Filed with the Securities and Exchange Commission on ___________, 1997
Registration No.____________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
A. Exact name of trust: Variable Account II
B. Name of depositor: AIG Life Insurance Company
C. Complete address of depositor's principal executive offices:
One Alico Plaza, P.O. Box 667, Wilmington, Delaware 19899
D. Name and address of agent for service:
Robert Liguori, Vice President and General Counsel
AIG Life Insurance Company
One Alico Plaza
P.O. Box 667
Wilmington, DE 19899
COPIES TO:
Michael Berenson, Esq. and Florence Davis, Esq.
Jorden Burt Berenson & Johnson LLP American International
Suite 400 East Group, Inc.
1025 Thomas Jefferson St., NW 70 Pine Street
Washington, D.C. 20007-0805 New York, N.Y. 10270
It is proposed that this filing will become effective:
_____ immediately upon filing pursuant to paragraph (b)
_____ on ____________, 1997, pursuant to paragraph (b)
_____ 60 days after filing pursuant to paragraph (a)(1)
_____ on _________ pursuant to paragraph (a)(1) 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
E. Title and amount of securities being registered:
Group Flexible Premium Variable Universal Life Insurance Policies.
F. N/A
<PAGE>
G. Amount of Filing Fee:
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, 1997.
<PAGE>
CROSS REFERENCE TO ITEMS REQUIRED
BY FORM N-8B-2
N-8B-2 Item Caption in Prospectus
1 . . . . . . . . . . . . . . . . . . . . . The Company, The Separate
Account
2 . . . . . . . . . . . . . . . . . . . . . The Company
3 . . . . . . . . . . . . . . . . . . . . . Not Applicable
4 . . . . . . . . . . . . . . . . . . . . . Distribution of Policy
5 . . . . . . . . . . . . . . . . . . . . . The Separate Account
6(a) . . . . . . . . . . . . . . . . . . . Not Applicable
6(b) . . . . . . . . . . . . . . . . . . . Not Applicable
9 . . . . . . . . . . . . . . . . . . . . . Legal Proceedings
10 . . . . . . . . . . . . . . . . . . . . The Policy
11 . . . . . . . . . . . . . . . . . . . . The Separate Account, The
Funds and the Investment
Advisors
12 . . . . . . . . . . . . . . . . . . . . The Separate Account, The
Funds and the Investment
Advisors
13 . . . . . . . . . . . . . . . . . . . . Charges and Deductions
14 . . . . . . . . . . . . . . . . . . . . The Policy
15 . . . . . . . . . . . . . . . . . . . . The Separate Account
16 . . . . . . . . . . . . . . . . . . . . The Separate Account, The
Funds and the Investment
Advisors
17 . . . . . . . . . . . . . . . . . . . . The Policy
18 . . . . . . . . . . . . . . . . . . . . The Policy
19 . . . . . . . . . . . . . . . . . . . . Not Applicable
20 . . . . . . . . . . . . . . . . . . . . Not Applicable
21 . . . . . . . . . . . . . . . . . . . . Not Applicable
22 . . . . . . . . . . . . . . . . . . . . Not Applicable
23 . . . . . . . . . . . . . . . . . . . . Not Applicable
24 . . . . . . . . . . . . . . . . . . . . Not Applicable
25 . . . . . . . . . . . . . . . . . . . . The Company
26 . . . . . . . . . . . . . . . . . . . . Not Applicable
27 . . . . . . . . . . . . . . . . . . . . The Company
28 . . . . . . . . . . . . . . . . . . . . The Company
29 . . . . . . . . . . . . . . . . . . . . The Company
30 . . . . . . . . . . . . . . . . . . . . The Company
31 . . . . . . . . . . . . . . . . . . . . Not Applicable
32 . . . . . . . . . . . . . . . . . . . . Not Applicable
33 . . . . . . . . . . . . . . . . . . . . Not Applicable
34 . . . . . . . . . . . . . . . . . . . . Not Applicable
35 . . . . . . . . . . . . . . . . . . . . The Company
37 . . . . . . . . . . . . . . . . . . . . Not Applicable
38 . . . . . . . . . . . . . . . . . . . . Distribution of Policy
39 . . . . . . . . . . . . . . . . . . . . Distribution of Policy
40 . . . . . . . . . . . . . . . . . . . . Not Applicable
41(a) . . . . . . . . . . . . . . . . . . . Distribution of Policy
42 . . . . . . . . . . . . . . . . . . . . Not Applicable
<PAGE>
43 . . . . . . . . . . . . . . . . . . . . Not Applicable
44 . . . . . . . . . . . . . . . . . . . . The Policy
45 . . . . . . . . . . . . . . . . . . . . Not Applicable
46 . . . . . . . . . . . . . . . . . . . . The Policy
47 . . . . . . . . . . . . . . . . . . . . Not Applicable
48 . . . . . . . . . . . . . . . . . . . . Not Applicable
49 . . . . . . . . . . . . . . . . . . . . Not Applicable
50 . . . . . . . . . . . . . . . . . . . . Not Applicable
51 . . . . . . . . . . . . . . . . . . . . The Company, The Policy
52 . . . . . . . . . . . . . . . . . . . . The Funds and the
Investment Advisors
53 . . . . . . . . . . . . . . . . . . . . Tax Considerations
54 . . . . . . . . . . . . . . . . . . . . Financial Statements
55 . . . . . . . . . . . . . . . . . . . . Not Applicable
<PAGE>
Group Flexible Premium Variable Universal Life Insurance Policies
VARIABLE ACCOUNT II
of AIG LIFE INSURANCE COMPANY
One Alico Plaza, P.O. Box 8718
Wilmington, DE 19899
1-800-340-2765
This prospectus describes a group flexible premium variable universal
life insurance policy (the "Policy") offered by AIG Life Insurance Company
(the "Company"). The Policy provides insurance protection for individuals
within groups under sponsored arrangements. Sponsored arrangements may
include, for example, those instances where an employer, a financial
institution, an association, or group otherwise permitted by state
insurance law, allows the Company to sell policies to, respectively, its
employees, depositors, or members. An Owner may be issued a certificate as
evidence of individual insured coverage under a group arrangement. The
description of the Policy in this Prospectus is fully applicable to any
certificate that may be issued under the Policy. As used herein the word
"Policy" includes any such certificate.
The Policy is designed to provide lifetime insurance protection on
the named Insured and at the same time provide flexibility to vary the
amount and timing of Premiums and to change the amount of Death Benefit
payable. This flexibility allows You as Owner to provide for changing
insurance needs under a single life insurance product.
You also have the opportunity to allocate Net Premiums and Account
Value to one or more Subaccounts of Variable Account II (the "Separate
Account") and the Company's general account (the "Guaranteed Account,"
collectively with the Separate Account, the "Accounts") within limits.
This Prospectus generally describes only that portion of the Account Value
allocated to the Separate Account. For a brief summary of the Guaranteed
Account, see "The Guaranteed Account," page ___.
The assets of each Subaccount are invested in a corresponding
portfolio as selected by the Owner from the following choices: the
Conservative Investors Portfolio, Growth Investors Portfolio, Growth
Portfolio, Quasar Portfolio, Technology Portfolio and Growth and Income
Portfolio of the ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC. ("Alliance
Fund"); the VIP High Income Portfolio, VIP Growth Portfolio, VIP Money
Market Portfolio and VIP Overseas Portfolio of the FIDELITY INVESTMENTS
VARIABLE INSURANCE PRODUCTS FUND ("Fidelity Fund"); the VIP II Asset
Manager Portfolio and VIP II Investment Grade Bond Portfolio of the
FIDELITY INVESTMENTS VARIABLE INSURANCE PRODUCTS FUND II ("Fidelity Fund
II"); the Small Company Stock Portfolio of the DREYFUS VARIABLE INVESTMENT
FUND ("Dreyfus Fund"); the Worldwide Hard Assets Fund and Worldwide
Balanced Fund of the VAN ECK INVESTMENT TRUST ("Van Eck Funds"); the Short-
Term Retirement Portfolio, Medium-Term Retirement Portfolio and Long-Term
Retirement Portfolio of the TOMORROW FUNDS RETIREMENT TRUST ("Tomorrow
Funds"); and the DREYFUS STOCK INDEX FUND.
5
<PAGE>
The accompanying prospectuses for Alliance Fund, Fidelity Fund,
Fidelity Fund II, Dreyfus Fund, Dreyfus Stock Index Fund, Tomorrow Funds
and Van Eck Funds (collectively, the "Funds") describe their respective
portfolios, including the risks of investing in the Funds, and provide
other information on the Funds and on their managers.
The Policy provides for a Net Cash Surrender Value that can be
obtained by surrender. Because this value is based on the investment
performance of the Subaccounts, to the extent of allocations to the
Separate Account, there is no guaranteed Net Cash Surrender Value. If the
Net Cash Surrender Value is insufficient to cover the charges due, coverage
will lapse without value. The Policy also provides for loans and permits
partial surrenders within limits.
It may not be advantageous to replace existing insurance with the
Policy. Within certain limits, you may return the Policy or exchange it
for another life insurance policy issued by the Company with benefits that
do not vary with the investment results of a separate account. A Policy
may be returned according to the terms of its Period to Examine and Cancel
(see "Period to Examine and Cancel Policy," page __), during which time Net
Premium payments allocated to the Separate Account will be invested in the
Money Market Subaccount.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
INVESTMENTS IN THESE CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF,
AND ARE NOT GUARANTEED OR ENDORSED BY, THE ADVISER OR ANY BANK OR BANK
AFFILIATE. INVESTMENTS ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENTAL
AGENCY. ANY INVESTMENT IN THE CONTRACT INVOLVES CERTAIN INVESTMENT RISK
WHICH MAY INCLUDE THE POSSIBLE LOSS OF PRINCIPAL.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY OR PRECEDED BY A
CURRENT PROSPECTUS FOR EACH OF THE ALLIANCE FUND, FIDELITY FUND, FIDELITY
FUND II, DREYFUS FUND, DREYFUS STOCK INDEX FUND, TOMORROW FUNDS AND VAN ECK
FUNDS, AS IDENTIFIED ABOVE.
THIS PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
Date of Prospectus: _________, 1997
Distributor:
AIG Equity Sales Corp.
Attention: Variable Products
80 Pine Street
New York, New York 10270
1-800-888-7485
6
<PAGE>
TABLE OF CONTENTS Page
DEFINITIONS OF TERMS . . . . . . . . . . . . . . . . . . . . . . . .
SUMMARY OF THE POLICY . . . . . . . . . . . . . . . . . . . . . . . .
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . .
INFORMATION ABOUT THE COMPANY, THE SEPARATE ACCOUNT
AND THE FUNDS . . . . . . . . . . . . . . . . . . . . . . . .
PREMIUMS AND ALLOCATIONS . . . . . . . . . . . . . . . . . . . . . . . .
GUARANTEED ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . .
CHARGES AND DEDUCTION . . . . . . . . . . . . . . . . . . . . . . . .
SHOW YOUR ACCOUNT VALUE VARIES . . . . . . . . . . . . . . . . . . . . .
DEATH BENEFIT AND CHANGES IN FACE AMOUNT . . . . . . . . . . . . . . . .
CASH BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ILLUSTRATIONS OF ACCOUNT VALUES, NET CASH SURRENDER VALUES, DEATH . . .
BENEFITS AND ACCUMULATED PREMIUMS . . . . . . . . . . . . . . . . . . . .
OTHER POLICY BENEFITS AND PROVISIONS . . . . . . . . . . . . . . . . . .
TAX CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . .
SUPPLEMENTAL BENEFITS AND RIDERS . . . . . . . . . . . . . . . . . . . .
MANAGEMENT OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . .
DISTRIBUTION OF POLICY . . . . . . . . . . . . . . . . . . . . . . . . .
OTHER POLICIES ISSUED BY THE COMPANY . . . . . . . . . . . . . . . . . .
STATE REGULATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PUBLISHED RATINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . .
APPENDICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7
<PAGE>
DEFINITIONS OF TERMS
Administrative Office. One Alico Plaza, Wilmington, DE 19801
Account Value. The total amount in the Accounts credited to a Policy. The
Account Value is described on page ___.
Allocation Date. The first business day after the Period to Examine and
Cancel expires.
Attained Age. The Insured's age on the Policy Date plus the number of full
years since the Policy Date.
Beneficiary. The person(s) who is entitled to the Insurance Benefit of
this Policy.
Cash Surrender Value. Account Value less any applicable surrender charge
that would be deducted upon surrender.
Company, We, Our, Us. AIG Life Insurance Company
Death Benefit. The amount of money payable to the Beneficiary if the
Insured dies while coverage is in force. The calculation of the Death
Benefit is described on page __.
Face Amount. The amount of insurance specified by the Owner and from which
the Death
Benefit will be determined. The initial Face Amount is shown in the Policy
application.
Grace Period. The period of time following a Monthly Anniversary during
which this Policy will continue in force while the Net Cash Surrender Value
is not sufficient to cover the total monthly deduction then due.
Guaranteed Account. An account within the general account which consists
of all of the Company's assets other than the assets of the Separate
Account and any other separate accounts of the Company.
Insured. The person whose life is covered by the Policy.
Issue Date. The date the Policy is issued. It may be a later date than
the Policy Date if the initial Premium is received at Our Administrative
Office and invested before underwriting has been completed. Once issued,
Policy coverage is retroactive to the Policy Date. The Issue Date is used
to measure contestability periods. See page __.
Loan Account. The portion of the Account Value held in the Guaranteed
Account as collateral for Policy loans. See page __.
Maturity Date. The first Policy Anniversary following the Insured's
attained age 99.
8
<PAGE>
Monthly Anniversary. The same day as the Policy Date for each succeeding
month. If the Policy Date is the 29th, 30th or 31st of a month, in any
month that has no such day, the Monthly Anniversary is deemed to be the
last day of that month. The monthly deduction is deducted on each Monthly
Anniversary.
Net Cash Surrender Value. The Cash Surrender Value less any Outstanding
Loans.
Net Premium. A Premium less any expense charges deducted from the Premium.
See page __.
Outstanding Loan. The total amount of Policy loans, including both
principal and accrued interest.
Owner, You, Your. The person who purchased the Policy as shown in the
application, unless later changed. The Owner may be someone other than the
Insured.
Planned Periodic Premium. The Premium designated at the time of
application as the amount planned to be paid at specific intervals until
the Maturity Date.
Policy. The Group Flexible Premium Variable Universal Life Insurance
contract issued by AIG Life Insurance Company.
Policy Anniversary. An anniversary of the Policy Date.
Policy Date. The first date as of which We have received the initial
Premium and an application in good order. If a Policy is issued, insurance
is effective as of the Policy Date.
Policy Month. The month commencing with the Policy Date and ending on the
day before the first Monthly Anniversary, or any following month commencing
with a Monthly Anniversary and ending on the day before the next Monthly
Anniversary.
Policy Year. The year commencing with the Policy Date and ending on the
day before the first Policy Anniversary, or any following year commencing
with a Policy Anniversary and ending on the day before the next Policy
Anniversary.
Premium. The total consideration paid by You in exchange for Our
obligations under the Policy.
Separate Account. Variable Account II, a separate investment account of
AIG Life Insurance Company.
Subaccount. A division of the Separate Account established to invest in
shares of a corresponding portfolio of a fund that is available for
investment under the Policy.
9
<PAGE>
Valuation Date. Each day the New York Stock Exchange is open for trading.
Valuation Period. A period commencing as of the close of the New York
Stock Exchange (presently 4 P.M., Eastern Time) on each Valuation Date and
ending as of the close of the New York Stock Exchange on the next
succeeding Valuation Date.
10
<PAGE>
SUMMARY OF THE POLICY
This summary is intended to provide a brief overview of the more
significant aspects of the Policy. Further detail is provided in this
prospectus and in the Policy. Unless the context indicates otherwise, the
discussion in this summary and the remainder of the prospectus relates to
the portion of the Policy involving the Separate Account. The Guaranteed
Account is briefly described under "THE GUARANTEED ACCOUNT" on page __ and
in the Policy.
Purpose of the Policy
The Policy offers an Owner insurance protection on the life of the
Insured through the Maturity Date for so long as the Policy is in force.
Like traditional life insurance, the Policy provides for an initial death
benefit equal to its Face Amount, accumulation of cash value, and surrender
and loan privileges. Unlike traditional life insurance, the Policy offers
a choice of investment alternatives and an opportunity for the Account
Value and, if elected by the Owner and under certain circumstances, its
Death Benefit to grow based on investment results. The Policy is a
flexible premium Policy, so that, unlike many other insurance policies and
subject to certain limitations, an Owner may choose the amount and
frequency of premium payments.
Policy Values
An Owner may allocate Net Premium payments among the various
Subaccounts that comprise the Separate Account and that invest in the
Dreyfus Stock Index Fund, or in corresponding portfolios of the Alliance
Fund, Fidelity Fund, Fidelity Fund II, Dreyfus Fund, Tomorrow Funds, or Van
Eck Funds. An Owner may also allocate Net Premium payments to the
Guaranteed Account.
Depending on the investment experience of the selected Subaccounts,
the Account Value may increase or decrease on any day. The Death Benefit
may or may not increase or decrease depending upon several factors,
including the Death Benefit Option selected by the Owner. There is no
guarantee that the Account Value and Death Benefit will increase. The
Owner bears the investment risk on that portion of the Net Premiums and
Account Value allocated to the Separate Account.
The Policy will remain in force until the earliest of the Maturity
Date, the death of the Insured, or a full surrender of the Policy, unless,
before any of these events, the Net Cash Surrender Value is insufficient to
pay the current monthly deduction on a Monthly Anniversary Date and a Grace
Period expires without sufficient additional premium payment or loan
repayment by the Owner.
Policy Charges
There are charges and deductions which the Company will deduct from
each Policy. The deductions from Premium are the sales charge of 5% plus
11
<PAGE>
the specific state and local premium tax (a typical state premium tax rate
would be in the range of 2% to 2.5%). (See "CHARGES AND DEDUCTIONS," page
__.)
On the Issue Date and each Monthly Anniversary, the following
deductions are made from the Account Value:
(a) administrative charges;
(b) insurance charges; and
(c) supplemental benefit charges.
The monthly deduction is made from the Subaccounts pro rata on the
basis of the portion of Account Value in each Subaccount. The
administrative charge varies by current Policy Face Amount. There is also
an additional monthly deduction during the first Policy Year and the 12
months immediately following an increase in Face Amount. (See "CHARGES AND
DEDUCTIONS," page __.)
Deductions are also made on a daily basis against the assets of each
Subaccount. Daily charges calculated at a current annual rate of 0.90% are
charged for mortality and expense risks. This charge may be decreased to
not less than 0.50% in Policy Years 11 and later. It is guaranteed not to
exceed 0.90% for the duration of the Policy.
If the Policy is surrendered during the first 14 Policy Years, We
will deduct a Surrender Charge for the initial Face Amount. If a Policy is
surrendered within 14 years immediately following an increase in Face
Amount, we will deduct a surrender charge for the increase in Face Amount.
The surrender charge will be deducted before any surrender proceeds are
paid.
A charge for partial surrenders is equal to a pro rata portion of the
surrender charge that would apply to a full surrender. A partial surrender
charge is also deducted from the Account Value upon a decrease in Face
Amount.
The administrative charge upon a partial surrender will be equal to
the lesser of $25 or 2% of the amount surrendered. (See "CHARGES AND
DEDUCTIONS," page __.)
Death Benefit
The Policy provides for the payment of benefits upon the death of the
Insured. Upon application for a Policy, the Owner designates a Planned
Periodic Premium. The Policy indicates the initial Face Amount of
insurance. The Owner also elects in the application to have the Death
Benefit determined under one of two available options. Under Option I, the
Death Benefit will equal the Face Amount on the date of the Insured's death
or, if greater, the Account Value on the date of the Insured's death
increased by the applicable percentage set forth in the Policy. Under
Option II, the Death Benefit will equal the Face Amount on the date of the
Insured's death plus the Account Value or, if greater, the Account Value on
12
<PAGE>
the date of the Insured's death increased by the applicable percentage set
forth in the Policy. (See "DEATH BENEFIT OPTIONS" and "CHANGES IN DEATH
BENEFIT OPTION," pages ___ and ___, respectively.)
Premium Features
A. Basic Minimum Premium
A Table of Basic Minimum Premiums for various ages, sex and
Face Amount in the nonsmoker class is provided in the Appendix.
The Premium for the initial Face Amount must be at least as
great as the Basic Minimum Premium at the time of application
adjusted for the Attained Age, any substandard Premium, and any
supplemental benefits riders.
B. Planned Periodic Premium
The Planned Periodic Premium is the Premium designated at the
time of application as the amount planned to be paid at
specific intervals until the Maturity Date.
C. Flexibility
In general Premiums are flexible as to both timing and amount.
If Premiums cease at any time, the insurance provided under the
Policy will continue for as long as the Net Cash Surrender
Value is sufficient to keep the Policy in force. (See
"PREMIUMS AND ALLOCATIONS," page __.)
When applying for a Policy, an Owner will determine a Planned
Periodic Premium that provides for the payment of level Premiums over a
specified period of time. Each Owner will receive a Premium reminder
notice on either an annual, semi-annual, quarterly, or monthly basis;
however, the Owner is not required to pay Planned Periodic Premiums.
Payment of the Planned Periodic Premiums will not guarantee that a
Policy will remain in force. Instead, the duration of the Policy depends
upon the Policy's Net Cash Surrender Value. Even if Planned Periodic
Premiums are paid, the Policy will lapse any time the Net Cash Surrender
Value is insufficient to pay the current monthly deduction and a Grace
Period expires without sufficient payment. Any payment of additional
Premium must be at least $50.00. The Company also may reject or limit any
Premium that would result in an immediate increase in the net amount at
risk under the Policy.
For information regarding the taxation of the Policy under federal
income tax law, (see "TAX CONSIDERATIONS," page ___.)
13
<PAGE>
PERFORMANCE INFORMATION
The Company from time to time may advertise the "total return" and
the "average annual total return" of the Subaccounts and the Funds. Both
total return and average total return figures are based on historical
earnings and are not intended to indicate future performance.
"Total Return" for a portfolio refers to the total of the income
generated by the portfolio net of total portfolio operating expenses plus
capital gains and losses, realized or unrealized. "Total Return" for the
Subaccounts refers to the total of the income generated by the portfolio
net of total portfolio operating expenses plus capital gains and losses,
realized or unrealized, and the monthly deduction charge. "Average Annual
Total Return" reflects the hypothetical annually compounded return that
would have produced the same cumulative return if a Fund's portfolio's or
Subaccount's performance had been constant over the entire period. Because
average annual total returns tend to smooth out variations in the return of
the portfolio, they are not the same as actual year-by-year results.
Performance information may be compared, in reports and promotional
literature, to: (i) the Standard & Poor's 500 Stock Index ("S&P 500"), Dow
Jones Industrial Average ("DJIA"), Shearson Lehman Aggregate Bond Index or
other unmanaged indices so that investors may compare the Subaccount
results with those of a group of unmanaged securities widely regarded by
investors as representative of the securities markets in general; (ii)
other groups of variable life separate accounts or other investment
products tracked by Lipper Analytical Services, a widely used independent
research firm which ranks mutual funds and other investment products by
overall performance, investment objectives, and assets, or tracked by other
services, companies, publications, or persons, such as Morningstar, Inc.,
who rank such investment products on overall performance or other criteria;
or (iii) the Consumer Price Index (a measure for inflation) to assess the
real rate of return from an investment in the Subaccount. Unmanaged
indices may assume the reinvestment of dividends but generally do not
reflect deductions for administrative and management costs and expenses.
The Company may provide in advertising, sales literature, periodic
publications or other materials information on various topics of interest
to Owners and prospective Owners. These topics may include the
relationship between sectors of the economy and the economy as a whole and
its effect on various securities markets, investment strategies and
techniques (such as value investing, market timing, dollar cost averaging,
asset allocation, constant ratio transfer and account rebalancing), the
advantages and disadvantages of investing in tax-deferred and taxable
investments, customer profiles and hypothetical purchase and investment
scenarios, financial management and tax and retirement planning, and
investment alternatives to certificates of deposit and other financial
instruments, including comparisons between the Policies and the
characteristics of and market for such financial instruments.
Total return data may be advertised based on the period of time that
the portfolios have been in existence. The results for any period prior to
14
<PAGE>
the Policies being offered will be calculated as if the Policies had been
offered during that period of time, with all charges assumed to be those
applicable to the Policies.
Performance information for any Subaccount in any advertising will
reflect only the performance of a hypothetical investment in the Subaccount
during the particular time period on which the calculations are based.
Performance information should be considered in light of the investment
objectives and policies, characteristics and quality of the portfolio in
which the Subaccount invests and the market conditions during the given
time period, and should not be considered as a representation of what may
be achieved in the future. Actual returns may be more or less than those
shown in any advertising and will depend on a number of factors, including
the investment allocations by an Owner and the different investment rates
of return for the portfolios.
15
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS*
As of
December 31, 1996
<TABLE>
<CAPTION>
Inception Since
Portfolio Date 1 Year 3 Years 5 Years 10 Years Inception
<S> <C> <C> <C> <C> <C> <C>
ALLIANCE
Conservative
Investors 10/28/94 2.85% N/A N/A N/A 8.69%
Growth
Investors 10/28/94 7.21% N/A N/A N/A 11.20%
Growth 09/15/94 27.34% N/A N/A N/A 28.94%
Growth &
Income 01/14/91 22.98% 17.77% 14.10% N/A 12.18%
Quasar 10/01/96 N/A N/A N/A N/A 6.04%
Technology 09/30/96 N/A N/A N/A N/A 9.43%
DREYFUS
Stock Index 09/29/89 21.35% 17.31% 13.17% N/A 12.36%
Small Company
Stock 2,3 04/30/96 N/A N/A N/A N/A 8.73%
FIDELITY
VIP II Asset
Manager 09/06/89 13.58% 7.01% 10.25% N/A 10.70%
VIP Growth 10/09/86 13.68% 14.73% 14.11% 14.11% 13.78%
VIP Overseas 01/28/87 12.20% 7.12% 8.15% N/A 6.92%
VIP II Investment
Grade Bond 12/05/88 2.26% 4.28% 5.68% N/A 7.23%
VIP High
Income 09/19/85 13.01% 9.57% 13.88% 10.10% 10.98%
VIP Money
Market 04/01/82 4.42% 4.06% 3.49% 4.95% 6.00%
TOMORROW FUNDS
Long-Term 04/1/96 N/A N/A N/A N/A 8.30%
Medium-Term 04/1/96 N/A N/A N/A N/A 7.56%
Short-Term 04/1/96 N/A N/A N/A N/A 7.23%
VAN ECK
Gold and
Natural
Resources1 09/01/89 15.90% 6.37% 13.31% N/A 7.15%
Worldwide
Balanced 12/23/94 10.66% N/A N/A N/A 4.61%
</TABLE>
--------------------
16
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(1) Effective May 1, 1997, the investment objectives and the name of the
Van Eck Gold and Natural Resources Fund have been changed. The new
name is Van Eck Worldwide Hard Assets Fund and its investment
objective are described in the section entitled "The Funds and the
Investment Advisors."
(2) Not annualized.
(3) Calculated based on net value on the close of business on May 1, 1996
(commencement of initial offering) to December 31, 1996.
* This performance information reflects the total of the income
generated by the portfolio net of the total portfolio operating
expenses, plus capital gains and losses, realized or unrealized, and
net of the mortality and expense risk charge. The performance
results do not reflect: monthly deductions; cost of insurance;
surrender charges; sales loads and any state or local premium taxes
(see charges and deductions in the prospectus). If these charges
were included, the total return figures would be lower. The data
assumes the Subaccounts under the Policy were in existence on the
portfolio's inception date. The policies funded by the Separate
Account were first offered in 1995.
17
<PAGE>
INFORMATION ABOUT THE COMPANY,
THE SEPARATE ACCOUNT AND THE FUNDS
The Company
AIG Life Insurance Company is a stock life insurance company
organized under the laws of the State of Delaware in 1962. The Company
provides a full range of individual and group life, disability, accidental
death and dismemberment policies and annuities. 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 approximately 130 countries
and jurisdictions around the world.
The Separate Account
We established the Separate Account as a separate investment account
on June 5, 1986. It may be used to support the Policies as well as other
variable life insurance policies, and for other purposes permitted by law.
The Separate Account is registered with the Securities and Exchange
Commission as a unit investment trust under the Investment Company Act of
1940 (the "1940 Act") and qualifies as a "separate account" within the
meaning of the federal securities law.
We own the assets in the Separate Account. The Separate Account is
divided into Subaccounts. The Subaccounts available under the Policies
invest in shares of a specific series of the Alliance Fund, Fidelity Fund,
Fidelity Fund II, Dreyfus Fund, Dreyfus Stock Index Fund, Tomorrow Funds
and Van Eck Funds. The Separate Account may include other Subaccounts
which are not available under the Policies and are not otherwise discussed
in this Prospectus.
Income, gains and losses, realized or unrealized, of a Subaccount are
credited to or charged against the Subaccount without regard to any other
income, gains or losses of the Company. Assets equal to the reserves and
other contract liabilities with respect to each Subaccount are not
chargeable with liabilities arising out of any other business or account of
the Company. If the assets exceed the required reserves and other
liabilities, we may transfer the excess to our general account. We are
obligated to pay all benefits provided under the Policies.
Subject to compliance with all applicable regulatory requirements, we
have reserved certain rights. We have the right to change, add or delete
designated investment companies. We have the right to add or remove
Subaccounts. We have the right to withdraw assets of a class of policies
to which the Policy belongs from a Subaccount and put them in another
Subaccount. We also have the right to combine any two or more Subaccounts.
The term Subaccount in the Policy shall then refer to any other Subaccount
in which the assets of a class of policies to which the Policy belongs were
placed.
18
<PAGE>
We have the right to register other separate accounts or deregister
the Separate Account under the 1940 Act. We have the right to run the
Separate Account under the direction of a committee, and discharge such
committee at any time. We have the right to restrict or eliminate any
voting rights of Owners, or other persons who have voting rights as to the
Separate Account. We also have the right to operate the Separate Account
or one or more of the Subaccounts by making direct investments or in any
other form. If We do so, We may invest the assets of the Separate Account
or one or more of the Subaccounts in any legal investments. We will rely
upon Our own or outside counsel for advice in this regard. Also, unless
otherwise required by law or regulation, an investment advisor or any
investment of a Subaccount of Our Separate Account will not be changed by
Us unless approved by the Commissioner of Insurance of the State of
Delaware or deemed approved in accordance with such law or regulation. If
so required, the process for getting such approval is on file with the
insurance supervisory official of the jurisdiction in which this Policy is
delivered.
If any of these changes result in a material change in the underlying
investments of a Subaccount of Our Separate Account, We will notify You of
such change, as required by law. If You have value in that Subaccount, We
will transfer it at Your written direction from that Subaccount (without
charge) to another Subaccount of Our Separate Account or to Our Guaranteed
Account, and You may then change Your Premium allocation percentages.
The Funds and the Investment Advisors
Alliance Fund, Fidelity Fund, Fidelity Fund II, Dreyfus Fund,
Tomorrow Funds, and Van Eck Funds are each registered with the SEC as a
diversified open-end management investment company under the 1940 Act.
Each is a series-type mutual fund made up of different series, referred to
as 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 only to separate accounts of life insurance
companies. The investment objectives of each of the portfolios in which
Subaccounts invest are set forth below. The Fund prospectuses may include
portfolios or funds which are not available under this Policy.
ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.
Conservative Investors 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 -- 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 -- seeks the long term growth of capital by investing
primarily in common stocks and other equity securities.
19
<PAGE>
Growth and Income 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.
Quasar Portfolio -- seeks growth of capital by pursuing aggressive
investment policies. The Portfolio invests principally in a diversified
portfolio of equity securities of any company and industry and in any type
of security which is believed to offer possibilities for capital
appreciation.
Technology Portfolio -- seeks growth of capital through investment in
companies expected to benefit from advances in technology. The 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.
The Alliance Fund 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 portfolios, 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
Small Company Stock Portfolio -- seeks to provide investment results that
are greater than the total return performance of publicly-traded common
stocks in the aggregate, as represented by Russell 2500 TM Index.
DREYFUS STOCK INDEX FUND
The 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 ("Dreyfus"), located at 200 Park Avenue, New
York, New York 10166, was formed in 1947 and serves as the investment
advisor for the Small Company Stock Portfolio, which is an available
portfolio of the Dreyfus Variable Investment Fund. Dreyfus is a wholly-
owned subsidiary of Mellon Bank, N.A. which is a wholly-owned subsidiary
of Mellon Bank Corporation ("Mellon"). As of March 31, 1997, Dreyfus
managed or administered approximately $82 billion in assets for
approximately 1.7 million investor accounts nationwide. The Fund also
includes other portfolios which are not available under this prospectus as
funding vehicles for the Policies. Dreyfus has engaged Mellon Equity,
located at 500 Grant Street, Pittsburgh, Pennsylvania 15258, to serve as
the Fund's index fund manager. Mellon Equity, a registered investment
advisor formed in 1957, is an indirect wholly-owned subsidiary of Mellon
20
<PAGE>
and, thus an affiliate of Dreyfus. As of December 31, 1996, Mellon Equity
and its employees managed approximately $11.3 billion in assets and served
as the investment advisor of 14 other investment companies. More detailed
information regarding management of the portfolios, 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 INVESTMENTS VARIABLE INSURANCE PRODUCTS FUND
VIP Growth Portfolio -- seeks to aggressively achieve capital appreciation
through investments primarily in common stock.
VIP High Income Portfolio -- seeks to obtain a high level of current income
by investing primarily in high-yielding, lower-rated, fixed-income
securities, while also considering growth of capital.
VIP Overseas Portfolio -- seeks the long-term growth of capital primarily
through investments in securities of companies and economies outside of the
United States.
VIP Market 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.
FIDELITY INVESTMENTS VARIABLE INSURANCE PRODUCTS FUND II
VIP II Asset Manager 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.
VIP II Investment Grade Bond Portfolio -- seeks as high a level of current
income as in consistent with the preservation of capital by investing in a
broad range of investment-grade fixed-income securities. The fund will
maintain a dollar-weighted average portfolio maturity of ten years or less.
Fidelity Management & Research Company ("FMR") is the investment
advisor for both the Variable Insurance Products Fund and Variable
Insurance Products Fund II. 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. Both Fidelity Fund and
Fidelity Fund II include other portfolios which are not available under
this prospectus as funding vehicles for the Policies. More detailed
21
<PAGE>
information regarding management of the portfolios, investment objectives,
investment advisory fees and other charges assessed by the Fidelity Fund,
are contained in the prospectuses of the Funds, each of which is included
with this Prospectus.
TOMORROW FUNDS RETIREMENT TRUST
Short-Term Retirement Fund -- 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 -- 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 -- 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 amounts,
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 high 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 assessed
by the Tomorrow Funds, is contained in the prospectuses of the Tomorrow
Funds, included with this Prospectus.
VAN ECK INVESTMENT TRUST
Worldwide Balanced Fund -- 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.
22
<PAGE>
Worldwide Hard Assets Fund* (formerly the Gold and Natural Resources
Fund) -- seeks long-term capital appreciation by investing globally,
primarily in equity and debt securities of companies engaged to a
significant extent in the exploration, development, production and
distribution of (1) precious metals; (2) ferrous and non-ferrous metals;
(3) oil and gas; (4) forest products; (5) real estate; and (6) other basic
non-agricultural commodities (collectively, "hard assets"). Income is a
secondary consideration.
*Effective May 1, 1997, the name and investment objectives of the Gold and
Natural Resources Fund were changed. The new name of the portfolio and its
investment objectives are described above.
Van Eck Associates Corporation is the investment adviser and manager
of the Van Eck Funds and has entered into sub-advisory agreements to
provide investment advice for certain portfolios. Fiduciary International
Inc. ("FII"), located at Two World Trade Center, New York, New York 10048,
is expected to serve as a sub-investment adviser to the Worldwide Balanced
Fund pursuant to a Sub-Investment Advisory Agreement with the Fund when the
portfolio's assets reach a level at which it is appropriate to use the sub-
investment adviser's services. FII will then be expected to manage the
investment operations of the Worldwide Balanced Fund and furnish it with a
continuous investment program including which securities should be bought,
sold, or held. At that time, the Adviser would manage and administer the
business and affairs of the portfolio. As compensation for its services,
FII will be paid a monthly fee at an annual rate of .50% of average daily
net assets by the Adviser from the advisory fee it receives from the
portfolio. FII serves as an investment adviser to other registered
investment companies.
The Van Eck Funds includes other portfolios which are not available
under this Prospectus as funding vehicles for the Policies. More detailed
information regarding management, investment objectives, and investment
advisory fees and other charges assessed by the Van Eck Funds, is contained
in the prospectus for the Fund included with this Prospectus.
There is no assurance that any of the portfolios will achieve their stated
objective.
The shares of the Funds are sold not only to the Separate Account,
but to other separate accounts of the Company that fund benefits under
variable annuity 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 policy separate accounts to invest in the same underlying mutual
fund. Although neither We nor the Funds currently perceive or anticipate
any such disadvantage, the Company will monitor events to determine whether
any material conflict between variable annuity owners and variable life
owners arises.
Material conflicts could result from such occurrences as (1) changes
in state insurance laws; (2) changes in federal income tax law; (3) changes
23
<PAGE>
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 Fund;
however, there are sales and additional charges associated with the
purchase of the Policies. (See "PREMIUMS AND ALLOCATIONS," page
___.)Further information about the Funds and the managers is contained in
the accompanying prospectuses, which You should read in conjunction with
this Prospectus.
Substitution of Securities
If investment in a Subaccount should no longer be possible or, if in
Our judgment, becomes inappropriate to the purposes of the Policies, or, if
in Our judgment, investment in another Subaccount or insurance company
separate account is in the interest of Owners, We may substitute another
Subaccount or insurance company separate account. No substitution may take
place without notice to Owners and prior approval of the SEC and insurance
regulatory authorities, to the extent required by the 1940 Act and
applicable law.
Voting Rights
We are the legal owner of shares held by the Subaccounts and as such
have the right to vote on all matters submitted to shareholders of the
Funds. However, as required by law, We will vote shares held in the
Subaccounts at regular and special meetings of shareholders of the Funds in
accordance with instructions received from Owners with Account Value in the
Subaccounts. Should the applicable federal securities laws, regulations or
interpretations thereof change so as to permit Us to vote shares of the
Funds in Our own right, We may elect to do so.
To obtain voting instructions from Owners, before a meeting We will
send Owners voting instruction material, a voting instruction form and any
other related material. The number of shares held by each Subaccount for
which an Owner may give voting instructions is currently determined by
dividing the portion of the Owner's Account Value in the Subaccount by the
Net Asset Value of one share of the applicable Fund. Fractional votes will
be counted. The number of votes for which an Owner may give instructions
will be determined as of a date chosen by the Company but not more than 90
days prior to the meeting of shareholders. Shares held by a Subaccount for
which no timely instructions are received will be voted by the Company in
the same proportion as those shares for which voting instructions are
received.
We may, if required by state insurance officials, disregard Owner
voting instructions if such instructions would require shares to be voted
24
<PAGE>
so as to cause a change in sub-classification or investment objectives of
one or more of the Funds, or to approve or disapprove an investment
advisory agreement. In addition, We may under certain circumstances
disregard voting instructions that would require changes in the investment
policy or investment adviser of one or more of the Funds, provided that We
reasonably disapprove of such changes in accordance with applicable federal
regulations. If We ever disregard voting instructions, We will advise
Owners of that action and of Our reasons for such action in the next
semiannual report. Finally, We reserve the right to modify the manner in
which We calculate the weight to be given to pass through voting
instructions where such a change is necessary to comply with current
federal regulations or the current interpretation thereof.
25
<PAGE>
PREMIUMS AND ALLOCATIONS
Applying for a Policy
If You want to purchase a Policy, You must complete an application
and submit it to one of Our authorized agents. The minimum Policy size
will be $50,000 of Face Amount at issue. You must pay an initial Premium
at least equal to the minimum required. (See "PREMIUMS," below.) Your
Premium may be submitted with the application or at a later date, but
Policy coverage will not become effective until the initial Premium is
received at Our Administrative Office.
We require satisfactory evidence of the Insured's insurability, which
may include a medical examination of the Insured. Generally, We will issue
a Policy covering an Insured up to age 75 if evidence of insurability
satisfies Our underwriting rules. Acceptance of an application depends on
Our underwriting rules. We reserve the right to reject an application for
any reason.
Period to Examine and Cancel Policy
The Policy provides for an initial period during which the Owner may
examine the Policy and cancel it for any reason. The Owner may cancel the
Policy before the latest of: (a) 45 days after Part I of the Application
for the Policy is signed; (b) 10 days after the Owner receives the Policy;
and (c) 10 days after the Company mails or personally delivers a Notice of
Withdrawal Right to the Owner. The period will be extended beyond 10 days
after Policy delivery, if required by the state where the Owner resides.
Upon returning the Policy to the Administrative Office or to an agent of
the Company within such time with a written request for cancellation, the
Owner will receive a refund equal to the gross premium paid on the Policy
and will not reflect the investment experience of the Separate Account.
The Period to Examine and Cancel also applies after a requested
increase in Face Amount as to the amount of the increase and the Premium
paid for the increased Face Amount.
Premiums
The minimum initial Premium required depends on a number of factors,
such as the age, sex and underwriting rate class of the proposed Insured,
the desired Face Amount ($50,000 minimum amount) and any supplemental
benefits. The minimum initial Premium must be at least equal to two
payments of the Planned Periodic Premium. (See "PLANNED PERIODIC
PREMIUMS," below.) Sample Basic Minimum Premiums are shown in the
Appendix.
Additional Premiums may be paid in any amount and at any time,
subject to the following limits. First, a Premium must be at least $50 and
must be sent to Our Administrative Office. We may require satisfactory
evidence of insurability before accepting any Premium which results in an
increase in the net amount at risk (defined on page __).
26
<PAGE>
In addition, total Premiums paid may not exceed guideline Premium
limitations for life insurance set forth in the Internal Revenue Code. We
will refund any portion of any Premium which is determined to be in excess
of the Premium limit established by law to qualify a Policy as a Policy for
life insurance. The amount refunded will be the excess Premium. In
addition, We will monitor Policies and will attempt to notify the Owner on
a timely basis if his or her Policy is in jeopardy of becoming a modified
endowment contract under the Internal Revenue Code. (See "TAX
CONSIDERATIONS," page __.)
Lastly, no Premium will be accepted after the Maturity Date.
Planned Periodic Premiums. When applying for a Policy, You select a
plan for paying level Premiums at specified intervals, e.g., monthly,
quarterly, semi-annually or annually, until the Maturity Date. You are not
required to pay Premiums in accordance with this plan; rather, You can pay
more or less than planned or skip a Planned Periodic Premium entirely. You
can change the amount and frequency of Planned Periodic Premiums whenever
You want by sending written notice to Our Administrative Office. However,
We reserve the right to limit the amount of a Premium or the total Premiums
paid, as discussed above.
The Planned Periodic Premium may be recalculated if the Policy Face
Amount is increased or decreased.
The first year minimum Premium payable must be at least as great as
the Planned Periodic Premium. If Premiums cease at any time, the insurance
provided under the Policy will continue for as long as the Net Cash
Surrender Value in the Policy is sufficient to keep it in force (See "GRACE
PERIOD" below).
We will send You a reminder notice for Your Planned Periodic
Premiums.
Premiums Upon Increase in Specified Face Amount. Depending on the
Account Value at the time of an increase in the Face Amount and the amount
of the increase requested, an additional Premium or change in the amount of
Planned Periodic Premiums may be advisable. (See "CHANGES IN FACE AMOUNT,"
page ___.)
Premiums to Prevent Lapse
Failure to pay Planned Periodic Premiums will not necessarily cause a
Policy to lapse. Conversely, paying all Planned Periodic Premiums will not
necessarily guarantee that a Policy will not lapse. Rather, whether a
Policy lapses depends on whether its Net Cash Surrender Value is
insufficient to cover the monthly deduction when due (see page ___).
If the Net Cash Surrender Value on a Monthly Anniversary is less than
the amount of the monthly deduction to be deducted on that date, the Policy
will be in default and a Grace Period will begin. This could happen if
investment experience has been sufficiently unfavorable that it has
27
<PAGE>
resulted in a decrease in the Net Cash Surrender Value or the Net Cash
Surrender Value has decreased because of any combination of the following:
Outstanding Loans, partial surrenders, expense charges, or insufficient
Premiums paid to offset the monthly deduction. A Policy that lapses with
an Outstanding Loan may have tax consequences. (See "TAX CONSIDERATIONS,"
page ___.)
Grace Period. If Your Policy goes into default, You will be allowed
a 61-day Grace Period to pay a Premium sufficient to keep the Policy in
force for 3 months. We will send notice of the amount required to be paid
during the Grace Period ("Grace Period Premium") to Your last known address
and to any assignee of record. The Grace Period will begin when the notice
is sent. Your Policy will remain in effect during the Grace Period. If
the Insured should die during the Grace Period or before the Grace Period
Premium is paid, the Death Benefit will still be payable to the
Beneficiary, although the amount paid will reflect a reduction for the
monthly deductions due on or before the date of the Insured's death. See
"Death Benefit," page ___. If the Grace Period Premium has not been paid
before the Grace Period ends, Your Policy will lapse. It will have no
value and no benefits will be payable. (See "REINSTATEMENT," page ___.)
A Grace Period may also begin if Outstanding Loans exceed the Policy
limit. (See "LOAN REPAYMENT; EFFECT IF NOT REPAID," page ___.)
Net Premium Allocations
In the application, You specify the percentage of a Net Premium to be
allocated to each Subaccount. This allocation must comply with the
allocation rules described in the following paragraph. However, until the
Period to Examine and Cancel expires, all Net Premiums received are
invested in the Money Market Subaccount. The first business day after the
period expires, the Account Value in the Money Market Subaccount is
transferred and allocated based on the Premium allocation percentages in
the application. (See "DETERMINING THE POLICY VALUE," page ___.)
The Premium allocation percentages specified in the application will
apply to subsequent Premiums until You change them. You can change the
allocation percentages at any time, subject to the rules below, by sending
written notice to Our Administrative Office. The change will apply to all
Premiums received with or after Your notice.
Dollar Cost Averaging
If elected, this option allows for automatic transfer from the Money
Market Subaccount into other Subaccounts for a specified dollar amount or
number of months not in excess of 24. This option can be elected at any
time provided there is a minimum balance of $2,000 in the Money Market
Subaccount at the time of election. The allocation to the Subaccounts will
be based on Your Premium allocation that is in effect at the time of each
transfer. The automatic transfers will begin on the first Monthly
Anniversary following the end of Your Free Look Period; or, if You elect
the option after Your application has been submitted, the automatic
28
<PAGE>
transfers will begin on the second Monthly Anniversary following the
receipt of Your request at Our Administrative Office.
If You elect to transfer a specific dollar amount each month, the
automatic transfers will continue until Your Money Market Subaccount is
depleted. If You elect to have Your funds transferred over a specific
number of months, We will transfer a fraction equal to one divided by the
number of months remaining in the period. For example, if You elect to
transfer over a 12 month period, the first transfer will be 1/12 of Your
Money Market Subaccount value, the second transfer will be for 1/11, the
third will be for 1/10 and so on until the end of the requested period.
Automatic transfers will remain in effect until one of the following
conditions occur:
1. The funds in the Money Market Subaccount are depleted;
2. We receive Your written request at Our Administrative Office to
cancel future transfers;
3. We receive notification of death of the Insured; or
4. The Policy lapses.
Use of Dollar Cost Averaging does not guarantee investment gains or
protect against loss in a declining market.
The allocation and transfer provisions discussed below do not apply
to transfers effected under the Dollar Cost Averaging Option.
Allocation Rules. No less than 5% of a Premium may be allocated to
any one Subaccount. The sum of Your allocations must equal 100% and each
allocation percentage must be a whole number.
Crediting Premiums
The initial Net Premium will be credited to the Policy as of the
Policy Date. Subsequent Planned Periodic Premiums and accepted unplanned
premiums will be credited to the Policy and the Net Premiums will be
invested as of the date the Premium or notification of deposit is received
at Our Administrative Office. However, any Net Premiums requiring
underwriting will be allocated to the Money Market Subaccount until
underwriting has been completed. When accepted or at the end of the Period
to Examine and Cancel, the Account Value in the Money Market Subaccount
attributable to the resulting Net Premium will be credited to the Policy
and allocated in accordance with the specified allocation percentages. Net
Premiums not requiring underwriting will be invested in the Subaccounts
according to the specified allocation percentages directly. If additional
Premium is rejected, We will refund the excess amount.
Transfers
You may transfer Account Value among the Subaccounts subject to the
following rules, some of which depend on whether Account Value is to be
transferred from a Subaccount or the Guaranteed Account. Transfer requests
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must be in writing. Transfers may not be requested until after the end of
the Period to Examine and Cancel (see page ___). A transfer will take
effect on the date the request is received at Our Administrative Office.
We may, however, defer transfers under the same conditions as described in
"WHEN PROCEEDS ARE PAID," page ___. There is no limit on the number of
transfers. However, after six (6) transfers have been made during a Policy
Year, We currently impose a $25 transfer charge on each subsequent
transfer. (See "TRANSFER CHARGE," page ___.) The Company reserves the
right to increase or decrease the number of "free" transfers allowed in any
Policy Year.
The minimum amount of Account Value that may be transferred is $250.
If less than the full amount of Account Value in a Subaccount is being
transferred from the Subaccount, the amount remaining must be at least
$250. If the amount remaining would be less than $250, the full amount of
the Account Value will be transferred.
Subaccount Transfer Rules. Transfers among Subaccounts and from
Subaccounts to the Guaranteed Account may be made at any time after the
Period to Examine and Cancel. All transfers processed on the same business
date will count as one transfer for purposes of determining whether the
transfer is free or may be subject to the $25 charge.
Guaranteed Account Transfer Rules. Account Value held in the
Guaranteed Account may be transferred to a Subaccount or Subaccounts only
during the 60-day period within 30 days before and following the end of
each Policy Year. The amount transferred must be at least $250, or the
Account Value held in the Guaranteed Account, whichever is less. If the
amount transferred is less than the Account Value then held in the
Guaranteed Account, at least $250 must remain in the Guaranteed Account.
The maximum allowable amount that can be transferred from the Guaranteed
Account, at any one time, is 25% of the unloaned portion of the Guaranteed
Account. (See "DEDUCTIONS FROM THE GUARANTEED ACCOUNT," page ___, for
additional rules and limits for the Guaranteed Account.)
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GUARANTEED ACCOUNT
Because of exemptive and exclusionary provisions, interests in the
Guaranteed Account have not been registered under the Securities Act of
1933 nor has the Guaranteed Account been registered as an investment
company under the Investment Company Act of 1940. Accordingly, neither the
Guaranteed Account nor any interests therein are subject to the provisions
of these Acts and, as a result, the staff of the Securities and Exchange
Commission has not reviewed the disclosure in this Prospectus relating to
the Guaranteed Account. The disclosure 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.
The Guaranteed Account is an account within the general account of
the Company. It is part of Our general account assets. Our general
account assets are used to support Our insurance and annuity obligations
other than those funded by separate accounts. Subject to applicable law,
We have sole discretion over the investment of the assets of the general
account. The Loan Account is part of the Guaranteed Account.
Interest Credited on Policy Value in the Guaranteed Account
Net Premiums allocated to the Guaranteed Account and Account Value
transferred from the Subaccounts to the Guaranteed Account are credited to
the Guaranteed Account portion of the Account Value. We will credit
interest on these amounts at rates We determine in Our sole discretion, but
in no event will interest credited on these amounts be less than an
effective rate of at least 0.32737% per month, compounded monthly which
equates to 4% per year, compounded annually. The Loan Account portion of
the Guaranteed Account will be credited with interest at an annual rate
that is 2.0% less than the then current Policy loan interest rate.
However, if at the time of an allocation or transfer to the
Guaranteed Account, We are crediting a rate of interest higher than 4%, the
higher rate will apply to the amount from the date of its allocation or
transfer to the Guaranteed Account through the end of the period during
which the excess rate is effective. If a higher rate of interest is
credited, different rates of interest may apply to amounts allocated or
transferred at different times, and different rates of interest may apply
to amounts held in a Loan Account than to the remaining portion of Account
Value held in the Guaranteed Account. YOU ASSUME THE RISK THAT INTEREST
CREDITED MAY NOT EXCEED THE GUARANTEED MINIMUM RATE OF 4% PER YEAR.
Calculating Guaranteed Account Value
The Guaranteed Account Value is calculated daily. (See "GUARANTEED
ACCOUNT VALUE," page __.)
Deductions from the Guaranteed Account
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Amounts allocated to the Guaranteed Account at different times,
whether from Net Premiums or transfers, may be credited with different
rates of interest. Whenever a charge is deducted from the Account Value in
the Guaranteed Account, or an amount is withdrawn from the Account Value in
the Guaranteed Account to satisfy a partial surrender, transfer or Policy
loan request, the charge or withdrawal will be taken first from the amount
most recently allocated to the Guaranteed Account, then the amount next
most recently allocated, and so forth. See page ___ for limits and
restrictions on transfers of Account Value from the Guaranteed Account.
If there is any Account Value in the Loan Account, it is not
available for transfers, partial surrenders or Policy loans, nor any
charges deducted from this portion of Account Value. Amounts are
transferred to or from the Loan Account only when Policy loans are taken or
repayments made. If an amount is transferred from the Loan Account to the
remaining portion of the Guaranteed Account Value, it will be treated as a
new allocation to the Guaranteed Account and will be credited with interest
at the rate then in effect for Guaranteed Account allocations. (See "LOAN
ACCOUNT," page ___.)
Payments from the Guaranteed Account
We may defer payment of proceeds from the Guaranteed Account for a
partial surrender, surrender or Policy loan request for up to six months
from the date We receive the written request. If a payment from the
Guaranteed Account is deferred for 30 days or more, it will bear interest
at a rate of 4% per year compounded annually while it is deferred.
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CHARGES AND DEDUCTIONS
Periodically, the Company will deduct charges from the Account Value
and also from each Premium to cover certain expenses related to issuing and
administering the Policy. These charges and deductions are described in
the Policy as either guaranteed or current. The Company will never charge
more than the guaranteed amount; however, solely within the Company's
discretion, it may on a current basis charge less than the guaranteed
amount.
Premium Charges
We will deduct a charge from each Premium. This charge consists of a
5% sales charge plus an explicit percent of Premium equal to the state and
local premium tax rate applicable to the Policy (e.g., a typical state
premium tax rate would be in the range of 2% to 2.5%). An additional sales
charge may be deducted on a partial surrender or surrender of a Policy
during the first 14 Policy Years. (See "SURRENDER CHARGES," page ___.)
The 5% sales charge partially compensates Us for the expenses of
selling and distributing the Policies, including paying sales commissions,
printing prospectuses, preparing sales literature and paying for other
promotional activities.
Daily Mortality and Expense Risk Charge
We deduct a daily charge from assets in the Subaccounts attributable
to the Policies for assuming certain mortality and expense risks under the
Policy. This charge does not apply to Guaranteed Account assets
attributable to the Policies. The guaranteed and current charge is at an
annual rate of 0.90% of net assets. Although the charge may be decreased
to not less than 0.50% in Policy Years 11 and later, it is guaranteed not
to exceed 0.90% for the duration of a Policy. Starting in Policy Year 11,
if the current charge is less than .90%, We will notify You before We
increase this charge. We may realize a profit from this charge.
The mortality risk We assume is that the Insureds on the Policies may
die sooner than anticipated and that therefore the Company will pay an
aggregate amount of death benefits greater than anticipated. The expense
risk we assume is that expenses incurred in issuing and administering the
Policies and the Separate Account will exceed the amounts realized from the
administrative charges assessed against the Policies.
Monthly Deduction
On the Issue Date and each Monthly Anniversary, We deduct the monthly
deduction from the Account Value. The amount deducted on the Issue Date is
for the Policy Date and any Monthly Anniversaries that have elapsed since
the Policy Date. (For this purpose, the Policy Date is treated as a
Monthly Anniversary.) The monthly deduction consists of (1) administrative
charges (the "Monthly Expense Charge"), (2) insurance charges ("Cost of
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Insurance Charge"), and (3) any charges for additional benefits added by
supplemental agreement to a Policy ("Supplemental Benefit Charges"), as
described below. The monthly deduction is deducted from the Accounts pro
rata on the basis of the portion of Account Value in each Account. (See
"DEDUCTIONS FROM THE GUARANTEED ACCOUNT," page ___.)
Current and Guaranteed Expense Charges. The monthly expense charge
varies by current Policy Face Amount. There is also an additional monthly
charge (see "First Year Additional Charge" in table below) during the first
Policy year and the twelve months immediately following an increase in Face
Amount.
The monthly expense charges per Policy varying by the Policy Face
Amount and the additional monthly charge during the first Policy Year and
every twelve months immediately following an increase in Face Amount for
current and guaranteed expense charges are shown below:
Current Guaranteed
Monthly Expense Charge Per Policy Charge Charge
If Face Amount is between $50,000 and $7.50 $15.00
$199,99
If Face Amount is between $200,000 and $5.00 $10.00
$499,999
If Face Amount is $500,000 or greater $ 4.00 $10.00
First Year Additional Charge $20.00 $25.00
These charges compensate Us for administrative expenses associated
with the Policies and the Separate Account. These expenses relate to
Premium billing and collection, recordkeeping, processing Death Benefit
claims, Policy loans, Policy changes, reporting and overhead costs,
processing applications and establishing Policy records.
Cost of Insurance Charge. This charge compensates Us for providing
insurance coverage. The charge depends on a number of factors, such as
Attained Age, sex and rate class of the Insured, and therefore will vary
from Policy to Policy and from Monthly Anniversary to Monthly Anniversary.
For any Policy the cost of insurance on a Monthly Anniversary is calculated
by multiplying the cost of insurance rate for the Insured by the net amount
at risk under the Policy for that Monthly Anniversary.
The Net Amount at Risk is calculated as (a) minus (b) where
(a) is the current Death Benefit at the beginning of the Policy
month divided by 1.0032737.
(b) is current total Account Value.
The cost of insurance rate for a Policy is based on the Attained Age,
sex and rate class of the Insured, and therefore varies from time to time.
We currently place Insureds in one of three basic rate classifications,
based on Our underwriting: a smoker, a nonsmoker standard, or a rate class
involving a higher mortality risk (a "substandard class"). Insureds
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Attained Age 14 and under are placed in a rate class that does not
distinguish between smoker and nonsmoker, and are assigned to a smoker
class at Attained Age 15 unless they have provided satisfactory evidence
that they qualify for a nonsmoker class.
We place the Insured in a rate class when We issue the Policy based
on Our underwriting of the application. This original rate class applies
to the initial Face Amount. When an increase in Face Amount is requested,
We conduct underwriting before approving the increase (except as noted
below) to determine whether a different rate class will apply to the
increase. If the rate class for the increase has lower cost of insurance
rates than the original rate class, the rate class for the increase also
will be applied to the initial Face Amount. If the rate class for the
increase has higher cost of insurance rates than the original rate class,
the rate class for the increase will apply only to the increase in Face
Amount, and the original rate class will continue to apply to the initial
Face Amount.
If there have been increases in the Face Amount, we may use different
cost of insurance rates for the increased portions of the Policy Face
Amount. For purposes of calculating the cost of insurance charge after the
Face Amount has been increased, the Account Value will be applied to the
initial Face Amount first and then to any subsequent increases in Face
Amount. If at the time an increase is requested, the Account Value exceeds
the initial Face Amount (or any subsequently increased Face Amount) divided
by 1.0032737, the excess will then be applied to the subsequent increase in
Face Amount in the sequence of the increases.
If the Death Benefit equals the Account Value multiplied by the
applicable death benefit corridor percentage, any increase in Account Value
will cause an automatic increase in Death Benefit. The Attained Age and
underwriting class for such increase will be the same as that used for the
most recent increase in Face Amount (that has not been eliminated through a
subsequent decrease in Face Amount).
If there is a decrease in Face Amount after there had been prior
increases to the Face Amount, then for purposes of calculating the cost of
insurance charge, the decrease will first be applied to reduce any prior
increases in Face Amount, starting with the most recent increase in Face
Amount and then to each prior increase.
The guaranteed cost of insurance rates for substandard policies
issued on a table rated basis are based on multiples of the 1980 CSO
tables. The substandard multiple applicable depends on the substandard
underwriting classification assigned to the insured. Currently, multiples
range from 125% to 500% of the 1980 CSO tables.
The guaranteed cost of insurance charges at any given time for a
substandard policy with flat extra charges will be based on the guaranteed
maximum cost of insurance rate for the policy (including table rating
multiples, if applicable), the current net amount at risk at the time the
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deduction is made, plus the actual dollar amount of the flat extra charge.
Our current cost of insurance rates may be less than the guaranteed rates.
Our current cost of insurance rates will be determined based on Our
expectations as to future mortality, investment, expense and persistency
experience. These rates may change from time to time. In the Company's
discretion, the current charge may be increased in any amount up to the
maximum guaranteed charge shown in the table.
Cost of insurance rates (whether guaranteed or current) for an
Insured in a nonsmoker standard class are lower than guaranteed rates for
an Insured of the same age and sex in a smoker standard class. Cost of
insurance rates (whether guaranteed or current) for an Insured in a
nonsmoker or smoker standard class are generally lower than guaranteed
rates for an Insured of the same age and sex and smoking status in a
substandard class.
We do not conduct underwriting for an increase in Face Amount if the
increase is requested as part of a conversion from a term policy issued by
the Company. (See "SUPPLEMENTAL BENEFITS," page ___.) In the case of a
term conversion, the rate class that applies to the increase is the same
rate class that applied to the term policy.
Legal Considerations Relating to Sex-Distinct Premiums and Benefits.
Mortality tables for the Policies generally distinguish between males and
females. Thus, Premiums and benefits under Policies covering males and
females of the same age will generally differ.
We do, however, also offer Policies based on unisex mortality tables
if required by state law. Employers and employee organizations considering
purchase of a Policy should consult their legal advisors to determine
whether purchase of a Policy based on sex-distinct actuarial tables is
consistent with Title VII of the Civil Rights Act of 1964 or other
applicable law. Upon request, We may offer Policies with unisex mortality
tables to such prospective purchasers.
Supplemental Benefit Charges. See "SUPPLEMENTAL BENEFITS," page ___.
Transfer Charge
We currently impose a $25 transfer charge on any transfer of Account
Value among the Subaccounts in excess of six free transfers permitted each
Policy Year. If the charge is imposed, it will be deducted from the amount
requested to be transferred before allocation to the new Subaccount(s) and
shown in the confirmation of the transaction. If an amount is being
transferred from more than one Subaccount, the transfer charge will be
deducted proportionately from the amount being transferred from each
Subaccount. This charge, if imposed, will reimburse Us for administrative
expenses incurred in effecting transfers.
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Surrender Charge
If the Policy is surrendered during the first 14 Policy Years, We
will deduct a surrender charge for the initial Face Amount. If a Policy is
surrendered within 14 years after an increase in Face Amount, We will
deduct a surrender charge for the increase in Face Amount. The surrender
charge will be deducted before any surrender proceeds are paid.
Surrender Charge for Initial Face Amount. The surrender charge for
the initial Face Amount will be no greater than the sum of (1) and (2)
times a duration factor (as shown in the table below), where:
(1) is equal to 25% of the first year paid Premium up to the
surrender charge premium (which is an amount calculated
separately for each Policy based on age, sex and
smoker/nonsmoker class and is provided in the Appendix); and
(2) is equal to 4% of the first year paid Premium in excess of the
surrender charge premium.
The following table lists the Policy duration factor as described
above:
Policy Surrender Charge
Duration Factor
-------- ----------------
1 100%
2 100%
3 100%
4 100%
5 100%
6 90%
7 80%
8 70%
9 60%
10 50%
11 40%
12 30%
13 20%
14 10%
15+ 0%
A Table of Surrender Charge Premiums for various ages, sex and Face
Amount in the nonsmoker class is shown in Appendix B.
An increase in the Face Amount of the Policy will result in an
additional surrender charge during the 14 years. The additional surrender
charge period will begin on the effective date of the increase.
If the Face Amount of the Policy is reduced before the end of the
14th Policy Year or within 14 years immediately following a Face Amount
increase, We may also deduct a pro rata share of any applicable surrender
charge from Your Account Value. Reductions will first be applied against
the most recent increase in the Face Amount of the Policy. They will then
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be applied to prior increases in the Face Amount of the Policy in the
reverse order in which such increases took place, and then to the original
Face Amount of the Policy.
Partial Surrender Charge
The partial surrender charge is equal to a pro rata portion of the
surrender charge that would apply to a full surrender, determined by
multiplying the applicable full surrender charge by a fraction (equal to
the partial surrender amount payable plus the partial surrender
administrative charge divided by the result of subtracting the applicable
surrender charge from the unloaned portion of the Account Value). This
amount is assessed against the Subaccounts or the Guaranteed Account in the
same manner as provided for with respect to the partial surrender amount
paid.
A partial surrender charge is also deducted from the Account Value
upon a decrease in Face Amount. The charge is equal to the applicable
surrender charge multiplied by a fraction (equal to the decrease in Face
Amount divided by the Face Amount of the Policy prior to the decrease).
Partial Surrender Administrative Charge
We will deduct an administrative charge upon a partial surrender.
This charge is $25. If required by the insurance regulations of any state,
the administrative charge for a partial surrender will be equal to the
lesser of $25 or 2% of the amount surrendered. This charge will be
deducted from the Account Value in addition to the amount requested to be
surrendered and will be considered to be part of the partial surrender
amount. (See page __ for rules for allocating the deduction and "Partial
Surrenders" on page __.)
Each partial surrender will reduce the Account Value by the amount of
partial surrender plus the proportional surrender charge and $25 fee. If
the Death Benefit coverage is the Level Death Benefit Option, the Face
Amount will also be reduced by the amount of the partial surrender in the
following order:
1. The most recent increase in the Face Amount, if any, will be
reduced first.
2. The next most recent increases in the Face Amount, if any, will
then be successively decreased.
3. The initial Face Amount will then be decreased.
Discount Purchase Programs
The amount of the surrender charge may be reduced or eliminated when
sales of the Policies are made to individuals or to groups of individuals
in a manner that, in the opinion of the Company, results in savings of
sales expenses. For purchases made by officers, directors and employees of
the Company, an affiliate, or any individual, firm, or company that has
executed the necessary agreements to sell the Policies, and members of the
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immediate families of such officers, directors, and employees, the Company
may reduce or eliminate the surrender charge.
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HOW YOUR ACCOUNT VALUE VARIES
There is no minimum guaranteed Account Value or Net Cash Surrender
Value. These values will vary with the investment experience of the
Subaccounts and/or the crediting of interest in the Guaranteed Account, and
will depend on the allocation of Account Value. If the Net Cash Surrender
Value on a Monthly Anniversary is less than the amount of the monthly
deduction to be deducted on that date (see page __), the Policy will be in
default and a Grace Period will begin.
Determining the Account Value
On the Policy Date the Account Value is equal to the initial Net
Premium. If the Policy Date and the Issue Date are the same day, the
Account Value is equal to the initial Net Premium, less the monthly
deduction. On each Valuation Date thereafter, the value is the aggregate
of the accumulation values in the Subaccounts and the Guaranteed Account
portion of the Account Value. The Account Value will vary to reflect the
performance of the Subaccounts to which amounts have been allocated,
interest credited on amounts allocated to the Guaranteed Account, charges,
transfers, withdrawals, Policy loans and Policy loan repayments.
Accumulation Unit Values. When You allocate an amount to a
Subaccount, either by Net Premium allocation or transfer of Account Value,
Your Policy is credited with accumulation units in that Subaccount. The
number of accumulation units is determined by dividing the amount allocated
to the Subaccount by the Subaccount's accumulation unit value for the
Valuation Date when the allocation is effected.
The number of Subaccount accumulation units credited to Your Policy
will increase when Net Premiums are allocated to the Subaccount, amounts
are transferred to the Subaccount and loan repayments are credited to the
Subaccount. The number of Subaccount accumulation units credited to a
Policy will decrease when the allocated portion of the monthly deduction is
taken from the Subaccount, a Policy loan is taken from the Subaccount, an
amount is transferred from the Subaccount, or a partial surrender,
including the partial surrender charge, is taken from the Subaccount.
A Subaccount's accumulation unit value varies to reflect the
investment experience of the underlying Portfolio, and may increase or
decrease from one Valuation Date to the next. The accumulation unit value
for each Subaccount was arbitrarily set at $10 when the Subaccount was
established. For each Valuation Period after the date of establishment,
the accumulation unit value is determined by multiplying the value of an
accumulation unit for a Subaccount for the prior valuation period by the
net investment factor for the Subaccount for the current valuation period.
Net Investment Factor. The net investment factor is an index used to
measure the investment performance of a Subaccount from one Valuation
Period to the next. It is based on the change in net asset value of the
Fund shares held by the Subaccount, and reflects any dividend or capital
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gain distributions on Fund shares and the deduction of the daily mortality
and expense risk charge.
Guaranteed Account Value. On any Valuation Date, the Guaranteed
Account portion of the Account Value of a Policy is the total of all Net
Premiums allocated to the Guaranteed Account, plus any amounts transferred
to the Guaranteed Account, plus interest credited on such Net Premiums and
amounts, less the amount of any transfers from the Guaranteed Account, less
the amount of any partial surrenders, including the partial surrender
charges, taken from the Guaranteed Account, and less the pro rata portion
of the monthly deduction deducted from the Guaranteed Account. If there
have been any Policy loans, the Guaranteed Account Value is further
adjusted to reflect the amount in the Loan Account held in the Guaranteed
Account, including transfers to and from the Loan Account as loans are
taken and repayments are made, and interest credited on the Loan Account.
Net Account Value
The Net Account Value on a Valuation Date is the Account Value less
Outstanding Loans on that date.
Cash Surrender Value
The Cash Surrender Value on a Valuation Date is the Account Value
reduced by any surrender charge that would be assessed if the Policy were
surrendered on that date. The Cash Surrender Value is used to calculate
the loan value and to determine whether Outstanding Loans exceed the Policy
limits (see page ___). The loan value may not exceed 90% of the Net Cash
Surrender Value at the time the loan is made.
Net Cash Surrender Value
The Net Cash Surrender Value on a Valuation Date is equal to the Net
Account Value reduced by any surrender charge that would be imposed if the
Policy were surrendered on that date. It is the amount received upon a
full surrender of the Policy.
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DEATH BENEFIT AND CHANGES IN FACE AMOUNT
As long as the Policy remains in force, We will pay the Death Benefit
upon receipt at Our Administrative Office of satisfactory proof of the
Insured's death. We will require return of the Policy. The Death Benefit
will be paid in a lump sum generally within seven days after We receive due
proof of the death of the Insured (see "WHEN PROCEEDS ARE PAID," page ___),
or, if elected, under a payment option (see "PAYMENT OPTIONS," page ___).
The Death Benefit will be paid to the Beneficiary. (See "SELECTING AND
CHANGING THE BENEFICIARY," page __.)
If part or all of the Death Benefit is paid in one sum, the Company
will pay interest on this sum from the date of the Insured's death to the
date of payment. We determine the interest rate, but it will not be less
than a rate of 3% per year compounded annually.
Death Benefit Options
The Policy Owner may choose one of two Death Benefit Options, which
will determine the Death Benefit. Under Option I, the Death Benefit is the
greater of the Face Amount or the applicable percentage of Account Value on
the date of the Insured's death. Under Option II, the Death Benefit is the
greater of the Face Amount plus the Account Value, or the applicable
percentage of the Account Value, on the date of the Insured's death.
If investment performance is favorable the amount of the Death
Benefit may increase. However, under Option I, the Death Benefit
ordinarily will not change for several years to reflect any favorable
investment performance and may not change at all, whereas under Option II,
the Death Benefit will vary directly with the investment performance of the
Account Value. To see how and when investment performance may begin to
affect the Death Benefit, please see the illustrations beginning on page
___.
The applicable percentage of Account Value is 250% when the Insured
is Attained Age 40 or less, and decreases each year thereafter to 100% when
the Insured is Attained Age 95. A table showing the applicable percentages
for Attained Ages 0 to 99 is shown below. The Internal Revenue Code
requires that the applicable percentage requirements be met in order for
the Policy to qualify under the Code as life insurance.
Table of Applicable Percentages
Percentage of Policy
Attained Age Account Value
------------ --------------------
Under 40 250%
45 215%
50 185%
55 150%
60 130%
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70 115%
75 through 90 105%
95 through 99 100%
The initial Face Amount is set at the time the Policy is issued. You
may increase or decrease the Face Amount from time to time, as discussed
below. You select from Options I or II when you apply for the Policy. You
also may change the Option, as discussed below.
Changes in Death Benefit Options
You can change Your Death Benefit Option on Your Policy subject to
the following rules. After any change, We may require that You submit
evidence, satisfactory to Us that the Insured is then insurable. If You
ask Us to change from Option I to Option II, We will decrease the Face
Amount of the Policy by the amount in Your Account Value on the date the
change takes effect. However, We reserve the right to decline to make such
change if it would reduce the Face Amount of this Policy below the minimum
Face Amount for which We would then issue the Policy under Our rules. If
You ask Us to change from Option II to Option I, We will increase the Face
Amount of this Policy by the amount in Your Account Value on the date the
change takes effect. Such decreases and increases in the Face Amount of
the Policy are made so that the Death Benefit remains the same on the date
the change takes effect. However, if Your Death Benefit is determined by a
percentage multiple of the Account Value, there may be an increase in the
Death Benefit.
The change will take effect at the beginning of the Policy Month that
coincides with or next follows the date We approve Your request.
We reserve the right to decline to make any change that We determine
would cause the Policy to fail to qualify as life insurance under
applicable tax law as interpreted by Us.
You may ask for a change by completing an Application For Change,
which You can get from Our agent or by writing to Us at Our Administrative
Office. A copy of Your Application For Change will be attached to the new
policy information section of the Policy that We will issue when the change
is made. The new section and the Application For Change will become a part
of the Policy. We may require You to return the Policy to Our
Administrative Office to make a Policy change.
Changes in Face Amount
At any time after the first Policy Year while the Policy is in force,
You may request a change in the Face Amount, subject to the following
conditions. No change will be permitted that would result in Your Policy's
Death Benefit not being excludable from gross income due to not satisfying
the requirements of Section 7702 of the Internal Revenue Code. (See "TAX
CONSIDERATIONS," page ___.)
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Any increase in the Face Amount must be at least $10,000, however,
the resulting Face Amount of the Policy after the increase may not be in
excess of twice the Face Amount of the Policy on the Issue Date. A written
application must be submitted to Our Administrative Office along with
evidence of insurability satisfactory to the Company. A change in the
Planned Periodic Premium may be advisable. (See "PREMIUMS UPON INCREASE IN
SPECIFIED FACE AMOUNT," page ___.) The increase in Face Amount will become
effective on the Monthly Anniversary on or next following the date the
increase is approved, and the Account Value will be adjusted to the extent
necessary to reflect a monthly deduction as of the effective date based on
the increase in Face Amount. You must return Your Policy so We can amend
the Policy to reflect the increase. There will be an additional $20 per
month in Monthly Expense Charges imposed on the contract for the next
twelve months immediately following the effective date of such an increase.
Any decrease in the Face Amount must be at least $5,000 and the Face
Amount after the decrease must be at least $50,000. In addition, no
decrease may be made in the first twelve months following the effective
date of an increase in Face Amount. During the first five Policy Years,
the Face Amount may not be decreased by more than 10 percent of the initial
Face Amount in any one Policy Year. A decrease in Face Amount will become
effective on the Monthly Anniversary that coincides with or next follows
Our receipt of a request at Our Administrative Office.
There is an impact on Surrender Charges for both increases and
decreases in Face Amount. (See "SURRENDER CHARGES," page __.) In
addition, an increase or decrease in Face Amount may impact the status of
the Policy as a Modified Endowment Contract. (See "TAX CONSIDERATIONS,"
page __.)
Selecting and Changing the Beneficiary
You select a Beneficiary in Your application. You may later change
the Beneficiary in accordance with the terms of the Policy. If the Insured
dies and there is no surviving Beneficiary, the Owner's estate will be the
Beneficiary.
CASH BENEFITS
Policy Loans
You may borrow up to the loan value of Your Policy at any time after
the first twelve months of the Policy, or after the first twelve months
following any increase in Face Amount, by submitting a written request to
Our Administrative Office. The minimum amount You may borrow is $500. The
loan value is 90% of Your Net Cash Surrender Value. Outstanding Loans
reduce the amount of the loan value available for new Policy loans. Policy
loans will be processed as of the date Your written request is received and
loan proceeds generally will be sent to You within seven days. (See "WHEN
PROCEEDS ARE PAID," page ___, and "PAYMENTS FROM THE GUARANTEED ACCOUNT,"
page ___.) In addition, loans from Modified Endowment Contracts may be
44
<PAGE>
treated for tax purposes as distributions of income. (See "TAX
CONSIDERATIONS," page ___.)
Interest. We will charge interest daily on any outstanding Policy
loan at a declared annual rate not in excess of 8.00%. The current rate,
subject to change by the Company, is 8.00%. Interest is due and payable at
the end of each Policy Year while a Policy loan is outstanding. If
interest is not paid when due, the amount of the interest is added to the
loan and becomes part of the outstanding Policy loan.
Outstanding Loans. Unrepaid Policy loans (including unpaid interest
added to the loan) plus accrued interest not yet due equals the Outstanding
Loans.
Loan Repayment; Effect if Not Repaid. You may repay all or part of
Your Outstanding Loan at any time while the Insured is living and the
Policy is in force. Loan repayments must be sent to Our Administrative
Office and will be credited as of the date received. If the Death Benefit
becomes payable while a Policy loan is outstanding, the Outstanding Loan
will be deducted in calculating the Death Benefit. If the Outstanding
Loans exceed the Net Cash Surrender Value on any monthly anniversary, the
Policy will be in default. We will send You, and any assignee of record,
notice of the default. You will have a 61-day Grace Period to submit a
sufficient payment to avoid termination. The notice will specify the
amount that must be repaid to prevent termination.
Loan Account. When a Policy loan is made, an amount equal to the
loan proceeds is withdrawn from the Account Value in the Subaccounts. This
withdrawal is made pro rata on the basis of the Account Value in each
Subaccount unless You direct a different allocation when requesting the
loan. The loan amount withdrawn is then transferred to the Loan Account in
the Guaranteed Account. Conversely, when a loan is repaid, an amount equal
to the repayment will be transferred from the Loan Account to the
Subaccounts in accordance with Your then effective Net Premium allocation
percentages. Thus, a loan or loan repayment will have no immediate effect
on the Account Value, but other Policy values, such as the Net Policy Value
and Net Cash Surrender Value, will be reduced or increased immediately by
the amount transferred to or from the Loan Account.
Policy Loan Net Cost. The maximum net cost of a loan is 2.00% per
year (the difference between the rate of interest We charge on Policy loans
and the amount We credit on the equivalent amount held in the Loan
Account). In addition, We currently intend to credit 6.00% on the amount
held in the Loan Account during the first 10 Policy Years. The net loan
cost during the first ten Policy Years will always be no more than 2.00%.
For Policy Years 11 and later, a portion of the maximum loanable
amount may be available on a preferred loan basis. The amount available on
a preferred basis is the excess, if any, of the Account Value over the sum
of the Premiums paid. For a preferred loan, the interest rate charged and
credited to the preferred portion of the loan value will be the same.
45
<PAGE>
Effect of Policy Loan. A Policy loan, whether or not repaid, will
have a permanent effect on the Death Benefit and Account Value because the
investment results of the Subaccounts and current interest rates credited
in the Guaranteed Account will apply only to the non-loaned portion of the
Account Value. The longer the loan is outstanding, the greater this effect
is likely to be. Depending on the investment results of the Subaccounts or
credited interest rates for the Guaranteed Account while the Policy loan is
outstanding, the effect could be favorable or unfavorable. Also, Policy
loans could, particularly if not repaid, make it more likely than otherwise
for a Policy to terminate.
Surrendering the Policy for Net Cash Surrender Value
You may surrender your Policy at any time for its Net Cash Surrender
Value by submitting a written request to Our Administrative Office. We
will require return of the Policy. A surrender charge may apply. (See
"SURRENDER CHARGES," page ___.) A surrender request will be processed as
of the date Your written request and all required documents are received
and generally will be paid within seven days. (See "WHEN PROCEEDS ARE
PAID," page ___, and "PAYMENTS FROM THE GUARANTEED ACCOUNT," page ___.)
The Net Cash Surrender Value may be taken in one sum or it may be applied
to a payment option. (See "PAYMENT OPTIONS," below.) Your Policy will
terminate and cease to be in force if it is surrendered for one sum. It
cannot later be reinstated.
Partial Surrenders
We will not allow a partial surrender during the first twelve months
of the Policy or during the first twelve Policy Months immediately
following an increase in the Face Amount of the Policy. After the first
Policy Year, You may make partial surrenders under Your Policy up to a
maximum of 90% of the Net Cash Surrender Value subject to the following
conditions. You must submit a written request to Our Administrative
Office. The Net Cash Surrender Value must exceed $500 after the partial
surrender is deducted from the Account Value. No more than two partial
surrenders may be made during a Policy Year, and each partial surrender
must be at least $500. A partial surrender charge and an administrative
charge will be assessed on a partial surrender. (See "PARTIAL SURRENDER
CHARGE," page __.) This charge will be deducted from Your Account Value
along with the amount requested to be surrendered and will be considered
part of the partial surrender (together, the "partial surrender amount").
Account Value will be reduced by the partial surrender amount.
When You request a partial surrender, You can direct how the partial
surrender amount will be deducted from Your Account Value in the Accounts.
If You provide no directions, the partial surrender amount will be deducted
from Your Account Value in the Accounts on a pro rata basis. (See
"PAYMENTS FROM THE GUARANTEED ACCOUNT," page __.)
If Option I is in effect, the Face Amount will also be reduced by the
partial surrender amount. If the Face Amount has been increased, the
partial surrender will reduce first the most recent increase, and then the
46
<PAGE>
next most recent increase, if any, in reverse order, and finally the
initial Face Amount. No partial surrender may be made that would reduce
the Face Amount to less than $50,000.
Partial surrender requests will be processed as of the date your
written request is received, and generally will be paid within seven days.
(See "WHEN PROCEEDS ARE PAID," page __, and "PAYMENTS FROM THE GUARANTEED
ACCOUNT," page __.)
Surrenders of all or part of a Policy may have tax consequences.
(See "TAX CONSIDERATIONS," page __.)
Maturity Benefit
The Maturity Date is the Policy Anniversary following Insured's
Attained Age 99 unless you requested an extended Maturity Date. If the
Policy is still in force on the Maturity Date, the Maturity Benefit will be
paid to You. The Maturity Benefit is equal to the Account Value less
Outstanding Loans on the Maturity Date. Maturity of a Policy may have tax
consequences. (See "TAX CONSIDERATIONS," page __.)
Payment Options
The Policy offers a wide variety of optional ways of receiving
proceeds payable under the Policy, such as on surrender, death or maturity,
other than in a lump sum. Any agent authorized to sell this Policy can
explain these options upon request. None of these options vary with the
investment performance of a separate account because they are all forms of
guaranteed benefit payments.
47
<PAGE>
ILLUSTRATIONS OF POLICY VALUES, NET CASH SURRENDER
VALUES, DEATH BENEFITS AND ACCUMULATED PREMIUMS
The following tables have been prepared to show how certain values
under a Policy change with investment performance over an extended period
of time. The tables illustrate how Account Value, Net Cash Surrender Value
and Death Benefit under a Policy covering an Insured of a given age on the
Issue Date, would vary over time if planned Premiums were paid annually and
the return on the assets in the selected Funds was an average rate of 0%,
6% or 12%. The tables also show Planned Periodic Premiums accumulated at
5% interest.
The tables reflect the fact that the net investment return on the
assets held in the subaccounts is lower than the gross after tax return of
the selected Funds. The tables assume an average annual expense ratio of
0.85% of the average daily net assets of the Funds available under the
Policies. This average annual expense ratio is based on the expense ratios
of each of the Funds for the last fiscal year, adjusted, as appropriate,
for any material changes in expenses effective for the current fiscal year
of a Fund. For information on Fund expenses, see the prospectuses for the
Funds accompanying this prospectus.
In addition, the tables reflect the daily charge to the Separate
Account for assuming mortality and expense risks, which is equivalent to an
effective annual charge at the guaranteed maximum rate of 0.90% which is
also the current rate. In Policy Years 11 and later, the Company may
reduce the effective annual charge to a current rate of no less than 0.50%.
After deduction of Fund expenses and the mortality and expense risk charge,
the illustrated gross annual investment rates of return of 0%, 6% and 12%
would correspond to approximate net annual rates of 1.74%, 4.26% and
10.26%.
The tables also reflect the deduction of the monthly expense charge
and the monthly cost of insurance charge for the hypothetical Insured. Our
current cost of insurance charges and the higher guaranteed maximum cost of
insurance charges We have the contractual right to charge are reflected in
separate tables on each of the following pages. All the tables reflect the
fact that no charges for federal income taxes are currently made against
the Separate Account and assume no Outstanding Loans or charges for
supplemental benefits. The tables also reflect a state premium tax rate of
2.00%.
The illustrations are based on Our sex distinct rates for nonsmokers.
Upon request, We will furnish a comparable illustration based upon the
proposed Insured's individual circumstances. Such illustrations may assume
different hypothetical rates of return than those illustrated in the
following tables.
48
<PAGE>
ILLUSTRATION OF POLICY VALUES
AIG LIFE INSURANCE COMPANY
Male Issue Age 40 Non Smoker
$3,200 Annual Premium
$250,000 Face Amount
Death Benefit Option (Level)
<TABLE>
<CAPTION>
Using Current Cost of Insurance Rates
-----------------------------------------------------------------------------------------------------------------
Premiums 0% Hypothetical 6% Hypothetical 12% Hypothetical
Accumulated Gross Investment Return Gross Investment Return Gross Investment Return
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
End of at 5.00% Policy Net Cash Policy Net Cash Policy Net Cash
Policy Interest Account Surrender Death Account Surrender Death Account Surrender Death
Year Per Year Value Value Benefit Value Value Benefit Value Value Benefit
1 $3,360 $2,205 $1,405 $250,000 $2,358 $1,558 $250,000 $2,511 $1,711 $250,000
2 $6,888 $4,595 $3,795 $250,000 $5,044 $4,244 $250,000 $5,511 $4,711 $250,000
3 $10,592 $6,932 $6,132 $250,000 $7,831 $7,031 $250,000 $8,804 $8,004 $250,000
4 $14,482 $9,215 $8,415 $250,000 $10,721 $9,921 $250,000 $12,416 $11,616 $250,000
5 $18,566 $11,431 $10,631 $250,000 $13,706 $12,906 $250,000 $16,367 $15,567 $250,000
6 $22,854 $13,543 $12,823 $250,000 $16,749 $16,029 $250,000 $20,651 $19,931 $250,000
7 $27,357 $15,565 $14,925 $250,000 $19,868 $19,228 $250,000 $25,317 $24,677 $250,000
8 $32,085 $17,503 $16,943 $250,000 $23,070 $22,510 $250,000 $30,412 $29,852 $250,000
9 $37,049 $19,396 $18,916 $250,000 $26,398 $25,918 $250,000 $36,019 $35,539 $250,000
10 $42,262 $21,215 $20,815 $250,000 $29,829 $29,429 $250,000 $42,164 $41,764 $250,000
11 $47,735 $23,026 $22,706 $250,000 $33,475 $33,155 $250,000 $49,072 $48,752 $250,000
12 $53,482 $24,746 $24,506 $250,000 $37,228 $36,988 $250,000 $56,665 $56,425 $250,000
13 $59,516 $26,389 $26,229 $250,000 $41,110 $40,950 $250,000 $65,034 $64,874 $250,000
14 $65,851 $27,955 $27,875 $250,000 $45,129 $45,049 $250,000 $74,268 $74,188 $250,000
15 $72,504 $29,422 $29,422 $250,000 $49,269 $49,269 $250,000 $84,446 $84,446 $250,000
16 $79,489 $30,743 $30,743 $250,000 $53,496 $53,496 $250,000 $95,644 $95,644 $250,000
17 $86,824 $31,934 $31,934 $250,000 $57,831 $57,831 $250,000 $108,000 $108,000 $250,000
18 $94,525 $32,965 $32,965 $250,000 $62,257 $62,257 $250,000 $121,635 $121,635 $250,000
19 $102,611 $33,818 $33,818 $250,000 $66,764 $66,764 $250,000 $136,703 $136,703 $250,000
20 $111,102 $34,532 $34,532 $250,000 $71,398 $71,398 $250,000 $153,409 $153,409 $250,000
25 $160,363 $35,929 $35,929 $250,000 $96,836 $96,836 $250,000 $268,563 $268,563 $327,647
30 $223,235 $31,985 $31,985 $250,000 $126,443 $126,443 $250,000 $456,374 $456,374 $529,394
</TABLE>
The above illustrations are based on the following:
(1) Assumes no policy loans have been made.
(2) Current values reflect current cost of insurance rates, a state
premium tax rate of 2.00%, a combined administrative charge of
49
<PAGE>
$25.00 per month in year 1 and $5.00 per month thereafter, and
a mortality and expense risk charge of 0.90% of assets for the
first 10 policy years and 0.50% for policy years eleven and later.
(3) Net investment returns are calculated as the hypothetical
gross investment returns less all charges and deductions shown
in the prospectus.
(4) Assumes that the premium is paid at the beginning of the policy
year. Values would be different if the premiums are paid with a
different frequency or in different amounts.
==========================================================================
THE HYPOTHETICAL INVESTMENT RATE OF RETURN SHOWN ABOVE AND ELSEWHERE IN
THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A
REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES
OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING
RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY
WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED
0%, 6%, OR 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW
THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE
BY THE COMPANY OR THE FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
50
<PAGE>
<TABLE>
<CAPTION>
Illustration of Policy Values
AIG Life Insurance Company
Male Issue Age 40 Non Smoker
$3,200 Annual Premium
$250,000 Face Amount
Death Benefit Option (Level)
Using Guaranteed Cost of Insurance Rates
--------------------------------------------------------------------------------------------------------
Premiums 0% Hypothetical 6% Hypothetical 12% Hypothetical
Accumulated Gross Investment Return Gross Investment Return Gross Investment Return
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
End of at 5.00% Policy Net Cash Policy Net Cash Policy Net Cash
Policy Interest Account Surrender Death Account Surrender Death Account Surrender Death
Year Per Year Value Value Benefit Value Value Benefit Value Value Benefit
1 $3,360 $1,927 $1,127 $250,000 $2,070 $1,270 $250,000 $2,215 $1,415 $250,000
2 $6,888 $4,079 $3,279 $250,000 $4,495 $3,695 $250,000 $4,928 $4,128 $250,000
3 $10,592 $6,154 $5,354 $250,000 $6,979 $6,179 $250,000 $7,875 $7,075 $250,000
4 $14,482 $8,148 $7,348 $250,000 $9,524 $8,724 $250,000 $11,074 $10,274 $250,000
5 $18,566 $10,060 $9,260 $250,000 $12,126 $11,326 $250,000 $14,549 $13,749 $250,000
6 $22,854 $11,883 $11,163 $250,000 $14,783 $14,063 $250,000 $18,322 $17,602 $250,000
7 $27,357 $13,616 $12,976 $250,000 $17,495 $16,855 $250,000 $22,423 $21,783 $250,000
8 $32,085 $15,256 $14,696 $250,000 $20,260 $19,700 $250,000 $26,883 $26,323 $250,000
9 $37,049 $16,799 $16,319 $250,000 $23,075 $22,595 $250,000 $31,736 $31,256 $250,000
10 $42,262 $18,239 $17,839 $250,000 $25,939 $25,539 $250,000 $37,020 $36,620 $250,000
11 $47,735 $19,568 $19,248 $250,000 $28,843 $28,523 $250,000 $42,773 $42,453 $250,000
12 $53,482 $20,775 $20,535 $250,000 $31,780 $31,540 $250,000 $49,038 $48,798 $250,000
13 $59,516 $21,846 $21,686 $250,000 $34,738 $34,578 $250,000 $55,862 $55,702 $250,000
14 $65,851 $22,766 $22,686 $250,000 $37,703 $37,623 $250,000 $63,295 $63,215 $250,000
15 $72,504 $23,522 $23,522 $250,000 $40,665 $40,665 $250,000 $71,401 $71,401 $250,000
16 $79,489 $24,099 $24,099 $250,000 $43,612 $43,612 $250,000 $80,249 $80,249 $250,000
17 $86,824 $24,484 $24,484 $250,000 $46,532 $46,532 $250,000 $89,924 $89,924 $250,000
18 $94,525 $24,669 $24,669 $250,000 $49,419 $49,419 $250,000 $100,526 $100,526 $250,000
19 $102,611 $24,632 $24,632 $250,000 $52,256 $52,256 $250,000 $112,164 $112,164 $250,000
20 $111,102 $24,348 $24,348 $250,000 $55,022 $55,022 $250,000 $124,962 $124,962 $250,000
25 $160,363 $17,985 $17,985 $250,000 $66,780 $66,780 $250,000 $212,469 $212,469 $259,213
30 $223,235 $0 $0 $0 $71,235 $71,235 $250,000 $353,973 $353,973 $410,609
</TABLE>
The above illustrations are based on the following:
(1) Assumes no policy loans have been made.
(2) Values reflect guaranteed cost of insurance rates, a state
premium tax rate of 2.00%, a combined administrative charge
of $35.00 per month in year 1 and $10.00 per month thereafter,
51
<PAGE>
and a mortality and expense risk charge of 0.90% of assets for
all years.
(3) Net investment returns are calculated as the hypothetical gross
investment returns less all charges and deductions shown in the
prospectus.
(4) Assumes that the premium is paid at the beginning of the policy
year. Values would be different if the premiums are paid with a
different frequency or in different amounts.
============================================================================
THE HYPOTHETICAL INVESTMENT RATE OF RETURN SHOWN ABOVE AND ELSEWHERE IN
THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A
REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES
OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING
RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY
WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED
0%, 6%, OR 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW
THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE
BY THE COMPANY OR THE FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
52
<PAGE>
Illustration of Policy Values
AIG Life Insurance Company
$8,500 Annual Premium
$400,000 Face Amount
Death Benefit Option (Level)
Male Issue Age 50 Non Smoker
<TABLE>
<CAPTION>
Using Current Cost of Insurance Rates
-----------------------------------------------------------------------------------------------------------------------
0% Hypothetical 6% Hypothetical 12% Hypothetical
Gross Investment Return Gross Investment Return Gross Investment Return
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Premiums
Accumulated
Policy
End of at 5.00% Policy Net Cash Death Net Cash Policy Net Cash
Policy Interest Account Surrender Account Surrender Death Account Surrender Death
Year Per Year Value Value Benefit Value Value Benefit Value Value Benefit
1 $8,925 $6,116 $3,991 $400,000 $6,530 $4,405 $400,000 $6,945 $4,820 $400,000
2 $18,296 $12,259 $10,134 $400,000 $13,471 $11,346 $400,000 $14,734 $12,609 $400,000
3 $28,136 $18,216 $16,091 $400,000 $20,624 $18,499 $400,000 $23,233 $21,108 $400,000
4 $38,468 $23,992 $21,867 $400,000 $28,001 $25,876 $400,000 $32,518 $30,393 $400,000
5 $49,316 $29,549 $27,424 $400,000 $35,573 $33,448 $400,000 $42,634 $40,509 $400,000
6 $60,707 $34,816 $32,903 $400,000 $43,275 $41,362 $400,000 $53,598 $51,685 $400,000
7 $72,667 $39,823 $38,123 $400,000 $51,144 $49,444 $400,000 $65,535 $63,835 $400,000
8 $85,226 $44,526 $43,039 $400,000 $59,146 $57,658 $400,000 $78,512 $77,024 $400,000
9 $98,412 $48,902 $47,627 $400,000 $67,263 $65,988 $400,000 $92,628 $91,353 $400,000
10 $112,258 $53,019 $51,957 $400,000 $75,575 $74,512 $400,000 $108,086 $107,023 $400,000
11 $126,796 $57,077 $56,227 $400,000 $84,401 $83,551 $400,000 $125,519 $124,669 $400,000
12 $142,060 $60,953 $60,316 $400,000 $93,559 $92,922 $400,000 $144,820 $144,182 $400,000
13 $158,088 $64,593 $64,168 $400,000 $103,024 $102,599 $400,000 $166,178 $165,753 $400,000
14 $174,918 $67,966 $67,754 $400,000 $112,793 $112,581 $400,000 $189,838 $189,625 $400,000
15 $192,589 $71,053 $71,053 $400,000 $122,877 $122,877 $400,000 $216,091 $216,091 $400,000
16 $211,143 $73,835 $73,835 $400,000 $133,290 $133,290 $400,000 $245,278 $245,278 $400,000
17 $230,625 $76,260 $76,260 $400,000 $144,025 $144,025 $400,000 $277,779 $277,779 $400,000
18 $251,082 $78,270 $78,270 $400,000 $155,075 $155,075 $400,000 $314,049 $314,049 $400,000
19 $272,561 $79,823 $79,823 $400,000 $166,453 $166,453 $400,000 $354,593 $354,593 $414,874
20 $295,114 $80,879 $80,879 $400,000 $178,183 $178,183 $400,000 $399,369 $399,369 $463,267
25 $425,964 $76,510 $76,510 $400,000 $243,201 $243,201 $400,000 $702,822 $702,822 $752,020
30 $592,967 $49,687 $49,687 $400,000 $326,223 $326,223 $400,000 $1,200,63 $1,200,630 $1,260,661
</TABLE>
The above illustrations are based on the following:
53
<PAGE>
(1) Assumes no policy loans have been made.
(2) Current values reflect current cost of insurance rates, a state
premium tax rate of 2.00%, a combined administrative charge of
$25.00 per month in year 1 and $5.00 per month thereafter, and
a mortality and expense risk charge of 0.90% of assets for the
first 10 policy years and 0.50% for policy years eleven and
later.
(3) Net investment returns are calculated as the hypothetical gross
investment returns less all charges and deductions shown in the
prospectus.
(4) Assumes that the premium is paid at the beginning of the policy
year. Values would be different if the premiums are paid with
a different frequency or in different amounts.
============================================================================
THE HYPOTHETICAL INVESTMENT RATE OF RETURN SHOWN ABOVE AND ELSEWHERE IN
THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A
REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES
OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING
RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY
WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED
0%, 6%, OR 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW
THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE
BY THE COMPANY OR THE FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
54
<PAGE>
Illustration of Policy Values
AIG Life Insurance Company
Male Issue Age 50 $8,500 Annual Premium Non Smoker
$400,000 Face Amount
Death Benefit Option (Level)
<TABLE>
<CAPTION>
Using Guaranteed Cost of Insurance Rates
---------------------------------------------------------------------------------------------------------------
0% Hypothetical 6% Hypothetical 12% Hypothetical
Gross Investment Return Gross Investment Return Gross Investment Return
-------------------------------------------------------------- -------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Premiums
Accumulated
End of at 5.00% Policy Net Cash Policy Net Cash Policy Net Cash
Policy Interest Account Surrender Death Account Surrender Death Account Surrender Death
Year Per Year Value Value Benefit Value Value Benefit Value Value Benefit
1 $8,925 $5,360 $3,235 $400,000 $5,750 $3,625 $400,000 $6,141 $4,016 $400,000
2 $18,296 $10,772 $8,647 $400,000 $11,892 $9,767 $400,000 $13,061 $10,936 $400,000
3 $28,136 $15,916 $13,791 $400,000 $18,116 $15,991 $400,000 $20,504 $18,379 $400,000
4 $38,468 $20,771 $18,646 $400,000 $24,402 $22,277 $400,000 $28,506 $26,381 $400,000
5 $49,316 $25,319 $23,194 $400,000 $30,736 $28,611 $400,000 $37,108 $34,983 $400,000
6 $60,707 $29,541 $27,629 $400,000 $37,097 $35,185 $400,000 $46,360 $44,448 $400,000
7 $72,667 $33,421 $31,721 $400,000 $43,473 $41,773 $400,000 $56,322 $54,622 $400,000
8 $85,226 $36,951 $35,463 $400,000 $49,857 $48,370 $400,000 $67,073 $65,586 $400,000
9 $98,412 $40,102 $38,827 $400,000 $56,226 $54,951 $400,000 $78,688 $77,413 $400,000
10 $112,258 $42,843 $41,781 $400,000 $62,551 $61,489 $400,000 $91,247 $90,185 $400,000
11 $126,796 $45,135 $44,285 $400,000 $68,800 $67,950 $400,000 $104,849 $103,999 $400,000
12 $142,060 $46,938 $46,301 $400,000 $74,938 $74,300 $400,000 $119,606 $118,968 $400,000
13 $158,088 $48,184 $47,759 $400,000 $80,906 $80,481 $400,000 $135,636 $135,211 $400,000
14 $174,918 $48,806 $48,593 $400,000 $86,648 $86,435 $400,000 $153,090 $152,877 $400,000
15 $192,589 $48,735 $48,735 $400,000 $92,107 $92,107 $400,000 $172,156 $172,156 $400,000
16 $211,143 $47,904 $47,904 $400,000 $97,228 $97,228 $400,000 $193,070 $193,070 $400,000
17 $230,625 $46,241 $46,241 $400,000 $101,959 $101,959 $400,000 $216,125 $216,125 $400,000
18 $251,082 $43,674 $43,674 $400,000 $106,244 $106,244 $400,000 $241,681 $241,681 $400,000
19 $272,561 $40,101 $40,101 $400,000 $110,009 $110,009 $400,000 $270,173 $270,173 $400,000
20 $295,114 $35,382 $35,382 $400,000 $113,148 $113,148 $400,000 $302,126 $302,126 $400,000
25 $425,964 $0 $0 $0 $112,746 $112,746 $400,000 $526,573 $526,573 $563,433
30 $592,967 $0 $0 $0 $55,418 $55,418 $400,000 $886,643 $886,643 $930,975
</TABLE>
The above illustrations are based on the following:
(1) Assumes no policy loans have been made.
(2) Values reflect guaranteed cost of insurance rates, a state
55
<PAGE>
premium tax rate of 2.00%, a combined administrative charge of
$35.00 per month in year 1 and $10.00 per month thereafter,
and a mortality and expense risk charge of 0.90% of assets for
all years.
(3) Net investment returns are calculated as the hypothetical gross
investment returns less all charges and deductions shown in the
prospectus.
(4) Assumes that the premium is paid at the beginning of the policy
year. Values would be different if the premiums are paid with
a different frequency or in different amounts.
============================================================================
THE HYPOTHETICAL INVESTMENT RATE OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION
OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE
MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS
INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND
RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD
BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%,
OR 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE
AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE
COMPANY OR THE FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED
FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
56
<PAGE>
Illustration of Policy Values
AIG Life Insurance Company
Male Issue Age 35 Non Smoker
$2,000 Annual Premium
$200,000 Face Amount
Death Benefit Option (Level)
<TABLE>
<CAPTION>
Using Current Cost of Insurance Rates
--------------------------------------------------------------------------------------------------------
0% Hypothetical 6% Hypothetical 12% Hypothetical
Gross Investment Return Gross Investment Return Gross Investment Return
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Premiums
Accumulated
End of at 5.00% Policy Net Cash Policy Net Cash Policy Net Cash
Policy Interest Account Surrender Death Account Surrender Death Account Surrender Death
Year Per Year Value Value Benefit Value Value Benefit Value Value Benefit
1 $2,100 $1,277 $777 $200,000 $1,369 $869 $200,000 $1,462 $962 $200,000
2 $4,305 $2,760 $2,260 $200,000 $3,030 $2,530 $200,000 $3,313 $2,813 $200,000
3 $6,620 $4,203 $3,703 $200,000 $4,748 $4,248 $200,000 $5,337 $4,837 $200,000
4 $9,051 $5,608 $5,108 $200,000 $6,523 $6,023 $200,000 $7,551 $7,051 $200,000
5 $11,604 $6,968 $6,468 $200,000 $8,351 $7,851 $200,000 $9,968 $9,468 $200,000
6 $14,284 $8,290 $7,840 $200,000 $10,242 $9,792 $200,000 $12,615 $12,165 $200,000
7 $17,098 $9,576 $9,176 $200,000 $12,199 $11,799 $200,000 $15,518 $15,118 $200,000
8 $20,053 $10,830 $10,480 $200,000 $14,230 $13,880 $200,000 $18,707 $18,357 $200,000
9 $23,156 $12,052 $11,752 $200,000 $16,336 $16,036 $200,000 $22,209 $21,909 $200,000
10 $26,414 $13,229 $12,979 $200,000 $18,508 $18,258 $200,000 $26,047 $25,797 $200,000
11 $29,834 $14,390 $14,190 $200,000 $20,803 $20,603 $200,000 $30,347 $30,147 $200,000
12 $33,426 $15,493 $15,343 $200,000 $23,163 $23,013 $200,000 $35,064 $34,914 $200,000
13 $37,197 $16,540 $16,440 $200,000 $25,596 $25,496 $200,000 $40,251 $40,151 $200,000
14 $41,157 $17,563 $17,513 $200,000 $28,134 $28,084 $200,000 $45,986 $45,936 $200,000
15 $45,315 $18,538 $18,538 $200,000 $30,760 $30,760 $200,000 $52,311 $52,311 $200,000
16 $49,681 $19,444 $19,444 $200,000 $33,459 $33,459 $200,000 $59,271 $59,271 $200,000
17 $54,265 $20,283 $20,283 $200,000 $36,236 $36,236 $200,000 $66,943 $66,943 $200,000
18 $59,078 $21,064 $21,064 $200,000 $39,107 $39,107 $200,000 $75,416 $75,416 $200,000
19 $64,132 $21,790 $21,790 $200,000 $42,076 $42,076 $200,000 $84,783 $84,783 $200,000
20 $69,439 $22,440 $22,440 $200,000 $45,132 $45,132 $200,000 $95,134 $95,134 $200,000
25 $100,227 $23,949 $23,949 $200,000 $61,395 $61,395 $200,000 $165,906 $165,906 $222,315
30 $139,522 $22,487 $22,487 $200,000 $79,945 $79,945 $200,000 $282,063 $282,063 $344,117
</TABLE>
The above illustrations are based on the following:
(1) Assumes no policy loans have been made.
(2) Current values reflect current cost of insurance rates, a
57
<PAGE>
state premium tax rate of 2.00%, a combined administrative
charge of $25.00 per month in year 1 and $5.00 per month
thereafter, and a mortality and expense risk charge of
0.90% of assets for the first 10 policy years and 0.50%
for policy years eleven and later.
(3) Net investment returns are calculated as the hypothetical
gross investment returns less all charges and deductions
shown in the prospectus.
(4) Assumes that the premium is paid at the beginning of the
policy year. Values would be different if the premiums
are paid with a different frequency or in different amounts.
============================================================================
THE HYPOTHETICAL INVESTMENT RATE OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION
OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE
MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS
INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND
RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%,
OR 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE
AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE
COMPANY OR THE FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED
FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
58
<PAGE>
Illustration of Policy Values
AIG Life Insurance Company
Male Issue Age 35 Non Smoker
$2,000 Annual Premium
$200,000 Face Amount
Death Benefit Option (Level)
<TABLE>
<CAPTION>
Using Guaranteed Cost of Insurance Rates
-----------------------------------------------------------------------------------------------------------
0% Hypothetical 6% Hypothetical 12% Hypothetical
Gross Investment Return Gross Investment Return Gross Investment Return
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Premiums
Accumulated
End of at 5.00% Policy Net Cash Policy Net Cash Policy Net Cash
Policy Interest Account Surrender Death Account Surrender Death Account Surrender Death
Year Per Year Value Value Benefit Value Value Benefit Value Value Benefit
1 $2,100 $1,073 $573 $200,000 $1,158 $658 $200,000 $1,244 $744 $200,000
2 $4,305 $2,409 $1,909 $200,000 $2,656 $2,156 $200,000 $2,914 $2,414 $200,000
3 $6,620 $3,701 $3,201 $200,000 $4,195 $3,695 $200,000 $4,730 $4,230 $200,000
4 $9,051 $4,948 $4,448 $200,000 $5,775 $5,275 $200,000 $6,707 $6,207 $200,000
5 $11,604 $6,150 $5,650 $200,000 $7,398 $6,898 $200,000 $8,860 $8,360 $200,000
6 $14,284 $7,301 $6,851 $200,000 $9,059 $8,609 $200,000 $11,200 $10,750 $200,000
7 $17,098 $8,401 $8,001 $200,000 $10,759 $10,359 $200,000 $13,747 $13,347 $200,000
8 $20,053 $9,449 $9,099 $200,000 $12,498 $12,148 $200,000 $16,522 $16,172 $200,000
9 $23,156 $10,443 $10,143 $200,000 $14,274 $13,974 $200,000 $19,544 $19,244 $200,000
10 $26,414 $11,380 $11,130 $200,000 $16,087 $15,837 $200,000 $22,837 $22,587 $200,000
11 $29,834 $12,255 $12,055 $200,000 $17,934 $17,734 $200,000 $26,426 $26,226 $200,000
12 $33,426 $13,067 $12,917 $200,000 $19,813 $19,663 $200,000 $30,339 $30,189 $200,000
13 $37,197 $13,812 $13,712 $200,000 $21,723 $21,623 $200,000 $34,610 $34,510 $200,000
14 $41,157 $14,488 $14,438 $200,000 $23,661 $23,611 $200,000 $39,275 $39,225 $200,000
15 $45,315 $15,089 $15,089 $200,000 $25,625 $25,625 $200,000 $44,371 $44,371 $200,000
16 $49,681 $15,607 $15,607 $200,000 $27,608 $27,608 $200,000 $49,942 $49,942 $200,000
17 $54,265 $16,035 $16,035 $200,000 $29,603 $29,603 $200,000 $56,034 $56,034 $200,000
18 $59,078 $16,359 $16,359 $200,000 $31,600 $31,600 $200,000 $62,697 $62,697 $200,000
19 $64,132 $16,568 $16,568 $200,000 $33,588 $33,588 $200,000 $69,989 $69,989 $200,000
20 $69,439 $16,649 $16,649 $200,000 $35,556 $35,556 $200,000 $77,979 $77,979 $200,000
25 $100,227 $14,717 $14,717 $200,000 $44,734 $44,734 $200,000 $131,626 $131,626 $200,000
30 $139,522 $6,922 $6,922 $200,000 $51,125 $51,125 $200,000 $219,379 $219,379 $267,643
</TABLE>
The above illustrations are based on the following:
(1) Assumes no policy loans have been made.
(2) Values reflect guaranteed cost of insurance rates, a state
premium tax rate of 2.00%, a combined administrative charge
59
<PAGE>
of $35.00 per month in year 1 and $10.00 per month thereafter,
and a mortality and expense risk charge of 0.90% of assets for
all years.
(3) Net investment returns are calculated as the hypothetical gross
investment returns less all charges and deductions shown in the
prospectus.
(4) Assumes that the premium is paid at the beginning of the policy
year. Values would be different if the premiums are paid with a
different frequency or in different amounts.
================================================================================
HYPOTHETICAL INVESTMENT RATE OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION
OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY
BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS
INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND
RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%,
OR 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE
AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY
THE COMPANY OR THE FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
60
<PAGE>
OTHER POLICY BENEFITS AND PROVISIONS
Right to Convert
The Policy may be converted to a Policy of flexible premium fixed benefit
life insurance on the life of the Insured. This conversion may be made
either:
a. within 24 months after the Issue Date while the Policy is in
force or within 24 months of any increase in Face Amount, or
b. within 60 days of the effective date of a material change in the
investment policy of a Subaccount, or within 60 days of the
notification of such change, if later. In the event of such a
change, the Company will notify the Owner and give the Owner
information on the options available.
When such a conversion is made, no evidence of insurability is
required. When a conversion is requested, the Company accomplishes this by
transferring all of the Account Value to the Guaranteed Account. There is
no charge for this transfer. Once this option is exercised, the entire
Account Value must remain in the Guaranteed Account for the life of the
Policy. The Face Amount in effect at the time of the conversion remains
unchanged. The Effective Date, Date of Issue and Issue Age are unchanged.
The Owner and Beneficiary are the same as were recorded immediately before
the conversion.
Limits on Our Rights to Contest the Policy
Incontestability. We will not contest the Policy after it has been in
force during the Insured's lifetime for two years from the Issue Date. Any
increase in the Face Amount will be incontestable with respect to
statements made in the evidence of insurability for that increase after the
increase has been in force during the life of the Insured for two years
after the effective date of the increase.
Suicide Exclusion. If the Insured commits suicide (while sane or
insane) within two years after the Issue Date, Our liability will be
limited to the payment of a single sum. This sum will be equal to the
Premiums paid, minus any loan and accrued loan interest and minus any
partial surrender and minus the cost of any riders attached to the Policy.
If the Insured commits suicide (while sane or insane) within two years
after the effective date of an increase in the Face Amount, then Our
liability as to the increase in amount will be limited to the payment of a
single sum equal to the monthly cost of insurance deductions made for such
increase plus the expense charge deducted for the increase.
Changes in the Policy or Benefits
Misstatement of Age or Sex. If an Insured's age or sex has been
misstated in the Policy, the Death Benefit and any benefits provided by
61
<PAGE>
Riders to the Policy shall be those which would be purchased at the then
current cost of insurance charge for the correct age and sex.
Other Changes. At any time We may make such changes in the Policy as
are necessary to assure compliance at all times with the definition of life
insurance prescribed by the Internal Revenue Code or to make the Policy
conform with any law or regulation issued by any government agency to which
it is subject. Any such change, however, may be accepted or rejected by
the Owner.
When Proceeds Are Paid
We will ordinarily pay any Death Benefit, loan proceeds or partial or
full surrender proceeds within seven days after receipt at Our
Administrative Office of all the documents required for such a payment.
Other than the Death Benefit, which is determined as of the date of death,
the amount will be determined as of the date of receipt of required
documents. However, We may delay making a payment or processing a transfer
request if (1) the disposal or valuation of the Separate Account's assets
is not reasonably practicable because the New York Stock Exchange is closed
for other than a regular holiday or weekend, trading is restricted by the
SEC, or the SEC declares that an emergency exists; or (2) the SEC by order
permits postponement of payment to protect the Company's Owners. (See also
"PAYMENTS FROM THE GUARANTEED ACCOUNT," page ___.)
Reports to Policy Owners
You will receive a confirmation within seven days of the transaction
of: the receipt of any Premium (except Premiums received before the Issue
Date); any change of allocation of Premiums; any transfer between
Subaccounts; any loan, interest repayment, or loan repayment; any partial
surrender; or any return of Premium necessary to comply with applicable
maximum receipt of any Premium payment. You will also receive confirmation
within seven days of transaction of: (1) exercise of the Period to Examine
and Cancel; (2) an exchange of the Policy; (3) full surrender of the
Policy; and (4) payment of the Death Benefit under the Policy.
Within 30 days after each Policy Anniversary an annual statement will
be sent to each Owner. The statement will show the current amount of Death
Benefits payable under the Policy, the current Account Value, the current
Cash Surrender Value and current Outstanding Loans. The statement will
also show Premiums paid, all charges deducted during the Policy Year, and
all transactions. The Company will also send to Owners annual and semi-
annual report of the Separate Account.
Assignment
The Policy may be assigned in accordance with its terms on a form
provided by Us. We will not be deemed to know of an assignment unless We
receive a copy of it at Our Administrative Office. We assume no
responsibility for the validity or sufficiency of any assignment. Any
62
<PAGE>
assignment or pledge of a Modified Endowment Contract as collateral for a
loan may result in a taxable event. (See "TAX CONSIDERATIONS," page ___.)
Reinstatement
If the Policy has ended without value, You may reinstate Policy
benefits while the Insured is alive if You:
1. Ask for reinstatement of Policy benefits within 3 years from the
end of the Grace Period;
2. Provide evidence of insurability satisfactory to Us;
3. Make a payment of an amount sufficient to cover (i) the total
monthly administrative charges from the beginning of the Grace
Period to the effective date of reinstatement; (ii) total
monthly deductions for 3 months, calculated from the effective
date of reinstatement; and (iii) the charge for applicable
taxes, the Premium charge, and any increase in surrender charges
associated with this payment. We will determine the amount of
this required payment as if no interest or investment
performance were credited to or charged against Your Account
Value; and
4. Repay or reinstate any Policy loan which existed on the date the
Policy ended.
The effective date of the reinstatement of Policy benefits will be the
beginning of the Policy Month which coincides with or next follows the date
We approve Your request.
From the required payment We will deduct the charge for applicable
taxes and the premium charge. The Account Value, Policy loan and surrender
charges that will apply upon reinstatement will be those that were in
effect on the date the Policy lapsed.
We will start to make monthly deductions again as of the effective
date of reinstatement. The monthly expense charge from the beginning of
the Grace Period to the effective date of reinstatement will be deducted
from the Account Value as of the effective date of reinstatement. No other
charges will accrue for this period.
63
<PAGE>
TAX CONSIDERATIONS
The following description is based upon the Company's
understanding of current federal income tax law applicable to
life insurance in general. The Company cannot predict the
probability that any changes in such laws will be made.
Purchasers are cautioned to seek competent tax advice
regarding the possibility of such changes.
Section 7702 of the Internal Revenue Code of 1986, as
amended ("Code"), defines the term "life insurance contract"
for purposes of the Code. The Company believes that the
Policies to be issued will qualify as "life insurance
contracts" under Section 7702, but the Company does not
guarantee the tax status of the Policies. Purchasers bear the
complete risk that the Policies may not be treated as "life
insurance" under federal income tax laws. Purchasers should
consult their own tax advisers with regard to these risks.
Introduction
The discussion contained herein is general in nature and is
not intended as tax advice. Each person concerned should
consult a competent tax adviser. No attempt is made to
consider any applicable state or other tax laws. Moreover,
the discussion herein is based upon the Company's
understanding of current federal income tax laws and the
current interpretation of those laws. No representation is
made regarding the likelihood of continuation of those current
federal income tax laws or of the current interpretations by
the Internal Revenue Service.
The Company
The Company is taxed as a life insurance company under the
Code. For federal income tax purposes, the Separate Account
is not a separate entity from the Company and its operations
form a part of the Company.
Diversification
Section 817 (h) of the Code and the regulations prescribed
under that Section by the United States Treasury Department
("Treasury Department") impose certain diversification
standards on the investments underlying variable life
insurance contracts. Section 817(h) of the Code provides that
if the investment assets underlying a variable life insurance
contract are not properly diversified in accordance with the
Treasury regulations issued under that Section, then that
contract shall be immediately and permanently disqualified
from treatment as a life insurance contract for federal income
tax purposes. Disqualification of the Policy as a life
64
<PAGE>
insurance contract would result in imposition of federal
income tax on the Policy Owner with respect to earnings
allocable to the Policy prior to the receipt of payments under
the Policy.
Generally, for purposes of determining whether the
diversification standards imposed by Section 817(h) of the
Code on the underlying assets of variable contracts have been
met, "each United States government agency or instrumentality
shall be treated as a separate issuer." To the extent that
any segregated asset account with respect to a variable life
insurance contract is invested in securities issued by the
U.S. Treasury, the investments made by such accounts shall be
treated as adequately diversified. The Code also contains a
safe harbor provision which provides that a segregated asset
account underlying life insurance contracts such as the
Policies will meet the diversification requirements of Section
817(h) if, as of the close of each quarter, the underlying
assets of the account meet the diversification requirements
applicable to regulated investment companies and not more than
55 percent of the value of the assets of the account are
attributable to cash and cash items (including receivables),
Government securities and securities of other regulated
investment companies.
Treasury Regulation Section 1.817-5 establishes the
specific diversification requirements applicable to the
investment portfolios underlying variable life insurance
contracts such as the Policies, and provides alternatives to
the safe harbor provisions described above. Under this
Regulation, an investment portfolio will be deemed adequately
diversified if: (i) no more than 55% of the value of the total
assets of the portfolio is represented by any one investment;
(ii) no more than 70% of the value of the total assets of the
portfolio is represented by any two investments; (iii) no more
than 80% of the value of the total assets of the portfolio is
represented by any three investments; and (iv) no more than
90% of the value of the total assets of the portfolio is
represented by any four investments. For purposes of these
percentage tests, all securities of the same issuer are
generally treated as a single investment. The Regulation also
provides a remedial procedure pursuant to which some of the
adverse consequences of a violation of the diversification
requirements may be avoided. This procedure requires, among
other things, a tax penalty payment by the issuer of the
affected policies.
The Company intends that each Fund underlying the Policies
will be managed by its Investment Manager in such a manner as
to comply with these diversification requirements.
65
<PAGE>
When Regulations under Section 817(h) of the Code were
first proposed in 1989, the Treasury Department also indicated
that guidelines would be forthcoming under which a variable
life insurance Policy would not be treated as a life insurance
contract for tax purposes if the owner of the Policy had an
excessive degree of control over the investments underlying
the Policy (e.g., by being able to transfer values among Sub-
accounts with only limited restrictions). The issuance of
such guidelines could require the Company to impose
limitations on the rights of the Policy Owners to control
investment designations under the Policies. It is not
presently known whether any such guidelines will be issued or
whether any such guidelines would have retroactive effect.
Tax Treatment of the Policy
Section 7702 of the Code sets forth a detailed definition
of a life insurance contract for Federal tax purposes. The
Treasury Department is authorized to prescribe regulations
implementing Section 7702. While proposed regulations and
other interim guidance have been issued, final regulations
have not been adopted so that the extent of the official
guidance as to how Section 7702 is to be applied is quite
limited. If a Policy were determined not to be a life
insurance contract for purposes of Section 7702, that Policy
would not qualify for the favorable tax treatment normally
provided to a life insurance Policy.
With respect to a Policy issued on the basis of a standard
rate class, the Company believes (largely in reliance on IRS
Notice 88-128 and the proposed regulations under Section 7702,
issued on July 5, 1991) that such a Policy should meet the
Section 7702 definition of a life insurance contract.
With respect to a Policy that is issued on a substandard
basis (i.e., a premium class involving higher than standard
mortality risk), there is less certainty, in particular as to
how the mortality and other expense requirements of Section
7702 are to be applied in determining whether such a Policy
meets the definition of a life insurance contract set forth in
section 7702. Thus, it is not clear that such a Policy would
satisfy Section 7702, particularly if the Owner pays the full
amount of premiums permitted under the Policy.
If subsequent guidance issued under Section 7702 leads the
Company to conclude that a Policy does not (or may not)
satisfy Section 7702, the Company will take appropriate and
necessary steps for the purpose of causing such Policy to
comply with Section 7702, but the Company can give no
assurance that it will be possible to achieve that result.
The Company expressly reserves the right to restrict Policy
transactions if it determines such action to be necessary as
66
<PAGE>
part of an attempt by the Company to qualify the Policies as
life insurance contracts under Section 7702.
The discussion set forth below assumes that each Policy
will qualify as a life insurance contract for Federal income
tax purposes under Section 7702.
Tax Treatment of Policy Benefits In General
The Company believes that the Policy should be treated as a
life insurance contract for Federal income tax purposes.
Thus, the Death Benefit under the Policy should be excluded
from the gross income of the Beneficiary under Section
101(a)(1) of the Code. In addition, the cash value increases
of a Policy should not be taxed until there has been a
distribution from the Policy such as a surrender, partial
surrender, lapse with loan, or a payment of benefits at a
Policy's Maturity Date.
Upon a complete surrender or lapse of any Policy or upon a
payment of benefits at a Policy's Maturity Date, any excess of
the amount received plus the amount of Outstanding Loan over
the total investment in the Policy, will generally be treated
as ordinary income subject to tax. This treatment of
surrenders, lapses, and payments at a Policy's Maturity Date
applies whether the Policy is or is not treated as a Modified
Endowment Contract.
Investment in the Policy. The term "investment in the
Policy" means (i) the aggregate amount of any Premiums or
other consideration paid for a Policy, minus (ii) the
aggregate amount received under the Policy which is excluded
from gross income of the Owner (except that the amount of any
loan from, or secured by, a Policy that is a Modified
Endowment Contract, to the extent such amount is excluded from
gross income, will be disregarded), plus (iii) the amount of
any loan from, or secured by, a Policy that is a Modified
Endowment Contract to the extent that such amount is included
in the gross income of the Owner.
Distributions From Policies Not Classified as Modified
Endowment Contracts. Distributions from a Policy that is not
a Modified Endowment Contract, are generally treated first as
a recovery of the Owner's investment in the Policy and then,
but only after the return of all such investment in the
Policy, as a distribution of taxable income. An exception to
this general rule applies in the case of a decrease in the
Policy's Death Benefit or any other change that reduces
benefits under the Policy in the first fifteen years after the
Policy is issued and that results in a cash distribution to
the Owner, even where such a distribution must be made in
order for the Policy to continue complying with the
67
<PAGE>
definitional limits of Section 7702. Such a cash distribution
will be taxed in whole or in part as ordinary income (to the
extent of any gain in the Policy) under rules prescribed in
Section 7702.
Loans from, or secured by, a Policy that is not a Modified
Endowment Contract are not treated as distributions. Instead,
any such loan is generally treated as an Outstanding Loan of
the Owner.
Modified Endowment Contracts. Section 7702A of the Code
establishes a class of life insurance contracts designated as
"Modified Endowment Contracts," which applies to Policies
entered into or Policies with certain material changes after
June 20, 1988. Due to the Policy's flexibility,
classification as a Modified Endowment Contract will depend on
the individual circumstances of each Policy.
In general, a Policy will be a Modified Endowment Contract
if the accumulated Premiums paid at any time during the first
seven Policy Years exceed the sum of the net level Premiums
which would have been paid on or before such time if the
Policy provided for paid-up future benefits after the payment
of seven level annual Premiums. Whether a Policy will be a
Modified Endowment Contract after a material change generally
depends upon the relationship of the Death Benefit and Account
Value at the time of such change and the additional premiums
paid in the seven years following the material change.
The rules relating to whether a Policy will be treated as a
Modified Endowment Contract are extremely complex and cannot
be adequately described in the limited confines of this
summary. Therefore, a current or prospective Owner should
consult with a competent advisor to determine whether a Policy
transaction will cause the Policy to be treated as a Modified
Endowment Contract. The Company will, however, monitor
Policies and will take all steps reasonably necessary to
notify an Owner on a timely basis if his or her Policy is in
jeopardy of becoming a Modified Endowment Contract.
Distributions from Policies Classified as Modified
Endowment Contracts. Any Policies that are classified as
Modified Endowment Contracts will be subject to additional
adverse tax rules. Loans taken from, or secured by, such a
Policy will be treated as distributions from the Policy and
will be taxed accordingly. (Past due loan interest that is
added to the loan amount will also be treated as a loan for
this purpose.) In addition, all distributions, including any
loans and any distributions upon any full or partial
surrender, a lapse, or a payment of benefits at the Maturity
Date of such a Policy, will be treated as ordinary income to
the extent of the excess (if any) of the Account Value
68
<PAGE>
immediately before the distribution over the Owner's
investment in the Policy (described above) at such time.
These rules may also apply to Policies during the two-year
period prior to the Policy's classification as a Modified
Endowment Contract.
Penalties on Early Distributions from Policies Classified
as Modified Endowment Contracts. A ten percent additional
income tax may be imposed under Section 72(v) of the Code on
the portion of any distribution (or any loan) from a Policy
that is classified as a Modified Endowment Contract. This
additional tax applies to the full amount that is included in
the Owner's taxable income except where the distribution from
the Policy (including distributions upon surrender) or loan is
made from or secured by the Policy on or after the date that
the Owner attains age 59 1/2, is attributable to the Owner's
becoming disabled, or is part of a series of substantially
equal periodic payments (not less frequently than annually)
made for the life (or life expectancy) of the Owner or the
joint lives (or joint life expectancies) of the Owner and the
Owner's Beneficiary. If a Policy is not a Modified Endowment
Contract, however, then neither distributions (including
distributions upon surrender) nor loans from, or secured by,
the Policy will be subject to the 10% additional tax.
Multiple Policies. Section 72(e)(11) of the Code provides
that if two or more Modified Endowment Contracts are issued
within the same calendar year to the same Owner by one company
or its affiliates, then all such contracts must be treated as
one Modified Endowment Contract for purposes of determining
the taxable portion of any loans or distributions. Such
treatment may result in adverse tax consequences including
more rapid taxation of the loans or other amounts distributed
from all such contracts. Owners should consult a tax adviser
prior to purchasing more than one Modified Endowment Contract
in any calendar year.
Interest on Policy Loans. Except in special circumstances,
interest paid on a loan under a Policy which is owned by an
individual is treated as personal interest under Section
163(h) of the Code and thus will not be tax deductible. In
addition, the deduction of interest that is incurred on any
loan under a Policy owned by a taxpayer and covering the life
of any individual who is an officer or employee of or who is
financially interested in the business carried on by that
taxpayer may also be subject to certain restrictions set forth
in Section 264 of the Code. Before taking a Policy loan, an
Owner should consult a tax adviser as to the tax consequences
of such a loan. (Also Section 264 of the Code may preclude
business Policy Owners from deducting premium payments.)
69
<PAGE>
Policy Exchanges and Modifications. Depending on the
circumstances, the exchange of a Policy, a change in the
Policy's Death Benefit option (e.g., a change from Option I to
Option II or vice versa), a Policy loan, a partial surrender,
a surrender, a change in ownership, or an assignment of the
Policy may have Federal income tax consequences. In addition,
the Federal, state and local transfer, and other tax
consequences of ownership or receipt of Policy proceeds will
depend on the circumstances of each Owner or Beneficiary.
Withholding. The Company is required to withhold Federal
income taxes on the taxable portion of any amounts received
under the Policy unless You elect to not have any withholding
or in certain other circumstances. Special withholding rules
apply to payments made to non-resident aliens.
You are liable for payment of Federal income taxes on the
taxable portion of any amounts received under the Policy. You
may be subject to penalties under the estimated tax rules if
your withholding and estimated tax payments are not
sufficient.
Generation Skipping Transfer Tax. A transfer of the Policy
or the designation of a beneficiary who is either 37 1/2 years
younger than the Owner or a grandchild of the Owner may have
Generation Skipping Transfer Tax consequences.
Contracts Issued in Connection With Tax Qualified Pension
Plans. Prior to purchase of a Policy in connection with a
qualified plan, the applicable tax rules relating to such
plans and life insurance thereunder should be examined in
consultation with a qualified tax advisor.
Possible Charge for the Company's Taxes
At the present time, the Company makes no charge for any
Federal, state or local taxes (other than state premium taxes)
that it incurs that may be attributable to the Separate and
Guaranteed Accounts or to the Policies. The Company, however,
reserves the right in the future to make a charge for any such
tax or other economic burden resulting from the application of
the tax laws that it determines to be properly attributable to
the Separate Account or to the Policies.
SUPPLEMENTAL BENEFITS AND RIDERS
The Company intends to make available certain supplemental
benefits and riders which may be issued with the Policy. Any
monthly charges for these supplemental benefits and riders, as
listed below, will be deducted from the Account Value.
- Accidental Death Benefit (ADB)
70
<PAGE>
- Accelerated Benefits Rider
- Waiver of Monthly Deductions
- Waiver of Specified Premium
- Child's Term Rider
- Primary Insured Term Rider (PIR)
- Other Insured Term Rider (OIR)
- Minimum Guaranteed Death Benefit
For a complete description of these supplemental benefits
and riders, their costs, and any rules or limits applicable to
their issue, please contact Our Administrative Office or one
of Our authorized agents.
71
<PAGE>
MANAGEMENT OF THE COMPANY
The Directors and Principal Officers of the Company are
listed below with their current principal business affiliation
and their principal occupations during the past five (5)
years. All officers have been affiliated with the Company
during the past five (5) years unless otherwise indicated.
<TABLE>
<S> <C> <C>
Current Principal
Business Affiliations
and Principal
Occupations During
Name and Address Office Past Five Years
Robert John O'Connell Chief Executive Officer President and CEO AIG
80 Pine Street President and Director Life Companies. Senior
13th Floor Vice President - Life
New York, NY 10005 Insurance, AIG, Inc.
Nicholas Alexander Vice President Senior Vice President - Life
O'Kulich* Treasurer and Director Insurance, AIG, Inc.
Maurice Raymond Director Director, Chairman and
Greenberg* Chief Executive Officer,
AIG, Inc.
Edwin A. G. Manton* Director Senior Advisor, American
International Group, Inc.
Edward Easton Matthews* Senior Vice President Vice Chairman Investment and
and Vice Chairman Financial Services, AIG, Inc.
Formerly Vice Chairman
Investment - AIG
Jerome Thomas Muldowney* Senior Vice President Managing Director AIG
175 Water Street and Director Investments Corp.
25 Floor
New York, New York 10005
Win Jay Neuger* Director Senior Vice President and
175 Water Street Chief Investment Officer
25 Floor AIG, Inc. Formerly, Managing
New York, New York 10005 Director - Banker's Trust Co.
John Robert Skar Vice President Vice President and Chief
One Alico Plaza Actuary and Director Actuary AIG Domestic Life
P.O. Box 667 Companies. Formerly,
Wilmington DE 19899 Senior Vice President,
Fidelity Mutual Life
Insurance Company.
72
<PAGE>
Howard Ian Smith* Director Director, Executive Vice
President, Chief Financial
Officer and Comptroller, AIG,
Inc. Formerly Executive Vice
President and Comptroller,
AIG, Inc.
Ernest Edward Stempel* Director Senior Advisor AIG.
Chairman of the Board Formerly Director and
Vice Chairman - Life
Insurance AIG, Inc.
Elizabeth Margaret Tuck* Secretary Secretary and Assistant
Secretary of AIG, Inc. and
certain affiliates
Gerald Walter Wyndorf Director and Executive Executive Vice President-
80 Pine Street Vice President AIG Domestic Life Companies
13th Floor and formerly, Regional Vice
New York, NY 10038 President Mutual of NY.
Howard Earl Gunton Vice President and Vice President and
One Alico Plaza Comptroller Comptroller of AIG
Wilmington, DE 19899 Domestic Life Companies
</TABLE>
* Indicates the business address of the individual, which is 70 Pine
Street, New York, New York 10270.
73
<PAGE>
DISTRIBUTION OF POLICY
Where the Policy may be lawfully sold, the Policy is sold by licensed
insurance agents who are registered representatives of broker-dealers which
are registered under the Securities Exchange Act of 1934 and are members of
the National Association of Securities Dealers, Inc.
The Policy will be distributed through the principal underwriter for
the Separate Account, AIG Equity Sales Corp. (AESC), 80 Pine Street, New
York, New York, an affiliate of the Company. The Company pays commissions
on behalf of AESC to selling product dealers and registered
representatives.
Commissions may be paid to registered representatives based on
Premiums paid for Policies sold, in amounts up to 50% of first year
Premiums, 5% on Premiums paid during the 2nd through 10th Policy Years, and
2% on Premiums paid after the first ten Policy Years. Other expense
reimbursements, allowances, and overrides may also be paid. Registered
representatives who meet certain productivity and profitability standards
may be eligible for additional compensation. Additional payments may be
made for administrative or other services not directly related to the sale
of the Policies.
OTHER POLICIES ISSUED BY THE COMPANY
The Company may offer other policies similar to those offered herein.
STATE REGULATION
The Company is subject to the laws of Delaware governing insurance
companies and to regulation by the Delaware Insurance Department. An
annual statement in a prescribed form is filed with the Insurance
Department each year covering the operation of the Company for the
preceding year and its final condition as of the end of such year.
Regulation by the Insurance Department includes periodic examinations to
determine the Company's Policy liabilities and reserves so that the
Insurance Department may certify the items are correct. The Company's
books and accounts are subject to review by the Insurance Department at all
times and a full examination of its operations is conducted periodically by
the staff of the Insurance Department pursuant to the National Association
of Insurance Commissioners. Such regulation does not, however, involve any
supervision of management or investment practices or policies. In
addition, the Company is subject to regulation under the insurance laws of
other jurisdictions in which it may operate.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Separate Account or the
principal underwriter is a party. The Company is engaged in various kinds
74
<PAGE>
of routine litigation which, in the opinion of the Company, are not of
material importance in relation to the total capital and surplus of the
Company.
EXPERTS
The financial statements of the Company which appear in this
Prospectus have been audited by Coopers & Lybrand, independent certified
public accountants, as stated in their reports, and have been included in
reliance upon the authority of such firm as experts in accounting and
auditing.
LEGAL MATTERS
Legal matters relating to the federal securities laws are being passed
upon by the firm of Jorden Burt Berenson & Johnson, LLP of Washington, D.C.
PUBLISHED RATINGS
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
75
<PAGE>
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 separate account or the degree of
risk associated with an investment in the separate account.
FINANCIAL STATEMENTS
The financial statements of the Company and the Separate Account are
included herein.
76
<PAGE>
PART II - OTHER INFORMATION
<PAGE>
PART II - OTHER INFORMATION
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file
with the Securities and Exchange Commission such supplementary and
periodic information, documents, and reports as may be prescribed by any
rule or regulation of the Commission theretofore or hereafter duly adopted
pursuant to authority conferred in that section.
REPRESENTATION
AIG Life Insurance Company represents that the fees and charges
deducted under the policies covered by this registration statement, in the
aggregate are reasonable in relation to the services rendered, the expenses
expected to be incurred, and the risks assumed by the Company.
INDEMNIFICATION
Under its Bylaws, the Company, to the full extent permitted by
Delaware law shall indemnify any person who was or is a party to any
proceeding (whether brought by or in the right of the Company or otherwise)
by reason of the fact that he or she is or was a Director of the Company,
or while a Director of the Company, is or was serving at the request of the
Company as a Director, Officer, Partner, Trustee, Employee, or Agent of
another foreign or domestic corporation, partnership, joint venture, trust,
other enterprise or employee benefit plan, against judgments, penalties,
fines, settlements and reasonable expenses actually incurred by him or her
in connection with such proceeding.
The Company shall extend such indemnification, as is provided to
directors above, to any person, not a director of the Company, who is or
was an officer of the Company or is or was serving at the request of the
Company as a director, officer, partner, trustee, or agent of another
foreign or domestic corporation, partnership, joint venture, trust, other
enterprise or employee benefit plan. In addition, the Board of Directors of
the Company may, by resolution, extend such further indemnification to an
officer or such other person as may to it seem fair and reasonable in view
of all relevant circumstances.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Company pursuant to such provisions of the
bylaws or statutes or otherwise, the Company has been advised that in the
opinion of the Securities and Exchange Commission, such indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the
Company in the successful defense of any such action, suit or proceeding)
is asserted by such director, officer or controlling person in connection
with the Policies issued by the Variable Account, the Company will, unless
1
<PAGE>
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public Policy as expressed in
said Act and will be governed by the final adjudication of such issue.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and
documents:
The facing sheet.
The Prospectus consisting of 72 pages.
The undertaking to file reports.
Representation.
The signatures.
Written consents of the following persons:
Kenneth D. Walma
Jorden Burt Berenson & Johnson, LLP
Michael Burns
The following exhibits:
A. Copies of all exhibits required by paragraph A of instructions for
Exhibits in Form N-8B-2.
1. Resolution of the Board of Directors of the Company*
2. Not Applicable
3. a. Principal Underwriter's Agreement***
b. Registered Representative's Agreement***
4. Not Applicable
5. a. Group Flexible Premium Variable Universal Life Insurance Policy
b. Flexible Premium Variable Life Insurance Certificate
6. a. Articles of Incorporation of the Company**
b. By-Laws of the Company**
7. Not Applicable
8. Not Applicable
9. Not Applicable
10. Form of Policy Application
2
<PAGE>
11. Powers of Attorney****
B. Opinion and Consent of Counsel
C. Opinion and Consent of Actuary
D. Consent of Independent Certified Public Accountants*****
E. Consent of Jorden Burt Berenson & Johnson LLP
F. Memorandum Regarding Administrative Procedures***
------------------
* Incorporated by reference to Registrant's Form N-8B-2.
** Incorporated by reference to Registrant's Pre-Effective Amendment No.
1 to Form N-8B-2.
*** Incorporated by reference to Registrant's filing on Form S-6, March
28, 1995 (File No. 33-90684).
**** Incorporated by reference to Registrant's Post-Effective Amendment
No. 2 filed on Form S-6, May 1, 1997 (File No. 33-90684).
***** To be filed by amendment.
3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has caused this Registration
Statement to be signed on its behalf, in the City of Wilmington, and State
of Delaware on this 20th day of August, 1997.
VARIABLE ACCOUNT II
(Registrant)
By: AIG LIFE INSURANCE COMPANY
(Sponsor)
By:/s/Kenneth D. Walma
Kenneth D. Walma, Assistant
Secretary
ATTEST:
/s/ Robert Liguori
Robert Liguori, Vice President
and General Counsel
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
Signature Title Date
/s/ Howard E. Gunton, Jr.*
------------------------ Chief Accounting August 20, 1997
Howard E. Gunton, Jr. Officer
/s/ Nicholas A. O'Kulich*
------------------------ Director August 20, 1997
Nicholas A. O'Kulich
/s/ Maurice R. Greenberg*
------------------------ Director August 20, 1997
Maurice R. Greenberg
/s/ Edwin A. G. Manton*
---------------------- Director August 20, 1997
Edwin A. G. Manton
/s/ Edward E. Matthews*
---------------------- Director August 20, 1997
Edward E. Matthews
/s/ Jerome T. Muldowney*
----------------------- Director August 20, 1997
Jerome T. Muldowney
/s/ Win J. Neuger*
---------------------- Director August 20, 1997
Win J. Neuger
/s/ John R. Skar*
---------------------- Director August 20, 1997
John R. Skar
/s/ Howard I. Smith*
---------------------- Director August 20, 1997
Howard I. Smith
/s/ Ernest E. Stempel*
---------------------- Director August 20, 1997
Ernest E. Stempel
/s/ Gerald W. Wyndorf*
---------------------- Director August 20, 1997
<PAGE>
Gerald W. Wyndorf
/s/ Robert J. O'Connell*
----------------------- Director August 20, 1997
Robert J. O'Connell
/s/Kenneth D. Walma
*By:--------------------------------
Kenneth D. Walma
Attorney in Fact
</TABLE>
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
A. Group Flexible Premium Variable Universal
Life Insurance Policy
B. Flexible Premium Variable Life Insurance
Certificate
C. Form of Policy Application
D. Opinion and Consent of Counsel
E. Opinion and Consent of Actuary
F. Consent of Jorden Burt Berenson & Johnson LLP
<PAGE>
AIG Life Insurance Company
P.O. Box 667
One Alico Plaza
Wilmington, Delaware 19899-0667
A capital stock company
This Policy is a contract between AIG Life Insurance Company ("We", "Us" or
"Our") and the Policyholder ("You" or "Your") shown on the Policy Schedule.
Subject to the terms of this Policy and the Certificates We issue to each
Certificate Owner, We will provide the benefits described in this Policy. We
do this in return for the application of the Policyholder, and the required
individual applications for life insurance coverage on the Insureds and for
the payment of the premiums.
This Policy becomes effective at 12:01 A.M. Standard Time on the Policy
Effective Date at the address of the Policyholder and will continue in force,
in accordance with the applicable provisions, unless terminated in accordance
with its provisions.
This Policy is non-participating and is not entitled to share in Our surplus
earnings.
/s/Elizabeth M. Tucker /s/R.J. O'Connell
- ---------------------- ---------------------
Secretary President
GROUP FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Non-Participating<PAGE>
POLICY SCHEDULE
POLICY NUMBER GUL12345
POLICYHOLDER XYZ Trust
POLICY EFFECTIVE DATE June 1, 1997
ELIGIBLE PERSONS: Exempt Employees Of ABC Corporation<PAGE>
INDEX
Policy Sections Page
Policy Schedule 3
Table of Guaranteed Maximum Cost Of
Insurance Rates 4 & 5
Policy Provisions 6<PAGE>
Guaranteed Monthly Cost Insurance Rates-Male
Per $1,000 of Net Amount at Risk
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Attained Monthly COI Rate Attained Monthly COI Rate
Age Nonsmoker Smoker Age Nonsmoker Smoker
0 N/A 0.21921 50 0.42768 0.83403
1 N/A 0.08584 51 0.46688 0.91166
2 N/A 0.08251 52 0.51193 0.99933
3 N/A 0.08084 53 0.56365 1.09871
4 N/A 0.07751 54 0.62122 1.20729
5 N/A 0.07334 55 0.68547 1.32342
6 N/A 0.06917 56 0.75557 1.44626
7 N/A 0.06500 57 0.82985 1.57581
8 N/A 0.06250 58 0.91250 1.71209
9 N/A 0.06167 59 1.00518 1.85845
10 N/A 0.06250 60 1.10873 2.02158
11 N/A 0.06750 61 1.22400 2.20569
12 N/A 0.07667 62 1.35684 2.41331
13 N/A 0.08917 63 1.50727 2.64531
14 N/A 0.10334 64 1.67447 2.89921
15 0.11335 0.14669 65 1.85761 3.16834
16 0.12335 0.16336 66 2.05588 3.45020
17 0.13085 0.17503 67 2.26847 3.74229
18 0.13585 0.18420 68 2.49957 4.04883
19 0.13919 0.19004 69 2.75591 4.38161
20 0.14002 0.19337 70 3.04592 4.74911
21 0.13835 0.19337 71 3.37720 5.16235
22 0.13585 0.19004 72 3.75992 5.62985
23 0.13252 0.18670 73 4.19334 6.14841
24 0.12918 0.18170 74 4.67004 6.71732
25 0.12502 0.17586 75 5.18003 7.32578
26 0.12252 0.17253 76 5.71919 7.94851
27 0.12085 0.17086 77 6.28340 8.57456
28 0.12001 0.17086 78 6.87612 9.20818
29 0.12001 0.17336 79 7.51607 9.87149
30 0.12085 0.17753 80 8.22375 10.58674
31 0.12335 0.18337 81 9.01810 11.37459
32 0.12668 0.19087 82 9.91569 12.24906
33 0.13168 0.20087 83 10.91280 13.19603
34 0.13752 0.21255 84 11.99040 14.18421 <PAGE>
Age Nonsmoker Smoker Age Nonsmoker Smoker
35 0.14419 0.22672 85 13.12418 15.18033
36 0.15169 0.24339 86 14.29994 16.16034
37 0.16169 0.26424 87 15.49991 17.16810
38 0.17253 0.28758 88 16.71910 18.22020
39 0.18420 0.31427 89 17.97489 19.26842
40 0.19837 0.34512 90 19.28574 20.32834
41 0.21338 0.37848 91 20.68243 21.43307
42 0.22922 0.41517 92 22.21791 22.71710
43 0.24673 0.45521 93 24.04369 24.36888
44 0.26590 0.49942 94 26.50346 26.62992
45 0.28758 0.54613 95 30.20740 30.20740
46 0.31093 0.59452 96 36.35803 36.35803
47 0.33595 0.64709 97 47.21180 47.21180
48 0.36347 0.70383 98 66.20701 66.20701
49 0.39349 0.76559 99 90.90909 90.90909
/TABLE
<PAGE>
Guaranteed Monthly Cost Insurance Rates-Female
Per $1,000 of Net Amount at Risk
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Attained Monthly COI Rate Attained Monthly COI Rate
Age Nonsmoker Smoker Age Nonsmoker Smoker
0 N/A 0.15669 50 0.36180 0.56449
1 N/A 0.07000 51 0.38932 0.60537
2 N/A 0.06667 52 0.42101 0.65209
3 N/A 0.06500 53 0.45604 0.70383
4 N/A 0.06417 54 0.49191 0.75641
5 N/A 0.06250 55 0.53028 0.81066
6 N/A 0.06084 56 0.56866 0.86408
7 N/A 0.05917 57 0.60620 0.91417
8 N/A 0.05834 58 0.64375 0.96343
9 N/A 0.05750 59 0.68630 1.01603
10 N/A 0.05667 60 0.73638 1.07866
11 N/A 0.05834 61 0.79814 1.15717
12 N/A 0.06084 62 0.87493 1.25825
13 N/A 0.06417 63 0.96927 1.38107
14 N/A 0.06834 64 1.07532 1.51813
15 0.07167 0.08001 65 1.18975 1.66276
16 0.07501 0.08417 66 1.30838 1.80994
17 0.07751 0.08834 67 1.42954 1.95214
18 0.08001 0.09251 68 1.55491 2.09605
19 0.08251 0.09501 69 1.69453 2.25256
20 0.08417 0.09751 70 1.85845 2.43759
21 0.08584 0.09918 71 2.05839 2.67212
22 0.08667 0.10168 72 2.30363 2.95957
23 0.08834 0.10418 73 2.59756 3.30170
24 0.09001 0.10668 74 2.93610 3.69191
25 0.09168 0.10918 75 3.31428 4.11856
26 0.09418 0.11335 76 3.72382 4.57248
27 0.09584 0.11668 77 4.16309 5.04701
28 0.09834 0.12085 78 4.63892 5.54895
29 0.10168 0.12585 79 5.16656 6.09610
30 0.10418 0.13168 80 5.76724 6.70972
31 0.10751 0.13669 81 6.45895 7.40696
32 0.11085 0.14252 82 7.25729 8.20087
33 0.11501 0.15002 83 8.15937 9.11907
34 0.12001 0.15836 84 9.15556 10.11631 <PAGE>
Age Nonsmoker Smoker Age Nonsmoker Smoker
35 0.12585 0.16753 85 10.23537 11.17773
36 0.13418 0.18170 86 11.39164 12.29517
37 0.14419 0.19837 87 12.62319 13.45788
38 0.15502 0.21755 88 13.93142 14.67216
39 0.16669 0.23839 89 15.32721 15.93752
40 0.18087 0.26340 90 16.82248 17.34402
41 0.19587 0.29008 91 18.45266 18.86254
42 0.21088 0.31677 92 20.28063 20.55222
43 0.22588 0.34345 93 22.43826 22.54368
44 0.24089 0.37014 94 25.22305 25.22305
45 0.25757 0.39849 95 29.24956 29.24956
46 0.27508 0.42768 96 35.72205 35.72205
47 0.29425 0.45771 97 46.86829 46.86829
48 0.31427 0.49024 98 66.09429 66.09429
49 0.33678 0.52611 99 90.90909 90.90909
/TABLE
<PAGE>
POLICY PROVISIONS
Eligible Persons. Persons eligible to become insured under this Policy are
those described as Eligible Persons on the Policy Schedule.
Certificates. We will issue a Certificate to each Certificate Owner
describing each Insured s life insurance coverage under this Policy. The
certificate will describe the benefits of this Policy, to whom the benefits
will be paid, and the limitations and conditions that apply.
A certificate may be modified by rider or endorsement issued by Us to be
attached to the certificate. The rider or endorsement will set forth the
modifications to the certificate which affect the Insured.
Premiums. All premiums are payable in advance to Us. The planned premium for
each Insured is shown on that Insured s certificate Information Page.
Required Data. The Policyholder must give Us all data that We need to
administer this Policy.
Examination Of Records. We have the right to examine all records of the
Policyholder that pertain to the life insurance provided by this Policy.
Continuation Of This Policy. This Policy will continue in force, subject to
the Policy Termination provision.
Entire Contract. The entire contract ("Policy") consists of this Policy, the
certificates, the policyholder s application, each Insured s application for
l i fe insurance coverage under this Policy, and any attached riders,
endorsements or amendments.
We rely on the Policyholder s application to issue this Policy and the
individual applications, if any, to issue certificates providing life
insurance coverage on each Insured. Statements made by the Policyholder or
any Insured or Certificate Owner are deemed to be representations and not
warranties. No such statement will be used to contest this Policy, a
certificate or a claim unless a copy of the instrument is furnished to the
person making the statement or to his/her beneficiary.
Changing This Policy. This Policy may only be changed, in writing, by one of
our executive officers. No other person, including an agent, has any
authority to change or reinstate this Policy or extend the time for paying a
premium.
Conformity With State Statutes. Any provision of this Policy that, on the
Policy Effective Date, conflicts with state laws of the governing jurisdiction
is changed to meet the minimum requirements of those laws.
Policy Termination. This Policy may only be terminated with respect to the
issuance of new certificates. Either We or the Policyholder may terminate
this Policy upon giving at least 31 days written notice to the other. We will<PAGE>
not terminate this Policy prior to the end of the first year following the
Policy Effective Date.
Clerical Error. Clerical error will not void any certificate issued under
this Policy which is otherwise validly in force, nor will it keep in force any
certificate that otherwise would end.
Certificate Provisions Made Part Of This Policy. The remainder of this Policy
consists of provisions that appear in the certificates, riders and
endorsements. A copy of the certificates, riders and endorsements is added to
and made a part of this Policy.<PAGE>
AIG LIFE INSURANCE COMPANY
One Alico Plaza
Wilmington, Delaware 19899
GROUP FLEXIBLE PREMIUM ADJUSTABLE LIFE INSURANCE POLICY
Non-Participating<PAGE>
AIG Life Insurance Company
One Alico Plaza
P.O. Box 667
Wilmington, Delaware 19899
A capital stock company
Flexible Premium Variable Life Insurance Certificate. AIG Life Insurance
Company having issued a Group Policy ("Policy") to the Group Policyholder
shown on the Information Page, agrees to pay the benefits described in this
Certificate.
We agree to pay the Insurance Benefit of this Certificate and to provide
its other benefits and rights in accordance with its provisions.
Flexible Premium Variable Life Insurance Certificate
This is a flexible premium variable life insurance certificate. You can,
within limits:
o increase or decrease the Face Amount;
o pay Premium at any time and in any amount;
o change the Death Benefit Option;
o change the allocation of Net Premiums among Your investment
options; and
o transfer amounts among Your investment options.
All of these rights and benefits are subject to the terms and conditions of
this Certificate. All requests for certificate changes are subject to Our
approval and may require evidence of insurability.
We will put Your Net Premiums paid prior to the Allocation Date into the
Money Market Subaccount. On the Allocation Date all such Premiums will then
be allocated in accordance with directions contained in Your certificate
application.
The portion of Your Certificate Account Value that is in a Subaccount will
vary up or down depending on the unit value of such Subaccount, which in
turn depends on the investment performance of the corresponding portfolio
of a designated investment company. There are no minimum guarantees as to
such portion of Your Certificate Account Value.
The portion of Your Certificate Account Value that is in Our Guaranteed
Account will accumulate, after deductions, at rates of interest We
determine. Such rates will not be less than 4% per year, compounded
annually.
The amount and duration of the Death Benefit may be variable or fixed as
described in this Certificate.
Please Read This Certificate With Care. A Table Of Contents is on Page 2.
A Certificate Summary is also on Page 2.
Right To Examine This Certificate. You may examine this Certificate and if
for any reason You are not satisfied with it You may cancel it by returning<PAGE>
t h i s Certificate with a written request for cancellation to Our
Administrative Office no later than the later of (a) 10 days after You
receive it; or (b) 45 days after the application was signed. If You do
this, We will refund the Premiums that were paid on this Certificate.
/s/Elizabeth M. Tuck /s/R.J. O Connell
--------------------- -------------------
Secretary President<PAGE>
CONTENTS
<TABLE>
<S> <C>
Certificate Summary 2
Certificate Information 3
Table Of Expense Charges 4
Table Of Maximum Surrender Charges 5
Table Of Guaranteed Maximum Cost Of Insurance Rates 6
Definitions 7
Certificate Owner And Beneficiary Provisions 9
The Benefits We Pay 9
Changing The Face Amount Or The Death Benefit Option 11
The Premiums You Pay 12
Your Certificate Account Value And How It Works 13
Your Investment Options 14
Your Certificate Account Value 15
The Cash Surrender Value Of This Certificate 16
How A Loan Can Be Made 18
Our Separate Account 19
Our Annual Report To You 19
How Benefits Are Paid 20
Other Important Information 20
</TABLE>
A copy of the application for this Certificate and any additional benefit
riders are at the back of this Certificate.<PAGE>
CERTIFICATE SUMMARY
The Premiums You pay into this Flexible Premium Variable Life Insurance
Certificate, after deductions are made in accordance with the Table Of
Expense Charges in the Certificate Information section, are put into Your
Certificate Account Value. Amounts in Your Certificate Account Value are
allocated at Your direction to one or more Subaccounts and to Our
Guaranteed Account.
The Subaccounts invest in shares of registered investment companies whose
value is subject to market fluctuations and investment risk. There is no
guarantee of principal or investment experience.
The Guaranteed Account earns interest at rates We declare in advance. The
rates are guaranteed not to be less than 4% per year, compounded annually.
The principal, after deductions, is also guaranteed.
The duration of life insurance coverage depends upon the Net Cash Surrender
Value.
If Death Benefit Option I is in effect, the Death Benefit is the Face
Amount, and the amount of the Death Benefit is fixed except when it is a
percentage of Your Certificate Account Value. If Death Benefit Option II
is in effect, the Death Benefit is the Face Amount plus Your Certificate
Account Value. The amount of the Death Benefit under Death Benefit Option
II is variable.
We make monthly deductions from Your Certificate Account Value to cover the
cost of the benefits provided by this Certificate. If You give up this
Certificate for its Net Cash Surrender Value, make a Partial Surrender,
reduce the Face Amount, or if this Certificate ends without value at the
end of the Grace Period, We may deduct a surrender charge from Your
Certificate Account Value.
This is only a summary of what this Certificate provides. You should read
the entire Certificate carefully. Its terms govern Your rights and Our
obligations.
1<PAGE>
CERTIFICATE INFORMATION
GROUP POLICYHOLDER ABC Group Trust
GROUP POLICY NUMBER 11GVUL0597
INSURED PERSON [JOHN DOE] AGE [35] SEX [MALE] [NONSMOKER]
CERTIFICATE OWNER [JOHN DOE]
FACE AMOUNT [$100,000]
DEATH BENEFIT OPTION [I] (SEE PAGE 10)
CERTIFICATE NUMBER [XX XXX XXX]
BENEFICIARY [JANE DOE]
CERTIFICATE DATE [JANUARY 1, 1995]
ISSUE DATE [JANUARY 1, 1995]
INSURED PERSON'S
STATE OF RESIDENCE [SPECIMEN]
SEPARATE ACCOUNT [VARIABLE ACCOUNT II]
PARTIAL SURRENDER MINIMUM PARTIAL SURRENDER IS [$500]
CERTIFICATE LOAN MINIMUM LOAN IS [$500]
CERTIFICATE LOAN
INTEREST RATE [8%]
TRANSFER MINIMUM TRANSFER AMOUNT IS [$250]
AN INITIAL PREMIUM OF [$800.00] IS DUE ON OR BEFORE DELIVERY OF THE
CERTIFICATE.
[THE PLANNED PERIODIC PREMIUM OF [$800.00] IS PAYABLE [QUARTERLY]]. THE
MINIMUM PREMIUM WHICH WE WILL ACCEPT AT ANY TIME IS [$50].
ANY ADDITIONAL BENEFIT ARE RIDERS LISTED BELOW.
THE PREMIUM SHOWN ABOVE MAY NOT BE SUFFICIENT TO CONTINUE THE CERTIFICATE
AND LIFE INSURANCE COVERAGE TO THE MATURITY DATE, WHICH IS THE CERTIFICATE
ANNIVERSARY FOLLOWING THE INSURED PERSON'S ATTAINED AGE 99. THE PERIOD FOR
WHICH THE CERTIFICATE AND COVERAGE WILL CONTINUE IN FORCE WILL DEPEND ON:
(1) THE TIMING, FREQUENCY, AND AMOUNT OF PREMIUM; (2) CHANGES IN THE FACE
AMOUNT AND THE DEATH BENEFIT OPTIONS; (3) CHANGES IN THE INTEREST RATES
CREDITED TO OUR GUARANTEED ACCOUNT AND IN THE INVESTMENT PERFORMANCE OF THE
2<PAGE>
SUBACCOUNTS; (4) CHANGES IN THE MONTHLY COST OF INSURANCE DEDUCTIONS FROM
THE CERTIFICATE ACCOUNT VALUE FOR THIS CERTIFICATE AND ANY BENEFITS
PROVIDED BY RIDERS TO THIS CERTIFICATE; AND (5) LOAN AND PARTIAL SURRENDER
ACTIVITY.
3<PAGE>
CERTIFICATE INFORMATION CONTINUED
TABLE OF EXPENSE CHARGES
DEDUCTIONS FROM PREMIUMS:
CHARGE FOR APPLICABLE TAXES (OTHER THAN TAXES DISCUSSED ON PAGE 15):
[2.00%] OF EACH PREMIUM PAYMENT. THIS AMOUNT IS SUBTRACTED FROM
EACH PREMIUM PAYMENT. WE RESERVE THE RIGHT TO CHANGE THIS
PERCENTAGE TO CONFORM TO CHANGES IN THE LAW OR IF THE OWNER CHANGES
PLACE OF RESIDENCE.
PREMIUM CHARGE.
[5.00%] OF EACH PREMIUM. WE RESERVE THE RIGHT TO CHANGE THIS CHARGE
BUT IT WILL NEVER BE MORE THAN 5.00%.
DEDUCTIONS FROM YOUR CERTIFICATE ACCOUNT VALUE:
ADDITIONAL FIRST YEAR ADMINISTRATIVE CHARGE:
[$20.00] IS DEDUCTED AT THE BEGINNING OF EACH CERTIFICATE MONTH
DURING THE FIRST CERTIFICATE YEAR. WE RESERVE THE RIGHT TO CHANGE
THIS CHARGE BUT IT WILL NEVER BE MORE THAN $25.00 A MONTH.
ADMINISTRATIVE CHARGE:
[$7.50] IS DEDUCTED AT THE BEGINNING OF EACH CERTIFICATE MONTH
DURING EACH CERTIFICATE YEAR. WE RESERVE THE RIGHT TO CHANGE THIS
CHARGE BUT IT WILL NEVER BE MORE THAN $15.00 A MONTH. CHANGES WILL
BE AS DESCRIBED IN "CHANGES IN CERTIFICATE COST FACTORS: ON PAGE 20.
PARTIAL SURRENDER;
$25.00 IS DEDUCTED WHENEVER THERE IS A PARTIAL SURRENDER. THERE
ALSO MAY BE A PARTIAL SURRENDER CHARGE AS DESCRIBED IN "PARTIAL
SURRENDER" ON PAGE 17.
INCREASES IN FACE AMOUNT THAT YOU ASK FOR:
[$20.00] A MONTH IS DEDUCTED FOR THE 12 MONTHS IMMEDIATELY FOLLOWING
THE EFFECTIVE DATE OF THE INCREASE. WE RESERVE THE RIGHT TO CHANGE
THIS CHARGE BUT IT WILL NEVER BE MORE THAN $25.00 A MONTH.
TRANSFERS:
WE RESERVE THE RIGHT TO DEDUCT UP TO $25.00 FOR EACH TRANSFER OF
AMOUNTS AMONG YOUR INVESTMENT OPTIONS. HOWEVER WE WILL NOT MAKE A
CHARGE FOR THE FIRST [6] TRANSFERS IN ANY CERTIFICATE YEAR.
4<PAGE>
CERTIFICATE INFORMATION CONTINUED
TABLE OF MAXIMUM SURRENDER CHARGES
<TABLE>
<CAPTION>
CERTIFICATE MINIMUM CERTIFICATE MINIMUM
YEAR FACTOR CHARGE YEAR FACTOR CHARGE
<S> <C> <C> <C> <C> <C>
1 100% $1,086.94 9 60% $652.16
2 100% $1,086.94 10 50% $543.47
3 100% $1,086.94 11 40% $434.78
4 100% $1,086.94 12 30% $326.08
5 100% $1,086.94 13 20% $217.39
6 90% $978.25 14 10% $108.69
7 80% $869.55 15 0% $0.00
8 70% $760.86
</TABLE>
A SURRENDER CHARGE WILL BE SUBTRACTED FROM YOUR CERTIFICATE ACCOUNT VALUE
IF THIS CERTIFICATE IS SURRENDERED FOR ITS NET CASH SURRENDER VALUE OR IF
THIS CERTIFICATE TERMINATES WITHIN THE FIRST FOURTEEN CERTIFICATE YEARS. A
PARTIAL SURRENDER CHARGE WILL ALSO BE SUBTRACTED FROM YOUR CERTIFICATE
ACCOUNT VALUE IF YOU MAKE A PARTIAL SURRENDER OF THIS CERTIFICATE. THE
MAXIMUM CHARGE AT ANY TIME IN A CERTIFICATE YEAR IS EQUAL TO THE LESSER OF
(1) THE CHARGE SHOWN IN THE TABLE ABOVE FOR THAT YEAR; OR (2) AN AMOUNT
EQUAL TO (A) TIMES (B) WHERE (A) IS 25% OF THE FIRST $1,025 IN PREMIUM
RECEIVED DURING THE FIRST CERTIFICATE YEAR, PLUS 4% OF ALL OTHER PREMIUM
RECEIVED DURING THE FIRST CERTIFICATE YEAR; AND (B) IS THE FACTOR IN THE
TABLE ABOVE FOR THAT YEAR.
THIS TABLE ASSUMES NO FACE AMOUNT INCREASES. SEE PAGE 17 FOR A DESCRIPTION
OF SURRENDER CHARGES FOR FACE AMOUNT INCREASES.
IN THE FACE AMOUNT IS REDUCED WITHIN THE FIRST FOURTEEN CERTIFICATE YEARS,
A PRO RATA SHARE OF THE APPLICABLE SURRENDER CHARGE AT THAT TIME MAY BE
DEDUCTED FROM YOUR CERTIFICATE ACCOUNT VALUE. SEE PAGE 17 FOR A
DESCRIPTION OF THE PRO RATA SURRENDER CHARGE.
5<PAGE>
CERTIFICATE INFORMATION CONTINUED
TABLE OF GUARANTEED MAXIMUM COST OF INSURANCE RATES
GUARANTEED MAXIMUM MONTHLY RATES PER $1,000
OF NET AMOUNT AT RISK (SEE PAGE 13)
<TABLE>
<CAPTION>
Attained Monthly Attained Monthly
Age Rate Age Rate
<S> <C> <C> <C>
68 2.49957
35 0.14419 69 2.75591
36 0.15169 70 3.04592
37 0.16169 71 3.37720
38 0.17253 72 3.75992
39 0.18420 73 4.19334
40 0.19837 74 4.67004
41 0.21338 75 5.18003
42 0.22922 76 5.71919
43 0.24673 77 6.28340
44 0.26590 78 6.87612
45 0.28758 79 7.51607
46 0.31093 80 8.22375
47 0.33595 81 9.01810
48 0.36347 82 9.91569
49 0.39349 83 10.91280
50 0.42768 84 11.99040
51 0.46688 85 13.12418
52 0.51193 86 14.29994
53 0.56365 87 15.49991
54 0.62122 88 16.71910
55 0.68547 89 17.97489
56 0.75557 90 19.28574
57 0.82985 91 20.68243
58 0.91250 92 22.21791
59 1.00518 93 24.04369
60 1.10873 94 26.50346
61 1.22400 95 30.20740
62 1.35684 96 36.35803
63 1.50727 97 47.21180
64 1.67447 98 66.20701
65 1.85761 99 90.90909
66 2.05588
67 2.26847
</TABLE>
DEFINITIONS
We, Our, Us. AIG Life Insurance Company.
Administrative Office. One Alico Plaza, Wilmington, DE 19899.
6<PAGE>
Allocation Date. The first business day following the completion of the
Right To Examine This Certificate period.
Attained Age. The Insured Person's age on the Certificate Date plus the
number of full years since the Certificate Date.
Beneficiary. The person(s) who is entitled to the Insurance Benefit of
this Certificate.
Cash Surrender Value. Certificate Account Value less any applicable
surrender charge that would be deducted upon surrender. See page 5.
Certificate. This document, including the Certificate Information pages,
and all attached applications, riders and endorsements.
Certificate Account Value. The total amounts in the accounts credited to a
Certificate. The Certificate Account Value is described on page 15.
Certificate Anniversary. An anniversary of the Certificate Date.
Certificate Date. The first date as of which We have received the initial
Premium and an application in good order. If a Certificate is issued,
insurance is effective as of the Certificate Date.
Certificate Loan Account. The portion of the Certificate Account Value
held in the Guaranteed Account as collateral for certificate loans.
Certificate Month. The month commencing with the Certificate Date and
ending on the day before the first Monthly Anniversary, or any following
month commencing with a Monthly Anniversary and ending on the day before
the next Monthly Anniversary.
Certificate Year. The year commencing with the Certificate Date and ending
on the day before the first Certificate Anniversary, or any following year
commencing with a Certificate Anniversary and ending on the day before the
next Certificate Anniversary.
Death Benefit. The amount of money payable to the Beneficiary if the
Insured Person dies while the Certificate is in force. The Death Benefit
is described on page 10.
Face Amount. The amount of insurance You have specified and from which the
death benefit will be determined. The initial Face Amount is shown in the
Certificate Information section.
Grace Period. The period of time following a Monthly Anniversary during
which this Certificate will continue in force while the Net Cash Surrender
Value is not sufficient to cover the total monthly deduction then due.
Guaranteed Account. An account within the general account which consists
of all of Our assets other than the assets of the Separate Account and any
of Our other separate accounts.
7<PAGE>
Insured Person. The person whose life is covered by the Certificate.
Issue Date. The date this Certificate is issued. It may be a later date
than the Certificate Date if the initial Premium is received at Our
Administrative Office and invested before underwriting has been completed.
Once issued, Certificate coverage is retroactive to the Certificate Date.
The Issue Date is used to measure contestability periods. See page 20.
Maturity Date. The Certificate Anniversary following the Insured Person's
attained age 99.
Monthly Anniversary. The same day as the Certificate Date for each
succeeding month, except that, for those months not having such a day, it
is the last day of that month.
Net Cash Surrender Value. The Cash Surrender Value less any Outstanding
Loan.
Net Premium. A Premium less any expense charges deducted from the Premium.
See page 4.
Outstanding Loan. The total amount of certificate loans including both
principal and accrued interest.
Owner, You, Your. The person who purchased this Certificate as shown in
the application, unless later changed. The Owner may be someone other than
the Insured Person.
Planned Periodic Premium. The amount of Premium You have selected to pay
at the frequency shown in the Certificate Information section.
Premium. The total consideration paid by you in exchange for our
obligations under this Certificate. The initial Premium is due on or
before delivery of this Certificate.
Separate Account. Variable Account II, a separate investment account of
AIG Life Insurance Company.
Subaccount. A division of the Separate Account that invests in shares of a
particular portfolio available for investment under the Certificate.
Valuation Date. Each day the New York Stock Exchange is open for business.
Valuation Period. A period commencing with the close of business on the
New York Stock Exchange on any particular day and ending at the close of
business on the New York Stock Exchange for the next succeeding Valuation
Date.
8<PAGE>
CERTIFICATE OWNER AND BENEFICIARY PROVISIONS
Owner. The Owner of this Certificate is the Insured Person unless
otherwise stated in the application, or later changed.
As the Owner, You are entitled to exercise all the rights of this
Certificate while the Insured Person is living. To exercise a right, You
do not need the consent of anyone who has only a conditional or future
ownership interest in this Certificate.
Beneficiary. The Beneficiary is as stated in the application, unless later
changed. The Beneficiary is entitled to the Insurance Benefit of this
Certificate. One or more beneficiaries for the Insurance Benefit can be
named in the application. If more than one Beneficiary is named, they can
be classed as primary or contingent. If two or more persons are named in a
class, their shares in the benefit can be stated. The stated shares in the
Insurance Benefit will be paid to any primary beneficiaries who survive the
Insured Person. If no primary beneficiaries survive, payment will be made
to any surviving contingent beneficiaries. Beneficiaries who survive in
the same class will share the Insurance Benefit equally, unless You have
made another arrangement with us.
If there is no designated Beneficiary living at the death of the Insured
Person, We will pay the Insurance Benefit to the Owner, if living,
otherwise to the Owner's estate.
Changing The Owner Or Beneficiary. While the Insured Person is living, You
may change the Owner or Beneficiary by written notice in a form
satisfactory to us. (You can get such a form from Our agent or by writing
to Us at Our Administrative Office.) The change will take effect on the
date You sign the notice. But, it will not apply to any payment We make or
other action We take before We receive the notice. If You change the
Beneficiary, any previous arrangement You made as to a payment option for
benefits is canceled. You may choose a payment option for the new
Beneficiary in accordance with "How Benefits Are Paid" on page 20.
Assignment. You may assign this Certificate, if We agree. In any event,
We will not be bound by an assignment unless We have received it in writing
at Our Administrative Office. Your rights and those of any other person
referred to in this Certificate will be subject to the assignment. We
assume no responsibility for the validity of an assignment. An absolute
assignment will be considered as a change of ownership to the assignee.
THE BENEFITS WE PAY
Insurance Benefit. We will pay the Insurance Benefit of this Certificate to
the Beneficiary when We receive at Our Administrative Office (1) proof
satisfactory to Us that the Insured Person died before the Maturity Date
and while this Certificate was in force; and (2) all other requirements We
deem necessary before such payment may be made. The Insurance Benefit
includes the following amounts, which We will determine as of the date of
the Insured Person's death:
9<PAGE>
o the Death Benefit described below;
o p l u s any other benefits then due from riders to this
Certificate;
o minus any Outstanding Loan and accrued loan interest;
o minus any overdue deductions from Your Certificate Account Value
if the Insured Person dies during a Grace Period.
We will add interest to the resulting amount for the period from the date
of death to the date of payment. We will compute the interest at a rate We
determine, but not less than the rate required by any applicable law.
Payment of the Insurance Benefit may also be affected by other provisions
of this Certificate. See Pages 20 and 21, where We specify Our right to
contest the Certificate, the suicide exclusion, and what happens if age or
sex has been misstated. Special exclusions or limitations (if any) are
listed in the Certificate Information section.
10<PAGE>
Death Benefit. The Death Benefit will be determined under either Death
Benefit Option I or II below, whichever You have chosen and is in effect at
such time.
Under either Death Benefit Option, the duration of insurance coverage
depends upon Your Net Cash Surrender Value.
Under Death Benefit Option I, the Death Benefit is the greater of the Face
Amount, or a percentage of the Certificate Account Value on the date of
death (see Table Of Applicable Percentages, below). Under this Option, the
amount of the Death Benefit is fixed, unless it is determined by such a
percentage.
Under Death Benefit Option II, the Death Benefit is the greater of the Face
Amount plus the Certificate Account Value on the date of death, or a
percentage of the Certificate Account Value on the date of death (see Table
Of Applicable Percentages, below). Under this Option, the amount of the
Death Benefit is variable.
The following table is used in determining the Death Benefit under Death
Benefit Options I and II above. For Attained Ages not shown, the
applicable percentages shall decrease by a ratable portion for each full
year.
Table Of Applicable Percentages
<TABLE>
<CAPTION>
Attained Age Percentage
<S> <C>
40 Or Less 250%
45 215%
50 185%
55 150%
60 130%
70 115%
75 through 90 105%
95 through 99 100%
</TABLE>
Maturity Benefit. If the Insured Person is living on the Maturity Date
defined in the Certificate Information section, We will pay You Your
Certificate Account Value on that date minus any Outstanding Loan and
accrued loan interest. This Certificate will then end, subject to Your
election of the Extended Maturity Option.
Extended Maturity Option. If the Insured Person is living on the Maturity
Date of this Certificate, You may elect to continue this Certificate. You
must send Us written notice of such election. At that time all riders
attached to this Certificate will end, no further Premium will be accepted
and no cost of insurance charges will be incurred. The amount of the Death
11<PAGE>
Benefit will then be equal to the Certificate Account Value minus any
Outstanding Loan and accrued loan interest.
CHANGING THE FACE AMOUNT OR THE DEATH BENEFIT OPTION
At any time after the first Certificate Year while this Certificate is in
force, You may change the Death Benefit Option or the Face Amount by
written request to Us at Our Administrative Office, subject to Our approval
and the following:
1. You may ask Us to increase the Face Amount if You provide evidence
satisfactory to Us of the insurability of the Insured Person. If the
Face Amount is increased, then the cost of insurance rate for the
amount of the increase will be based on the rating class of the
Insured Person on the date of the increase, and the Insured Person's
sex and Attained Age. Any increase You ask for must be at least
$10,000. There is a charge for such increase which is shown in the
Certificate Information section. We will deduct the charge from Your
Certificate Account Value beginning with the date the increase takes
effect. Such deduction will be made in accordance with the "Treatment
Of Deductions" provision on Page 13. If You increase the Face Amount,
an additional fourteen year surrender charge may apply to that
increase if any or all of that increase is surrendered before the end
of the fourteenth year from the effective date of increase. We will
not allow You to increase the Face Amount more than once during any
Certificate Year, nor will We allow You to increase the Face Amount
after the Insured Person's 75th birthday.
2. You may ask Us to reduce the Face Amount but not to less than the
minimum Face Amount for which We would then issue this Certificate
under Our rules. Any such reduction in the Face Amount may not be
less than $5,000 or, during the first five Certificate Years, more
than 10% of the original Face Amount. If You do this before the end
of the fourteenth year or before the end of the fourteenth year
following an increase in the Face Amount, We may deduct from Your
Certificate Account Value a pro rata share of the applicable surrender
charge (see Page 17). Reductions will first be applied against the
most recent increase in the Face Amount. They will then be applied to
prior increases in the Face Amount in the reverse order in which such
increases took place, and then to the original Face Amount. We will
not allow You to reduce the Face Amount in the first year immediately
following the effective date of an increase in the Face Amount or more
than once during any Certificate Year.
3. You can change Your Death Benefit Option. We may require that You
submit evidence, satisfactory to Us that the Insured Person is
insurable. If You ask Us to change from the Death Benefit Option I to
Death Benefit Option II, We will decrease the Face Amount by the
amount in Your Certificate Account Value on the date the change takes
effect. However, We reserve the right to decline to make such change
if it would reduce the Face Amount below the minimum Face Amount for
12<PAGE>
which We would then issue this Certificate under Our rules. If You
ask Us to change from Death Benefit Option II to Death Benefit Option
I, We will increase the Face Amount by the amount in Your Certificate
Account Value on the date the change takes effect. Such decreases and
increases in the Face Amount are made so that the Death Benefit
remains the same on the date the change takes effect. However, if
Your Death Benefit is determined by a percentage multiple of the
Certificate Account Value, there may be an increase in the Death
Benefit.
4. The change will take effect at the beginning of the Certificate Month
that coincides with or next follows the date We approve Your request.
5. We reserve the right to decline to make any change that We determine
would cause this Certificate to fail to qualify as life insurance
under applicable tax law as interpreted by Us (see Page 20).
6. You may ask for a change by completing an Application For Change,
which You can get from Our agent or by writing to Us at Our
Administrative Office. A copy of Your Application For Change will be
attached to the new Certificate Information section that We will issue
when the change is made. The new section and the Application For
Change will become a part of this Certificate. We may require You to
return this Certificate to Our Administrative Office to make a
certificate change.
13<PAGE>
THE PREMIUMS YOU PAY
The initial Premium shown in the Certificate Information section is due on
or before delivery of this Certificate. No insurance will take effect
before the initial Premium is paid. Other Premiums may be paid at any time
while this Certificate is in force and before the Maturity Date at Our
Administrative Office.
We will send Premium notices to You for the Planned Periodic Premium shown
in the Certificate Information section. You may skip Planned Periodic
Premiums. However, this may adversely affect the duration of the Death
Benefit and Your Certificate's values.
Limits. Each Premium after the initial one must be at least the minimum
Premium amount shown in the Certificate Information section. We may
increase this minimum limit 90 days after We send You written notice of
such increase. We reserve the right to limit the amount of any Premium
which is in addition to the Planned Periodic Premiums.
We also reserve the right not to accept Premium (in a Certificate Year)
that We determine would cause this Certificate to fail to qualify as life
insurance under applicable tax law as interpreted by Us (see Page 20).
Grace Period. The duration of insurance coverage depends upon the Net Cash
Surrender Value being sufficient to cover the total monthly deductions
described on Page 13. If the Net Cash Surrender Value at the beginning of
any Certificate Month is less than such deductions for that month, We will
send a written notice to You and any assignee on Our records at last known
addresses stating that a Grace Period of 61 days has begun, starting with
the beginning of that Certificate Month. The notice will also state the
amount of premium which would increase the Net Cash Surrender Value
sufficiently to cover total monthly deductions for 3 months, if no interest
or investment performance were credited to or charged against the
Certificate Account Value and no Certificate changes were made. If we do
not receive the requested premium amount before the end of the Grace Period
and the Net Cash Surrender Value remains insufficient to cover deductions,
this Certificate will end without value.
If We do receive the requested premium amount before the end of the Grace
Period, but the Net Cash Surrender Value is still insufficient to cover
total monthly deductions, We will send a written notice that a new 61 day
Grace Period has begun and request additional premium.
If the Insured Person dies during a Grace Period, We will pay the Insurance
Benefit as described on Page 9.
Reinstatement Of Your Certificate. If this Certificate has ended without
value, You may reinstate the Certificate while the Insured Person is alive
if you:
1. Ask for reinstatement of the Certificate within 3 years from the end
of the Grace Period; and
14<PAGE>
2. Provide evidence of insurability satisfactory to us; and
3. Pay a Premium sufficient to cover (i) the total monthly administrative
charges from the beginning of the Grace Period to the effective date
of reinstatement; (ii) total monthly deductions for 3 months,
calculated from the effective date of reinstatement; and (iii) the
charge for applicable taxes, the Premium charge, and any increase in
surrender charges associated with this payment. We will determine the
required Premium as if no interest or investment performance were
credited to or charged against Your Certificate Account Value; and
4. Repay or reinstate any certificate loan which existed on the date the
Certificate ended.
The effective date of the reinstatement of this Certificate will be the
beginning of the Certificate Month which coincides with or next follows the
date We approve Your request.
From the required Premium We will deduct the charge for applicable taxes
and the Premium charge. The Certificate Account Value, certificate loan
and surrender charges applicable at the time of reinstatement will be those
that were in effect on the date this Certificate lapsed.
We will start to make monthly deductions again as of the effective date of
reinstatement. The monthly administrative charges from the beginning of
the Grace Period to the effective date of reinstatement will be deducted
f r o m the Certificate Account Value as of the effective date of
reinstatement.
YOUR CERTIFICATE ACCOUNT VALUE AND HOW IT WORKS
Premium. When We receive Your Premium, We subtract the expense charges
shown in the table in the Certificate Information section. We put the
balance (the Net Premium) into Your Certificate Account Value as of the
date We receive the Premium at Our Administrative Office, and before any
deductions from Your Certificate Account Value as of the Certificate Date
if it is later than the date of receipt. No Premiums will be applied to
Your Certificate Account Value until the full initial Premium, as shown on
Your application, is received at Our Administrative Office.
Monthly Deductions. At the beginning of each Certificate Month We make a
d e d u c tion from Your Certificate Account Value to cover monthly
administrative charges and to provide insurance coverage, subject to the
Grace Period provision. Such deduction for any Certificate Month is the
sum of the following amounts determined as of the beginning of that month:
o the monthly administrative charges;
o the monthly cost of insurance for the Insured Person;
o the monthly cost of any benefits provided by riders to this
Certificate.
15<PAGE>
The monthly cost of insurance is the sum of a) Our current monthly cost of
insurance rate times the net amount at risk at the beginning of the
Certificate Month divided by $1,000; plus b) any extra charge per $1,000 of
Face Amount shown in the Certificate Information section, times the Face
Amount at the beginning of the Certificate Month divided by $1,000. If the
Death Benefit is the Face Amount, then the net amount at risk is the Death
Benefit divided by 1.0032737 minus the amount in Your Certificate Account
Value at that time. However, if the Death Benefit is a percentage of the
Account Value of this Certificate, then the net amount at risk is the Death
Benefit minus the amount in Your Certificate Account Value at that time.
The cost of insurance rate is based on the Face Amount and on the sex,
Attained Age, rating class, and smoker or non-smoker status of the Insured
Person.
We will determine cost of insurance rates from time to time. Any change in
the cost of insurance rates We use will be as described in "Changes In
Certificate Cost Factors" on page 20. They will never be more than those
shown in the Table Of Guaranteed Maximum Cost Of Insurance Rates on page 6.
Other Deductions. We also make the following additional deductions from
Your Certificate Account Value as they occur:
o We deduct a partial surrender charge if You make a partial
surrender of this Certificate (see page 17).
o We deduct a surrender charge if, before the end of the
fourteenth Certificate Year, You give up this Certificate for
its Net Cash Surrender Value, You reduce the Face Amount, or if
this Certificate terminates without value at the end of a Grace
Period (see page 17). A surrender charge may also apply to such
transactions for up to fourteen years immediately following a
Face Amount increase.
o We deduct a charge if You increase the Face Amount (see page
11).
o We deduct a charge for certain transfers (see page 14).
Treatment Of Deductions. We will make all deductions based on the
proportion that Your unloaned value in Our Guaranteed Account and Your
values in the Subaccounts bear to the total unloaned value in Your
Certificate Account Value.
16<PAGE>
YOUR INVESTMENT OPTIONS
Allocations. This Certificate provides investment options for the amount
in Your Certificate Account Value. Amounts put into Your Certificate
Account Value are allocated to the Subaccounts and to the unloaned portion
of Our Guaranteed Account at Your direction. You specified Your initial
Premium allocation percentages in Your application for this Certificate, a
copy of which is attached to this Certificate. Unless You change them,
such percentages shall also apply to subsequent Premiums. However, any
Premium which is put into Your Certificate Account Value prior to the
Allocation Date will initially be allocated to the Money Market Subaccount.
On the Allocation Date, any such amounts then in the Money Market
Subaccount will be allocated in accordance with the directions contained in
Your Certificate application.
No less than 5% of a Premium may be allocated to any one account.
Allocation percentages must be zero or a whole number not greater than 100.
The sum of the Premium allocation percentages must equal 100. You may
change such allocation percentages by written notice to Our Administrative
Office. A change will take effect on the date We receive it at Our
Administrative Office except for changes received on or prior to the
Allocation Date which will take effect on the first business day following
the Allocation Date.
Transfers. At Your written request to Our Administrative Office, We will
transfer amounts from Your value in any Subaccounts to one or more other
Subaccounts or to Our Guaranteed Account. Any such transfer will take
effect on the date We receive Your written request for it at Our
Administrative Office.
Once during each Certificate Year You may ask Us by written request to Our
Administrative Office to transfer an amount You specify from Your unloaned
value in Our Guaranteed Account to one or more Subaccounts. However, We
will make such a transfer only if (1) We receive Your written request at
Our Administrative Office within 30 days before or after a Certificate
Anniversary; and (2) the amount You specify is not more than the greater of
25% of Your unloaned value in Our Guaranteed Account as of the date the
transfer takes effect or the minimum transfer amount shown on page 3. In
no event will We transfer more than Your unloaned value in Our Guaranteed
Account. The transfer will take effect on the date We receive Your written
request for it at Our Administrative Office but not before the Certificate
Anniversary.
The minimum amount that We will transfer from the amount You have in a
Subaccount is the lesser of the minimum transfer amount shown on page 3 or
the amount You have in that Subaccount on that date, except as stated in
the next paragraph. The minimum amount that We will transfer from the
amount You have in Our Guaranteed Account is the lesser of the minimum
transfer amount shown on page 3 or Your unloaned value in Our Guaranteed
Account as of the date the transfer takes effect, except as stated in the
next paragraph. If You do not transfer the entire amount You have in a
Subaccount or of the unloaned amount You have in Our Guaranteed Account,
17<PAGE>
the remaining value in either must be no less than the minimum transfer
amount shown on page 3.
We will waive the minimum amount limitations set forth in the immediately
preceding paragraph if the total amount being transferred on that date is
at least the minimum transfer amount shown on Page 3.
We reserve the right to make a transfer charge up to the amount shown on
Page 4. The transfer charge, if any, is deducted from the amounts
transferred from the Subaccounts and the Guaranteed Account based on the
proportion that the amount transferred from each Subaccount and the
Guaranteed Account bears to the total amount being transferred. A transfer
from the Money Market Subaccount on the Allocation Date (if applicable)
will not incur a transfer charge.
18<PAGE>
YOUR CERTIFICATE ACCOUNT VALUE
The amount in Your Certificate Account Value at any time is equal to the
sum of the amounts You then have in Our Guaranteed Account and the
Subaccounts under this Certificate.
Your Value In The Subaccounts. The amount You have in a Subaccount under
this Certificate at any time is equal to the number of units this
Certificate then has in that Subaccount multiplied by the Subaccount's unit
value at that time. A certificate transaction occurs when units of a
S u b account are either purchased or redeemed. Amounts allocated,
transferred or added to a Subaccount are used to purchase units of that
S u baccount; units are redeemed when amounts are deducted, loaned,
transferred, or fully or partially surrendered.
The number of units a certificate has in a Subaccount at any time is equal
to the number of units purchased minus the number of units redeemed in that
Subaccount to that time. The number of units purchased or redeemed in a
certificate transaction is equal to the dollar amount of the certificate
transaction divided by the Subaccount's unit value on the date of the
certificate transaction. Certificate transactions may be made on any day.
The unit value that applies to a transaction made on a business day will be
the unit value for that day. The unit value that applies to a transaction
made on a non-business day will be the unit value for the next business
day.
We determine unit values for the Subaccounts at the end of each business
day. Generally, a business day is any day the New York Stock Exchange is
open for trading. A business day immediately preceded by one or more non-
business calendar days will include those non-business days as part of that
business day. For example, a business day which falls on a Monday will
consist of that Monday and the immediately preceding Saturday and Sunday.
The unit value of a Subaccount on any business day is equal to the unit
value for that Subaccount on the immediately preceding business day
multiplied by the net investment factor for that Subaccount on that
business day.
The net investment factor for a Subaccount on any business day is (a)
divided by (b), minus (c), where:
(a) is the net asset value of the shares in designated investment companies
that belong to the Subaccount at the close of business on such business day
before any certificate transactions are made on that day, plus the amount
of any dividend or capital gain distribution paid by the investment
companies on that day;
(b) is the value of the assets in that Subaccount at the close of business
on the immediately preceding business day after all transactions were made
for that day; and
19<PAGE>
(c) is a charge for each calendar day in that business day, as defined
above, corresponding to a charge not exceeding .90% yearly for mortality
and expense risks, plus any charge for that day for taxes or amounts set
aside as a reserve for taxes.
The net asset value of an investment company's shares held in each
Subaccount shall be the value reported to Us by that investment company.
Your Value In Our Guaranteed Account. The amount You have in Our
Guaranteed Account at any time is equal to the amounts allocated and
transferred to it, plus the interest credited to it, minus amounts
deducted, transferred and partially surrendered from it.
We will credit Our Guaranteed Account with interest rates We determine. An
interest rate equal to the loan interest rate will be applied to the loaned
portion in Our Guaranteed Account which is considered preferred certificate
loan. An interest rate of not less than the certificate loan rate minus 2%
will be credited to the loaned amount in Our Guaranteed Account which is
considered non-preferred certificate loan. Any change in the interest rate
We credit to the unloaned amount in Our Guaranteed Account will be as
described in "Changes In Certificate Cost Factors" on Page 20. The
interest rate applied to either the loaned or unloaned amount in Our
Guaranteed Account will not be less than 4% per year, compounded annually.
At the end of each Certificate Month We will credit interest on unloaned
amounts in Our Guaranteed Account as follows:
o On amounts that remain in Our Guaranteed Account for the entire
Certificate Month from the beginning to the end of the
Certificate Month.
o On amounts allocated to Our Guaranteed Account during a
Certificate Month that are Net Premium payments or loan
repayments, from the date We receive them to the end of the
Certificate Month.
o On amounts transferred to Our Guaranteed Account during a
Certificate Month from the date of the transfer to the end of
the Certificate Month.
o On amounts deducted or partially surrendered from Our Guaranteed
Account during a Certificate Month, from the beginning of the
Certificate Month, or the date such amount is allocated to the
Guaranteed Account, if later, to the date of the deduction or
partial surrender.
THE CASH SURRENDER VALUE OF THIS CERTIFICATE
Cash Surrender Value. The Cash Surrender Value on any date is equal to the
amount in Your Certificate Account Value on that date minus any surrender
charge.
20<PAGE>
Net Cash Surrender Value. The Net Cash Surrender Value is equal to the
Cash Surrender Value minus any certificate loan and accrued loan interest.
You may give up this Certificate for its Net Cash Surrender Value at any
time while the Insured Person is living. You may do this by sending Us a
written request for it and this Certificate to Our Administrative Office.
We will compute the Net Cash Surrender Value as of the date We receive Your
request for it and this Certificate at Our Administrative Office. All
insurance coverage under this Certificate ends on such date.
Surrender Charges. If You give up this Certificate for its Net Cash
Surrender Value or if it ends without value at the end of a Grace Period
before the end of the fourteenth Certificate Year, We will subtract a
surrender charge from Your Certificate Account Value. A table of maximum
surrender charges is in the Certificate Information section.
An increase in the Face Amount will result in an additional fourteen year
surrender charge applicable to that increase. The additional surrender
charge period will begin on the effective date of the increase.
If the Face Amount is reduced before the end of the fourteenth Certificate
Year or within fourteen years immediately following a Face Amount increase,
because You asked for a reduction in the Face Amount, We will also deduct a
pro rata share of any applicable surrender charge from Your Certificate
Account Value. Reductions will first be applied against the most recent
increase in the Face Amount. They will then be applied to prior increases
in the Face Amount in the reverse order in which such increases took place,
and then to the original Face Amount.
The amount of any pro rata surrender charge will be determined by the
formula A/B x C, where:
A = the amount of the reduction in the Face Amount.
B = the Face Amount immediately prior to the reduction.
C = the total surrender charge applicable to this Certificate
immediately prior to the reduction.
If there is an increase or reduction in the surrender charge shown on page
5, We will send You a new table showing the revised surrender charges. We
have filed a detailed statement of the method of computing surrender
charges with the insurance supervisory official of the jurisdiction in
which this Certificate is delivered.
Partial Surrender. A partial surrender will result in a reduction in the
Cash Surrender Value and in Your Certificate Account Value equal to the
partial surrender amount as well as a reduction in Your Death Benefit. If
Death Benefit Option I is in effect, the partial surrender may also result
in a decrease in the Face Amount. However, We will not allow such partial
surrender if it would reduce the Face Amount to less than the minimum
amount for which We would then issue this Certificate under Our rules. We
will also not allow a partial surrender during the first Certificate Year
21<PAGE>
or during the first 12 Certificate Months immediately following an increase
in the Face Amount. After such periods and while the Insured Person is
living, You may ask for a partial surrender by written request to Our
Administrative Office no more than twice during a Certificate Year. Your
request will be subject to Our approval based on Our rules in effect when
We receive Your request, and to the minimum partial surrender amount shown
in the Certificate Information section. The partial surrender amount
deducted from the Certificate Account Value is equal to the amount
requested plus the expense charge shown in the Table Of Expense Charges in
the Certificate Information section, as well as a partial surrender charge.
We have the right to decline a request for a partial surrender.
You may tell Us how much of each partial surrender is to come from Your
unloaned value in Our Guaranteed Account and from Your values in each of
the Subaccounts. If You do not tell us, the partial surrender will be
deducted from the Certificate Account Value based on the proportion that
Your unloaned value in Our Guaranteed Account and Your values in the
Subaccounts bear to the total unloaned value in Your Certificate Account
Value.
Such partial surrender and resulting reduction in the Death Benefit, in the
Cash Surrender Value and in Your Certificate Account Value will take effect
on the date We receive Your written request for it at Our Administrative
Office. We will send You the applicable new page in the Certificate
Information section if a partial surrender results in a reduction in the
Face Amount. It will become a part of this Certificate. We may require
You to return this Certificate to Our Administrative Office to make a
change.
Partial Surrender Charge. The partial surrender charge is equal to the
amount of partial surrender plus the expense charge for a partial surrender
divided by the Net Cash Surrender Value immediately prior to the partial
surrender and then multiplied by the total surrender charge in effect at
that time.
HOW A LOAN CAN BE MADE
Certificate Loans. After the first Certificate Year You can get a loan on
this Certificate while it has a loan value. However, We will not allow You
to get a loan during the first 12 Certificate Months immediately following
an increase in the Face Amount and We will not allow you to get more than
two loans during a Certificate Year. This Certificate will be the only
security for the loan. The initial loan and each additional loan must be
for at least the minimum loan amount shown in the Certificate Information
section. Any amount on loan is part of Your Certificate Account Value (see
page 16). We refer to this as the loaned portion of Your Certificate
Account Value.
Loan Value. The loan value on any date is 90% of the Net Cash Surrender
Value on that date. The amount of the loan may not be more than the loan
value. If You request an increase to an existing loan, the amount
22<PAGE>
requested will be added to the amount of the existing loan and accrued loan
interest.
Y o u r request for a certificate loan must be in writing to Our
Administrative Office. You may tell Us how much of the requested loan is
to be allocated to Your unloaned value in Our Guaranteed Account and Your
value in each Subaccount. Such values will be determined as of the date We
receive Your request. If You do not tell Us We will allocate the loan based
on the proportion that Your unloaned value in Our Guaranteed Account and
Your values in the Subaccounts bear to the total unloaned value in Your
Certificate Account Value.
The loaned portion of Your Certificate Account Value will be maintained as
a part of Our Guaranteed Account. Thus, when a loaned amount is allocated
to an Subaccount, We will redeem units of that Subaccount sufficient in
value to cover the amount of the loan so allocated and transfer that amount
to Our Guaranteed Account.
Preferred Loan Value. In Certificate Year 11 and thereafter, the loaned
portion of Your Certificate Account Value which is equal to or less than
Your Certificate Account Value minus the sum of the Premiums paid into this
Certificate will be considered preferred certificate loan. The remaining
loaned portion of Your Certificate Account Value will be considered non-
preferred certificate loan. These amounts will be recalculated on each
Monthly Anniversary.
Loan Interest. Interest on a loan accrues daily at the loan interest rate
shown in Certificate Information section. Loan interest is due on each
Certificate Anniversary. If the interest is not paid when due, it will be
added to Your Outstanding Loan and allocated based on the proportion that
Your unloaned value in Our Guaranteed Account and Your values in the
Subaccounts bear to the total unloaned value in Your Certificate Account
Value. The unpaid interest will then be treated as part of the loaned
amount and will bear interest at the loan rate.
When unpaid loan interest is allocated to a Subaccount, We will redeem
units of that Subaccount sufficient in value to cover the amount of the
interest so allocated and transfer that amount to Our Guaranteed Account.
Loan Repayment. You may repay all or part of a certificate loan at any
time while the Insured Person is alive and this Certificate is in force.
We will assume that any payment You make to Us while You have a loan and
Your Certificate is not in the Grace Period is a loan repayment, unless You
tell Us in writing that it is a Premium payment. A loan repayment will
reduce the loaned portion of Your Certificate Account and will then be
allocated on the basis of the Premium allocation percentages then in
effect.
Failure to repay a certificate loan or to pay loan interest will not
terminate this Certificate unless at the beginning of a Certificate Month
the Net Cash Surrender Value is less than the total monthly deduction then
due. In that case, the Grace Period provision will apply (see page 12).
23<PAGE>
A certificate loan will have a permanent effect on Your benefits under this
Certificate even if it is repaid.
24<PAGE>
OUR SEPARATE ACCOUNT
The Separate Account is described on page 3. We established it and We
maintain it under the laws of the State of Delaware. Realized and
unrealized gains and losses from the assets in each Subaccount of Our
Separate Account are credited or charged against such Subaccount without
regard to Our other income, gains, or losses. Assets are put into each
Subaccount of the Separate Account to support this Certificate and other
variable life insurance policies.
The assets in each Subaccount of the Separate Account are Our property.
The portion of each Subaccount assets equal to the reserves and other
certificate liabilities with respect to the Separate Account will not be
chargeable with liabilities arising out of any other business We conduct.
We may transfer assets of a Subaccount or the Separate Account in excess of
its reserves and other liabilities to another separate account or to Our
general account.
Subaccounts. Our Separate Account consists of Subaccounts. Each
Subaccount invests its assets in shares of a designated portfolio of one or
more investment companies. The Subaccounts that You chose for Your initial
allocations are shown on the application for this Certificate, a copy of
which is attached to this Certificate. We may from time to time make other
Subaccounts available to you. We will provide You with written notice of
all material details including investment objectives and all charges.
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.
Consistent with state law, We have the right to:
1. register or deregister the Separate Account under the Investment
Company Act of 1940;
2. run the Separate Account under the direction of a committee, and
discharge such committee at any time;
3. restrict or eliminate any voting rights of Certificate Owners, or
other persons who have voting rights as to the Separate Account; and
4. operate the Separate Account or one or more of the Subaccounts by
making direct investments or in any other form. If We do so, We may
invest the assets of the Separate Account or one or more of the
Subaccounts in any legal investments. We will rely upon Our own or
outside counsel for advice in this regard. Also, unless otherwise
required by law or regulation, an investment advisor or any investment
policy may not be changed without Our consent. As required by law or
regulation, the investment policy of a Subaccount will not be changed
by Us unless approved by the Commissioner of Insurance of the State of
Delaware or deemed approved in accordance with such law or regulation.
If so required, the process for getting such approval is on file with
the insurance supervisory official of the jurisdiction in which the
group policy is delivered.
25<PAGE>
If any of these changes result in a material change in the underlying
investments of a Subaccount, We will notify You of such change, as required
by law. If You have value in that Subaccount, We will transfer it at Your
written direction from that Subaccount (without charge) to another
Subaccount or to Our Guaranteed Account, and You may then change Your
Premium allocation percentages.
OUR ANNUAL REPORT TO YOU
For each Certificate Year We will send You a report for this Certificate
that shows the current Death Benefit, the value You have in Our Guaranteed
Account and the value You have in each Subaccount of Our Separate Account,
the Cash Surrender Value and any certificate loan with the current loan
interest rate. It will also show the Premiums paid and any other
information as may be required by the insurance supervisory official of the
jurisdiction in which the group policy is delivered.
26<PAGE>
HOW BENEFITS ARE PAID
The Insurance Benefit, surrender value or Your Certificate Account Value
payable on the Maturity Date will be paid immediately in one sum. Or, You
can choose another form of payment for all or part of them. If you send Us
a written notice, We will inform You of all other forms of payment
including annuities, with or without life contingencies. Interest on any
other form of payment will be at an annual rate of interest that We decide,
but not less than the rate required by the law of the state in which the
group policy is delivered. If You do not arrange for a specific choice
before the Insured Person dies, the Beneficiary will have this right when
the Insured Person dies. If You do make an arrangement, however, the
Beneficiary cannot change it after the Insured Person dies.
OTHER IMPORTANT INFORMATION
Your Contract With Us. This Certificate is issued in consideration of the
payment of the initial Premium shown in the Certificate Information
section.
The Group Policy, this Certificate, and the attached copy of the initial
application and all subsequent applications to change this Certificate, and
all additional Certificate Information sections added to this Certificate,
make up the entire contract. The rights conferred by the Group Policy and
this Certificate are in addition to those provided by applicable Federal
and State laws and regulations.
Only Our executive officers can modify this Certificate or waive any of Our
rights or requirements under it. The person making these changes must put
them in writing and sign them.
Certificate Changes - Applicable Tax Law. For You and the Beneficiary to
receive the tax treatment accorded to life insurance under Federal law,
this Certificate must qualify initially and continue to qualify as life
insurance under the Internal Revenue Code or and successor law or
regulation. Therefore, in our best efforts to assure this qualification
for You, We have reserved earlier in this Certificate the right to decline
to accept Premium, in whole or in part, to decline to change Death Benefit
Options, to decline to change the Face Amount or to decline to make partial
surrenders that would cause this Certificate to fail to qualify as life
insurance under applicable tax law as interpreted by us. Further, We
reserve the right to make changes in this Certificate or its riders (for
example, in the Table Of Applicable Percentages on page 10) or to require
additional Premium or to make distributions from this Certificate to the
extent We deem it necessary to continue to qualify this Certificate as life
insurance. Any such changes will apply uniformly to all policies that are
affected. You will be given advance notice of such changes.
Changes In Certificate Cost Factors. Changes in certificate cost factors
(interest rates We credit, cost of insurance deductions and expense
charges) will be by class and based upon changes in future expectations for
such elements as: investment earnings, mortality, persistency, expenses and
27<PAGE>
taxes. Any change in certificate cost factors will be determined in
accordance with procedures and standards on file, if required, with the
insurance supervisory official of the jurisdiction in which the group
policy is delivered.
When The Certificate Is Incontestable. We have the right to contest the
validity of this Certificate based on material misstatements made in the
initial application for this Certificate. We also have the right to
contest the validity of any certificate change or restoration based on
material misstatements made in any application for that change. However,
We will not contest the validity of this Certificate after it has been in
effect during the lifetime of the Insured Person for two years from the
Issue Date shown in the Certificate Information section. We will not
contest any certificate change that requires evidence of insurability, or
any restoration of this Certificate, after the change or restoration has
been in effect for two years during the Insured Person's lifetime.
No statement shall be used to contest a claim unless contained in an
application.
All statements made in an application are representations and not
warranties.
See any additional benefit riders for modifications of this provision that
apply to them.
What If Age Or Sex Has Been Misstated? If the Insured Person's age or sex
has been misstated on any application, the Death Benefit and any benefits
provided by riders to this Certificate shall be those which would be
purchased by the most recent deduction for the cost of insurance, and the
cost of any benefits provided by riders, at the correct age and sex.
How The Suicide Exclusion Affects Benefits. If the Insured Person commits
suicide (while sane or insane) within two years after the Issue Date shown
in the Certificate Information section, Our liability will be limited to
the payment of a single sum. This sum will be equal to the Premiums paid,
minus any loan and accrued loan interest and minus any partial surrender
and minus the cost of any riders attached to this Certificate. If the
Insured Person commits suicide (while sane or insane) within two years
after the effective date of a change that You asked for that increases the
Death Benefit, then Our liability as to the increase in amount will be
limited to the payment of a single sum equal to the monthly cost of
insurance deductions made for such increase plus the expense charge
deducted for the increase (see page 11).
How We Measure Certificate Periods And Anniversaries. We measure
Certificate Years, Certificate Months, and Certificate Anniversaries from
the Certificate Date. Each Certificate Month begins on the same day as the
Certificate Date for each succeeding month, except that, for those months
not having such a day, it is the last day of that month.
28<PAGE>
How, When And What We May Defer. We may not be able to obtain the value of
the assets of the Subaccounts if: (1) the New York Stock Exchange is
closed; or (2) the Securities and Exchange Commission requires trading to
be restricted or declares an emergency. During such times, as to amounts
allocated to the Subaccounts, We may defer:
1. Determination and payment of partial surrenders;
2. Determination and payment of any Death Benefit in excess of the Face
Amount;
3. Payments of loans;
4. Determination of the unit values of the Subaccounts; and
5. Any requested transfer or the transfer on the Allocation Date.
As to amounts allocated to Our Guaranteed Account, We may defer payment of
any partial surrender or loan amount for up to six months after We receive
a request for it. We will allow interest, at a rate of at least 4% a year,
on any Net Cash Surrender Value payment derived from Our Guaranteed Account
that we defer for 30 days or more.
The Basis We Use For Computation. We provide Cash Surrender Values that
are at least equal to those required by law. If required to do so, We have
filed with the insurance supervisory official of the jurisdiction in which
the group policy is delivered a detailed statement of Our method of
computing such values. We compute reserves under this Certificate by the
Commissioners Reserve Valuation Method.
We base minimum Cash Surrender Values and reserves on the Commissioners
1980 Standard Ordinary Male and Female, Smoker and Non-Smoker, Mortality
Tables, Age Last Birthday. We also use these tables as the basis for
determining maximum insurance costs, taking account of sex, Attained Age,
rating class and Smoker or Non-Smoker status of the Insured Person. We use
an effective annual interest rate of 4%.
Certificate Illustrations. Upon request We will give You an illustration
of the future benefits under this Certificate based upon both guaranteed
and current cost factor assumptions. However, if You ask Us to do this
more than once in any Certificate Year, We reserve the right to charge You
a fee for this service.
Certificate Changes. This Certificate can only be changed, in writing, by
one of our executive officers. No other person, including an agent, has
any authority to change or reinstate this Certificate, or extend the time
of paying a premium.
Continuation Of Certificate Coverage. If the Policy under which this
Certificate is issued should terminate, coverage may be continued under
this Certificate by the timely payment of premiums directly to our
Administrative Office or to one of our agents.
29<PAGE>
Adding Additional Benefits. You may add additional benefit riders or make
other changes, subject to Our rules at the time of change.
30<PAGE>
AIG LIFE INSURANCE COMPANY
ONE ALICO PLAZA
P.O. BOX 667
WILMINGTON, DELAWARE 19899
Flexible Premium Variable Life Insurance Certificate. Insurance payable
upon death before the Maturity Date while this Certificate is in force.
Certificate Account Value payable on Maturity Date. Adjustable Death
Benefit. Premiums may be paid while Insured Person is living and before
the Maturity Date. Net Cash Surrender Value must be sufficient to keep the
Certificate in force. Values provided by this Certificate are based on
declared interest rates, and on the investment performance of the
Subaccounts. Certificate values are not guaranteed as to dollar amount.
Investment options are described on page 14. This is a non-participating
Certificate.
31<PAGE>
AIG Life Insurance Company Variable Administrative Offices:
One Alico Plaza P.O. Box 8718
Wilmington, DE 19899 Wilmington, DE 19899
Life Insurance Application
1. Proposed Insured
First Name Middle Initial Last Name
______________________________________________________________
Date of Birth Age Sex Place of Birth
______________ ___ ___M ______________________
mon. day yr. ___F
Address City State Zip
______________________________________________________________
Social Security No. ___-___-____ Citizenship:
__ U.S.
__ Other(Country__________)
Telephone:
Home ( )________________ Business ( )_____________
Address:______________________________________________________
Occupation and Duties:________________________________________
Employer:_____________________________________________________
2. Owner (If other than proposed insured)
First Name Middle Initial Last Name
______________________________________________________________
Address City State Zip
______________________________________________________________
Social Security Or Tax ID No.: _______________________________
______________________________________________________________
(If a contingent owner is desired, indicate in special instructions below.)<PAGE>
3. Beneficiary
Primary Relationship
______________________________________________________________
Contingent Relationship
______________________________________________________________
______________________________________________________________
4. Plan Selection
Plan _________________________________________________________
Insurance Amount $_________ __ Waiver of Premium
Accidental Death $_________
Waiver of Specified Premium $_________ Other ___________
Death Benefit Option:___Universal Life - Option A (increasing)
___Universal Life - Option B (level)
___Variable Life - Option I (level)
___Variable Life - Option II (enhanced)
5. Premium Information
Premium Paid with Application $______________
(must be at least two months premium for the plan and insurance amount
applied for)
Universal Life or Variable Life only:
Planned Initial Premium $__________
Planned Periodic Payment $__________
Frequency: __Annual __Semi-Annual __Quarterly ___Other______
______________________________________________________________
6. Other Important Information
Life Insurance now in force: (If none, so state)
Company Amount Plan Year Issued<PAGE>
YES NO
a. Have you ever had a request for life or disability
insurance declined, postponed, rated or restricted
in any way, or are any other applications for
insurance pending or contemplated? ____ ____
b. Will the coverage applied for replace or change any
existing life insurance or annuity?
c. Within the past two years have you flown or taken ____ ____
instruction as a pilot or engaged in any kind of
racing, scuba or sky diving, hang gliding, or do
you intend to?
d. Within the past five years have you used ____ ____
amphetamines, narcotics, barbiturates,
hallucinogens, cocaine, or marijuana, or received
treatment for drug or alcohol use?
e. Have you ever had your driver s license restricted
or revoked? ____ ____
Driver License No. _____________________
f. Proposed Insured s Height __ft. __in. Weight __lbs. ____ ____
Any weight loss in last year?
g. Within the past 12 months have you smoked
cigarettes or used any other tobacco products?
h. Do you intend to reside or travel outside the ____ ____
United States?
Give details to YES responses to questions 6a through ____ ____
6h.
____ ____
HOME OFFICE AMENDMENTS AND SPECIAL INSTRUCTIONS
CORRECTIONS
(for home office use where
permitted by state statute)
7. Have you within the past 5 years: YES NO
a. Consulted a physician for any reason; had an
electrocardiogram or other diagnostic tests?
b. Been in a clinic, hospital or medical facility ____ ____
for observation or treatment?
c. Been advised to have any diagnostic test, ____ ____
hospitalization or surgery which was not done?
____ ____<PAGE>
8. Have you ever had or been treated for or had
indication of:
a. Cancer, stroke or heart attack? ____ ____
b. Diabetes, glandular disorder, enlarged lymph
nodes, epilepsy, or any mental or nervous
disorder? ____ ____
c. Chest pain, high blood pressure, heart murmur
or other circulatory or blood disorder?
d. Kidney, urinary or reproductive disorder, or ____ ____
sexually transmitted disease?
e. Liver or gastro-intestinal disorder? f.
Asthma, emphysema, or other respiratory ____ ____
disorder? ____ ____
g. Loss of vision, amputation, deformity,
arthritis or other musculo-skeletal disorder? ____ ____
____ ____
9. Any family history of diabetes or heart disease?
____ ____
10.FAMILY HISTORY
Age If State of Age at Cause of
Living Health Death Death
Father ______ ________ ________ ________
Mother ______ ________ ________ ________
Brothers & Sisters
No. Living______ ______ ________ ________ ________
No. Dead ______ ______ ________ ________ ________
______________________________________________________________
YES NO
11. Has a member of the Medical Profession ever
treated you for or diagnosed you as having:
a. AIDS (Acquired Immune Deficiency
Syndrome)? ____ ____
b. AIDS Related Complex (ARC)?
____ ____
12. Are you presently taking any medication? ____ ____
INSTRUCTIONS: Give full details for all YES answers to questions 7 to 12.
Give dates, treatment, duration of illness and names and addresses of all
attending physicians and medical facilities.
______________________________________________________________
13. Personal Physician: (If none, so state)
Name:___________________________________________________
Address:________________________________________________
Date and Reason Last Seen:______________________________<PAGE>
______________________________________________________________
______________________________________________________________
I hereby represent all my statements and answers to the above questions to
be correct and true to the best of my knowledge and belief. This
application and any amendments shall be a part of any contract issued by
the Company. No medical examiner or agent can make or change a contract or
waive any of the Company s rights or requirements. Unless otherwise
provided by the Receipt for Conditional Temporary Insurance, if applicable,
no certificate will take effect unless and until, while the insured is
living, the application is approved, the full initial premium is paid, the
certificate is delivered to and accepted by the owner, and answers and
statements in this application continue to be complete and true at the time
of such payment and acceptance. Acceptance of any certificate issued based
on this application will be a ratification of any amendments or corrections
noted by AIG Life Insurance Company in the space headed Home Office
Amendments and Corrections, except that if required by state statute or
regulation any change in amount, age, plan of insurance, additional
benefits or classification must be agreed to in writing. [By applying for
coverage, I hereby agree to become a participant in the (XYZ Trust).]
I authorize any physician or medical professional, hospital, clinic or
medically-related facility, insurer or reinsurer, Veterans Administration
facility, the Medical Information Bureau, Inc., consumer reporting agency,
employer or person to disclose to AIG Life Insurance Company and its
reinsurers, medical and other information pertaining to me for use in
determining insurability. I authorize all such sources, except the MIB,
Inc., to give such information to any insurance support organization
authorized by AIG Life Insurance Company to collect and transmit such
information. I agree that this authorization shall be valid from the date
signed for a period of 2 1/2 years. I agree that a photocopy of this
authorization shall be valid as the original. I understand that a copy is
available to me upon request. I hereby acknowledge receipt of the Notice
to Applicant Part One and Part Two. Any person who includes any false or
misleading information on an application for insurance coverage is subject
to criminal and civil penalties.
SIGNED AT________________________ ON_________________________
(City, State)
____________________________ ____________________________
(Signature of Witness) (Signature of Proposed
Insured or Parent if a
Minor)
AGENT: Do you have any reason ____________________________
to believe the coverage applied (Signature of Owner if other
for is to replace or change any than Proposed Insured)
existing annuities or life
insurance on the life of the ____________________________
proposed insured? (Printed Name of Agency/
____ YES ____ NO Code No.)
____________________________ ____________________________
(Signature of Agent) (Address of Agency)<PAGE>
____________________________ (____)______________________
(Printed Name of Agent/ (Agent Phone Number)
Code No.) (____)______________________
(Agency Phone Number)
AIG Life Insurance Company P.O. Box 667
One Alico Plaza
Wilmington, DE 19899
RECEIPT FOR CONDITIONAL TEMPORARY INSURANCE
In exchange for the completion of the application and the payment of the
premium required by this receipt as shown below, AIG Life Insurance Company
( Company ) will provide insurance prior to the issuance of the
certificate, upon the following terms:
No insurance will be provided under this receipt unless all Requirements
shown below are first fulfilled during the lifetime of the proposed insured
and within 60 days from the date Conditional Temporary Insurance starts.
If all Requirements are not so met, or the proposed insured dies by
suicide, the liability of the Company shall be limited to a refund to the
applicant of the premium paid with this receipt. This receipt provides no
insurance for riders or additional benefits.
Requirements. The following must be fulfilled before insurance will start:
(1) All questions in the application(s) have been fully answered with no
material misrepresentation; (2) Question No. 8a is answered NO ; (3) A
first premium equal to the greater of (a) the full modal premium or (b) at
least two months premium for the plan and insurance amount applied for, has
been received by the Company; (4) All medical examinations and tests
required by the Company s published underwriting rules according to the age
and insurance amount applied for have been completed; (5) The proposed
insured is acceptable to the Company under its rules and practices, for the
plan and insurance amount applied for, at the rate class applied for or a
lesser premium, as of the date the Company receives all of its medical
requirements.
When Conditional Temporary Insurance Starts. If the Requirements have been
fulfilled, this Receipt will provide insurance beginning with the later of
(1) the date of the application; or (2) the date all medical examinations
and test have been completed.
Death Benefit Amount Limit. The total amount of insurance provided by this
receipt, and the total in the aggregate of this and all other similar
receipts on the life of the proposed insured pending with the Company, is
limited to the lesser of: (1) the initial death benefit of the insurance
applied for in the application; or (2) $500,000. The death benefit will be
paid to the beneficiary name in the application.
When Conditional Temporary Insurance Ends. Insurance provided by this
receipt ends on the earliest of the following: (1) The date the certificate
applied for is issued as applied for; (2) The date the Company mails to the
applicant at the address on the application, a notice that the application
has been declined; (3) 60 days after the date Conditional Temporary<PAGE>
Insurance starts under this receipt; (4) The date the applicant receives an
offer from the Company to issue a certificate other than as applied for.
If the insurance coverage ends under (2),(3) or (4) above, the premium paid
with this receipt will be refunded. In no event will insurance be in
effect under both this receipt and any certificate issued on the basis of
the application.
Payment Terms. The required premium will not be considered paid unless any
check, draft, money order or other form of payment is paid in accordance
with its terms. All premium checks must be made payable to the Company.
Do not leave the payee blank.
No agent may alter or waive any part of this receipt.
Receipt of $_____________ is hereby acknowledge this _____ day of
_____________________, 19______.
__________________________________
Signature of Agent
______________________________________________________________
NOTICE TO APPLICANT - PART ONE
In order to properly underwrite and administer your insurance program, AIG
Life Insurance Company (we, our) and our reinsurers will rely heavily on
information provided by you. We may also ask for medical or other
information about you from others, such as medical professionals who have
treated you and the Medical Information Bureau, Inc. In some situations,
and in compliance with applicable law, we may disclose necessary items of
information to third parties without your specific authorization. Upon
written request, you may have access to the information in your file
(medical information will be disclosed only to your attending physician, if
permitted by law). You also have the right to seek correction of
information you believe to be inaccurate.
In making this application for insurance, it is understood that an
investigative consumer report may be prepared whereby information is
obtained through personal interviews with your neighbors, friends, or
others with whom you are acquainted. This inquiry includes information as
to your character, general reputation, personal characteristics and mode of
living. You have the right to make a written request within a reasonable
period of time to receive additional information about the nature and scope
of this investigation. You also have the right to request to be
interviewed in connection with the preparation of such report. You may
receive a copy of the report upon written request.
NOTICE OF APPLICATION - PART TWO
Information regarding your insurability will be treated as confidential.
We may, however, make a brief report thereon to the Medical Information<PAGE>
Bureau, Inc., a non-profit membership organization of life insurance
companies, which operates an information exchange on behalf of its members.
If you apply to another Bureau member company for life or health insurance
coverage, or a claim for benefits is submitted to such a company, the
Bureau, upon request, will supply such company with information in its
file. We or our reinsurers may also release information in our files to
other insurance companies to which you may apply for life or health
insurance or to which a claim for benefits may be submitted.
Upon receipt of a request from you, the Bureau will arrange disclosure of
any information it may have in your file. If you question the accuracy of
information in the Bureau s file, you may contact the Bureau and seek
correction in accordance with the procedures set forth in the Federal Fair
Credit Reporting Act. The address of the Bureau s information office is:
P.O. Box 105, Essex Station, Boston, MA, 02112, telephone number (617) 426-
3660. If you would like to receive a more detailed explanation of our
procedures and your rights, please send your request to: The Director of
Underwriting, AIG Life Insurance Company, P.O. Box 667, Wilmington, DE
19899.<PAGE>
EXHIBIT D
OPINION AND CONSENT OF COUNSEL
Gentlemen:
I have made such examination of the law and have examined such Company
records and documents as in my judgment are necessary or appropriate to enable
me to render the opinion:
1. AIG Life Insurance Company is a valid and existing stock life
insurance company of the State of Delaware.
2. Variable Account II is a separate investment account of AIG Life
insurance Company created and validly existing pursuant to the
Delaware Insurance Laws and the Regulations thereunder.
3. All of the prescribed corporate procedures for the issuance of the
Policies have been followed, and, when such Policies are issued in
accordance with the Prospectus contained the in Registration
Statement, all state requirements relating to such Policies will
have been complied with.
4. Upon the acceptance of Premiums made by Owners pursuant to a
Policy issued in accordance with the Prospectus contained in the
Registration Statement and upon compliance with the applicable
law, such Owner will have a legally issued, fully paid,
non-assessable contractual interest in such Policy.
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
Registration Statement on Form S-6 for the Contracts to be issued by AIG Life
Insurance Company and its separate account, Variable Account II.
Kenneth D. Walma
Assistant Secretary and
Associate Counsel
August 20, 1997<PAGE>
EXHIBIT E
OPINION AND CONSENT OF ACTUARY
On behalf of AIG Life Insurance Company, I hereby consent to the
inclusion of the section entitled "Illustration of Policy Values", and the
Table of Minimum and Maximum Face Amounts in a Registration Statement of Form
S-6 registering Group Variable Life Insurance Policies. The illustrations
have been prepared in accordance with standard actuarial principles and
reflect the operation of the Policy by taking into account all charges under
the Policy and in the underlying fund.
/s/Michael J. Burns
---------------------------
Michael J. Burns, FSA, MAAA
Dated: August 20, 1997<PAGE>
EXHIBIT F
JORDEN BURT BERENSON &JOHNSON LLP
SUITE 400 EAST
1025 THOMAS JEFFERSON STREET, N.W.
WASHINGTON, D.C. 2007-0805
(202) 985-8100
TELECOPIER (202) 965-8104
August 22, 1997
AIG Life Insurance Company
One Alico Plaza
Wilmington, Delaware 19899
Gentlemen:
We hereby consent to the reference to our name under the caption "Legal
Matters" in the Prospectus contained in the Registration Statement on Form S-6
filed on August 22, 1997 by AIG Life Insurance Company and Variable Account II
with the Securities and Exchange Commission under the Securities Act of 1933.
Very truly yours,
/s/Jorden Burt Berenson & Johnson LLP
-------------------------------------
Jorden Burt Berenson & Johnson LLP<PAGE>
