AIG Life Insurance Company
--------------------------------------------
VARIABLE ACCOUNT II
ANNUAL REPORT
--------------------------------------------
DECEMBER 31, 1995
(Audited)
<PAGE>
AIG LIFE INSURANCE COMPANY
(AIG LIFE)
VARIABLE ACCOUNT II
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Shares Cost
---------- --------
<S> <C> <C> <C>
Assets:
Investments at Market Value:
Alliance
Growth and Income Portfolio ........ 1,032.846 $ 15,602 $ 16,309
Conservative Investors Portfolio ... 39.957 461 470
Growth Portfolio ................... 1,688.198 23,404 24,024
Growth Investors Portfolio ......... 132.604 1,552 1,574
Fidelity
Money Market Portfolio ............. 26,636.060 26,636 26,636
Asset Manager Portfolio ............ 187.629 2,869 2,963
Growth Portfolio ................... 914.032 26,877 26,690
Overseas Portfolio ................. 303.948 5,061 5,183
Investment Grade Bond Portfolio .... 49.210 604 614
High Income Portfolio .............. 109.772 1,310 1,323
Van Eck
Gold and Natural Resources Portfolio 17.803 259 257
Worldwide Balanced Portfolio ....... 111.361 1,110 1,111
Dreyfus
Stock Index Portfolio .............. 210.062 3,514 3,613
Zero Coupon 2000 Portfolio ......... 25.067 317 320
-------- --------
Total Investments ................ $109,576 111,087
Total Assets ..................... $111,087
========
Liabilities:
Payable to AIG Life
Insurance Company .................... $ 222
--------
Equity:
Contract Owners' Equity ................ 110,865
--------
Total Liabilities and Equity ..... $111,087
========
</TABLE>
See Notes to Financial Statements
<PAGE>
AIG LIFE INSURANCE COMPANY
(AIG LIFE)
VARIABLE ACCOUNT II
STATEMENT OF OPERATIONS
For the Period Ended December 31, 1995
<TABLE>
<CAPTION>
Alliance Alliance Alliance Alliance
Growth and Conservative Growth
Income Investors Growth Investors
Total Portfolio Portfolio Portfolio Portfolio
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Investment Income:
Dividends ................................... $ 348 $ -- $ -- $ -- $ --
Expenses:
Mortality & Expense Risk Fees ............... (188) (30) (1) (43) (2)
------- ------- ------- ------- -------
Total Expenses ............................ (188) (30) (1) (43) (2)
------- ------- ------- ------- -------
Net Investment Income (Loss) ................ 160 (30) (1) (43) (2)
------- ------- ------- ------- -------
Realized and Unrealized Gain (Loss)
on Investments:
Realized Gain (Loss) on Investment
Activity .................................... (55) 79 6 80 15
Change in Unrealized Appreciation
(Depreciation) .............................. 1,511 707 9 620 22
------- ------- ------- ------- -------
Net Gain (Loss) on Investments .............. 1,456 786 15 700 37
Increase (Decrease) in Net Assets
Resulting From Operations ................... $ 1,616 $ 756 $ 14 $ 657 $ 35
======= ======= ======= ======= =======
</TABLE>
See Notes to Financial Statements
<PAGE>
AIG LIFE INSURANCE COMPANY
(AIG LIFE)
VARIABLE ACCOUNT II
STATEMENT OF OPERATIONS
For the Period Ended December 31, 1995
<TABLE>
<CAPTION>
Fidelity Fidelity Fidelity Fidelity Fidelity
Money Asset Investment
Market Manager Growth Overseas Grade Bond
Portfolio Portfolio Portfolio Portfolio Portfolio
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Investment Income:
Dividends ................................... $ 289 $ -- $ -- $ -- $ --
Expenses:
Mortality & Expense Risk Fees ............... (45) (5) (41) (9) (1)
------- ------- ------- ------- -------
Total Expenses ............................ (45) (5) (41) (9) (1)
------- ------- ------- ------- -------
Net Investment Income (Loss) ................ 244 (5) (41) (9) (1)
------- ------- ------- ------- -------
Realized and Unrealized Gain (Loss)
on Investments:
Realized Gain (Loss) on Investment
Activity .................................... -- 18 (291) (14) 6
Change in Unrealized Appreciation
(Depreciation) .............................. -- 94 (187) 122 10
------- ------- ------- ------- -------
Net Gain (Loss) on Investments .............. -- 112 (478) 108 16
Increase (Decrease) in Net Assets
Resulting From Operations ................... $ 244 $ 107 $ (519) $ 99 $ 15
======= ======= ======= ======= =======
</TABLE>
See Notes to Financial Statements
<PAGE>
AIG LIFE INSURANCE COMPANY
(AIG LIFE)
VARIABLE ACCOUNT II
STATEMENT OF OPERATIONS
For the Period Ended December 31, 1995
<TABLE>
<CAPTION>
Fidelity Van Eck Van Eck Dreyfus Dreyfus
Zero
High Gold and Natural Worldwide Stock Coupon
Income Resources Balance Index 2000
Portfolio Portfolio Portfolio Portfolio Portfolio
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Investment Income:
Dividends ................................... $ -- $ 1 $ -- $ 56 $ 2
Expenses:
Mortality & Expense Risk Fees ............... (1) (1) (1) (8) --
------- ------- ------- ------- -------
Total Expenses ............................ (1) (1) (1) (8) 0
------- ------- ------- ------- -------
Net Investment Income (Loss) ................ (1) -- (1) 48 2
------- ------- ------- ------- -------
Realized and Unrealized Gain (Loss)
on Investments:
Realized Gain (Loss) on Investment
Activity .................................... -- (2) -- 49 (1)
Change in Unrealized Appreciation
(Depreciation) .............................. 13 (2) 1 99 3
------- ------- ------- ------- -------
Net Gain (Loss) on Investments .............. 13 (4) 1 148 2
Increase (Decrease) in Net Assets
Resulting From Operations ................... $ 12 $ (4) $ -- $ 196 $ 4
======= ======= ======= ======= =======
</TABLE>
See Notes to Financial Statements
<PAGE>
AIG LIFE INSURANCE COMPANY
(AIG LIFE)
VARIABLE ACCOUNT II
STATEMENT OF CHANGES IN NET ASSETS
For the period ended December 31, 1995.
<TABLE>
<CAPTION>
Alliance Alliance Alliance Alliance
Growth and Conservative Growth
Income Investor Growth Investors
Total Portfolio Portfolio Portfolio Portfolio
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Increase in Net Assets
Operations:
Net Investment Income (Loss) ................. $ 160 $ (30) $ (1) $ (43) $ (2)
Realized Gain on Investment Activity ......... (55) 79 6 80 15
Change in Unrealized Appreciation
(Depreciation) ............................. 1,511 707 9 620 22
--------- --------- --------- --------- ---------
Increase in Net Assets Resulting from Operations 1,616 756 14 657 35
--------- --------- --------- --------- ---------
Capital Transactions:
Contract Deposits ............................ 133,550 11,299 460 15,441 1,326
Transfers Between Funds ...................... -- 6,137 211 11,912 916
Transfers From (To) AIG Life ................. (872) -- -- -- --
Transfers to the Company for
monthly deductions ......................... (23,429) (1,928) (211) (3,916) (702)
--------- --------- --------- --------- ---------
Increase (Decrease) in Net Assets
Resulting from Capital Transactions ........ 109,249 15,508 460 23,437 1,540
--------- --------- --------- --------- ---------
Total Increase (Decrease) in Net Assets ........ 110,865 16,264 474 24,094 1,575
Net Assets, at Beginning of Period ............. -- -- -- -- --
--------- --------- --------- --------- ---------
Net Assets, at End of Period ................... $ 110,865 $ 16,264 $ 474 $ 24,094 $ 1,575
========= ========= ========= ========= =========
</TABLE>
See Notes to Financial Statements
<PAGE>
AIG LIFE INSURANCE COMPANY
(AIG LIFE)
VARIABLE ACCOUNT II
STATEMENT OF CHANGES IN NET ASSETS
For the period ended December 31, 1995.
<TABLE>
<CAPTION>
Fidelity Fidelity Fidelity Fidelity Fidelity
Money Asset Investment
Market Manager Growth Overseas Grade Bond
Portfolio Portfolio Portfolio Portfolio Portfolio
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Increase in Net Assets
Operations:
Net Investment Income (Loss) ................. $ 244 $ (5) $ (41) $ (9) $ (1)
Realized Gain on Investment Activity ......... -- 18 (291) (14) 6
Change in Unrealized Appreciation
(Depreciation) ............................. -- 94 (187) 122 10
--------- --------- --------- --------- ---------
Increase in Net Assets Resulting from Operations 244 107 (519) 99 15
--------- --------- --------- --------- ---------
Capital Transactions:
Contract Deposits ............................ 80,546 1,541 18,203 1,799 356
Transfers Between Funds ...................... (44,242) 2,186 12,969 4,158 393
Transfers From (To) AIG Life ................. (872) -- -- -- --
Transfers to the Company for monthly deductions.. (8,878) (847) (4,503) (820) (150)
--------- --------- --------- --------- ---------
Increase (Decrease) in Net Assets
Resulting from Capital Transactions ........ 26,554 2,880 26,669 5,137 599
--------- --------- --------- --------- ---------
Total Increase (Decrease) in Net Assets ........ 26,798 2,987 26,150 5,236 614
Net Assets, at Beginning of Period ............. -- -- -- -- --
--------- --------- --------- --------- ---------
Net Assets, at End of Period ................... $ 26,798 $ 2,987 $ 26,150 $ 5,236 $ 614
========= ========= ========= ========= =========
</TABLE>
See Notes to Financial Statements
<PAGE>
AIG LIFE INSURANCE COMPANY
(AIG LIFE)
VARIABLE ACCOUNT II
STATEMENT OF CHANGES IN NET ASSETS
For the period ended December 31, 1995.
<TABLE>
<CAPTION>
Fidelity Van Eck Van Eck Dreyfus Dreyfus
Zero
High Gold and Natural Worldwide Stock Coupon
Income Resources Balance Index 2000
Portfolio Portfolio Portfolio Portfolio Portfolio
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Increase in Net Assets
Operations:
Net Investment Income (Loss) ................. $ (1) $ -- $ (1) $ 48 $ 2
Realized Gain on Investment Activity ......... -- (2) -- 49 (1)
Change in Unrealized Appreciation
(Depreciation) .............................. 13 (2) 1 99 3
--------- --------- --------- --------- ---------
Increase in Net Assets Resulting from Operations 12 (4) 0 196 4
--------- --------- --------- --------- ---------
Capital Transactions:
Contract Deposits ............................ 89 256 385 1,751 98
Transfers Between Funds ...................... 1,343 113 929 2,651 324
Transfers From (To) AIG Life ................. -- -- -- -- --
Transfers to the Company for monthly deductions.. (122) (100) (202) (942) (108)
--------- --------- --------- --------- ---------
Increase (Decrease) in Net Assets
Resulting from Capital Transactions ....... 1,310 269 1,112 3,460 314
--------- --------- --------- --------- ---------
Total Increase (Decrease) in Net Assets ........ 1,322 265 1,112 3,656 318
Net Assets, at Beginning of Period ............. -- -- -- -- --
--------- --------- --------- --------- ---------
Net Assets, at End of Period ................... $ 1,322 $ 265 $ 1,112 $ 3,656 $ 318
========= ========= ========= ========= =========
</TABLE>
See Notes to Financial Statements
<PAGE>
AIG LIFE INSURANCE COMPANY
(AIG LIFE)
VARIABLE ACCOUNT II
NOTES TO FINANCIAL STATEMENTS
1. History
Variable Account II (the "Account") is a separate investment account maintained
under the provisions of Delaware Insurance Law by AIG Life Insurance Company
(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
flexible premium variable universal life insurance policies (the "policies").
The Account invests in shares of Alliance Variable Products Series Fund, Inc.
("Alliance Fund"), Dreyfus Variable Investment Fund ("Dreyfus Fund"), Dreyfus
Stock Index Fund, Fidelity Investments Variable Insurance Products Fund
("Fidelity Trust"), Fidelity Variable Insurance Products Fund II ("Fidelity
Trust II") and Van Eck Investment Trust ("Van Eck Trust"). The assets in the
policies may be invested in the following subaccounts:
Alliance Fund:
Growth and Income Portfolio
Conservative Investors Portfolio
Growth Portfolio
Growth Investors Portfolio
Dreyfus Fund:
Zero Coupon 2000 Portfolio
The Dreyfus Stock Index Fund
Fidelity Trust:
Money Market Portfolio
High Income Portfolio
Growth Portfolio
Overseas Portfolio
Fidelity Trust II:
Investment Grade Bond Portfolio
Asset Manager Portfolio
Van Eck Trust:
Gold and Natural Resources Fund
Worldwide Balanced Fund
The Account commenced operations on May 4, 1995.
The assets of the Account are the property of the Company. The portion of the
Account's assets applicable to the policies are not chargeable with the
liabilities arising out of any other business conducted by the Company.
<PAGE>
In addition to the Account, policy owners may also allocate assets of the
policies 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 of interest. 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. Actual results could differ from those
estimates.
3. Contract Charges
There are charges and deductions which the Company will deduct from each policy.
The deductions from premium are a sales charge of 5% plus the state specific
premium taxes.
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 .90% of the account value of the policies. This charge may be
decreased to not less than .50% in policy years eleven and greater.
On the policies' issue date and each monthly anniversary, the following
deductions are made from the policies' account value:
(a) administrative charges
<PAGE>
(b) insurance charges
(c) supplemental benefit charges.
If the policy is surrendered during the first fourteen policy years, the Company
will deduct a surrender charge based on a percentage of first year premium. A
pro rata surrender charge will be deducted for any partial surrender. An
administrative charge upon partial surrender will be equal to the lessor of
$25.00 or 2% of the amount surrendered.
<PAGE>
AIG LIFE INSURANCE COMPANY
(AIG LIFE)
VARIABLE ACCOUNT II
NOTES TO FINANCIAL STATEMENTS (Continued)
4. Purchases of Investments
For the period ended December 31, 1995, investment activity in the Fund was as
follows:
Cost of Proceeds
Shares of Purchases From Sales
- --------- --------- ----------
Alliance Funds:
Growth and Income Portfolio ........ $17,402 $1,878
Conservative Investors Portfolio ... 672 217
Growth Portfolio ................... 26,173 2,850
Growth Investors Portfolio ......... 2,011 474
Fidelity Trust Funds:
Money Market Portfolio ............. 79,323 52,686
Asset Manager Portfolio ............ 3,611 760
Growth Portfolio ................... 44,248 16,780
Overseas Portfolio ................. 5,767 692
Investment Grade Bond Portfolio .... 889 291
High Income Portfolio .............. 1,361 52
Van Eck:
Gold and Natural Resources Portfolio 361 102
Worldwide Balance Portfolio ........ 1,440 331
Dreyfus:
Stock Index Portfolio .............. 4,255 790
Zero Coupon 2000 Portfolio ......... 421 105
<PAGE>
AIG LIFE INSURANCE COMPANY
(AIG LIFE)
VARIABLE ACCOUNT II
NOTES TO FINANCIAL STATEMENTS (Continued)
5. Net Increase in Accumulation Units
For the period ended December 31, 1995 transactions in accumulation units of the
account were as follows:
<TABLE>
<CAPTION>
Alliance Alliance Alliance Alliance Fidelity
Growth & Conservative Growth Money
Income Investors Growth Investors Market
VARIABLE LIFE Portfolio Portfolio Portfolio Portfolio Portfolio
-------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C>
Units Purchased ........................ 1,098.54 44.57 1,489.21 125.18 7,921.95
Units Withdrawn ........................ (193.09) (21.19) (385.06) (67.32) (874.63)
Units Transferred Between Funds ........ 584.00 20.92 1,141.63 88.29 (4,348.85)
Net Units Transferred From (To) AIG Life -- -- -- (85.27)
-------- ------ -------- ------ --------
Net Increase (Decrease) ................ 1,489.45 44.30 2,245.78 146.15 2,613.20
Units, at Beginning of the Period ...... -- -- -- -- --
-------- ------ -------- ------ --------
Units, at End of the Period ............ 1,489.45 44.30 2,245.78 146.15 2,613.20
======== ====== ======== ====== ========
Unit Value at December 31, 1995 ........ $10.92 $10.69 $10.73 $10.77 $10.25
======== ====== ======== ====== ========
</TABLE>
<TABLE>
<CAPTION>
Fidelity Fidelity Fidelity Fidelity Fidelity
Asset Investment High
Manager Growth Overseas Grade Bond Yield
Portfolio Portfolio Portfolio Portfolio Portfolio
------ -------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
Units Purchased ........................ 148.02 1,682.23 186.04 35.00 8.90
Units Withdrawn ........................ (83.59) (413.68) (87.35) (14.67) (11.93)
Units Transferred Between Funds ........ 208.66 1,188.86 422.12 39.01 133.69
Net Units Transferred From (To) AIG Life -- -- -- -- --
------ -------- ------ ------ ------
Net Increase (Decrease) ................ 273.09 2,457.41 520.81 59.34 130.66
Units, at Beginning of the Period ...... -- -- -- -- --
------ -------- ------ ------ ------
Units, at End of the Period ............ 273.09 2,457.41 520.81 59.34 130.66
====== ======== ====== ====== ======
Unit Value at December 31, 1995 ........ $10.94 $10.64 $10.05 $10.35 $10.12
====== ======== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
Van Eck Van Eck Dreyfus Dreyfus
Zero
Gold & Nat Worldwide Stock Coupon
Resources Balance Index 2000
Portfolio Portfolio Portfolio Portfolio
------ ------ ------ ------
<S> <C> <C> <C> <C>
Units Purchased ........................ 27.28 38.70 167.30 9.57
Units Withdrawn ........................ (12.24) (20.41) (85.55) (10.57)
Units Transferred Between Funds ........ 11.30 93.66 255.39 31.83
Net Units Transferred From (To) AIG Life -- -- -- --
------ ------ ------ ------
Net Increase (Decrease) ................ 26.34 111.95 337.14 30.83
Units, at Beginning of the Period ...... -- -- -- --
------ ------ ------ ------
Units, at End of the Period ............ 26.34 111.95 337.14 30.83
====== ====== ====== ======
Unit Value at December 31, 1995 ........ $10.06 $9.94 $10.84 $10.32
====== ====== ====== ======
</TABLE>
<PAGE>
AIG LIFE INSURANCE COMPANY
(AIG LIFE)
VARIABLE LIFE SEPARATE ACCOUNT II
REPORT OF INDEPENDENT ACCOUNTANTS
To the Contract Owners of
AIG Life Insurance Company
Variable Life Separate Account II
We have audited the accompanying statements of assets and liabilities of AIG
Life Insurance Company Variable Life Separate Account II comprising the Alliance
Growth and Income, Conservative Investors, Growth, Growth Investors; the
Fidelity Money market, Asset Manager, Growth, Overseas, Investment Grade Bond,
High Income; the Van Eck Gold and Natural Resources, Worldwide Balanced; and the
Dreyfus Stock Index and Zero Coupon 2000 Portfolios as of December 31, 1995, and
the related statements of operations and changes in net assets for the period
May 4, 1995 (Date of Inception) to December 31, 1995. These financial statements
are the responsibility of the management of the Variable Life Separate Account
II. Our responsibility is to express an opinion on these financial statements
based on our audit.
We conduct our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of investments held at December 31, 1995 by correspondence with the
transfer agents. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of AIG Life Insurance Company
Variable Life Separate Account II as of December 31, 1995, and the resluts of
its operations and the changes in its net assets for the period May 4, 1995
(Date of Inception) to December 31, 1995 in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 19, 1996
