  and  $(141,000),  respectively,  for  1995,
compared to $19,331,000 and $98,000, respectively, for 1994, and $17,189,000 and
$5,000, respectively, for 1993.
 
    (b) The Company provides life insurance coverage to employees of the  Parent
and  its domestic subsidiaries in connection  with the Parent's employee benefit
plans. The statement of income includes $4,080,000 in premiums relating to  this
business for 1995, $3,952,000 for 1994, and $3,908,000 for 1993.
 
    (c)  The  Company  is party  to  several  cost sharing  agreements  with its
affiliates. Generally, these agreements provide for the allocation of costs upon
either the specific identification basis or a proportional cost allocation basis
which management believes  to be reasonable.  For the years  ended December  31,
1995,  1994  and 1993,  the Company  was  charged $19,148,000,  $17,401,000, and
$14,907,000, respectively, for expenses attributed  to the Company but  incurred
by  affiliates. During the same period, the Company received reimbursements from
affiliates aggregating $20,920,000,  $19,505,000 and $18,579,000,  respectively,
for costs incurred by the Company but attributable to affiliates.
 
    (d)  The Company received cash surplus  contributions of $78,000,000 in 1993
from AIG, Inc., the  Parent and American Home  Assurance Company, an  affiliated
insurer.
 
    (e)  During 1993, the Company  sold a mortgage loan  to Atlanta 17th Street,
Inc., for the aggregate unpaid principal balance of $17,500,000.
 
    (f) During  1995,  the Company  sold  a mortgage  loan  to AIG  Real  Estate
Investment  and Management Company for the aggregate unpaid principal balance of
$5,000,000.
 
                                      F-21

<PAGE>





                                        PART C



<PAGE>

                                        PART C
                                  OTHER INFORMATION

ITEM 24.      FINANCIAL STATEMENTS AND EXHIBITS.

      a.      FINANCIAL STATEMENTS

              The financial statements of American International Life Assurance
              Company of New York and Variable Account A are included in Part B
              hereof.

      b.      EXHIBITS

               1.  Resolution of Board of Directors of the Company authorizing
                   the establishment of the Variable Account*

               2.  Not Applicable

               3. (i)        Principal Underwriter's Agreement**
                  (ii)       Broker-Dealer Agreement**
                  (iii)      General Agency Agreement***
                  (iv)       Distribution Agreement***

               4. (i)        Individual Single Purchase Payment Deferred
                             Variable Annuity Contracts#
                  (ii)       Individual Single and Flexible Premium (New
                             Contract )

               5.            Application for Annuity Contract#

               6. (i)        Copy of Articles of Incorporation of the Company*
                  (ii)       Copy of the Bylaws of the Company*

               7.            Not Applicable

               8.            Administrative Agreement* (filed confidentially)
               9.            Opinion and Consent of Counsel

              10. (i)        Consent of Counsel
                  (ii)       Consent of Independent Accountants

              11.            Not Applicable

              12.            Agreement Governing Contribution*

              13.            Performance Data***

              14.            Powers of Attorney****

    *    Incorporated by reference to Registrant's initial filing on Form N-4,
         (File No. 33-9144) filed on October 7, 1986.

    **   Incorporated by reference to Registrants Post-Effective Amendment No.
         3 to Form N-4 (File No. 33-9144), filed on May 1, 1989.



                                         II-1

<PAGE>

    ***  Incorporated by reference to Registrants Post-Effective Amendment No.
         4 to Form N-4 (File No. 33-9144), filed on May 1, 1990.

    **** Incorporated by reference to Registrants Post-Effective Amendment No.
         5 (File No. 33-9144), filed on May 1, 1991.

    #    Incorporated by reference to Registrants Post-Effective
         Amendment No. 11 (File No. 33-39170), Filed May 1, 1992.


ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR.

         The following are the Officers and Directors of the Company:

OFFICERS:

Name and Principal                Position and Offices
 Business Address                   with the Company

Ernest E. Stempel(1)              Chairman of the Board
Robert J. O'Connell(2)            President
Michele L. Abruzzo(2)             Senior Vice President
James A. Bambrick(2)              Senior Vice President
Howard Gunton(3)                  Vice President & Comptroller
Jeffrey M. Kestenbaum(2)               Senior Vice President
Robert Liguori(3)                 Vice President and Counsel
Edward E. Matthews(1)             Senior Vice President - Finance
Jerome T. Muldowney(4)            Vice President - Domestic Investments
Michael Mullin(3)                 Vice President
Nicholas A. O'Kulich(1)           Vice President & Treasurer
John R. Skar(3)                   Vice President & Chief Actuary
Gerald W. Wyndorf(2)              Senior Vice President
Elizabeth M. Tuck(1)              Secretary - Corporate
David J. Walsh(1)                 Vice President

    (1)  Business address is:  70 Pine Street, New York, New York 10270
    (2)  Business address is:  80 Pine Street, New York, New York 10005
    (3)  Business address is:  One Alico Plaza, Wilmington, Delaware 19801
    (4)  Business address is:  One Chase Plaza, New York, New York 10005


                                         II-2

<PAGE>

DIRECTORS                         ADDRESS

Peter J. Dalia                    20281 East Country Club Drive
                             Apt. #2212
                             North Miami Beach, Florida 33180

Marion E. Fajen                   5608 North Waterbury Road
                             Des Moines, Iowa 50312

Cecil Gamwell                American International Group, Inc.
                             70 Pine Street
                             New York, New York 10270

M.R. Greenberg                    American International Group, Inc.
                             70 Pine Street
                             New York, New York 10270

J. Ernest Hansen             AIG Marketing, Inc.
                             505 Carr Road
                             Wilmington, Delaware

Dr. Jack Harnes              American International Group, Inc.
                             70 Pine Street
                             New York, New York 10270

John I. Howell                    Indian Rock Corporation
                             P.O. Box 2606
                             Greenwick, Connecticut

Jeffrey Kestenbaum           American International Group, Inc.
                             70 Pine Street
                             New York, New Yorkk 10270

Edwin A. G. Manton           American International Group, Inc.
                             70 Pine Street
                             New York, New York 10270

Jerome Muldowney             American International Group, Inc.
                             70 Pine Street
                             New York, New York 10270

Win J. Neuger                American International Group, Inc.
                             70 Pine Street
                             New York, New York 10270

Robert J. O'Connell                  American International Life Assurance
                             Company of New York
                             80 Pine Street
                             New York, New York 10005


                                         II-3

<PAGE>

DIRECTORS                         ADDRESS

Nicholas A. O'Kulich         American International Group, Inc.
                             70 Pine Street
                             New York, New York 10270

John Skar                         American International Life
                             Assurance Company of New York
                             One Alico Plaza, 600 King Street
                             Wilmington, DE   19801

Ernest E. Stempel            American International Companies
                             70 Pine Street
                             New York, New York 10270

David J. Walsh                    Amaerican International Companies
                             70 Pine Street
                             New York, New York 10005

Geralad W. Wyndorf           American International Companies
                             80 Pine Street
                             New York, New York 10005



ITEM 26.      PERSONS CONTROLLED BY OR UNDER COMMON CONTROL
                    WITH THE DEPOSITOR OR REGISTRANT.


                         See Chart of Ownership



ITEM 27.      NUMBER OF CONTRACT OWNERS.

         There were approximately  653 contractholders as of March 31, 1995.


ITEM 28.      INDEMNIFICATION

         Incorporated by reference to Registrant's initial Form N-4 (File No.
         33-9144) filed  on October 7, 1986.


ITEM 29.      PRINCIPAL UNDERWRITER

         a.        AIG Equity Sales Corp., the principal underwriter for
                   Variable Account A, also acts as the principal underwriter
                   for other separate accounts of the Depositor, and for the
                   separate accounts of AIG Life Insurance Company, an
                   affiliated company.


                                         II-4

<PAGE>

         b.        The following information is provided for each director and
                   officer of the Principal Underwriter:

                   Name and Principal       Positions and Offices
                   BUSINESS ADDRESS*        WITH UNDERWRITER


                   Michele L. Abruzzo       Director and President
                   Kevin Clowe              Director and Vice President
                   Edward E. Matthews       Director and Chairman of
                                            the Board
                   Jerome T. Muldowney      Director
                   Robert J. O'Connell      Director
                   Ernest E. Stempel        Director
                   Kenneth F. Judkowitz     Vice President, Treasurer
                                            and Comptroller
                   Philomena Scamardella    Vice President and Senior
                                            Compliance Officer
                   Julia Perlman            Director of Marketing
                   Florence Davis           Director and General Counsel
                   Elizabeth M. Tuck        Secretary


                   *Business address is:  70 Pine Street, New York, New York
                   10270.


                                         II-5

<PAGE>

<TABLE>
<CAPTION>
 
    c.                                  Net
         Name of                      Underwriting     Compensation
         Principal                   Discounts and      on                   Brokerage
         Underwriter                  Commissions       Redemption          Commissions       Compensation

         <S>                         <C>               <C>                  <C>               <C>
         AIG Equity Sales Corp.        $659,435             $0                  $0                   $0

</TABLE>
 
ITEM 30.      LOCATION OF ACCOUNTS AND RECORDS.

    Kenneth F. Judkowitz, Assistant Vice President of the Company, whose
address is 80 Pine Street, New York, New York 10005, maintains physical
possession of the accounts, books or documents of the Variable Account required
to be maintained by Section 31(a) of Investment Act of 1940 and the rules
promulgated thereunder.


ITEM 31.      MANAGEMENT SERVICES.

    Not Applicable


ITEM 32.      UNDERTAKINGS.

         a.   Registrant hereby undertakes to file a post-effective amendment
              to this registration statement as frequently as is necessary to
              ensure that the audited financial statements in the registration
              statement are never more than sixteen (16) months old for so long
              as payments under the variable annuity contracts may be accepted.

         b.   Registrant hereby undertakes to include either (1) as part of any
              application to purchase a Contract offered by the Prospectus, a
              space that an applicant can check to request a Statement of
              Additional Information, or (2) a postcard or similar written
              communication affixed to or included in the Prospectus that the
              applicant can remove to send for a Statement of Additional
              Information.

         c.   Registrant hereby undertakes to deliver any Statement of
              Additional Information and any financial statements required to
              be made available under this Form promptly upon written or oral
              request.

         d.   Registrant represents that in connection with 403(b) Plans, it is
              relying on the November 28, 1988 no-action letter issued by the
              SEC to the American Council of Life Insurance.

         e.   Registrant represents that Variable Account A meets the
              definition of a separate account under the federal securities
              laws.


                                         II-6

<PAGE>



SUBSIDIARIES OF AMERICAN INTERNATIONAL GROUP, INC.

<TABLE>
<CAPTION>
 
                                                                                    % of Voting
                                                                                    Securities
                                                                                    Owned by its
                                                                   Jurisdiction of  Immediate
Name of Corporation                                                     Incorporation    Parent(1)

- --------------------------------------------------------------------------------------------------

<S>                                                                <C>              <C>
Starr                                                                               Delaware       (2)
SICO                                                                 Panama              (2)
   AIG(Registrant)(3)                                                Delaware            (4)
     AICCO                                                           New Hampshire  100%
     AIG Asset Management Group, Inc.                                Delaware       100%
     AIG Aviation, Inc.                                              Georgia        100%
     AIG Capital Corp.                                               Delaware       100%
     AIG Capital Management Corp.                                    Delaware       100%
     AIG Capital Partners, Inc.                                      Delaware       100%
     AIG Capital Services, Inc.                                      Delaware       100%
     AIG Consumer Finance, Inc.                                      Delaware       100%
     AIG Financial Products Corp.                                    Delaware       100%
     AIG Funding, Inc.                                               Delaware       100%
     AIG Global Investment Group, Inc.                               Delaware       100%
     AIG Life Insurance Company                                      Delaware       78.9%(5)
     AIG Life Insurance Company of Puerto Rico                       Puerto Rico    100%
     AIG Marketing, Inc.                                             Delaware       100%
     AIG Realty, Inc.                                                New Hampshire       (6)
         American International Realty Corp.                         Delaware       100%
     AIG Risk Management, Inc.                                       New York       !00%
     AIG Trading Group Inc.                                          Delaware        80%
     AIU Insurance Company                                           New York        52%(7)
     AIU North America, Inc.                                         New York       100%
     American International Underwriters Corporation                 New York       100%
     American Home                                                   New York       100%
        AIG Hawaii Insurance Company, Inc.                           Hawaii         100%
        American International Insurance Company                     New York       100%
           American International Insurance Company of California    California     100%
           Minnesota Insurance Company                               Minnesota      100%
        Transatlantic Holdings, Inc.                                 Delaware       34.12%
     American International Group Data Center, Inc.                  New Hampshire  100%
     American International Life Assurance Company of New York       New York       77.52%
     American International Reinsurance Company Limited              Bermuda        100%
        AIA                                                          Hong Kong      100%
           Australian American Assurance Company Limited             Australia      100%
        American International Assurance Company (Bermuda) Limited   Bermuda        100%
        Nan Shan Life Insurance Company, Ltd.                        Taiwan         94.12%
     AIUO                                                            Bermuda        100%
        AIG Europe (Ireland) Ltd.                                    Ireland        100%

</TABLE>
 

    4/24/96                              II-7

<PAGE>


SUBSIDIARIES OF REGISTRANT-- (CONTINUED)

<TABLE>
<CAPTION>
 
                                                                                                          % of Voting
                                                                                                          Securities
                                                                                                          Owned by its
                                                                                    Jurisdiction of       Immediate
Name of Corporation                                                                      Incorporation         Parent(1)

- -------------------------------------------------------------------------------------------------------------------

<S>                                                                                 <C>                   <C>
        Universal Insurance Co., Ltd.                                               Thailand              100%
        Interamericana Compania de Seguros Gerais (Brazil)                          Brazil                100%
        La Seguridad de Centroamerica, Compania de Seguros, Sociedad Anonima        Guatemala             100%
        American International Insurance Company of Puerto Rico                     Puerto Rico           100%
        La Interamerica Compania de Seguros Generales S.A.                          Colombia              100%
        American International Underwriters G.m.b.H.                                Germany               100%
        Underwriters Adjustment Company, Inc.                                       Panama                100%
     American Life Insurance Company                                                Delaware              100%
        Kenya American Insurance Company Limited                                    Kenya                 100%
        ALICO                                                                       France                89%
     Birmingham Fire Insurance Company of Pennsylvania                              Pennsylvania          100%
     China America Insurance Company, Ltd.                                          Delaware               50%
     Commerce and Industry Insurance Company                                        New York              100%
     Commerce and Industry Insurance Company of Canada                              Ontario               100%
     Delaware American Life Insurance Company                                       Delaware              100%
     Hawaii Insurance Consultants, Ltd.                                             Hawaii                100%
     The Insurance Company of the State of Pennsylvania                             Pennsylvania          100%
     Landmark Insurance Company                                                     California            100%
     La Metropolitana de Seguros, C. por A.                                         Dominican Republic    100%
     Mt. Mansfield Company, Inc.                                                    Vermont               100%
     National Union                                                                 Pennsylvania          100%
        American International Specialty Lines Insurance Company                    Alaska                 70%(10)
        International Lease Finance Corporation                                     California            100%
        Lexington                                                                   Delaware               70%(10)
           JI Accident & Fire Insurance Co. Ltd.                                    Japan                 50%
        National Union Fire Insurance Company Louisiana                             Louisiana             100%
     NHIG Holding Corp.                                                             Delaware              100%
        Audubon Insurance Company                                                   Louisiana             100%
           Audubon Indemnity Company                                                Mississippi           100%
           Agency Managament Corporation                                            Louisiana             100%
              The Gulf Agency, Inc.                                                 Alabama               100%
        New Hampshire                                                               Pennsylvania          100%
           AIG Europe, S.A.                                                         France                    (11)
           A.I. Network Corporation                                                 New Hampshire 100%
              Marketpae International, Inc.                                         Delaware              100%
           American International Pacific Insurance Company                         Colorado              100%
           American International South Insurance Company                           Pennsylvania          100%
           Granite State Insurance Company                                          Pennsylvania          100%
           New Hampshire Indemnity Company, Inc.                                    Pennsylvania          100%

</TABLE>
 

    4/24/96                              II-8

<PAGE>

SUBSIDIARIES OF REGISTRANT-- (CONTINUED)

<TABLE>
<CAPTION>
 
                                                                                              % of Voting
                                                                                              Securities
                                                                                              Owned by its
                                                                          Jurisdiction of     Immediate
Name of Corporation                                                            Incorporation       Parent(1)

- --------------------------------------------------------------------------------------------------------------

<S>                                                                       <C>                 <C>
           Illinois National Insurance Co.                                Illinois            100%
           New Hampshire Insurance services, Inc.                         New Hampshire       100%
     PHILAM                                                               Phillipines         99%
       Pacific Union Assurance Company                                    California          100%
       The Philippine American General Insurance Company, Inc.            Philippines         1005
           Philam Insurance Company, Inc.                                 Philippines         100%
           The Philippine American Assurance Company, Inc.                Philippines         25%
Risk Specialist Companies, Inc.                                           Delaware            100%
Picino Societa d' Assicurazioni Sulla Vita                                Switzerland         99.8%
20th Century Insurance Company of Arizona                                 Arizona             51%
UeberseeBank, AG                                                          Switzerland         100%
UGC                                                                       North Carolina      36.31%(12)
   United Guaranty Residential Insurance Company of North Carolina        North Carolina      100%
   United Guaranty Residential Insurance Company                          North Carolina         75%(13)
     United Guaranty Commercial Insurance Company of North Carolina       North Carolina      100%
     United Guaranty Commercial Insurance Company                         North Carolina      100%
     United Guaranty Credit Insurance Company                             North Carolina      100%
United Guaranty Services, Inc.                                            North Carolina      100%

- --------------------------------------------------------------------------------------------------------------

</TABLE>
  
Percentages include directors' qualifying shares.  The directors and officers of
AIG as a group own 88.17 the percent of the voting common stock of Starr and
81.82 percent of the voting stock of SICO.  Six of the directors of AIG also
serve as directors of Starr and SICO.  All subsidiaries listed except for
minority-owned Transatlantic Holdings, Inc., which is included under the equity
method, are consolidated in the accompanying financial statements.  Certain
subsidiaries have been omitted form the tabulation.  The omitted subsidiaries,
when considered in the aggregate as a single subsidiary, do not constitute a
significant subsidiary.  The common stock is owned 16.0 percent by SICO.  2.4
percent by Starr and 3.5 percent by the Starr Foundation.  Also owned 21.1
percent by Commerce & Industry Insurance Company.

(6)  Owned by 13 AIG subsidiaries.
(7)  Also owned 8 percent by the Insurance Company of the State of Pennsylvania,
     32 percent by National Union, and 8 percent by Birmingham.
(8)  Also owned 14.16 percent by American International Group, Inc.
(9)  Also owned 22.48% by American Home.
(10) Also owned 20 percent by the Insurance Company of the State of Pennsylvania
     and 10 percent by Birmingham.
(11) 100 percent to be held with other AIG companies.
(12) Also owned 45.88 percent by National Union, 16.95 percent by New Hampshire
     and 0.86 percent by the Insurance Company of the State of Pennsylvania
(13) Also owned 25 percent by the United Guaranty Residential Insurance Company
     of North Carolina


    4/24/96                              II-9

<PAGE>

                                      SIGNATURES


    As required by the Securities Act of 1933 and the Investment Company Act
of 1940, the Registrant certifies that it meets the requirements of Securities
Act Rule 485 for effectiveness of this Registration Statement and has caused
this Registration Statement to be signed on its behalf, in the City of
Wilmington, and State of Delaware on this  26th  day of April, 1996.

                                  Variable Account A
                                  ------------------
                                     Registrant


                           By:    /s/ James A. Bambrick
                                  ---------------------------------------
                                  James A. Bambrick, Senior Vice President


                           By:    American International Life Assurance
                                  -------------------------------------
                                  Company of New York
                                  -------------------
                                      Depositor


                           By:    /s/ James A. Bambrick
                                  ---------------------
                                  James A. Bambrick
                                  Senior Vice President


                                        II-10

<PAGE>

    As required by the Securities Act of 1933, this registration statement has
been signed by the following persons in the capacities and on the date
indicated.

Name                                        Title                    Date
- ----                                        -----                    ----

Peter J. Dalia*         Director                      April 26, 1996
- -----------------
Peter J. Dalia

Marion E. Fajen*             Director                      April 26, 1996
- -------------------
Marion E. Fajen

Cecil Gamwell*               Director                      April 26, 1996
- --------------
Cecil Gamwell

M.R. Greenberg*         Director                      April 26, 1996
- ---------------
M.R. Greenberg

J. Ernest Hanson*       Director                      April 26, 1996
- -----------------
J. Ernest Hanson

Dr. Jack Harnes*        Director                      April 26, 1996
- ---------------
Dr. Jack Harnes

John I. Howell*         Director                      April 26, 1996
- ---------------
John I. Howell

Jeffrey Kestenbaum*          Director                      April 26, 1996
- ------------------
Jeffrey Kestenbaum

Edwin A.G. Manton*      Director                      April 26, 1996
- -----------------
Edwin A. G. Manton

Jerome Muldowney*       Director                      April 26, 1996
- -----------------
Jerome Muldowney

Win J. Neuger*               Director                      April 26, 1996
- -------------
Win J. Neuger

Nicholas A. O'Kulich*   Director, Treasurer and       April 26, 1996
- ---------------------
Nicholas A. O'Kulich    Chief Financial Officer

John Skar*              Director                      April 26, 1996
- ----------
John Skar

Ernest E. Stempel*      Director and                  April 26, 1996
- -------------------
Ernest E. Stempel       Chairman of the Board

________________        Director
- ----------------
David J. Walsh

Gerald W. Wyndorf*      Director                      April 26,1996
- -----------------
Gerald W. Wyndorf


                                        II-11

<PAGE>

Name                                        Title                    Date
- ----                                        -----                    ----

Robert J. O'Connell*    Director and                  April 26, 1996
- -------------------
Robert J. O'Connell          President



                                            *By: /s/ James A. Bambrick
                                                 ---------------------
                                                 James A. Bambrick
                                                 Attorney in Fact


                                        II-12


<PAGE>


                                     EXHIBITS TO
                                AMENDMENT NUMBER 7 TO
                                       FORM N-4
                                         FOR
                                  VARIABLE ACCOUNT A


<PAGE>

                                  INDEX TO EXHIBITS


EXHIBIT                                                                     PAGE

4(ii)      Individual Single and Flexible Premium Contract

9          Opinion of Counsel

10 (i)     Consent of Counsel
   (ii)    Consent of Independent Accountants

<PAGE>


                                    Exhibit 4(ii)
                            Individual Single and Flexible
                                   Premium Contract


<PAGE>

[Logo]             American International Life Assurance
                   Company of New York
                   80 Pine Street
                   New York, New York 10270
                   A capital stock company

This is a legal contract issued in consideration of the payment of the Initial
Premium.  We will make annuity payments to the Annuitant as set forth in this
contract beginning on the Annuity Date.


READ YOUR CONTRACT CAREFULLY


RIGHT TO CANCEL THIS CONTRACT


This contract may be returned within 10 days after You receive it.  It can be
mailed or delivered to either Us or Our agent.  Return of this contract by mail
is effective as of the date of its postmark, properly addressed and postage
pre-paid.  The returned contract will be treated as if We had never issued it.
We will promptly refund the Contract Value as of the date of return; this may be
more or less than the Premium paid.

This is a variable annuity contract.  Annuity payments and Contract Value may
increase or decrease depending on the experience of the Variable Account
identified in the Contract Schedule.

Signed by the Company:


     /s/ Elizabeth M. Tuck             /s/ R. J. O'Connell
              Secretary                          President



                              DRAFT DATED APRIL 23, 1996



                     INDIVIDUAL FLEXIBLE PREMIUM VARIABLE ANNUITY
                                   NONPARTICIPATING


<PAGE>


                                  TABLE OF CONTENTS

                                                                PAGE
              CONTRACT SCHEDULE                                 3
              DEFINITIONS                                       5
              GENERAL PROVISIONS                                6
              OWNERSHIP PROVISIONS                              7
              BENEFICIARY PROVISIONS                            7
              PREMIUM PROVISIONS                                7
              VARIABLE ACCOUNT                                  8
              GUARANTEED ACCOUNT                                9
              TRANSFERS                                         10
              MARKET VALUE ADJUSTMENT                           11
              CONTRACT CHARGES                                  11
              ANNUITY PROVISIONS                                12
              ANNUITY OPTIONS                                   12
              DEATH BENEFIT                                     14
              SURRENDER PROVISIONS                              15
              DELAY OF PAYMENTS                                 16
              FIXED OPTIONS TABLE                               17
              VARIABLE OPTIONS TABLE                            18


                                          2

<PAGE>


                                  CONTRACT SCHEDULE



CONTRACT NUMBER:  (       )            INITIAL PREMIUM:             ($5,000)

OWNER(S):        (JOHN DOE)            MINIMUM SUBSEQUENT PREMIUM:  ($1,000)

ANNUITANT:       (JOHN DOE)

BENEFICIARY:     (JANE DOE)

EFFECTIVE DATE:   (       )

ANNUITY DATE:     (       )

CONTRACT MAINTENANCE CHARGE:  [$30.00] each Contract Year [This charge will be
waived for each year that the Contract Value exceeds $50,000 on the Contract
Anniversary.]

ADMINISTRATIVE CHARGE:  Equal on an annual basis to [.15%] of the average daily
net assets of the Variable Account.

MORTALITY AND EXPENSE RISK CHARGE:  Equal on an annual basis to [1.25%] of the
average daily net assets of the Variable Account.

ACCIDENTAL DEATH BENEFIT CHARGE:  Equal on an annual basis to [.10%] of the
average daily net assets of the Variable Account.

TRANSFER FEE:  [$30.00]  However, we will not make a charge for the first [12]
transfers in any policy year.

SURRENDER CHARGE:

<TABLE>
<CAPTION>

Number of Complete
Years Since Premium                    Percentage of
      Payment                             Premium
<S>                                     <C>
        0                                    6%
        1                                    6%
        2                                    5%
        3                                    5%
        4                                    4%
        5                                    3%
        6                                    2%
        7                                    0%

</TABLE>

SEPARATE ACCOUNT:  [Variable Account I]


                                          3

<PAGE>

                                  CONTRACT SCHEDULE


ELIGIBLE INVESTMENTS:

                                            Initial Premium Allocation
Alliance Variable Products Series Fund
     Money Market Portfolio                            %
     Growth Portfolio
     Global Bond Port
     US Govt./High Grade Corp. Bond Port
     Global Dollar Port
     Total Return Port
     Growth Investors Port
     North American Govt. Income Port
     Growth & Income Port
     International Port
     Short-Term Multi-Market Port
     Utility Port
     Premier Growth Port
     Conservative Investors Port
     World Privatization Port

Guaranteed Account
     One Year
     Three Year
     Six Year
     Ten Year

ANNUITY SERVICE OFFICE:

              American International Life Assurance Company of New York
                        c/o Delaware Valley Financial Services
                                   300 Berwyn Park
                                    P.O. Box 3031
                                Berwyn, PA  19312-0031
                                    (800) 255-8402


                                          4

<PAGE>

- --------------------------------------------------------------------------------


                                     DEFINITIONS


ACCUMULATION UNIT - An accounting unit of measure used to calculate the Contract
Value prior to the Annuity Date.

ADMINISTRATIVE OFFICE - The Annuity Service Office of the Company as designated
on the Contract Schedule.

ANNUITANT - The person designated by the Owner upon whose continuation of life
any annuity payment involving life contingencies depends.

ANNUITY DATE - The date on which annuity payments are to commence.

ANNUITY OPTION - An arrangement under which annuity payments are made under this
contract.

ANNUITY UNIT - An accounting unit of measure used to calculate annuity payments
after the Annuity Date.

CONTRACT ANNIVERSARY - An anniversary of the Effective Date of this contract.

CONTRACT VALUE - The dollar value as of any Valuation Date of all amounts
accumulated under this contract.

CONTRACT YEAR - Each  period of twelve (12) months commencing with the Effective
Date.

EFFECTIVE DATE - The date shown on the Contract Schedule on which the first
Contract Year begins.

ELIGIBLE INVESTMENT(S) - Those investments available under the contract.
Eligible Investments, at the time  this contract is issued, are shown on the
Contract Schedule.

GUARANTEED ACCOUNT - A part of Our General Account which earns a Guaranteed Rate
of interest.

INJURY - Bodily injury caused by an accident which occurs while coverage under
the Accidental Death Benefit is in force, and resulting, directly and
independently from all other causes, in death.

MARKET VALUE ADJUSTMENT - An adjustment applied as a result of a transfer or
surrender of an amount allocated to the Guaranteed Account which occurs on a
date prior to the end of an applicable Guarantee Period.

OWNER - The Owner is named in the Contract Schedule, unless changed, and has all
rights under this contract.

PREMIUM - Purchase payments are referred to in this contract as Premiums.

SUBACCOUNT - A division of the Variable Account established to invest in a
particular portfolio of Eligible Investments.

VALUATION DATE - Each day that the New York Stock Exchange is open for trading.

VALUATION PERIOD - The period between the close of business of the New York
Stock Exchange on any Valuation Date and the close of business for the next
succeeding Valuation Date.

VARIABLE ACCOUNT - The Separate Account designated on the Contract Schedule.

WE, OUR, US - American International Life Assurance Company of New York.

YOU, YOUR - The Owner of this contract.


                                          5

<PAGE>

- --------------------------------------------------------------------------------


                                  GENERAL PROVISIONS


THE CONTRACT - The entire contract consists of this form and any attached
endorsement, rider or application.  This contract may be changed or altered only
by Our President or Secretary.  Any change, modification or waiver must be made
in writing.

NON-PARTICIPATION IN SURPLUS - This contract does not share in any distribution
of Our profits or surplus.

INCONTESTABILITY - This contract is not contestable.

MISSTATEMENT OF AGE OR SEX - We will require proof of age of the Annuitant
before making any life annuity payment provided for by this contract.  If the
age or sex of the Annuitant has been misstated, the amount payable will be the
amount that the Contract Value would have provided at the true age or sex.

Once annuity payments have begun, any underpayments will be made up in one sum
with the next annuity payment and will include interest at the annual rate of 3%
unless a higher interest rate is required by the law of the jusridiction where
this contract is issued.  Overpayments will be deducted from future annuity
payments until the total is repaid and will include interest at the annual rate
of 3% unless a higher interest rate is required by the law of the jurisdiction
where this contract is issued.

CONTRACT SETTLEMENT - This contract must be returned to Us at the start of
annuity payments, upon surrender of this contract for its Surrender Value or
upon settlement as a death claim.  Prior to any settlement as a death claim, due
proof of death must be submitted to Us.  If any payment is not made in a lump
sum, a supplementary contract will be issued.

REPORTS - We will furnish You with a report showing the Contract Value at least
once each calendar year.  We will also furnish an annual report of the Variable
Account.  These reports will be sent to Your last known address.

TAXES - Any taxes paid to any governmental entity will be charged against the
Premiums or the Contract Value, depending upon the Owner's state of residence.
We may, at Our sole discretion, pay taxes when due and deduct that amount from
the Contract Value at a later date.  Payment at an earlier date does not waive
any right We may have to deduct amounts at a later date.

EVIDENCE OF SURVIVAL - Where any benefits under this contract are contingent
upon the recipient being alive on a given date, We will require proof
satisfactory to Us that the condition has been met.

PROTECTION OF PROCEEDS - No Beneficiary or payee may commute, or assign any
payments under this contract before they are due.  To the extent permitted by
law, no payments will be subject to the debts any Beneficiary or payee nor to
any judicial process for payment of those debts.

MODIFICATION OF CONTRACT - This contract may not be modified by Us, without Your
consent except as may be required by applicable law.  If the state insurance
laws or regulations, the federal securities or tax laws or regulations, or any
regulations under which  this contract would qualify as an annuity change, We
will amend  this contract to comply with these changes.


                                          6

<PAGE>

- --------------------------------------------------------------------------------


                                 OWNERSHIP PROVISIONS


OWNER - The Owner is named in the Contract Schedule.

The Owner may exercise all the rights of this contract, subject to the rights
of:

1.  any assignee under an assignment filed with Our Administrative Office; and

2.  any irrevocably named Beneficiary.

TRANSFER OF OWNERSHIP - You may transfer Ownership of this contract.  A written
request, dated and signed by You, must be sent to Our Administrative Office.  We
may require this contract for endorsement.  The transfer will take effect as of
the date the request was signed.

Transfer of Ownership does not change the Beneficiary, nor transfer the
Beneficiary's interest.  Any change or transfer of Ownership is subject to any
payment made by Us before endorsement.

ASSIGNMENT - You may assign this contract.  A copy of any assignment must be
filed with Our Administrative Office.  We are not responsible for the validity
of any assignment.  If You assign this contract, Your rights and those of any
revocably-named person will be subject to the assignment.  If this contract is
purchased in connection with a plan intended to qualify under sections 401, 403,
or other similar tax treatment provisions of the Internal Revenue Code, it may
not be assigned as security or for any other purpose.  An assignment will not
affect any payments We may make or actions We may take before such assignment
has been recorded at Our Administrative Office.  A change in ownership or an
assignment may result in adverse tax consequences.


- --------------------------------------------------------------------------------


                                BENEFICIARY PROVISIONS


BENEFICIARY - The Beneficiary will receive the death benefit.  The Beneficiary
is named in the Contract Schedule.

DEATH OF BENEFICIARY - If no named beneficiary is living at the time a death
benefit becomes payable We will pay the death benefit to You if You are living,
or if You are not living to Your estate.

CHANGE OF BENEFICIARY - To change a beneficiary, a written request for a change
of beneficiary, dated and signed by You, must be received at Our Administrative
Office.  If the request is received at Our Administrative Office after the death
of the Owner, it will be effective only if no payment has been made.  After the
change is recorded, it will take effect as of the date the request was signed.


- --------------------------------------------------------------------------------


                                  PREMIUM PROVISIONS


PREMIUM - The Initial Premium is due on or before the Effective Date.
Thereafter, Premiums may be made at any time, in an amount equal to or greater
than the Minimum Subsequent Premium amount, shown on the Contract Schedule page.

ALLOCATION OF PREMIUM PAYMENTS - Premiums may be allocated to one or more of the
Subaccounts of the Variable Account or to the Guaranteed Account.  Whole
percentages must be used.  The allocation of the Initial Premium is shown on the
Contract Schedule.  You may change the allocation by written request at any
time.  Any subsequent Premium received will be allocated in accordance with the
most recently received allocation instructions.


                                          7

<PAGE>

- --------------------------------------------------------------------------------


                                   VARIABLE ACCOUNT


GENERAL DESCRIPTION - The name of the Variable Account is shown in the Contract
Schedule.  The assets of the Variable Account and each Subaccount are Our
property but are not chargeable with the liabilities arising out of any other
business We may conduct, except to the extent that Variable Account assets
exceed Variable Account liabilities arising under the contracts supported by the
Variable Account.  The Variable Account and each Subaccount is separate from the
Our General Account and any other separate account or Subaccount We may have.

INVESTMENT ALLOCATIONS TO THE VARIABLE ACCOUNT - The Variable Account consists
of Subaccounts and each Subaccount may invest its assets in a separate class of
shares of a designated investment company or companies.

We have the right to change, add or delete designated investment companies.  We
have the right to add or remove Subaccounts.  We also have the right to combine
any two or more Subaccounts.

VALUATION OF ASSETS - Assets within each Subaccount will be valued at their net
asset value on each Valuation Date.

CONTRACT VALUE - Premiums are allocated among the various Subaccounts within the
Variable Account.  For each Subaccount, the Premiums are converted into
Accumulation Units.  The number of Accumulation Units credited to the contract
is determined by dividing the Premiums allocated to the Subaccount by the value
of the Accumulation Unit for the Subaccount.  Surrenders will result in the
cancellation of Accumulation Units.  The value of the contract is the sum of the
values for the contract within each Subaccount and the Guaranteed Account.  The
value of each Subaccount is determined by multiplying the number of Accumulation
Units attributable to the Subaccount by the Accumulation Unit value for the
Subaccount, independent of the value of any other Subaccount.

ACCUMULATION UNIT VALUES - The value of an Accumulation Unit will vary in
accordance with the investment experience of the underlying portfolio in which
the Subaccount invests.  The value of Accumulation Units is expected to increase
or decrease from Valuation Period to Valuation Period.  The value of
Accumulation Units in each Subaccount will change daily to reflect the
investment experience of the corresponding underlying portfolio as well as the
daily deduction of the Contract Charges.  The number of Accumulation Units
credited to a Contract will not change as a result of any fluctuations in the
value of an Accumulation Unit.


- --------------------------------------------------------------------------------


                                  GUARANTEED ACCOUNT


GENERAL DESCRIPTION - The Guaranteed Account is a part of Our General Account.
The amount You have in the Guaranteed Account at any time is a result of
Premiums You have allocated to it or any part of Your Contract Value you have
transferred to it.

GUARANTEE PERIODS - The portion of Your Contract Value within the Guaranteed
Account is credited with interest at rates guaranteed by Us for the Guarantee
Period(s) selected.  Interest is credited on a daily basis at the then
applicable effective guaranteed interest rate for the applicable Guarantee
Period.  You may select from one or more Guarantee Periods which we offer at any
particular time.  We reserve the right at any time to add or delete Guarantee
Periods.  If You have allocated any part of Your Initial Premium to a Guarantee
Period, the amount allocated, as well as the duration of the Guarantee Period is
shown on the Contract Schedule.

The guaranteed interest rate applicable to an allocation of Premium or transfer
of Contract Value to a Guarantee Period is the rate in effect for that Guarantee
Period at the time of the allocation or transfer.  If You have allocated or
transferred amounts at different times to the Guaranteed Account, each
allocation or transfer may have a unique effective guaranteed interest rate
associated with that amount.  We guarantee that the effective annual rate of
interest for the Guaranteed Account, including any of the Guaranteed Periods,
will not be less than 3%.


                                          8

<PAGE>

- --------------------------------------------------------------------------------


                                      TRANSFERS


During the Accumulation Period, or after the Annuity Date provided a variable
Annuity Option was selected, You may transfer all or part of Your interest in a
Subaccount or allocated to a Guarantee Period of the Guaranteed Account to
another Subaccount or Guarantee Period of the Guaranteed Account.  However,
after the Annuity Date no transfers may be made between a Subaccount and the
Guaranteed Account.  The Transfer Fee  is  shown on the Contract Schedule.
Transfers from one Guarantee Period to another may also be subject to a Market
Value Adjustment.

All transfers are subject to the following:

1. The deduction of any Transfer Fee that may be imposed is shown in the
   Contract Schedule.  The Transfer Fee will be deducted from the amount which
   is transferred.  However, no Transfer Fee will be imposed on transfers
   resulting from the expiration of a Guarantee Period.

2. If We have not received transfer instructions prior to the end of a
   Guarantee Period in which You have Contract Value, We will automatically
   transfer it to a new Guarantee Period of the same duration and under the
   same restrictions as if You had requested such transfer.  However, if a new
   Guarantee Period of the same duration is not available, then that portion of
   Your Contract Value will be transferred to the Guarantee Period next
   shortest in duration.

3. The minimum amount which may be transferred is the lesser of (A) $1,000 or
   (B) Your entire interest in the Subaccount or in the amount allocated to the
   Guarantee Period of the Guaranteed Account.

4. No partial transfer will be made if, as a result of such transfer, Your
   remaining Contract Value in the Subaccount or in the amount allocated to the
   Guarantee Period of the Guaranteed Account would be less than $1,000.

5. Transfers will be effected during the Valuation Period next following
   receipt by Us of a written transfer request containing all required
   information.  However, no transfer may be made effective within seven
   calendar days of the date on which any annuity payment is due.

6. Any transfer request must clearly specify:

   a.  the amount which is to be transferred; and

   b.  the Subaccounts or Guarantee Period of the Guaranteed Account which are
       to be affected.

7. After the Annuity Date, transfers may not take place between a fixed Annuity
   Option and a variable Annuity Option.


                                          9

<PAGE>

- --------------------------------------------------------------------------------


                               MARKET VALUE ADJUSTMENT


A surrender or transfer ("redemption") of any portion of the Contract Value
allocated to the Guaranteed Account may be subject to a Market Value Adjustment
if the redemption occurs one year or more prior to the expiration of the
applicable Guarantee Period.

MARKET VALUE ADJUSTMENT FACTOR - The Market Value Adjustment is calculated by
multiplying the amount to be redeemed from a Guarantee Period by the Market
Value Adjustment Factor determined from the following formula:

 .75 x (A-B) x (N/12) = Market Value Adjustment Factor, where:

A =  the guaranteed interest rate applicable to the portion of the Contract
     to be redeemed.

B =  the guaranteed rate of interest currently available for a Guarantee Period
     equal in duration to the Guarantee Period from which the Contract Value is
     being redeemed.  If no such Guarantee Period is then currently available,
     "B" will be calculated by straight line interpolation between the
     guaranteed interest rates then available nearest in duration to the time 
     remaining in the Guarantee Period from which the redemption is to be made,
     unless either a longer or a shorter Guarantee Period is unavailable.  In 
     such event, "B" will be equal to the guaranteed rate of interest currently
     available for a Guarantee Period closest in duration to the Guarantee
     Period from which the Contract Value is being redeemed.

N =  The number of complete and partial months remaining to the end of the
     applicable Guarantee Period.

In situations where "A" is greater than "B", the Market Value Adjustment will be
added to the amount redeemed.  Alternatively, if "B" is greater than "A", the
Market Value Adjustment will be subtracted from the amount redeemed.

MINIMUM SURRENDER VALUE - The minimum surrender value for amounts allocated to a
Guarantee Period of the Guaranteed Account is the amount allocated to that
Guarantee Period (less surrenders) with interest compounded annually at the rate
of 3%, reduced by any applicable Deferred Sales Charge.


- --------------------------------------------------------------------------------


                                   CONTRACT CHARGES


MORTALITY AND EXPENSE RISK CHARGE - We deduct a Mortality And Expense Risk
Charge equal, on an annual basis, to the amount shown on the Contract Schedule.
We guarantee that the dollar amount of each annuity payment after the first will
not be affected by variations in mortality or expense experience.

ADMINISTRATIVE EXPENSE CHARGE - We deduct an Administrative Expense Charge
equal, on an annual basis, to the amount shown on the Contract Schedule.  The
Administrative Expense Charge compensates Us for some of the costs associated
with the administration of this contract and the Variable Account.

CONTRACT MAINTENANCE CHARGE - We deduct an annual Contract Maintenance Charge
shown on the Contract Schedule. The Contract Maintenance Charge will be deducted
from the Contract Value on each Contract Anniversary while this contract is in
force.  Prior to the Annuity Date, the Contract Maintenance Charge will be
deducted from the Contract Value by canceling Accumulation Units.  The number of
Accumulation Units to be canceled will be from each applicable Subaccount in the
ratio that the value of each Subaccount bears to the total Contract Value.

If this contract is surrendered for its full Surrender Value on other than a
Contract Anniversary, the full Contract  Maintenance Charge due on the next
Contract Anniversary will be deducted at the time of surrender.

On and after the Annuity Date, the Contract  Maintenance Charge will be
pro-rated and collected on a monthly basis and this will result in a reduction
of the monthly annuity payments.


                                          10

<PAGE>

- --------------------------------------------------------------------------------


                                  ANNUITY PROVISIONS


CHANGE IN ANNUITY DATE - You may, upon at least thirty (30) days prior written
notice to Us, at any time prior to the Annuity Date, change the Annuity Date
shown on the Contract Schedule. The Annuity Date must always be the first day of
a calendar month.  Unless We approve otherwise, the new Annuity Date must be at
least one year after the effective Date.  The latest Annuity Date is the first
day of the first calendar month following the Annuitant's 90th birthday or such
earlier date as may be set by applicable law.


- --------------------------------------------------------------------------------


                                   ANNUITY OPTIONS


SELECTION OF ANNUITY OPTION - You may, upon at least thirty (30) days prior
written notice to Us, at any time prior to the Annuity Date, select and/or
change the Annuity Option.  The Annuity Option you select may be on a fixed or
variable basis, or a combination thereof.  We may, at the time of election of an
Annuity Option, offer more favorable rates in lieu of those here guaranteed.  We
may also make available other options.

OPTION 1 - LIFE INCOME.  Monthly annuity payments are paid during the life of an
Annuitant ceasing with the last Annuity Payment due prior to the Annuitant's
death.

OPTION 2 - LIFE INCOME WITH 10 YEAR GUARANTEE.  Monthly annuity payments are
paid during the life of an Annuitant, but at least for  a 10 year minimum
period.

OPTION 3 - JOINT AND LAST SURVIVOR ANNUITY.  Monthly annuity payments are paid
during the joint lifetime of the Annuitant and a designated second person and
are paid thereafter during the remaining lifetime of the survivor ceasing with
the last annuity payment due prior to the survivor's death.


- --------------------------------------------------------------------------------


FIXED OPTIONS

The amount of each fixed annuity payment is determined by multiplying the
available Contract Value (after the deduction of any premium taxes not
previously deducted) by the factor in the Fixed Option Table for the option
chosen, using the age and sex of the Annuitant and Joint Annuitant, if any,
divided by 1,000.


- --------------------------------------------------------------------------------


VARIABLE OPTIONS

The amount of the first variable annuity payment depends on the Annuity Option
elected and the age and sex of the Annuitant.  This contract contains a Variable
Options Table indicating the dollar amount of the first monthly payment under
each optional annuity form for each $1,000 of value applied.  The tables are
determined from the 1983 Individual Annuitant Mortality Table with interest at
the rate of 5% per annum.  If, when annuity payments are elected, We are using
tables of annuity rates for these contracts which result in larger annuity
payments, We will use those tables instead.

The 5% interest rate assumed in the annuity tables would produce level annuity
payments if the net investment rate remained constant at 5% per year.
Subsequent payments will be less than, equal to, or greater than the first
payment depending upon whether the actual net investment rate is less than,
equal to, or greater than 5%.


                                          11

<PAGE>

- --------------------------------------------------------------------------------


                             ANNUITY OPTIONS (CONTINUED)


The dollar amount of the first variable annuity payment is determined by
applying the available value (after deduction of any premium taxes not
previously deducted) to the table using the age and sex of the Annuitant and any
joint Annuitant.  The number of Annuity Units is then determined by dividing
this dollar amount by the then current Annuity Unit value.  Thereafter, the
number of Annuity Units remains unchanged during the period of annuity payments.
This determination is made separately for each Subaccount of the Variable
Account.  The number of Annuity Units is determined for each Subaccount and is
based upon the available value in each Subaccount as of the date annuity
payments are to begin.  The dollar amount determined for each Subaccount will
then be aggregated for purposes of making payments.

The dollar amount of the second and later variable annuity payments is equal to
the number of Annuity Units determined for each Subaccount times the Annuity
Unit value for that Subaccount as of the due date of the payment.  This amount
may increase or decrease from month to month. The value of an Annuity Unit for a
Subaccount is determined by subtracting 2. from 1. and dividing the result by 3.
and multiplying the result by .99986303 (.99986303 is the daily factor to
neutralize the assumed net investment rate, discussed above, of 5% per annum
which is built into the annuity rate tables below and which is not applicable
because the actual net investment rate is credited instead) where:

1. is the net result of:

   a)  the assets of the Subaccount attributable to the Annuity Units; plus or
       minus

   B)  the cumulative charge or credit for taxes reserved which is determined
       by Us to have resulted from the operation of the Subaccount.

2. is the cumulative unpaid charge for the Mortality and Expense Risk Charge
   and for the Administrative Expense Charge, which are shown in the Contract
   Schedule; and

3. is the number of Annuity Units outstanding at the end of the Valuation
   Period.

The value of an Annuity Unit may increase or decrease from Valuation Period to
Valuation Period.


                                          12

<PAGE>

- --------------------------------------------------------------------------------


                                    DEATH BENEFIT


DEATH OF THE OWNER - In the event of Your death prior to the Annuity Date, a
death benefit is payable to the Beneficiary.  The value of the death benefit
will be determined as of the date We receive proof of death in a form acceptable
to Us.  If there has been a change of Owner, the death benefit will be the
Contract Value.  Otherwise, We will pay the death benefit equal to the greatest
of:

1. the total of all Premiums paid, less surrenders;

2. the Contract Value on the date We receive proof of death;

3. the greatest Contract Value at any seventh Contract Anniversary prior to
   Your 76th birthday, plus any Premium paid and less any surrenders subsequent
   to that Contract Anniversary.

The Beneficiary may elect the death benefit to be paid as follows:

1. payment of the entire death benefit within 5 years of the date of the
   Owner's death; or

2. payment over the lifetime of the designated Beneficiary with distribution
   beginning within 1 year of the date of death of the Owner (see Annuity
   Options section of this contract); or

3. if the designated Beneficiary is Your spouse, he/she can continue the
   contract in his/her own name.

If no payment option is elected, a single sum settlement will be made at the end
of the sixty (60) day period following receipt of proof of death. Upon payment
of the death benefit, this contract will end.  If You are not the Annuitant and
You die prior to the Annuity Date, the Annuitant has no further rights under
this Contract unless the Annuitant is Your Beneficiary.

If the Owner is a person other than the Annuitant, and if the Owner's death
occurs on or after the Annuity Date, no death benefit will be payable under this
contract, except that any guaranteed payments remaining unpaid will continue to
be paid to the Annuitant pursuant to the Annuity Option in force at the date of
the Owner's death.

If the Owner is not an individual, the Annuitant shall be treated as the Owner
and any change of such Annuitant will be treated as if the Owner died.

ACCIDENTAL DEATH BENEFIT - If an Accidental Death Benefit Charge is included on
the Contract Schedule, an Accidental Death Benefit may be payable which is equal
to the lesser of the Contract Value as of the date the death benefit is
determined or $250,000.  The Accidental Death Benefit is payable if the death of
the primary Owner (i.e. the first owner listed on the contract schedule) occurs
prior to the Contract Anniversary next following his 75th birthday and is the
result of an Injury incurred while he was the primary Owner.  The death must
also occur before the Annuity Date and within 365 days of the date of the
accident which caused the Injury.

The Accidental Death Benefit will not be paid for any death caused by or
resulting (in whole or in part) from the following:

1. suicide or attempted suicide while sane or insane; intentionally
   self-inflicted injuries;
2. sickness, disease or bacterial infection of any kind, except pyogenic
   infections which occur as a result of an injury or bacterial infections
   which result from the accidental ingestion of contaminated substances;
3. hernia;
4. injury sustained as a consequence of riding in, including boarding or
   alighting from, any vehicle or device used for aerial navigation except if
   the primary Owner is a passenger on any aircraft licensed for the
   transportation of passengers;
5. declared or undeclared war or any act thereof; or
6. service in the military, naval or air service of any country.

DEATH OF THE ANNUITANT - If the Annuitant is a person other than the Owner, and
if the Annuitant dies before the Annuity Date, a new Annuitant may be named by
the Owner.  If no new Annuitant is named within sixty (60) days of Our receipt
of proof of death, the Owner will be the new Annuitant.  If the Annuitant dies
after the Annuity Date and before the entire annuity benefit under the selected
Annuity Option has been distributed, the remaining portion, if any, will
continue to be distributed under the same Annuity Option to the named
Beneficiary.  We will require proof of the Annuitant's death.  Unless otherwise
provided for in a supplementary contract, if no named Beneficiary survives the
Annuitant, the remaining portion will be paid to You if You are living; or to
Your estate if You are not living.


                                          13

<PAGE>

- --------------------------------------------------------------------------------


                                 SURRENDER PROVISIONS


SURRENDER - While this contract is in force and before the Annuity Date, We
will, upon written request, allow the surrender of all or a portion of this
contract for its Surrender Value.  Surrenders will result in the cancellation of
Accumulation Units from each applicable Subaccount and the Guaranteed Account in
the ratio that the value of each Subaccount bears to the total Contract Value.
You must specify in writing in advance which units are to be canceled if other
than the above mentioned method of cancellation is desired.  We will pay the
amount of any surrender within seven (7) days of receipt of a request unless the
"Delay of Payments" provision is in effect.

The Surrender Value will be the Contract Value, subject to any Market Value
Adjustment, as of the date of Our receipt of Your written surrender request,
reduced by the sum of:

1. any applicable premium taxes not previously deducted;

2. any applicable Contract Maintenance Charge;

3. any applicable  Surrender Charge; and

CALCULATION OF  SURRENDER CHARGE - If all or a portion of the Surrender Value is
surrendered, a Surrender Charge will be calculated at the time of each surrender
and will be deducted from the Contract Value.  In calculating the Surrender
Charge, Premiums will be allocated at the time of surrender on a first-in,
first-out basis.

The amount of the  Surrender Charge is calculated by:

1. reducing the amount to be surrendered by the greater of:
   a)  the accumulated earnings of this contract (i.e., the Contract Value
       minus Premiums which have not been allocated to amounts previously
       surrendered); or
   b)  10% of all remaining unsurrendered Premiums, decreased by any surrender
       made since the last Contract Anniversary; then

2. allocating Premiums to the remaining amount to be surrendered; and

3. multiplying each such allocated Premium by the applicable Percentage of
   Premium shown in the Contract Schedule for the period since such Premium was
   paid.

4. adding the products of each multiplication in (3) above.

For a partial surrender, the  Surrender Charge will be deducted from the
remaining Contract Value, if sufficient; otherwise it will be deducted from the
amount surrendered.


                                          14

<PAGE>

- --------------------------------------------------------------------------------


                                  DELAY OF PAYMENTS


We will make any payments under this contract within 7 days (or any shorter
period, if required by law) of a request received in good order.  We reserve the
right to suspend or postpone any type of payment from the Variable Account for
any period when:

1. the New York Stock Exchange is closed for other than customary weekend and
   holiday closings:

2. trading on the Exchange is restricted;

3. an emergency exists as a result of which it is not reasonably practicable to
   dispose of securities held in the Variable Account or determine their value;
   or

4. the Securities and Exchange Commission so permits delay for the protection
   of security holders.

   The applicable rules of the Securities and Exchange Commission will govern
   as to whether the conditions in 2. or 3. exist.


                                          15

<PAGE>

              AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
                                    80 PINE STREET
                               NEW YORK, NEW YORK 10270



                     INDIVIDUAL FLEXIBLE PREMIUM VARIABLE ANNUITY
                                   NONPARTICIPATING


<PAGE>

                                 FIXED OPTIONS TABLE

                                Option 1: Life Income
                         Monthly Income Per $1,000 Annuitized

<TABLE>
<CAPTION>

       Monthly           Monthly           Monthly           Monthly
Age    Income    Age     Income    Age     Income    Age     Income
<S>    <C>       <C>     <C>       <C>     <C>       <C>     <C>
 30     3.33      44      3.72      58      4.54      72      6.57
 31     3.35      45      3.76      59      4,63      73      6.82
 32     3.37      46      3.80      60      4.73      74      7.08
 33     3.39      47      3.85      61      4.83      75      7.37
 34     3.41      48      3.90      62      4.94      76      7.68
 35     3.44      49      3.95      63      5.05      77      8.02
 36     3.46      50      4.00      64      5.18      78      8.38
 37     3.49      51      4.05      65      5.31      79      8.78
 38     3.52      52      4.11      66      5.45      80      9.22
 39     3.55      53      4.17      67      5.61      81      9.70
 40     3.58      54      4.24      68      5.77      82     10.23
 41     3.61      55      4.31      69      5.95      83     10.81
 42     3.65      56      4.38      70      6.14      84     11.44
 43     3.68      57      4.46      71      6.35      85     12.13

</TABLE>

               Option 2: Life Income With 10 Years Payments Guaranteed
                         Monthly Income Per $1,000 Annuitized

<TABLE>
<CAPTION>

       Monthly           Monthly           Monthly           Monthly
Age    Income    Age     Income    Age     Income    Age     Income
<S>    <C>       <C>     <C>       <C>     <C>       <C>     <C>
 30     3.33      44      3.71      58      4.51      72      6.25
 31     3.35      45      3.75      59      4.59      73      6.44
 32     3.37      46      3.79      60      4.68      74      6.63
 33     3.39      47      3.84      61      4.77      75      6.83
 34     3.41      48      3.88      62      4.87      76      7.03
 35     3.44      49      3.93      63      4.98      77      7.25
 36     3.46      50      3.98      64      5.09      78      7.46
 37     3.49      51      4.04      65      5.21      79      7.68
 38     3.51      52      4.09      66      5.33      80      7.89
 39     3.54      53      4.15      67      5.47      81      8.10
 40     3.57      54      4.22      68      5.61      82      8.31
 41     3.61      55      4.28      69      5.76      83      8.51
 42     3.64      56      4.35      70      5.91      84      8.69
 43     3.68      57      4.43      71      6.08      85      8.86

</TABLE>

                          Option 3: Joint And Last Survivor
                         Monthly Income Per $1,000 Annuitized

<TABLE>
<CAPTION>

Age     40       45       50       55       60       65       70       75
<S>    <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>
 40    3.38     3.43     3.47     3.50     3.52     3.53     3.54     3.55
 45             3.51     3.58     3.63     3.67     3.69     3.71     3.73
 50                      3.68     3.77     3.84     3.89     3.93     3.95
 55                               3.90     4.02     4.11     4.18     4.23
 60                                        4.19     4.35     4.48     4.58
 65                                                 4.60     4.82     5.00
 70                                                          5.18     5.50
 75                                                                   6.02

</TABLE>

Values not shown are available on request from Our Administrative Office.


                                          16

<PAGE>

                                VARIABLE OPTIONS TABLE

                                Option 1: Life Income
                         Monthly Income Per $1,000 Annuitized

<TABLE>
<CAPTION>

       Monthly           Monthly           Monthly           Monthly
Age    Income    Age     Income    Age     Income    Age     Income
<S>    <C>       <C>     <C>       <C>     <C>       <C>     <C>
 30     4.35      44      4.68      58      5.45      72      7.44
 31     4.36      45      4.72      59      5.53      73      7.68
 32     4.38      46      4.75      60      5.62      74      7.95
 33     4.40      47      4.80      61      5.72      75      8.23
 34     4.42      48      4.84      62      5.82      76      8.54
 35     4.44      49      4.88      63      5.94      77      8.88
 36     4.46      50      4.93      64      6.06      78      9.25
 37     4.48      51      4.98      65      6.19      79      9.66
 38     4.50      52      5.04      66      6.33      80     10.10
 39     4.53      53      5.09      67      6.48      81     10.58
 40     4.56      54      5.16      68      6.64      82     11.12
 41     4.58      55      5.22      69      6.82      83     11.70
 42     4.61      56      5.29      70      7.01      84     12.34
 43     4.65      57      5.37      71      7.21      85     13.03

</TABLE>

               Option 2: Life Income With 10 Years Payments Guaranteed
                         Monthly Income Per $1,000 Annuitized

<TABLE>
<CAPTION>

       Monthly           Monthly           Monthly           Monthly
Age    Income    Age     Income    Age     Income    Age     Income
<S>    <C>       <C>     <C>       <C>     <C>       <C>     <C>
 30     4.35      44      4.67      58      5.39      72      7.07
 31     4.36      45      4.71      59      5.47      73      7.25
 32     4.38      46      4.74      60      5.56      74      7.43
 33     4.39      47      4.78      61      5.65      75      7.62
 34     4.41      48      4.82      62      5.74      76      7.82
 35     4.43      49      4.87      63      5.84      77      8.03
 36     4.45      50      4.91      64      5.95      78      8.23
 37     4.47      51      4.96      65      6.06      79      8.44
 38     4.50      52      5.01      66      6.18      80      8.65
 39     4.52      53      5.07      67      6.31      81      8.85
 40     4.55      54      5.12      68      6.45      82      9.05
 41     4.58      55      5.19      69      6.59      83      9.24
 42     4.61      56      5.25      70      6.74      84      9.41
 43     4.64      57      5.32      71      6.90      85      9.57

</TABLE>

                          Option 3: Joint And Last Survivor
                         Monthly Income Per $1,000 Annuitized

<TABLE>
<CAPTION>

Age     40       45       50       55       60       65       70       75
<S>    <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>
 40    4.38     4.42     4.45     4.48     4.50     4.51     4.52     4.53
 45             4.48     4.54     4.58     4.62     4.65     4.67     4.68
 50                      4.62     4.70     4.76     4.82     4.86     4.89
 55                               4.82     4.92     5.01     5.08     5.14
 60                                        5.08     5.23     5.36     5.46
 65                                                 6.01     5.68     5.86
 70                                                          6.01     6.33
 75                                                                   6.84

</TABLE>

Values not shown are available on request from Our Administrative Office.


                                          17

<PAGE>








                                    EXHIBIT 9

                               OPINION OF COUNSEL







<PAGE>


                               OPINION OF COUNSEL

     I have made such examination of the law and have examined such records and
documents as, in my judgment, are necessary or appropriate to enable me to
render the opinions expressed below.

     I am of the following opinions:

     1.   American International Life Assurance Company of New York is
          a valid and existing stock life insurance company domiciled
          in the State of New York.

     2.   Variable Account A is a separate investment account of
          American International Life Assurance Company of New York
          created and validly existing pursuant to the New York
          Insurance Laws and the Regulations thereunder.

     3.   All of the prescribed corporate procedures for the issuance
          of the Individual Single Purchase Payment Deferred Variable
          Annuity Contracts (the "Contracts") have been followed, and,
          when such Contracts are issued in accordance with the
          Prospectus contained in the Registration Statement, all
          state requirements relating to such Contracts will have been
          complied with.

     4.   Upon the acceptance of purchase payments made by Contract
          Owners pursuant to a Contract issued in accordance with the
          Prospectus contained in the Registration Statement and upon
          compliance with applicable law, such Contract Owner will
          have a legally-issued, fully paid, nonassessable contractual
          interest in such Contract.

     This opinion, or a copy hereof, may be used as an exhibit to or in
connection with the filing with the Securities and Exchange Commission of the
Post-Effective Amendment No. 7 to the Registration Statement on Form N-4 for the
Contracts to be issued by American International Life Assurance Company of New
York and its separate account, Variable Account A.



                              /s/ Kenneth D. Walma
                              ------------------------------
                              Kenneth D. Walma
                              Assistant Secretary and Associate Counsel

Dated: April 26, 1996


<PAGE>










                                 EXHIBIT 10 (i)
                               Consent of Counsel

<PAGE>

                       JORDEN BURT BERENSON & JOHNSON LLP
                                 SUITE 400 EAST
                       1025 THOMAS JEFFERSON STREET, N.W.
                           WASHINGTON, D.C. 20007-0805
                                 (202) 965-8100
                            TELECOPIER (202) 965-8104

                                 April 29, 1996

American International Life Assurance
   Company of New York
80 Pine Street
New York, New York 10005

Gentlemen:

     We hereby consent to the reference to our name under the caption "Legal
Counsel" in the Statement of Additional contained in Post-Effective Amendment
No. 7 to the Registration Statement on Form N-4 (File No. 33-39170) filed by
American International Life Assurance Company of New York and Variable Account A
with the Securities and Exchange Commission under the Securities Act of 1933 and
the Investment Company Act of 1940.


                                   Very truly yours,

                                   /s/ Jorden Burt Berenson & Johnson LLP
                                   Jorden Burt Berenson & Johnson LLP



<PAGE>










                                 EXHIBIT 10 (ii)
                       Consent of Independent Accountants








<PAGE>

<TABLE>
<S>         <C>                            <C>                         <C>
            COOPERS & LYBRAND L.L.P.       2400 Eleven Penn Center     Telephone (215) 963-8000
COOPERS                                    Philadelphia, Pennsylvania
& LYBRAND                                  19103-2982                  facsimile (215) 963-8700
            a professional services firm
</TABLE>

                                                                  EXHIBIT 10(ii)

                       CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the following with respect to Post-Effective Amendment No.
7 to the Registration Statement (No. 33-39170) on Form N-4 under the Securities
Act of 1933 of Variable Account A of American International Life Assurance
Company of New York.

     1.   The inclusion of our report dated February 22, 1996 relating to our
          audits of the financial statements of American Internation Life
          Assurance Company of New York in the Statement of Additional
          Information.

     2.   The inclusion of our report dated February 19, 1996 relating to our
          audits of the financial statements of Variable Account A in the
          Statement of Additional Information.

     3.   The incorporation by reference into the Prospectus of our report dated
          February 22, 1996 relating to our audits of the financial statements
          of American International Life Assurance Company of New York and our
          report dated February 19, 1996 relating to our audits of the financial
          statements of Variable Account A.

     4.   The reference to our firm under the heading "General Information --
          Independent Accountants" in the Statement of Additional Information.


                                   /s/ Coopers and Lybrand L.L.P.
                                   COOPERS AND LYBRAND L.L.P.

2400 Eleven Penn Center
Philadelphia, Pennsylvania
April 19, 1996






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