<PAGE> 1
As filed with the Securities and Exchange Commission on 9 April 1997
Registration No. 33-48550
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
POST-EFFECTIVE AMENDMENT NO. 7
TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
(Exact Name of Registrant)
GENERAL AMERICAN LIFE INSURANCE COMPANY
700 Market Street
St. Louis, MO 63101
(Name and Address of principal executive office of depositor)
Matthew P. McCauley, Esquire
General American Life Insurance Company
700 Market Street
St. Louis, MO 63101
(Name and Address of Agent for Service of Process)
Copy to:
Stephen E. Roth, Esquire
Sutherland, Asbill & Brennan
1275 Pennsylvania Ave., N.W.
Washington, DC 20004-2404
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It is proposed that this filing will become effective (check appropriate
space)
[ ] immediately upon filing pursuant to paragraph (b), of Rule 485
[ X ] 9 April 1997 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[ ] on (date), pursuant to paragraph (a)(1) of rule 485
[ ] 75 days after filing pursuant to paragraph (a)(2) of rule 485
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485
DECLARATION PURSUANT TO RULE 24f-2
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, an
indefinite number or amount of securities has been registered under the
Securities Act of 1933. The Registrant filed the 24f-2 Notice for the fiscal
year ended 31 December 1996 on 28 February 1997.
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RECONCILIATION AND TIE BETWEEN ITEMS
IN FORM N-8B-2 AND THE PROSPECTUS
<TABLE>
<CAPTION>
Item No. of
Form N-8B-2 Caption in Prospectus
----------- ---------------------
<C> <S>
1. Cover Page
2. Cover Page
3. Not Applicable
4. Distribution of the Policies
5. The Company and the Separate Account
6. The Separate Account
7. Not Required
8. Not Required
9. Legal Proceedings
10. Summary; General American Capital
Company/Russell Insurance Funds;
Charges and Deductions; Policy
Benefits; Policy Rights; Voting
Rights; General Matters
11. Summary; General American Capital
Company/ Russell Insurance Funds
12. Summary; General American Capital
Company/ Russell Insurance Funds
13. Summary; Charges and Deductions; General
American Capital Company/ Russell
Insurance Funds
14. Summary; Payment and Allocation of
Premiums
15. Payment and Allocation of Premiums
16. Payment and Allocation of Premiums;
General American Capital Company/
Russell Insurance Funds
17. Summary; Charges and Deductions; Policy
Rights; General American Capital
Company/ Russell Insurance Funds
18. General American Capital Company/
Russell Insurance Funds; Payment and
Allocation of Premiums
19. General Matters; Voting Rights
20. Not Applicable
21. Policy Rights; General Matters
22. Not Applicable
23. Safekeeping of the Separate Account's
Assets
24. General Matters
25. The Company and the Separate Account
26. Not Applicable
i
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<CAPTION>
Item No. of
Form N-8B-2 Caption in Prospectus
----------- ---------------------
<C> <S>
27. The Company and the Separate Account
28. Management of the Company
29. The Company and the Separate Account
30. Not Applicable
31. Not Applicable
32. Not Applicable
33. Not Applicable
34. Not Applicable
35. The Company and the Separate Account
36. Not Required
37. Not Applicable
38. Summary; Distribution of the Policies
39. Summary; Distribution of the Policies
40. Distribution of the Policies
41. The Company and the Separate Account;
Distribution of the Policies
42. Not Applicable
43. Not Applicable
44. Payment and Allocation of Premiums
45. Not Applicable
46. Policy Rights
47. General American Capital Company/Russell
Insurance Funds
48. Not Applicable
49. Not Applicable
50. The Separate Account
51. Cover Page; Summary; Charges and
Deductions; Policy Rights; Policy
Benefits; Payment and Allocation of
Premiums
52. General American Capital Company/Russell
Insurance Funds
53. Federal Tax Matters
54. Not Applicable
55. Not Applicable
56. Not Required
57. Not Required
58. Not Required
59. Not Required
</TABLE>
- ii -
<PAGE> 5
This Post-Effective Amendment No. 7 to the Registration Statement on Form S-6
includes two prospectuses describing variable life insurance policies which
are substantially identical, except that the policy described in the second
prospectus makes available to policy owners different investment divisions of
the registrant than does the policy described in the original prospectus.
- iii -
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FLEXIBLE PREMIUM VARIABLE LIFE
INSURANCE POLICY
ISSUED BY
GENERAL AMERICAN LIFE INSURANCE COMPANY
700 Market Street St. Louis, MO 63101 (314) 231-1700
This Prospectus describes an individual flexible premium variable life
insurance Policy ("the Policy") offered by General American Life Insurance
Company ("General American" or "the Company"). The Policy is designed to
provide lifetime insurance protection to age 100 and at the same time provide
maximum flexibility to vary premium payments and change the level of death
benefits payable under the Policy. This flexibility allows an Owner to
provide for changing insurance needs under a single insurance policy. An
Owner also has the opportunity to allocate Net Premiums among several
investment portfolios with different investment objectives.
The Policy provides for: (1) a Cash Surrender Value that can be
obtained by surrendering the Policy; (2) Policy Loans; and (3) a death
benefit payable at the Insured's death. As long as a Policy remains in force,
the death benefit will not be less than the current Face Amount of the
Policy. A Policy will remain in force so long as its Cash Surrender Value is
sufficient to pay certain monthly charges imposed in connection with the
Policy.
After the end of the "Right to Examine Policy" period, Net Premiums may
be allocated to one or more of the Divisions of General American Separate
Account Eleven ("the Separate Account") or in certain contracts to General
American's General Account. If Net Premiums are allocated to the Separate
Account, the amount of the Cash Value will vary to reflect the investment
performance of the investment Divisions selected by the Owner, the Policy may
lapse, and, depending on the death benefit option elected, the amount of the
death benefit above the minimum may also vary with that investment
performance. The Owner bears the entire investment risk for all amounts
allocated to the Separate Account; there is no minimum guaranteed Cash Value.
Divisions of the Separate Account invest in corresponding Funds from
the following open-end, diversified management investment companies: (1)
General American Capital Company, (2) Russell Insurance Funds, (3) Variable
Insurance Products Fund, (4) Variable Insurance Products Fund II, and (5)
Van Eck Worldwide Insurance Trust. Funds offered from General American Capital
Company include the S & P 500 Index Fund, the Money Market Fund, the Bond
Index Fund, the Managed Equity Fund, the Asset Allocation Fund, the
International Index Fund, and the Mid-Cap Equity Fund. Funds offered from
Russell Insurance Funds include the Multi-Style Equity Fund, the Aggressive
Equity Fund, the Non-U.S. Fund, and the Core Bond Fund. Funds offered from
Variable Insurance Products Fund include the Equity-Income Portfolio, the
Growth Portfolio, the High Income Portfolio, and the Overseas Portfolio. The
Fund offered from Variable Insurance Products Fund II is the Asset Manager
Portfolio. The Fund offered from Van Eck Worldwide Insurance Trust is the
Worldwide Hard Assets Fund.
A full description of the Funds, including the investment policies,
restrictions, risks, and charges is contained in the Prospectus of each Fund.
It may not be advantageous to purchase a Policy as a replacement for
another type of life insurance or as a means to obtain additional insurance
protection if the purchaser already owns another flexible premium variable
life insurance policy.
This Prospectus must be accompanied by current Prospectuses for General
American Capital Company, Russell Insurance Funds, Variable Insurance
Products Fund, Variable Insurance Products Fund II, and Van Eck Worldwide
Insurance Trust.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Please read this Prospectus carefully and retain it for future
reference. The date of this Prospectus is April 9, 1997. The Policies are
not available in all states.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN
WHICH SUCH OFFERING MAY NOT BE LAWFULLY MADE. NO DEALER, SALESMAN, OR OTHER
PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN
CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON.
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<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
<S> <C>
Definitions 1
Summary 2
The Company and the Separate Account 6
The Company
The Separate Account
General American Capital Company
Russell Insurance Funds
Variable Insurance Products Fund
Variable Insurance Products Fund II
Van Eck Worldwide Insurance Trust
Addition, Deletion, or Substitution of Investments
Policy Benefits 10
Death Benefit
Cash Value
Policy Rights 14
Loans
Surrender, Partial Withdrawals and Pro Rate Surrender
Transfers
Dollar Cost Averaging
Right to Examine Policy
Payment of Benefits at Maturity
Payment and Allocation of Premiums 19
Issuance of a Policy
Premiums
Allocation of Net Premiums and Cash Value
Policy Lapse and Reinstatement
Charges and Deductions 22
Premium Expense Charges
Monthly Deduction
Contingent Deferred Sales Charge
Separate Account Charges
Dividends 26
The General Account 27
General Matters 29
Distribution of the Policies 32
Federal Tax Matters 32
Unisex Requirements Under Montana Law 35
Safekeeping of the Separate Account's Assets 36
Voting Rights 36
State Regulation of the Company 36
Management of the Company 37
Legal Matters 40
Legal Proceedings 40
Experts 40
Additional Information 40
Financial Statements 40
Appendix A A-1
Appendix B B-1
</TABLE>
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DEFINITIONS
Attained Age - The Issue Age of the Insured plus the number of
completed Policy Years.
Beneficiary - the person(s) named in the application or by later
designation to receive Policy proceeds in the event of the Insured's death. A
Beneficiary may be changed as set forth in the Policy and this Prospectus.
Cash Value - The total amount that a Policy provides for investment at
any time. It is equal to the total of the amounts credited to the Owner in
the Separate Account, the Loan Account, and in certain contracts, the General
Account.
Cash Surrender Value - The Cash Value of a Policy on the date of
surrender, less any Indebtedness, and less any surrender charges.
Division - A subaccount of the Separate Account. Each Division invests
exclusively in the shares of a corresponding Fund of either General American
Capital Company, Variable Insurance Products Fund, Variable Insurance
Products Fund II, or Van Eck Worldwide Insurance Trust.
Effective Date - The date as of which insurance coverage begins under a
policy.
Face Amount - The minimum death benefit under the Policy so long as the
Policy remains in force.
Fund - A separate investment Portfolio of either General American
Capital Company, Russell Insurance Funds, Variable Insurance Products Fund,
Variable Insurance Products Fund II, or Van Eck Worldwide Insurance Trust.
Although sometimes referred to elsewhere as "Portfolios," they are referred to
herein as "Funds," except where "Portfolio" is part of their name.
General Account -The assets of the Company other than those allocated
to the Separate Account or any other separate account. The Loan Account is
part of the General Account.
Home Office - The service office of General American Life Insurance
Company, the mailing address of which is P.O. Box 14490, St. Louis, Missouri
63178.
Indebtedness - The sum of all unpaid Policy Loans and accrued interest
on loans.
Insured - The person whose life is insured under the Policy.
Investment Start Date - The date the initial premium is applied to the
General Account and/or the Divisions of the Separate Account. This date is
the later of the Issue Date or the date the initial premium is received at
General American's Home Office.
Issue Age - The Insured's age at his or her nearest birthday as of the
date the Policy is issued.
Issue Date - The date from which Policy Anniversaries, Policy Years,
and Policy Months are measured.
Loan Account - The account of the Company to which amounts securing
Policy Loans are allocated. The Loan Account is part of General American's
General Account.
Loan Subaccount - A Loan Subaccount exists for the General Account and
for each Division of the Separate Account. Any Cash Value transferred to the
Loan Account will be allocated to the appropriate Loan Subaccount to reflect
the origin of the Cash Value. At any point in time, the Loan Account will
equal the sum of all the Loan Subaccounts.
Maturity Date - The Policy Anniversary on which the Insured reaches
Attained Age 100.
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Monthly Anniversary - The same date in each succeeding month as the
Issue Date except that whenever the Monthly Anniversary falls on a date other
than a Valuation Date, the Monthly Anniversary will be deemed the next
Valuation Date. If any Monthly Anniversary would be the 29th, 30th, or 31st
day of a month that does not have that number of days, then the Monthly
Anniversary will be the last day of that month.
Net Premium - The premium less the premium expense charges (consisting
of the sales charge and the premium tax charge).
Owner - The Owner of a Policy, as designated in the application or as
subsequently changed.
Policy - The flexible premium variable life insurance Policy offered by
the Company and described in this Prospectus.
Policy Anniversary - The same date each year as the Issue Date.
Policy Month - A month beginning on the Monthly Anniversary.
Policy Year - A period beginning on a Policy Anniversary and ending on
the day immediately preceding the next Policy Anniversary.
Portfolio - see Fund.
SEC - The United States Securities and Exchange Commission.
Separate Account - General American Separate Account Eleven, a separate
investment account established by the Company to receive and invest the Net
Premiums paid under the Policy, and certain other variable life policies, and
allocated by the Owner to provide variable benefits.
Valuation Date - Each day that the New York Stock Exchange is open for
trading and the Company is open for business. The Company is not open for
business the day after Thanksgiving.
Valuation Period - The period between two successive Valuation Dates,
commencing at 4:00 p.m. (Eastern Standard Time) on a Valuation Date and
ending 4:00 p.m. on the next succeeding Valuation Date.
SUMMARY
The following summary of Prospectus information should be read in
conjunction with the detailed information appearing elsewhere in this
Prospectus. Unless otherwise indicated, the description of the Policies
contained in this Prospectus assumes that a Policy is in force and that there
is no outstanding Indebtedness.
The Policy. Under the flexible premium variable life insurance Policy
described in this Prospectus, the Owner may, subject to certain limitations,
make premium payments in any amount and at any frequency. The Policy is a
life insurance contract with death benefits, Cash Value, surrender rights,
Policy Loan privileges, and other features traditionally associated with life
insurance. It is a "flexible premium" Policy because, unlike traditional
insurance policies, there is no fixed schedule for premium payments.
Although the Owner may establish a schedule of premium payments ("planned
premium payments"), failure to make the planned premium payments will not
necessarily cause a Policy to lapse nor will making the planned premium
payments guarantee that a Policy will remain in force to maturity. Thus, an
Owner may, but is not required to, pay additional premiums. This flexibility
permits an Owner to provide for changing insurance needs within a single
insurance policy.
The Policy is a "variable" Policy because, unlike the fixed benefits
under an ordinary life insurance contract, to the extent that Net Premiums
are allocated to the Separate Account, the Cash Value and, under certain
circumstances, the death benefit under a Policy may increase or decrease
depending upon the investment performance of the Divisions of the Separate
Account to which the Owner has allocated Net Premium payments. However, so
long as a Policy's Cash Surrender Value continues to be sufficient to pay the
monthly deductions, an
2
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Owner is guaranteed a minimum death benefit equal to the Face Amount of his or
her Policy, less any outstanding Indebtedness.
A Policy will lapse (and terminate without value) when the Cash
Surrender Value is insufficient to pay the next monthly deduction and a grace
period of 62 days expires without an adequate payment being made by the
Owner. (See Payment and Allocation of Premiums - Policy Lapse and
Reinstatement.)
The Separate Account. After the end of the "Right to Examine Policy"
period, the Owner may allocate the Net Premiums to the Separate Account and,
if it is available, to the General Account. Amounts allocated to the
Separate Account are further allocated to one or more Divisions. Assets of
each Division are invested at net asset value in shares of a corresponding
Fund. (See The Company and the Separate Account.) An Owner may change future
allocations of Net Premiums at any time.
The option offered in connection with the Policies to allocate Net
Premiums or to transfer Cash Value to the General Account may not be made
available, at the Company's discretion, under all Policies. Further, the
option may be limited with respect to some Policies. The Company may, from
time to time, adjust the extent to which future premiums may be allocated to
the General Account in regard to any or all outstanding Policies. Such
adjustments may not be uniform as to all Policies.
Until the end of the "Right to Examine Policy" period (See Policy Rights
- - Right to Examine Policy.), all Net Premiums automatically will be allocated
to the Division that invests in the Money Market Fund. (See Payment and
Allocation of Premiums - Allocation of Net Premiums and Cash Value.)
To the extent Net Premiums are allocated to the Divisions of the
Separate Account, the Cash Value will, and the death benefit may, vary with
the investment performance of the chosen Division. To the extent Net
Premiums are allocated to the General Account, the Cash Value will accrue
interest at a guaranteed minimum rate. (See The General Account.). Thus,
depending upon the allocation of Net Premiums, investment risk over the life
of a Policy may be borne by the Owner, by the Company, or by both.
Subject to certain restrictions, an Owner may transfer Cash Values
among the Divisions of the Separate Account or, it available, between the
Separate Account and the General Account. Currently, no charge is assessed
for transfers. The Company reserves the right to revoke or modify the
transfer privilege. (See Policy Rights - Transfers.)
Charges and Deductions. A premium expense charge will be deducted from
each premium payment prior to allocation. The premium expense charge
consists of a sales charge and a charge to cover premium taxes. The sales
charge will never exceed 5.0% and is currently 5.0% in Policy years one
through ten and 2.25% in Policy years past Policy year ten. The charge to
cover premium taxes is 2.5%. (See Charges and Deductions - Premium Expense
Charges.)
A Contingent Deferred Sales Charge to compensate for sales expenses
will also be assessed against the Cash Value under a Policy upon a surrender,
a lapse, a partial withdrawal, or pro rata surrender. The Contingent
Deferred Sales Charge will never exceed 4% of premiums paid. (See Policy
Rights - Surrender, Partial Withdrawals, and Pro Rata Surrender; Policy
Benefits - Death Benefit; and Charges and Deductions - Contingent Deferred
Sales Charge.) Reductions in the Contingent Deferred Sales Charge are
available in some situations. (See Reduction of Charges.)
On each Monthly Anniversary, the Cash Value will be reduced by a
monthly deduction. The monthly deduction includes an administrative charge of
$4 per month for each Policy Month. (See Charges and Deductions - Monthly
Deduction.) A monthly charge is also made for the cost of insurance, and the
cost of any additional benefits provided by rider. (See Charges and
Deductions - Monthly Deduction.)
A daily charge based on an effective annual charge of .70% of the net
assets of each Division of the Separate Account will be imposed for the
Company's assumption of certain mortality and expense risks incurred in
connection with the Policies. (See Charges and Deductions - Separate Account
Charges.)
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<PAGE> 11
The Company may make a charge for any taxes or economic burden
resulting from the application of the tax laws that it determines to be
properly attributable to the Separate Account or to the Policy. (See Federal
Tax Matters.)
The operating expenses of the Separate Account are paid by General
American. Investment advisory fees and other operating expenses of the Funds
are paid by the Funds and are reflected in the value of the assets of the
corresponding Division of the Separate Account. For a description of these
charges, see Charges and Deductions--Separate Account Charges.
Currently, there are no transaction charges to cover the administrative
costs of processing partial withdrawals or transfers of Cash Value between
Divisions of the Separate Account. In contracts with the General Account
option, there are no transaction charges to cover the administrative costs of
processing transfers of Cash Value between the Separate and General Accounts.
However, the Company reserves the right to impose such charges in the future.
In addition, transfers and withdrawals are subject to restrictions relative
to amount and frequency. (See Payment and Allocation of Premiums - Allocation
of Net Premiums and Cash Value; Policy Rights - Surrender, Partial
Withdrawals, and Pro Rata Surrender; and The General Account.)
Premiums. An Owner has considerable flexibility concerning the amount
and frequency of premium payments. A Policy will not become effective until
the Owner has paid an initial premium equal to one-twelfth (1/12) of the
"Minimum Premium" for the Policy. This amount will be different for each
Policy. Thereafter, an Owner may, subject to certain restrictions, make
premium payments in any amount and at any frequency. The Owner may also
determine a planned premium payment schedule. The schedule will provide for a
premium payment of a level amount at a fixed interval over a specified period
of time. An Owner need not, however, adhere to the planned premium payment
schedule. For policies issued as a result of a term conversion from certain
General American term policies, the Company requires the Owner to pay an
initial premium, which combined with conversion credits given, if any, will
equal one full "Minimum Premium" for the Policy. (See Payment and Allocation
of Premiums.)
A Policy will lapse only when the Cash Surrender Value is insufficient
to pay the next monthly deduction (See Charges and Deductions - Monthly
Deduction.) and a grace period expires without a sufficient payment by the
Owner. (See Payment and Allocation of Premiums - Policy Lapse and
Reinstatement.)
Death Benefit. A death benefit is payable to the named Beneficiary when
the Insured under a Policy dies. Three death benefit options are available.
Under Death Benefit Option A, the death benefit is the Face Amount of the
Policy or, if greater, the applicable percentage of Cash Value. Under Death
Benefit Option B, the death benefit is the Face Amount of the Policy plus the
Cash Value or, if greater, the applicable percentage of Cash Value. Under
Death Benefit Option C, the death benefit is the Face Amount of the Policy
or, if greater, the Cash Value multiplied by the Attained Age factor. So long
as the Policy remains in force, the minimum death benefit under any death
benefit option will be at least the current Face Amount. The death benefit
will be increased by any unpaid dividends determined prior to the Insured's
death. and by the amount of the cost of insurance for the portion of the
month from the date of death to the end of the month, and reduced by any
outstanding Indebtedness. The death benefit will be paid according to the
settlement options available at the time of death. (See Policy Benefits -
Death Benefit.)
The minimum Face Amount at issue is $50,000 under the Company's current
rules. Subject to certain restrictions, the Owner may change the Face Amount
and the death benefit option. In certain cases evidence of insurability may
be required. (See Change in Death Benefit Option, and Change In Face Amount.)
Additional insurance benefits offered under the Policy include a waiver
of specified premium rider, a waiver of monthly deduction rider, and an
increasing benefit option. (See General Matters - Additional Insurance
Benefits.) The cost of these additional insurance benefits will be deducted
from the Cash Value as part of the monthly deduction. (See Charges and
Deductions - Monthly Deduction.)
Cash Value. The Policies provide for a Cash Value equal to the total of
the amounts credited to the Owner in the Separate Account, the Loan Account
(securing Policy Loans) and in certain contracts, the General Account. A
Policy's Cash Value will reflect the amount and frequency of Net Premium
payments, the investment performance of any selected Divisions of the
Separate Account, any Policy Loans, any partial withdrawals, and the charges
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<PAGE> 12
imposed in connection with the Policy. (See Policy Benefits - Cash Value.)
There is no minimum guaranteed Cash Value.
Policy Loans. After the first Policy Anniversary, an Owner may borrow
against the Cash Value of a Policy. The maximum amount that may be borrowed
under a Policy ("the Loan Value") is the Cash Value of the Policy on the date
the loan request is received, less loan interest to the next Policy
Anniversary, less any outstanding Indebtedness, less any surrender charges to
the next Policy Anniversary, and less monthly deductions to the next loan
interest due date. Loan interest is payable on each Policy Anniversary and
all outstanding Indebtedness will be deducted from proceeds payable at the
Insured's death, upon maturity, upon the exercise of a settlement option, or
upon surrender.
A Policy loan will be allocated among the General Account (if
available) and the various Divisions of the Separate Account. When a loan is
allocated to the Divisions of the Separate Account, a portion of the Policy's
Cash Value in the Divisions of the Separate Account sufficient to secure the
loan will be transferred to the Loan Account as security for the loan.
Therefore, a loan may have impact on the Policy's Cash Value even if it is
repaid. A Policy Loan may be repaid in whole or in part at any time while the
Policy is in force. (See Policy Rights - Loans.) Loans taken from, or secured
by, a Policy may have Federal income tax consequences. (See Federal Tax
Matters.)
Surrender, Partial Withdrawals, and Pro Rata Surrender. At any time
that a Policy is in force, an Owner may elect to surrender the Policy and
receive its Cash Surrender Value plus the value of any dividends determined
prior to the surrender. After the first year, an Owner may also request a
partial withdrawal of the Cash Surrender Value of the Policy. When the death
benefit is not based on an applicable percentage of the Cash Value, a partial
withdrawal reduces the death benefit payable under the Policy by an amount
equal to the reduction in the Policy's Cash Value. An Owner may also request
a pro rata surrender of the Policy. (See Policy Rights - Surrender, Partial
Withdrawals, and Pro Rata Surrender.) A surrender, partial withdrawal, or pro
rata surrender may have Federal income tax consequences. (See Federal Tax
Matters.)
Right to Examine Policy. The Owner has a limited right to return a
Policy for cancellation within 20 days after receiving it (30 days if the
Owner is a resident of California and is age 60 or older), or within 45 days
after the application is signed, whichever is later. If a Policy is canceled
within this time period, a refund will be paid which will equal all premiums
paid under the Policy except in Kansas. The Owner also has a similar right to
cancel a requested increase in Face Amount. Upon cancellation of an increase,
the additional charges deducted in connection with the increase will be added
to the Cash Value. (See Policy Rights - Right to Examine Policy.)
Illustrations of Death Benefits and Cash Surrender Values.
Illustrations on pages A-2 to A-10 in Appendix A show how death benefits and
Cash Surrender Values may vary based on certain rate of return assumptions
and how these benefits compare with amounts which would accumulate if
premiums were invested to earn interest at 5% compounded annually. If a
Policy is surrendered in the early Policy Years the Cash Surrender Value
payable will be low as compared to premiums accumulated at interest, and
consequently the insurance protection provided prior to surrender will be
costly. You may make a written request for a projection of illustrated
future Cash Values and death benefits for a nominal fee not to exceed $25.00.
Tax Consequences of the Policy. If a Policy is issued on the basis of a
standard premium class or on a guaranteed or simplified issue basis, while
limited guidance exists, the Company believes that the Policy should qualify
as a life insurance contract for Federal income tax purposes. However, if a
Policy is issued on a substandard basis, it is unclear whether or not such a
Policy would qualify as a life insurance contract for Federal income tax
purposes. Assuming that the Policy qualifies as a life insurance contract for
Federal income tax purposes, the Company believes the Cash Value of the
Policy should be subject to the same Federal income tax treatment as the Cash
Value of a conventional fixed-benefit contract. If so, the Owner is not
considered to be in constructive receipt of the Cash Value under the Policy
until there is a distribution. A change of Owners, a surrender, a partial
withdrawal, a pro rata surrender, a lapse with outstanding Indebtedness, or
an exchange may have tax consequences, depending on the particular
circumstances. (See Federal Tax Matters.)
A Policy may be treated as a "modified endowment contract" depending
upon the amount of premiums paid in relation to the death benefit. If the
Policy is a modified endowment contract, then all pre-death distributions,
including Policy Loans and due but unpaid loan interest, will be treated
first as a distribution of taxable income and
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then as a return of basis or investment in the contract. In addition, prior to
age 59 1/2 taxable income from such distributions generally will be subject to
a 10% additional tax.
If the Policy is not a modified endowment contract, distributions
generally will be treated first as a return of basis or investment in the
contract and then as disbursing taxable income. Moreover, loans will not be
treated as distributions. Finally, neither distributions nor loans from a
Policy that is not a modified endowment contract are subject to the 10.0%
additional tax. (See Federal Tax Matters.)
Dividends. While a Policy is in force, it may share in the divisible
surplus of the Company. Each year the Company will determine the share of
divisible surplus accruing to a Policy and will distribute the surplus as
dividend. The Company is not obligated to pay dividends on the Policies. (See
Dividends.)
* * *
This Prospectus describes only those aspects of the Policy that relate
to the Separate Account, except where General Account matters are specifically
mentioned. For a brief summary of the aspects of the Policy relating to the
General Account, see The General Account.
THE COMPANY AND THE SEPARATE ACCOUNT
The Company
General American Life Insurance Company ("General American" or "the
Company") is a mutual life insurance company originally incorporated as a
stock company under the laws of Missouri in 1933, and which began operations
as a mutual company in 1936. General American is principally engaged in
issuing individual and group life and health insurance policies and annuity
contracts. As of December 31,1996, it had assets of more than $19.2 billion.
It is admitted to do business in 49 states, the District of Columbia, Puerto
Rico, and in ten Canadian provinces. The principal offices of General
American are at 700 Market Street, St. Louis, Missouri 63101. The mailing
address of General American's service center ("the Home Office") is P.O. Box
14490, St. Louis, Missouri 63178.
The Separate Account
General American Life Insurance Company Separate Account Eleven ("the
Separate Account") was established by General American as a separate
investment account on January 24, 1985 under Missouri law. The Separate
Account will receive and invest the Net Premiums paid under this Policy and
allocated to it. In addition, the Separate Account currently receives and
invests Net Premiums for other classes of flexible premium variable life
insurance policies and might do so for additional classes in the future.
The Separate Account has been registered with the SEC as a unit
investment trust under the Investment Company Act of 1940 ("the 1940 Act")
and meets the definition of a "separate account" under Federal securities
laws. Registration with the SEC does not involve supervision of the
management or investment practices or policies of the Separate Account or
General American by the SEC.
The Separate Account currently is divided into seventeen Divisions.
Divisions invest in corresponding Funds from one of five open-end,
diversified management investment companies: (1) General American Capital
Company, (2) Russell Insurance Funds, (3) Variable Insurance Products Fund,
(4) Variable Insurance Products Fund II, and (5) Van Eck Worldwide Insurance
Trust. Income and both realized and unrealized gains or losses from the assets
of each Division of the Separate Account are credited to or charged against
that Division without regard to income, gains, or losses from any other
Division of the Separate Account or arising out of any other business General
American may conduct.
Although the assets of the Separate Account are the property of General
American, the assets in the Separate Account equal to the reserves and other
liabilities of the Separate Account are not chargeable with liabilities
arising out of any other business which General American may conduct. The
assets of the Separate Account are available to cover the general liabilities
of General American only to the extent that the Separate Account's assets
exceed its liabilities arising under the Policies. From time to time, the
Company may transfer to its General Account any assets of the Separate
Account that exceed the reserves and the Policy liabilities of the
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<PAGE> 14
Separate Account (which will always be at least equal to the aggregate Policy
value allocated to the Separate Account under the Policies). Before making any
such transfers, General American will consider any possible adverse impact the
transfer may have on the Separate Account.
General American Capital Company
General American Capital Company ("the Capital Company") is an
open-end, diversified management investment company which was incorporated in
Maryland on November 15, 1985, and commenced operations on October 1, 1987.
Only the Capital Company Funds described in this section of the Prospectus
are currently available as investment choices for this Policy even though
additional Funds may be described in the prospectus for the Capital Company
Shares of Capital Company are currently offered to separate accounts
established by General American Life Insurance Company and affiliates. The
Capital Company's investment Advisor is Conning Asset Management Company
("the Advisor"), an indirect subsidiary of General American Holding Company
which, in turn is wholly owned by General American. The Advisor selects
investments for the Funds.
The investment objectives and policies of each Fund are summarized
below:
S&P 500 Index Fund: The investment objective of this Fund is to
provide investment results that parallel the price and yield performance
of publicly-traded common stocks in the aggregate. The Fund uses the
Standard & Poor's Composite Index of 500 Stocks ("the S&P Index") as its
standard for performance comparison. The Fund attempts to duplicate the
performance of the S&P Index and includes dividend income as a component
of the Fund's total return. The Fund is not managed by Standard & Poor's.
The Money Market Fund: The investment objective of the Money
Market Fund is to obtain the highest level of current income which
is consistent with the preservation of capital and maintenance of
liquidity. The Fund invests primarily in high-quality, short-term
money market instruments. An investment in the Money Market Fund is
neither insured nor guaranteed by the U. S. Government.
Bond Index Fund: The investment objective of this Fund is to
provide a rate of return that reflects the performance of the
publicly-traded bond market as a whole. The Fund uses the Lehman
Brothers Government/Corporate Bond Index as its standard for
performance comparison.
Managed Equity Fund: The investment objective of this Fund is
long-term growth of capital, obtained by investing primarily in
common stocks. Securing moderate current income is a secondary
objective.
Asset Allocation Fund: The investment objective of this Fund is a
high rate of long-term total return composed of capital growth and
income payments. Preservation of capital is the secondary
objective and chief limit on investment risk. The Fund will
invest only in those types of securities that the other Capital
Company Funds may invest in. The Asset Allocation Fund invests in
a combination of common stocks, bonds, or money market instruments
in accordance with guidelines established from time to time by
Capital Company's Board of Directors.
International Index Fund: The investment objective of this Fund
is obtain investment results that parallel the price and yield
performance of publicly-traded common stocks in the Morgan Stanley
Capital International ("MSCI") Europe, Australia and Far East Index
("EAFE").
Mid-Cap Equity Fund: The investment objective of this Fund is
capital appreciation. It pursues this objective by investing
primarily in common stocks of United States-based, publicly traded
companies with medium market capitalizations falling within the
capitalization range of the S&P MidCap 400 at the time of the
Fund's investment.
Russell Insurance Funds
Russell Insurance Funds ("RIF") is organized as a Massachusetts business
trust under a Master Trust Agreement dated July 11, 1996. RIF is authorized
to issue an unlimited number of shares evidencing beneficial interests in
different investment Funds, which interests may be offered in one or more
classes. RIF is a diversified open end management investment company,
commonly known as a "mutual fund." Frank Russell Company, which is a
7
<PAGE> 15
consultant to RIF, has been primarily engaged since 1969 in providing asset
management consulting services to large corporate employee benefit funds.
Major components of its consulting services are: (i) quantitative and
qualitative research and evaluation aimed at identifying the most appropriate
investment management firms to invest large pools of assets in accord with
specific investment objectives and styles; and (ii) the development of
strategies for investing assets using "multi-style, multi-manager
diversification." This is a method for investing large pools of assets by
dividing the assets into segments to be invested using different investment
styles, and selecting money managers for each segment based upon their
expertise in that style of investment. General management of RIF is provided
by Frank Russell Investment Management Company, a wholly-owned subsidiary of
Frank Russell Company, which furnishes officers and staff required to manage
and administer RIF on a day-to-day basis.
The investment objectives and policies of each Fund are summarized
below:
Multi-Style Equity Fund: The investment objective of this Fund is
to provide income and capital growth by investing principally in
equity securities.
Aggressive Equity Fund: This Fund seeks to provide capital
appreciation by assuming a higher level of volatility than is
ordinarily expected from the Multi-Style Equity Fund while still
investing in equity securities.
Non-U.S. Fund: This Fund's objective is to provide favorable
total return and additional diversification for U.S. investors by
investing primarily in equity and fixed-income securities of
non-U.S. companies, and securities issued by non-U.S. governments.
Core Bond Fund: This Fund's objective is to maximize total
return, through capital appreciation and income, by assuming a
level of volatility consistent with the broad fixed-income market.
The Fund invests in fixed-income securities.
Variable Insurance Products Fund
Variable Insurance Products Fund ("VIP") is an open-end, diversified
management investment company organized as a Massachusetts business trust on
November 13, 1981. Only the Funds described in this section of the Prospectus
are currently available as investment choices for this Policy even though
additional Funds may be described in the prospectus for VIP. VIP shares are
purchased by insurance companies to fund benefits under variable insurance
and annuity policies. Fidelity Management & Research Company ("FMR") of
Boston, Massachusetts is the Funds' Manager.
The investment objectives and policies of each Fund are summarized
below:
Equity-Income Portfolio: The investment objective of this Fund is
income, obtained by investing primarily in income-producing equity
securities. In choosing these securities, FMR will also consider
the potential for capital appreciation. The Fund's goal is to
achieve a yield which exceeds the composite yield on the securities
comprising the Standard & Poor's Composite Index of 500 Stocks.
Growth Portfolio: The investment objective of this Fund is
capital appreciation. The Fund normally purchases common stocks,
although its investments are not restricted to any one type of
security. Capital appreciation may also be obtained from other
types of securities, including bonds and preferred stocks.
Overseas Portfolio: The investment objective of this Fund is
long-term growth of capital. The Fund invests primarily in
foreign securities. The Overseas Portfolio provides a means for
investors to diversify their own portfolios by participation in
companies and economies outside of the United States.
High Income Portfolio: The investment objective of this Fund is
a high level of current income. The Fund seeks to fulfill the
objective by investing primarily in high-yielding, lower-rated,
fixed-income securities, while also considering growth of capital.
Lower-rated securities, commonly referred to as "junk bonds,"
involve greater risk of default or price change than securities
assigned a higher quality rating.
8
<PAGE> 16
Variable Insurance Products Fund II
Variable Insurance Products Fund II ("VIP II") is an open-end,
diversified management investment company organized as a Massachusetts
business trust on March 21, 1988. Only the Fund described in this section of
the Prospectus is currently available as an investment choice for this Policy
even though additional Funds may be described in the prospectus for VIP II.
VIP II shares are purchased by insurance companies to fund benefits under
variable insurance and annuity policies. FMR is the Fund's manager.
The investment objective and policies of the Funds are summarized below:
Asset Manager: The investment objective of this Fund is to seek
a high total return with reduced risk over the long-term by
allocating its assets among domestic and foreign stocks, bonds,
and short-term fixed income instruments.
Van Eck Worldwide Insurance Trust
Van Eck Worldwide Insurance Trust ("Van Eck") is an open-end management
investment company organized as a Massachusetts business trust on January 7,
1987. Only the Fund described in this section of the Prospectus is
currently available as an investment choice for this Policy even though
additional Funds may be described in the prospectus for Van Eck. Shares of
Van Eck are offered only to separate accounts of various insurance companies
to support benefits of variable insurance and annuity policies. The assets of
Van Eck are managed by Van Eck Associates Corporation of New York, New York.
The investment objectives and policies of the Fund are summarized below:
Worldwide Hard Assets Fund: The investment objective of the Fund
is to seek long-term capital appreciation by investing in equity and debt
securities of companies engaged in the exploration, development, production,
and distribution of one or more of the following: (i) precious metals, (ii)
ferrous and non-ferrous metals, (iii) oil and gas, (iv) forest products, (v)
real estate, and (vi) other basic non-agricultural commodities (together, "Hard
Assets"). Income is a secondary consideration.
There is no assurance that any of the Funds will achieve its stated
objective. It is conceivable that in the future it may be disadvantageous
for Funds to offer shares to separate accounts of various insurance companies
to serve as the investment medium for their variable products or for both
variable life and annuity separate accounts to invest simultaneously in
Capital Company. The Board of Trustees of RIF, the Board of Trustees of FMR,
the Board of Trustees of Van Eck, the Board of Directors of Capital Company,
the respective advisors of each Fund, and the Company and any other insurance
companies participating in RIF, VIP, VIP II, Van Eck, and Capital Company
are required to monitor events to identify any material irreconcilable
conflicts that may possibly arise, and to determine what action, if any,
should be taken in response to those events or conflicts. A more detailed
description of the Funds, their investment policies, restrictions, risks, and
charges is in the prospectuses for RIF, VIP, VIP II, Van Eck, and Capital
Company, which must accompany or precede this Prospectus and which should be
read carefully.
9
<PAGE> 17
Addition, Deletion, or Substitution of Investments
The Company reserves the right, subject to compliance with applicable
law, to make additions to, deletions from, or substitutions for the shares
that are held by the Separate Account or that the Separate Account may
purchase. The Company reserves the right to eliminate the shares of any of
the Funds and to substitute shares of another Fund of Capital Company, RIF,
VIP, VIP II, Van Eck, or of another registered open-end investment company if
the shares of a Fund are no longer available for investment or if in its
judgment further investment in any Fund becomes inappropriate in view of the
purposes of the Separate Account. The Company will not substitute any shares
attributable to an Owner's interest in a Division of the Separate Account
without notice to the Owner and prior approval of the SEC, to the extent
required by the 1940 Act or other applicable law. Nothing contained in this
Prospectus shall prevent the Separate Account from purchasing other
securities for other series or classes of policies, or from permitting a
conversion between series or classes of policies on the basis of requests
made by Owners.
The Company also reserves the right to establish additional Divisions
of the Separate Account, each of which would invest in a new Fund of Capital
Company, RIF, VIP, VIP II, or Van Eck, or in shares of another investment
company, with a specified investment objective. New Divisions may be
established when, in the sole discretion of the Company, marketing needs or
investment conditions warrant. Any new Division will be made available to
existing Owners on a basis to be determined by the Company. To the extent
approved by the SEC, the Company may also eliminate or combine one or more
Divisions, substitute one Division for another Division, or transfer assets
between Divisions if, in its sole discretion, marketing, tax, or investment
conditions warrant.
In the event of a substitution or change, the Company may, if it
considers it necessary, make such changes in the Policy by appropriate
endorsement and offer conversion options required by law, if any. The Company
will notify all Owners of any such changes.
If deemed by the Company to be in the best interests of persons having
voting rights under the Policy, and to the extent any necessary SEC approvals
or Owner votes are obtained, the Separate Account may be: (a) operated as a
management company under the 1940 Act; (b) de-registered under that Act in
the event such registration is no longer required; or (c) combined with other
separate accounts of the Company. To the extent permitted by applicable law,
the Company may also transfer the assets of the Separate Account associated
with the Policy to another separate account.
POLICY BENEFITS
Death Benefit
As long as the Policy remains in force (See Payment and Allocation of
Premiums - Policy Lapse and Reinstatement.), the Company will, upon receipt of
proof of the Insured's death at its Home Office, pay the death benefit in a
lump sum The amount of the death benefit payable will be determined at the
end of the Valuation Period during which the Insured's death occurred. The
death benefit will be paid to the surviving Beneficiary or Beneficiaries
specified in the application or as subsequently changed.
The Policy provides three death benefit options: "Death Benefit Option
A," "Death Benefit Option B," and "Death Benefit Option C." The death
benefit under all options will never be less than the current Face Amount of
the Policy (less Indebtedness) as long as the Policy remains in force. (See
Payment and Allocation of Premiums - Policy Lapse and Reinstatement.) The
minimum Face Amount currently is $50,000.
Death Benefit Option A. Under Death Benefit Option A, the death
benefit is the current Face Amount of the Policy or, if greater, the
applicable percentage of Cash Value on the date of death. The applicable
percentage is 250% for an Insured Attained Age 40 or below on the Policy
Anniversary prior to the date of death. For Insureds with an a Attained Age
over 40 on that Policy Anniversary, the percentage is lower and declines with
age as shown in the Applicable Percentage of Cash Value Table shown below.
Accordingly, under Death Benefit Option A the death benefit will remain level
at the Face Amount unless the applicable percentage of Cash Value exceeds the
current Face Amount, in which case the amount of the death benefit will vary
as the Cash Value varies. (See Illustrations of Death Benefits and Cash
Values, Appendix A.)
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<PAGE> 18
Death Benefit Option B. Under Death Benefit Option B, the death benefit
is equal to the current Face Amount plus the Cash Value of the Policy on the
date of death or, if greater, the applicable percentage of the Cash Value on
the date of death. The applicable percentage is the same as under Death
Benefit Option A: 250% for an Insured Attained Age 40 or below on the Policy
Anniversary prior to the date of death, and for Insureds with an Attained Age
over 40 on that Policy Anniversary the percentage declines as shown in the
Applicable Percentage of Cash Value Table shown below. Accordingly, under
Death Benefit Option B the amount of the death benefit will always vary as
the Cash Value varies (but will never be less than the Face Amount). (See
Illustrations of Death Benefits and Cash Values, Appendix A.)
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------
Applicable Percentage of Cash Value Table <F*>
<CAPTION>
Insured 40 or 45 50 55 60 65 70 78 to 95 or
Person's Age under 90 older
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Policy Account 250% 215% 185% 150% 130% 120% 115% 105% 100%
Percentage Multiple
- ------------------------------------------------------------------------------------------------------------------------
<FN>
<F*>For ages that are not shown on this table, the applicable percentage
multiples will decrease by a ratable portion for each full year.
</TABLE>
Death Benefit Option C. Under Death Benefit Option C, the death
benefit is equal to the current Face Amount of the Policy or, if greater, the
Cash Value on the date of death multiplied by the "Attained Age factor" (a
list of sample Attained Age factors is shown in the Sample Attained Age
Factor Table below). Accordingly, under Death Benefit Option C the death
benefit will remain level at the Face Amount unless the Cash Value multiplied
by the Attained Age factor exceeds the current Face Amount, in which case the
amount of the death benefit will vary as the Cash Value varies. (See
Illustrations of Death Benefits and Cash Values, Appendix A.)
<TABLE>
Death Benefit Option C Sample Attained Age Factor Table
<CAPTION>
- -----------------------------------------------------------------------------------
Insured Male Female Insured Male Female
Attained Lives Lives Attained Lives Lives
Age Factor Factor Age Factor Factor
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
20 6.39373 7.62992 60 1.87392 2.15766
- -----------------------------------------------------------------------------------
25 5.50505 6.48136 65 1.65835 1.87615
- -----------------------------------------------------------------------------------
30 4.68733 5.49185 70 1.48797 1.64736
- -----------------------------------------------------------------------------------
35 3.97255 4.64894 75 1.35451 1.46009
- -----------------------------------------------------------------------------------
40 3.37168 3.94230 80 1.25595 1.31875
- -----------------------------------------------------------------------------------
45 2.87784 3.36481 85 1.18113 1.21344
- -----------------------------------------------------------------------------------
50 2.47279 2.88712 90 1.12767 1.13972
55 2.14116 2.49005 95 1.07472 1.07637
</TABLE>
Changes In Death Benefit Option. After the first Policy Anniversary,
if the Policy was issued with either Death Benefit Option A or Death Benefit
Option B, the death benefit option may be changed. The option may be changed
once each Policy Year, and a request for change must be made to the Company
in writing. The effective date of such a change will be the Monthly
Anniversary on or following the date the Company receives the change request.
A change in death benefit option may have Federal income tax consequences.
(See Federal Tax Matters.)
A Death Benefit Option A Policy may change its death benefit option to
Death Benefit Option B. The Face Amount will be decreased to equal the death
benefit less the Cash Value on the effective date of change. A Death Benefit
Option B Policy may change its death benefit option to Death Benefit Option
A. The Face Amount will be increased to equal the death benefit on the
effective date of change. A Policy issued under Death Benefit Option C may
not change to either Death Benefit Option A or Death Benefit Option B for the
entire lifetime of the Contract. Similarly, a Policy issued under either
Death Benefit Option A or B may not change to Death Benefit Option C for the
lifetime of the Policy.
11
<PAGE> 19
Satisfactory evidence of insurability must be submitted to the Company
in connection with a request for a change from Death Benefit Option A to
Death Benefit Option B. A change may not be made if it would result in a
Face Amount of less than the minimum Face Amount.
A change in death benefit option will not in itself result in an
immediate change in the amount of a Policy's death benefit or Cash Value. In
addition, if, prior to or accompanying a change in the death benefit option,
there has been an increase in the Face Amount, the cost of insurance charge
may be different for the increased amount. (See Monthly Deduction - Cost of
Insurance.)
Change in Face Amount. Subject to certain limitations set forth below,
an Owner may increase or decrease the Face Amount of a Policy once each
Policy Year and not before the first Policy Anniversary. A written request
is required for a change in the Face Amount. A change in Face Amount may
affect the cost of insurance rate and the net amount at risk, both of which
affect an Owner's cost of insurance charge. (See Monthly Deduction - Cost of
Insurance.) A change in the Face Amount of a Policy may have Federal income
tax consequences. (See Federal Tax Matters.)
For an increase in the Face Amount, the Company requires that
satisfactory evidence of insurability be submitted. An application for an
increase must be received by the Company. If approved, the increase will
become effective as of the Monthly Anniversary on or following receipt of the
application by the Company. In addition, the Insured must have an Attained
Age of not greater than 80 on the effective date of the increase. The
increase may not be less than $25,000. Although an application for an
increase need not be accompanied by an additional premium, the Cash Surrender
Value in effect immediately after the increase must be sufficient to cover
the next monthly deduction. To the extent the Cash Surrender Value is not
sufficient, an additional premium must be paid. (See Charges and Deductions
- - Monthly Deduction.) An increase in the Face Amount may result in certain
additional charges. (See Charges and Deductions - Monthly Deduction.)
For the Owner's rights upon an increase in Face Amount, see Policy
Rights - Right to Examine Policy. Owners should consult their sales
representative before deciding whether to increase coverage by increasing the
Face Amount of a Policy.
Any decrease in the Face Amount will become effective on the Monthly
Anniversary on or following receipt of the written request by the Company.
The amount of the requested decrease must be at least $5,000 and the Face
Amount remaining in force after any requested decrease may not be less than
minimum Face Amount. If following a decrease in Face Amount, the Policy
would not comply with the maximum premium limitations required by Federal tax
law (see Payment and Allocation of Premiums), the decrease may be limited or
Cash Value may be returned to the Owner (at the Owner's election), to the
extent necessary to meet these requirements. Decreases will be applied to
prior increases in the Face Amount, if any, in the reverse order in which
such increases occurred, and then to the original Face Amount. This order of
reduction will be used to determine the amount of subsequent cost of
insurance charges (See Monthly Deduction - Cost of Insurance; and Charges and
Deductions - Contingent Deferred Sales Charge.)
Payment of the Death Benefit. The death benefit under the Policy will
ordinarily be paid in a lump sum within seven days after the Company receives
all documentation required for such a payment. Payment may, however, be
postponed in certain circumstances. (See General Matters - Postponement of
Payment from the Separate Account.) The death benefit will be increased by
any unpaid dividends determined prior to the Insured's death, and by the
amount of the monthly cost of insurance for the portion of the month from the
date of death to the end of the month, and reduced by any outstanding
Indebtedness. (See General Matters - Additional Insurance Benefits,
Dividends, and Charges and Deductions.) The Company will pay interest on the
death benefit from the date of the Insured's death to the date of payment.
Interest will be at an annual rate determined by the Company, but will never
be less than the guaranteed rate of 4%. Provisions for settlement of
proceeds other than a lump sum payment may only be made upon written
agreement with the Company.
12
<PAGE> 20
Cash Value
The Cash Value of the Policy is equal to the total of the amounts
credited to the Owner in the Separate Account, the Loan Account (securing
Policy Loans), and, in certain contracts, the General Account. The Policy's
Cash Value in the Separate Account will reflect the investment performance of
the chosen Divisions of the Separate Account as measured by each Division's
Net Investment Factor (defined below), the frequency and amount of Net
Premiums paid, transfers, partial withdrawals, loans and the charges assessed
in connection with the Policy. An Owner may at any time surrender the Policy
and receive the Policy's Cash Surrender Value. (See Policy Rights -
Surrender, Partial Withdrawals, and Pro Rata Surrender.) The Policy's Cash
Value in the Separate Account equals the sum of the Policy's Cash Values in
each Division. There is no guaranteed minimum Cash Value.
Determination of Cash Value. Cash Value is determined on each
Valuation Date. On the Investment Start Date, the Cash Value in a Division
will equal the portion of any Net Premium allocated to the Division, reduced
by the portion allocated to that Division of the monthly deduction(s) due
from the Issue Date through the Investment Start Date. (See Payment and
Allocation of Premiums.) Thereafter, on each Valuation Date, the Cash Value
in a Division of the Separate Account will equal:
(1) The Cash Value in the Division on the preceding Valuation
Date, multiplied by the Division's Net Investment Factor (defined
below) for the current Valuation Period; plus
(2) Any Net Premium payments received during the current
Valuation Period which are allocated to the Division; plus
(3) Any loan repayments allocated to the Division during the
current Valuation Period; plus
(4) Any amounts transferred to the Division from the General
Account or from another Division during the current Valuation
Period; plus
(5) That portion of the interest credited on outstanding loans
which is allocated to the Division during the current Valuation
Period; minus
(6) Any amounts transferred from the Division to the General
Account, Loan Account, or to another Division during the current
Valuation Period (including any transfer charges); minus
(7) Any partial withdrawals from the Division during the
current Valuation Period; minus
(8) Any withdrawal due to a pro rata surrender from the
Division during the current Valuation Period; minus
(9) Any withdrawal or surrender charges incurred during the
current Valuation Period attributed to the Division in connection
with a partial withdrawal or pro rata surrender; minus
(10) If a Monthly Anniversary occurs during the current
Valuation Period, the portion of the monthly deduction allocated
to the Division during the current Valuation Period to cover the
Policy Month which starts during that Valuation Period. (See
Charges and Deductions.)
Net Investment Factor: The Net Investment Factor measures the
investment performance of a Division during a Valuation Period. The Net
Investment Factor for each Division for a Valuation period is calculated as
follows:
(1) The value of the assets at the end of the preceding
Valuation Period; plus
(2) The investment income and capital gains, realized or
unrealized, credited to the assets in the Valuation Period for
which the Net Investment Factor is being determined; minus
(3) The capital losses, realized or unrealized, charged against
those assets during the Valuation Period; minus
13
<PAGE> 21
(4) Any amount charged against each Division for taxes,
including any tax or other economic burden resulting from the
application of the tax laws determined by the Company to be
properly attributable to the Divisions of the Separate Account, or
any amount set aside during the Valuation Period as a reserve for
taxes attributable to the operation or maintenance of each
Division; minus
(5) A charge equal to .0019111% of the average net assets for
each day in the Valuation Period. This is equivalent to an
effective annual rate of 0.70% per year for mortality and expense
risks; divided by
(6) The value of the assets at the end of the preceding
Valuation Period.
POLICY RIGHTS
Loans
Loan Privileges. After the first Policy Anniversary, the Owner may,. by
written request to General American, borrow an amount up to the Loan Value of
the Policy, with the Policy serving as sole security for such loan. A loan
taken from, or secured by, a Policy may have Federal income tax consequences.
(See Federal Tax Matters.)
The Loan Value is the Cash Value of the Policy on the date the loan
request is received, less interest to the next loan interest due date, less
anticipated monthly deductions to the next loan interest due date, less any
existing loan, and less any surrender charge. Policy Loan interest is payable
on each Policy Anniversary.
The minimum amount that may be borrowed is $500. The loan may be
completely or partially repaid at any time while the Insured is living. Any
amount due to an Owner under a Policy Loan ordinarily will be paid within
seven days after General American receives the loan request at its Home
Office, although payments may be postponed under certain circumstances. (See
General Matters - Postponement of Payments from the Separate Account.)
When a Policy Loan is made, Cash Value equal to the amount of the loan
plus interest due will be transferred to the Loan Account as security for the
loan. A Loan Subaccount exists within the Loan Account for the General
Account and each Division of the Separate Account. Amounts transferred to the
Loan Account to secure Indebtedness are allocated to the appropriate Loan
Subaccount to reflect its origin. Unless the Owner requests a different
allocation, amounts will be transferred from the Divisions of the Separate
Account and the General Account in the same proportion that the Policy's Cash
Value in each Division and the General Account, if any, bears to the Policy's
total Cash Value, less the Cash Value in the Loan Account, at the end of the
Valuation Period during which the request for a Policy Loan is received.
This will reduce the Policy's Cash Value in the General Account and Separate
Account. These transactions will not be considered transfers for purposes of
the limitations on transfers between Divisions or to or from the General
Account.
Cash Value in the Loan Account is expected to earn interest at a rate
("the earnings rate") which is lower than the rate charged on the Policy Loan
("the borrowing rate"). Cash Value in the Loan Account will accrue interest
daily at an earnings rate which is the greater of (a) an annual rate of 4%
("the guaranteed earnings rate" or (b) a current rate determined by us ("the
discretionary earnings rate"). The Company may change the discretionary
earnings rate on Policy Loans at any time in its sole discretion. Currently
in Policy Years one through ten, we accrue interest at a discretionary
earnings rate which is .85% less than the borrowing rate we charge for Policy
Loan interest. Beginning in Policy Year eleven we accrue interest at a
discretionary earnings rate which is .50% less than the borrowing rate we
charge for Policy Loan interest. The difference between the rate of interest
earned and the borrowing rate is the "Loan Spread". The Loan Spreads
mentioned above are currently in effect and are not guaranteed.
Interest credited on the Cash Value held in the Loan Account will be
allocated on Policy Anniversaries to the General Account and the Divisions of
the Separate Account in the same proportion that the Cash Value in each Loan
Subaccount bears to the Cash Value in the Loan Account. The interest credited
will also be transferred: (1)
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when a new loan is made; (2) when a loan is partially or fully repaid; and
(3) when an amount is needed to meet a monthly deduction.
Interest Charged. The borrowing rate we charge for Policy Loan interest
will be based on an index. The indexed borrowing rate will never be more than
the maximum loan rate permitted by law. More information on the borrowing
rate charged is provided below.
General American will inform the Owner of the current borrowing rate
when a Policy Loan is made. General American will also mail the Owner an
advance notice if there is to be a change in the borrowing rate applicable to
any outstanding Indebtedness.
Policy Loan interest is due and payable annually on each Policy
Anniversary. If the Owner does not pay the interest when it is due, the
unpaid loan interest will be added to the outstanding Indebtedness as of the
due date and will be charged interest at the same rate as the rest of the
Indebtedness. (See Effect of Policy Loans below.) The amount of Policy Loan
interest which is transferred to the Loan Account will be deducted from the
Divisions of the Separate Account and from the General Account in the same
proportion that the portion of the Cash Value in each Division and in the
General Account, respectively, bears to the total Cash Value of the Policy
minus the Cash Value in the Loan Account.
We determine the borrowing rate at the beginning of each Policy Year .
The same rate applies to any outstanding Indebtedness and to any new Policy
Loans made during the year. The borrowing rate determined by General
American for a Policy Year may not exceed a Maximum Limit which is the
greater of:
(a) The Published Monthly Average (defined below) for the
calendar month ending two months before the beginning of the month
in which the Policy Anniversary falls (example: for a Policy with
a June Policy Anniversary, the March Published Average); or
(b) Five Percent (5%).
The Published Monthly Average means:
(1) Moody's Corporate Bond Yield Average - Monthly Average
Corporate, as published by Moody's Investors Service, Inc. or any
successor to that service; or
(2) If that average is no longer published, a substantially
similar average, established by regulation issued by the insurance
supervisory official of the state in which this Policy is issued.
If the Maximum Limit for a Policy Year, as determined in this manner,
is at lest 0.50% higher than the borrowing rate determined by General
American for the previous Policy Year, General American may increase the
borrowing rate to not more than the Maximum Limit. Therefore the borrowing
rate we charge for Policy Loan interest will only change if the Published
Monthly Average differs from the previous rate by at least 0.50%.
Effect of Policy Loans. Whether or not a Policy Loan is repaid, it
will permanently affect the Cash Value of a Policy, and may permanently
affect the amount of the death benefit. The collateral for the loan (the
amount held in the Loan Account) does not participate in the performance of
the Separate Account while the loan is outstanding. If the Loan Account
earnings rate is less than the investment performance of the selected
Division(s), the Cash Value of the Policy will be lower as a result of the
Policy Loan. Conversely, if the Loan Account earnings rate is higher than
the investment performance of the Division(s), the Cash Value may be higher.
In addition, if the Indebtedness (See Definitions) exceeds the Cash
Value minus the surrender charge on any Monthly Anniversary, the Policy will
lapse, subject to a grace period. (See Payment and Allocation of Premiums -
Policy Lapse and Reinstatement.) A sufficient payment must be made within
the later of the grace period of 62 days from the Monthly Anniversary
immediately before the date Indebtedness exceeds the Cash Value less any
surrender charges, or 31 days after notice that a Policy will terminate
unless a sufficient payment has been mailed, or the Policy will lapse and
terminate without value. A lapsed Policy, however, may later be reinstated
subject to certain limitations. (See Payment and Allocation of Premiums -
Policy Lapse and Reinstatement.)
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Any outstanding Indebtedness will be deducted from the proceeds payable
upon the death of the Insured, surrender, or the maturity of the Policy.
Repayment of Indebtedness. A Policy Loan may be repaid in whole or in
part at any time prior to the death of the Insured and as long as a Policy is
in force. When a loan repayment is made, an amount securing the Indebtedness
in the Loan Account equal to the loan repayment will be transferred to the
Divisions of the Separate Account and the General Account in the same
proportion that the Cash Value in each Loan Subaccount bears to Cash Value in
the Loan Account. Amounts paid while a Policy Loan is outstanding will be
treated as premiums unless the Owner requests in writing that they be treated
as repayment of Indebtedness.
Surrender, Partial Withdrawals and Pro Rata Surrender
At any time during the lifetime of the Insured and while a Policy is in
force, the Owner may surrender the Policy by sending a written request to the
Company. After the first Policy Year, an Owner may make a partial withdrawal
by sending a written request to the Company. The amount available for
surrender is the Cash Surrender Value at the end of the Valuation Period
during which the surrender request is received at the Company's Home Office.
Amounts payable from the Separate Account upon surrender, partial withdrawal,
or a pro rata surrender will ordinarily be paid within seven days of receipt
of the written request. (See General Matters - Postponement of Payments from
the Separate Account.)
Surrenders. To effect a surrender, either the Policy itself must be
returned to the Company along with the request, or the request must be
accompanied by a completed affidavit of loss, which is available from the
Company. Upon surrender, the Company will pay the Cash Surrender Value plus
any unpaid dividends determined prior to surrender (See Dividends) to the
Owner in a single sum. The Cash Surrender Value equals the Cash Value on the
date of surrender, less any Indebtedness, and less any surrender charge.
(See Charges and Deductions - Contingent Deferred Sales Charge.) The Company
will determine the Cash Surrender Value as of the date that an Owner's
written request is received at the Company's Home Office. If the request is
received on a Monthly Anniversary, the monthly deduction otherwise deductible
will be included in the amount paid. Coverage under a Policy will terminate
as of the date of surrender. The Insured must be living at the time of a
surrender. A surrender may have Federal income tax consequences. (See Federal
Tax Matters.)
Partial Withdrawals. After the first Policy Year, an Owner may make up
to one partial withdrawal each Policy Month from the Separate Account, and up
to four partial withdrawals and transfers in any Policy Year from the General
Account. A partial withdrawal may have Federal income tax consequences. (See
Federal Tax Matters.)
The minimum amount of a partial withdrawal request, net of any
applicable surrender charges, is the lesser of a) $500 from a Division of
the Separate Account, or b) the Policy's Cash Value in a Division. (See
Charges and Deductions - Contingent Deferred Sales Charge.) Partial
withdrawals made during a Policy Year may not exceed the following limits.
The maximum amount that may be withdrawn from a Division of the Separate
Account is the Policy's Cash Value net of any applicable surrender charges
in that Division. The total partial withdrawals and transfers from the
General Account over the Policy Year may not exceed a maximum amount equal to
the greatest of the following: (1) 25% of the Cash Surrender Value in the
General Account at the beginning of the Policy Year, (2) $5,000, (3) the
previous Policy Year's maximum amount.
The Owner may allocate the amount withdrawn plus any applicable
surrender charge, subject to the above conditions, among the Divisions of the
Separate Account and the General Account. If no allocation is specified, then
the partial withdrawal will be allocated among the Divisions of the Separate
Account and the General Account in the same proportion that the Policy's Cash
Value in each Division and the General Account bears to the total Cash Value
of the Policy, less the Cash Value in the Loan Account, on the date the
request for the partial withdrawal is received. If the limitations on
withdrawals from the General Account will not permit this proportionate
allocation, the Owner will be requested to provide an alternate allocation.
(See The General Account.)
No amount may be withdrawn that would result in there being
insufficient Cash Value to meet any surrender charge that would be payable
immediately following the withdrawal upon the surrender of the remaining Cash
Value.
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<PAGE> 24
The death benefit will be affected by a partial withdrawal. If Death
Benefit Option A or Death Benefit Option C is in effect and the death benefit
equals the Face Amount, then a partial withdrawal will decrease the Face
Amount by an amount equal to the partial withdrawal plus the applicable
surrender charge resulting from that partial withdrawal. If the death benefit
is based on a percentage of the Cash Value, then a partial withdrawal will
decrease the Face Amount by an amount by which the partial withdrawal plus
the applicable surrender charge exceeds the difference between the death
benefit and the Face Amount. If Death Option B is in effect, the Face Amount
will not change.
The Face Amount remaining in force after a partial withdrawal may not
be less than the minimum Face Amount. Any request for a partial withdrawal
that would reduce the Face Amount below this amount will not be implemented.
Partial withdrawals may affect the way in which the cost of insurance
charge is calculated and the amount of pure insurance protection afforded
under a Policy. (See Monthly Deduction - Cost of Insurance.) Partial
withdrawals will be applied first to reduce the initial Face Amount and then
to each increase in Face Amount in order, starting with the first increase.
The Company may change the minimum amount required for a partial withdrawal
or the number of times partial withdrawals may be made.
Pro Rata Surrender. After the first Policy Year, an Owner can make a
pro rata surrender of the Policy. The pro rata surrender will reduce the Face
Amount and the Cash Value by a percentage chosen by the Owner. This
percentage must be any whole number. A pro rata surrender may have Federal
income tax consequences. (See Federal Tax Matters.) The percentage will be
applied to the Face Amount and the Cash Value on the Monthly Anniversary on
or following our receipt of the request.
The Owner may allocate the amount of decrease in Cash Value plus any
applicable surrender charge among the Divisions of the Separate Account and
the General Account. (See Charges and Deductions - Contingent Deferred Sales
Charge.) If no allocation is specified, then the decrease in Cash Value and
any applicable surrender charge will be allocated among the Divisions of the
Separate Account and the General Account in the same proportion that the
Policy's Cash Value in each Division and the General Account bears to the
total Cash Value of the Policy, less the Cash Value in the Loan Account, on
the date the request for pro rata surrender is received.
A pro rata surrender can not be processed if it will reduce the Face
Amount below the minimum Face Amount of the Policy. No pro rata surrender
will be processed for more Cash Surrender Value than is available on the date
of the pro rata surrender. A cash payment will be made to the Owner for the
amount of Cash Value reduction less any applicable surrender charges.
Pro rata surrenders may affect the way in which the cost of insurance
charge is calculated and the amount of the pure insurance protection afforded
under the Policy. (See Monthly Deduction - Cost of Insurance.) Pro rata
surrenders will be applied to prior increases in the Face Amount, if any, in
the reverse order in which such increases occurred, and then to the original
Face Amount.
Charges on Surrender, Partial Withdrawals and Pro Rata Surrender. If a
Policy is surrendered within the first ten Policy Years, the Deferred
Contingent Sales Charge will apply. (See Contingent Deferred Sales Charge.)
A partial withdrawal or pro rata surrender may also result in a charge.
The amount of the charge assessed is a portion of the Contingent Deferred
Sales Charge that would be deducted upon surrender or lapse. Charges are
described in more detail under Charges and Deductions - Contingent Deferred
Sales Charge.
While partial withdrawals and pro rata surrenders are each methods of
reducing a Policy's Cash Value, a pro rata surrender differs from a partial
withdrawal in that a partial withdrawal does not typically have a
proportionate effect on a Policy's death benefit by reducing the Policy's
Face Amount, while a pro rata surrender does. Assuming that a Policy's death
benefit is not a percentage of the Policy's Cash Value, a pro rata surrender
will reduce the Policy's death benefit in the same proportion that the
Policy's Cash Value is reduced, while a partial withdrawal will reduce the
death benefit by one dollar for each dollar of Cash Value withdrawn. Partial
Withdrawals and Pro Rata Surrenders will also result in there being different
cost of insurance charges subsequently deducted. (See Monthly Deduction -
Cost of Insurance; Surrender, Partial Withdrawals and Pro Rata Surrender -
Partial Withdrawals; and Surrenders, Partial Withdrawals, and Pro Rata
Surrenders - Pro Rata Surrender.)
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<PAGE> 25
Transfers
Under General American's current practices, a Policy's Cash Value,
except amounts credited to the Loan Account, may be transferred among the
Divisions of the Separate Account and for certain contracts, between the
General Account and the Divisions. Transfers to and from the General Account
are subject to restrictions (See The General Account). Requests for
transfers from or among Divisions of the Separate Account must be made in
writing. Transfers from or among the Divisions of the Separate Account may be
made once each Policy Month and must be in amounts of at least $500 or, if
smaller, the Policy's Cash Value in a Division. General American ordinarily
will effectuate transfers and determine all values in connection with
transfers as of the end of the Valuation Period during which the transfer
request is received.
All requests received on the same Valuation Day will be considered a
single transfer request. Each transfer must meet the minimum requirement of
$500 or the entire Cash Value in a Division whichever is smaller. Where a
single transfer request calls for more than one transfer, and not all of the
transfers would meet the minimum requirements, General American will
effectuate those transfers that do meet the requirements. Transfers resulting
from Policy Loans will not be counted for purposes of the limitations on the
amount or frequency of transfers allowed in each Policy Month or Policy Year.
Although General American currently intends to continue to permit
transfers for the foreseeable future, the Policy provides that General
American may at any time revoke, modify, or limit the transfer privilege,
including the minimum amount transferable, the maximum General Account
allocation percent, and the frequency of such transfers. General American may
in the future impose a charge of no more than $25 per transfer request.
Dollar Cost Averaging
The Owner may direct the Company to transfer amounts on a monthly basis
from the Money Market Fund to any other Division of the Separate Account.
This service is intended to allow the Owner to utilize "dollar cost
averaging" ("DCA"), a long-term investment technique which provides for
regular, level investments over time. The Company makes no guarantee that DCA
will result in a profit or protect against loss.
The following rules and restrictions apply to DCA transfers:
(1) The minimum DCA transfer amount is $100.
(2) A written election of the DCA service, on a form provided by the
Company, must be completed by the Owner and on file with the Company in order
to begin DCA transfers.
(3) In the written election of the DCA service, the Owner indicates
how DCA transfers are to be allocated among the Divisions of the Separate
Account. For any Division chosen to receive DCA transfers, the minimum
percentage that may be allocated to a Division is 5% of the DCA transfer
amount, and fractional percentages may not be used.
(4) DCA transfers can only be made from the Money Market Fund, and
DCA transfers will not be allowed to the General Account.
(5) The DCA transfers will not count against the Policy's normal
transfer restrictions. (See Policy Rights - Transfers.)
(6) The DCA transfer percentages may differ from the allocation
percentages the Owner specifies for the allocation of Net Premiums. (See
Payment and Allocation of Premiums - Allocation of Net Premiums and Cash
Values.)
(7) Once elected, DCA transfers from the Money Market Fund will be
processed monthly until either the value in the Money Market Fund is
completely depleted or the Owner instructs the Company in writing to cancel
the DCA service.
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<PAGE> 26
(8) Transfers as a result of a Policy Loan or repayment, or in
exercise of the conversion privilege, are not subject to the DCA rules and
restrictions. The DCA service terminates at the time the conversion privilege
is exercised, when any outstanding amount in any Division of the Separate
Account is immediately transferred to the General Account. (See Policy Rights
- - Loans, and Policy Rights - Conversion Privilege.)
(9) DCA transfers will not be made until the Right to Examine Policy
period has expired (See Policy Rights - Right to Examine Policy).
The Company reserves the right to assess a processing fee for the DCA
service. The Company reserves the right to discontinue offering DCA upon 30
days' written notice to Owners. However, any such discontinuation will not
affect DCA services already commenced. The Company reserves the right to
impose a minimum total Cash Value, less outstanding Indebtedness, in order to
qualify for DCA service. Also, the Company reserves the right to change the
minimum necessary Cash Value and the minimum required DCA transfer amount.
Right to Examine Policy
The Owner may cancel a Policy within 20 days after receiving it (30
days if the Owner is a resident of California and is age 60 or older) or
within 45 days after the application was signed, whichever is later. If a
Policy is canceled within this time period, a refund will be paid. Where
required by state law, the refund will equal all premiums paid under the
Policy. Where required by state law, General American will refund an amount
equal to the greater of premiums paid or (1) plus (2) where (1) is the
difference between the premiums paid, including any policy fees or other
charges, and the amounts allocated to the Separate Account under the Policy
and (2) is the value of the amounts allocated to the Separate Account under
the Policy on the date the returned Policy is received by General American or
its agent.
To cancel the Policy, the Owner should mail or deliver the Policy to
either General American or the agent who sold it. A refund of premiums paid
by check may be delayed until the Owner's check has cleared the bank upon
which it was drawn. (See General Matters - Postponement of Payments from the
Separate Account.)
A request for an increase in Face Amount (see Policy Benefits - Death
Benefit) may also be canceled. The request for cancellation must be made
within the later of 20 days from the date the Owner received the new Policy
specifications page for the increase, or 45 days after the application for
the increase was signed.
Payments of Benefits at Maturity
If the Insured is living and the Policy is in force, the Company will
pay in a lump sum the Cash Surrender Value of the Policy on the Maturity
Date, plus any unpaid dividends determined prior to maturity. Amounts payable
on the Maturity Date ordinarily will be paid in a lump sum within seven days
of that date, although payments may be postponed under certain circumstances.
(See General Matters - Postponements of Payments from the Separate Account.)
A Policy will mature if and when the Insured reaches Attained Age 100.
Settlement options other than a lump sum payment may only be made upon
written agreement with the Company.
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PAYMENT AND ALLOCATION OF PREMIUMS
Issuance of a Policy
Individuals wishing to purchase a Policy must complete an application
and submit it to an authorized registered agent of General American or to
General American's Home Office. A Policy will generally be issued to
Insureds of Issue Ages 0 through 80 for regularly underwritten contracts and,
should they become available in the future, to Insureds of Issue Ages 0
through 64 for simplified issue and guaranteed issue contracts. General
American may, in its sole discretion, issue Policies to individuals falling
outside of those Issue Ages. Acceptance of an application is subject to
General American's underwriting rules and General American reserves the right
to reject an application for any reason.
The Issue Date is determined by General American in accordance with its
standard underwriting procedures for variable life insurance policies. The
Issue Date is used to determine Policy Anniversaries, Policy Years, and
Policy Months. Insurance coverages under a Policy will not take effect until
the Policy has been delivered and the initial premium has been paid prior to
the Insured's death and prior to any change in health as shown in the
application.
Premiums
The initial premium is due on the Issue Date, and may be paid to an
authorized registered agent of General American or to General American at its
Home Office. General American currently requires that the initial premium for
a Policy be at least equal to one-twelfth (1/12) of the Minimum Premium for
the Policy. The Minimum Premium is the amount specified for each Policy based
on the requested initial Face Amount and the charges under the Policy which
vary according to the Issue Age, sex, underwriting risk class, and smoker
status of the Insured. (See Charges and Deductions.) For policies issued as
a result of a term conversion from certain General American term policies,
the Company requires the Owner to pay an initial premium, which combined with
conversion credits given, if any, will equal one full "Minimum Premium" for
the Policy. Following the initial premium, subject to the limitations
described below, premiums may be paid in any amount and at any interval.
Premiums after the first premium payment must be paid to General American at
its Home Office. An Owner may establish a schedule of planned premiums which
will be billed by the Company at regular intervals. Failure to pay planned
premiums, however, will not itself cause the Policy to lapse. (See Policy
Lapse and Reinstatement.) Premium receipts will be furnished upon request.
An Owner may make unscheduled premium payments at any time in any
amount, or skip planned premium payments, subject to the minimum and maximum
premium limitations described below.
If a Policy is in the intended Owner's possession but the initial
premium has not been paid, the Policy is not in force. The intended Owner is
deemed to have the Policy for inspection only.
Premium Limitations. Every premium payment must be at least $10. In no
event may the total of all premiums paid in any Policy Year exceed the
current maximum premium limitations for that Policy Year. Maximum premium
limits for the Policy Year will be shown in an Owner's annual report.
In general, for policies issued with Death Benefit Option A or Death
Benefit Option B, the maximum premium limit for a Policy Year is the largest
amount of premium that can be paid in that Policy Year such that the sum of
the premiums paid under the Policy will not at any time exceed the guideline
premium limitations needed to comply with the tax definition of life
insurance. For policies issued with Death Benefit Option C, the company
reserves the right to impose other restrictions upon the amount of premium
that may be paid into the Policy. If at any time a premium is paid which
would result in total premiums exceeding the current maximum premium
limitations, the Company will only accept that portion of the premium which
will make total premiums equal the maximum. Any part of the premium in
excess of that amount will be returned or applied as otherwise agreed, and no
further premiums will be accepted until allowed under the current maximum
premium limitations.
In addition to the foregoing tax definitional limits on premiums, for
purposes of determining whether distributions (including loans) are a return
of income first, the Company monitors the Policy to detect whether the "seven
pay limit" has been exceeded. If the seven pay limit is exceeded, the Policy
becomes a "Modified
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Endowment". The Company has adopted administrative steps designed to notify
an Owner when it is believed that a premium payment will cause a Policy to
become a modified endowment contract. The Owner will be given a limited
amount of time to request that the premium be reversed in order to avoid the
Policy's being classified as a modified endowment contract. (See Federal
Tax Matters.)
If the Company receives a premium payment which would cause the death
benefit to increase by an amount that exceeds the Net Premium portion of the
payment, then the Company reserves the right to (1) refuse that premium
payment, or (2) require additional evidence of insurability before it accepts
the premium.
Allocation of Net Premiums and Cash Value
Allocation of Net Premiums. In the application for a Policy, the Owner
indicates how Net Premiums are to be allocated among the Divisions of the
Separate Account, to the General Account (if available), or both. For each
Division chosen, the minimum percentage that may be allocated to a Division
is 5% of the Net Premium, and fractional percentages may not be used. Certain
other restrictions apply to allocations made to the General Account (see
General Account). For policies issued with an allowable percentage to the
General Account of more than 5%, the minimum percentage is 5%, and fractional
percentages may not be used.
The allocation for future Net Premiums may be changed without charge at
any time by providing notice to the Company. Any change in allocation will
take effect immediately upon receipt by the Company of written notice. No
charge is imposed for changing the allocations of future premiums. The
initial allocation will be shown on the application which is attached to the
Policy. The Company may at any time modify the maximum percentage of future
Net Premiums that may be allocated to the General Account.
During the period from the Issue Date to the end of the Right to
Examine Policy Period (See Policy Rights - Right to Examine Policy), Net
Premiums will automatically be allocated to the Division that invests in the
Money Market Fund of Capital Company. When this period expires, the Policy's
Cash Value in that Division will be transferred to the Divisions of the
Separate Account and to the General Account (if available) in accordance with
the allocation requested in the application for the Policy, or any allocation
instructions received subsequent to receipt of the application. Net Premiums
received after the Right to Examine Policy Period will be allocated according
to the allocation instructions most recently received by the Company unless
otherwise instructed for that particular premium receipt.
The Policy's Cash Value may also be transferred between Divisions of
the Separate Account, and, if the General Account is available under the
Policy, between those Divisions and the General Account. (See Policy Rights -
Transfers.)
The value of amounts allocated to Divisions of the Separate Account
will vary with the investment performance of the chosen Divisions and the
Owner bears the entire investment risk. This will affect the Policy's Cash
Value, and may affect the death benefit as well. Owners should periodically
review their allocations of Net Premiums and the Policy's Cash Value in light
of market conditions and their overall financial planning requirements.
Policy Lapse and Reinstatement
Lapse. Unlike conventional whole life insurance policies, the failure
to make a premium payment following the initial premium will not itself cause
a Policy to lapse. Lapse will occur when the Cash Surrender Value is
insufficient to cover the monthly deduction, and a grace period expires
without a sufficient payment being made.
The grace period, which is 62 days, begins on the Monthly Anniversary
on which the Cash Surrender Value becomes insufficient to meet the next
monthly deduction. The Company will notify the Owner at the beginning of the
grace period by mail addressed to the last known address on file with the
Company. The notice to the Owner will indicate the amount of additional
premium that must be paid. The amount of the premium required to keep the
Policy in force will be the amount to cover the outstanding monthly
deductions and premium expense
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<PAGE> 29
charges. (See Charges and Deductions - Monthly Deduction.) If the Company
does not receive the required amount within the grace period, the Policy
will lapse and terminate without Cash Value.
If the Insured dies during the grace period, any overdue monthly
deductions will be deducted from the death benefit otherwise payable.
Reinstatement. The Owner may reinstate a lapsed Policy by written
application any time within five years after the date of lapse and before the
Maturity Date. Reinstatement is subject to the following conditions:
1. Evidence of the insurability of the Insured satisfactory to
the Company (including evidence of insurability of any person
covered by a rider to reinstate the rider).
2. Payment of a premium that, after the deduction of premium
expense charges, is large enough to cover: (a) the monthly
deductions due at the time of lapse, and (b) two times the monthly
deduction due at the time of reinstatement.
3. Payment or reinstatement of any Indebtedness. Any
Indebtedness reinstated will cause Cash Value of an equal amount
also to be reinstated. Any loan interest due and unpaid on the
Policy Anniversary prior to reinstatement must be repaid at the
time of reinstatement. Any loan paid at the time of reinstatement
will cause an increase in Cash Value equal to the amount to be
reinstated.
The Policy cannot be reinstated if it has been surrendered.
The amount of Cash Value on the date of reinstatement will be equal to
the amount of any Policy Loan reinstated, increased by the Net Premiums paid
at reinstatement, any Policy Loan paid at the time of reinstatement, and the
amount of any surrender charge paid at the time of lapse. The Insured must be
alive on the date the Company approves the application for reinstatement. If
the Insured is not then alive, such approval is void and of no effect.
The effective date of reinstatement will be the date the Company
approves the application for reinstatement. There will be a full monthly
deduction for the Policy Month which includes that date. (See Charges and
Deductions-Monthly Deduction.)
The surrender charge in effect at the time of reinstatement will equal
the surrender charge in effect at the time of lapse.
CHARGES AND DEDUCTIONS
Charges will be deducted in connection with the Policy to compensate
the Company for providing the insurance benefits set forth in the Policy and
any additional benefits added by rider, administering the Policies, incurring
expenses in distributing the Policies, and assuming certain risks in
connection with the Policy.
Premium Expense Charges
Prior to allocation of Net Premiums, premium payments will be reduced
by premium expense charges consisting of a sales charge and a charge for
premium taxes. The premium payment less the premium expense charge equals the
Net Premium.
Sales Charge. A sales charge not to exceed 5% of each premium payment
will be deducted from each premium payment to partially compensate the
Company for expenses incurred in distributing the Policy and any additional
benefits provided by riders. The Company currently intends to deduct a sales
charge of 5% in Policy Years one through ten and 2.25% in Policy Years past
Policy Year ten. The expenses covered by the sales charge include agent sales
commissions, the cost of printing Prospectuses and sales literature, and any
advertising costs. Where Policies are issued to Insureds with higher
mortality risks or to Insureds who have selected additional insurance
benefits, a portion of the amount deducted for sales charge is used to pay
distribution expenses and other costs associated with these additional
coverages. No increase in this sales charge will occur that would result in
an increase in the sales charge percentage deducted in any previous Policy
year.
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<PAGE> 30
A Contingent Deferred Sales Charge is also imposed under certain
circumstances for expenses incurred in distributing the Policies. That charge
is discussed below.
To the extent that sales expenses are not recovered from the sales
charge and the surrender charge, those expenses may be recovered from other
sources, including the mortality and expense risk charge described below.
Premium Taxes. Various states and subdivisions impose a tax on premiums
received by insurance companies. Premium taxes vary from state to state. A
deduction of 2.5% of the premium is taken from each premium payment for these
taxes. The deduction represents an amount the Company considers necessary to
pay the premium taxes imposed by the states and any subdivisions thereof.
Monthly Deduction
Charges will be deducted monthly from the Cash Value of each Policy
("the monthly deduction") to compensate the Company for (a) certain
administrative costs; (b) the cost of insurance; and (c) the cost of optional
benefits added by rider. The monthly deduction will be taken on the
Investment Start Date and on each Monthly Anniversary. It will be allocated
among the General Account and each Division of the Separate Account in the
same proportion that a Policy's Cash Value in the General Account and the
Policy's Cash Value in each Division bear to the total Cash Value of the
Policy, less the Cash Value in the Loan Account, on the date the deduction is
taken. Because portions of the monthly deduction, such as the cost of
insurance, can vary from month to month, the monthly deduction itself can
vary in amount from month to month.
Monthly Administrative Charge. The Company has responsibility for the
administration of the Policies and the Separate Account. Administrative
expenses include premium billing and collection, record keeping, processing
death benefit claims, cash surrenders, partial withdrawals, Policy changes,
and reporting and overhead costs, processing applications, and establishing
Policy records. As reimbursement for administrative expenses related to the
maintenance of each Policy and the Separate Account, the Company assesses a
monthly administration charge from each Policy. This charge is $4 per month
for all Policy Months. These charges are guaranteed not to increase while the
Policy is in force. The Company does not anticipate that it will make any
profit on the monthly administrative charge.
The Company may administer the Policy itself, or the Company may
purchase administrative services from such sources (including affiliates) as
may be available. Such services will be acquired on a basis which, in the
Company's sole discretion, affords the best services at the lowest cost. The
Company reserves the right to select a company to provide services which the
Company deems, in its sole discretion, is the best able to perform such
services in a satisfactory manner even though the costs for such services may
be higher than would prevail elsewhere.
Cost of Insurance. The cost of insurance is deducted on each Monthly
Anniversary for the following Policy Month. Because the cost of insurance
depends upon a number of variables, the cost will vary for each Policy Month.
The cost of insurance is determined separately for the initial Face Amount
and for any subsequent increases in Face Amount. The Company will determine
the cost of insurance charge by multiplying the applicable cost of insurance
rate or rates by the net amount at risk (defined below) for each Policy
Month.
The cost of insurance rates are determined at the beginning of each
Policy Year for the initial Face Amount and each increase in Face Amount. The
rates will be based on the Attained Age, duration, rate class, and sex
(except for Policies sold in Montana, (See Unisex Requirements Under Montana
Law) of the Insured at issue or the date of an increase in Face Amount. The
cost of insurance rates generally increase as the Insured's Attained Age
increases. The rate class of an Insured also will affect the cost of
insurance rate. For the initial Face Amount, the Company will use the rate
class on the Issue Date. For each increase in Face Amount, other than one
caused by a change in the death benefit option, the Company will use the rate
class applicable to that increase. If the death benefit equals a percentage
of Cash Value, an increase in Cash Value will cause an automatic increase in
the death benefit. The rate class for such increase will be the same as that
used for the most recent increase that required proof of insurability.
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<PAGE> 31
The Company currently places Insureds into a preferred rate class, a
standard rate class, or into rate classes involving a higher mortality risk.
The degree of underwriting imposed may vary from full underwriting, to
simplified issue underwriting, and should it become available in the future,
to guaranteed issue underwriting.
Actual cost of insurance rates may change and the actual monthly cost
of insurance rates will be determined by the Company based on its
expectations as to future mortality experience. However, the actual cost of
insurance rates will not be greater than the guaranteed cost of insurance
rates set forth in the Policy. For fully underwritten and simplified issue
Policies which are not in a substandard risk class, the guaranteed cost of
insurance rates are equal to 100% of the rates set forth in the male/female
1980 CSO Mortality Tables (1980 CSO Table A and 1980 CSO Table G), age
nearest birthday. Higher rates apply if the Insured is determined to be in a
substandard risk class.
In two otherwise identical Policies, an Insured in the preferred rate
class will have a lower cost of insurance than an Insured in a rate class
involving higher mortality risk. For rate classes other than the guaranteed
issue rate class, each rate class is also divided into two categories:
smokers and nonsmokers. Nonsmoker Insureds will generally incur a lower cost
of insurance than similarly situated Insureds who smoke. (Insureds under
Attained Age 20 are automatically assigned to the smoker rate class.)
Policies issued with simplified underwriting or guaranteed issue, if it would
become available in the future, will in general incur a higher cost of
insurance than Policies issued under full underwriting. Guaranteed issue
Policies will in general incur the highest cost of insurance rates.
The net amount at risk for a Policy Month is (a) the death benefit at
the beginning of the Policy Month divided by 1.0032737 (which reduces the net
amount at risk, solely for purposes of computing the cost of insurance, by
taking into account assumed monthly earnings at an annual rate of 4%), less
(b) the Cash Value at the beginning of the Policy Month. If there is an
increase in the Face Amount, a net amount at risk will be calculated
separately for the initial Face Amount and for each increase in Face Amount.
If Death Benefit Option A or Death Option C is in effect, for purposes of
determining the net amounts at risk for the initial Face Amount and for each
increase in Face Amount, Cash Value will first be considered a part of the
initial Face Amount. If the Cash Value is greater than the initial Face
Amount, the excess Cash Value will then be considered a part of each increase
in order, starting with the first increase. If Death Benefit Option B is in
effect, the net amount at risk will be determined separately for the initial
Face Amount and for each increase in Face Amount. In calculating the cost of
insurance charges, the cost of insurance rate for a Face Amount is applied to
the net amount at risk for that Face Amount.
Additional Insurance Benefits. The monthly deduction will include
charges for any additional benefits provided by rider. (See General Matters -
Additional Insurance Benefits.)
Contingent Deferred Sales Charge (CDSC)
For a period of up to ten years after the Issue Date, the Company will
impose a CDSC upon surrender or lapse of the Policy, upon a partial
withdrawal, or upon a pro rata surrender. The amount of the charge assessed
will depend upon a number of factors, including the type of event (a full
surrender, lapse, or partial withdrawal), the amount of any premium payments
made under the Policy prior to the event, and the number of Policy Years
having elapsed since the Policy was issued.
The Contingent Deferred Sales Charge compensates the Company for
expenses relating to the distribution of the Policy, including agents'
commissions, advertising, and the printing of the Prospectus and sales
literature.
Calculation of Charge. If a Policy is surrendered, the charge will be
the Contingent Deferred Sales Charge Percentage multiplied by 4.0% of
premiums paid since issue.
The Contingent Deferred Sales Charge Percentage is shown in the following
table:
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<PAGE> 32
<TABLE>
Contingent Deferred Sales Charge Percentage Table
<CAPTION>
If surrender or lapse The following percentage
occurs in the last month of the surrender charge
of Policy Year:<F*> will be payable:<F**>
<S> <C>
1 through 5 100%
6 80%
7 60%
8 40%
9 20%
10 and later 0%
--------------
<FN>
<F*> In addition, the percentages reduce equally for each Policy Month
during the years shown. For example, during the seventh year, the
percentage reduces equally each month from 80% at the end of the
sixth Year to 60% at the end of the seventh Year.
<F**> For male issue ages 75 through 80 and female issue ages 77 through 80,
the Contingent Deferred Sales Charge Percentage grades to 0% in
less than ten years.
</TABLE>
Charge Assessed Upon Partial Withdrawals or Pro Rata Surrender. The
amount of the Contingent Deferred Sales Charge deducted upon a partial
withdrawal or pro rata surrender will equal a fraction of the charge that
would be deducted if the Policy were surrendered at that time. The fraction
will be determined by dividing the amount of the withdrawal of cash by the
Cash Value before the withdrawal and multiplying the result by the charge.
Immediately after a withdrawal, the Policy's remaining surrender charge will
equal the amount of the surrender charge immediately before the withdrawal
less the amount deducted in connection with the withdrawal.
Reduction of Charges. The Policy is available for purchase by
individuals, corporations, and other institutions. For certain individuals
and certain corporate or other group or sponsored arrangements purchasing one
or more Policies, General American may waive or reduce the amount of the
Sales Charge, Contingent Deferred Sales Charge, monthly administrative
charge, or other charges where the expenses associated with the sale of the
Policy or Policies or the underwriting or other administrative costs
associated with the Policy or Policies are reduced.
Sales, underwriting, or other administrative expenses may be reduced
for reasons such as expected economies resulting from a corporate purchase or
a group or sponsored arrangement; from the amount of the initial premium
payment or payments; or from the amount of projected premium payments.
General American will determine in its discretion if, and in what amount, a
reduction is appropriate. The Company may modify its criteria for
qualification for reduction of charges as experience is gained, subject to
the limitation that such reductions will not be unfairly discriminatory
against the interests of any Owner.
Separate Account Charges
Mortality and Expense Risk Charge. General American will deduct a daily
charge from the Separate Account at the rate of .0019111% of the average net
assets of each Division of the Separate Account which equals an effective
annual rate of .70% of those net assets. This deduction is guaranteed not to
increase while the Policy is in force. General American may realize a profit
from this charge.
The mortality risk assumed by General American is that Insureds may die
sooner than anticipated and that therefore General American will pay an
aggregate amount of death benefits greater than anticipated. The expense risk
assumed is that expenses incurred in issuing and administering the Policy
will exceed the amounts realized from the administrative charges assessed
against the Policy.
Fund Expenses. The value of the net assets of the Separate Account
will reflect the investment advisory fee and other expenses incurred by the
underlying investment companies. See the prospectuses for the respective
Funds for a description of investment advisory fees and other expenses
incurred by the Capital Company, RIF, VIP, VIP II, and Van Eck.
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<PAGE> 33
No charges are currently made to the Separate Account for Federal,
state, or local taxes that the Company incurs which may be attributable to
such Separate Account or to the Policy. The Company may make such a charge
for any such taxes or economic burden resulting from the application of the
tax laws that it determines to be properly attributable to the Separate
Account or to the Policy. (See Federal Tax Matters.)
DIVIDENDS
The Policy is a participating Policy which is entitled to a share, if
any, of the divisible surplus of the Company as determined each year and
apportioned to it. This surplus will be distributed as a dividend payable
annually on the January Monthly Anniversary. If the Insured dies after the
dividend has been determined, the Company will pay any unpaid dividend to the
Beneficiary.
Dividends under participating policies may be described as refunds of
premiums which adjust the cost of a Policy to the actual level of costs
emerging over time after the issue of the Policies. Both Federal and state
law recognize that dividends are generally considered to be a refund of a
portion of the premium paid and therefore are not treated as income for
Federal or state income tax purposes. However, depending on the dividend
payment option chosen (see below), dividends may have tax consequences to
Owners. Counsel or other competent tax advisors should be consulted for more
complete information.
Dividend illustrations published at the time of issue of a Policy
reflect the actual recent experience of the issuing insurance company with
respect to factors such as interest, mortality, and expenses. State law
generally prohibits a company from projecting or estimating future results.
State law also requires that dividends must be based on surplus, after
setting aside certain necessary amounts, and that such surplus must be
apportioned equitably among participating policies. In other words, in
principle and by statute, dividends must be based on actual experience and
cannot be guaranteed at issue of a Policy.
Each year the Company's actuary analyzes the current and recent past
experience and compares it to the assumptions used in determining the premium
rates at the time of issue. Some of the more important data studied includes
mortality and lapse rates, investment yield in the General Account, and
actual expenses incurred in administering the Policy. Such data is then
allocated to each dividend class, e.g., by year of issue, age and plan. The
actuary then determines what dividends can be equitably apportioned to each
Policy class and makes a recommendation to the Company's Board of Directors
("the Board). The Board, which has the ultimate authority to declare
dividends, will vote the amount of surplus to be apportioned to each Policy
class, thereby, authorizing the distribution of the annual dividend.
An Owner may choose one of the following dividend options. Dividends
will be credited under the chosen option until the Owner changes it. If the
Owner does not choose an option, the Company will credit the dividend under
Dividend Option B until such time as the Owner requests in writing a
different option.
Dividend Option A: Cash. The amount of the dividend will be paid in
cash.
Dividend Option B: Increase Cash Value. The amount of the dividend will
be added to the Policy's Cash Value on the date of the dividend payment. The
Cash Value will be increased by the amount of the dividend. The dividend will
be allocated to the General Account (if available) and the Divisions of the
Separate Account according to the current allocation of the Net Premium.
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<PAGE> 34
THE GENERAL ACCOUNT
Because of exemptive and exclusionary provisions, interests in the
General Account have not been registered under the Securities Act of 1933 and
the General Account has not been registered as an investment company under
the 1940 Act. Accordingly, neither the General Account nor any interests
therein are subject to the provisions of these Acts and, as a result, the
staff of the SEC has not reviewed the disclosure in this Prospectus relating
to the General Account. The disclosure regarding the General Account may,
however, be subject to certain generally applicable provisions of the Federal
securities laws relating to the accuracy and completeness of statements made
in prospectuses.
General Description
The General Account consists of all assets owned by General American
other than those in the Separate Account and other separate accounts. Subject
to applicable law, General American has sole discretion over the investment
of the assets of the General Account.
At issue, General American will determine the maximum percentage of the
non-borrowed Cash Value that may be allocated, either initially or by
transfer, to the General Account. The ability to allocate Net Premiums or to
transfer Cash Value to the General Account may not be made available, in the
Company's discretion, under certain Policies. Further, the option may be
limited with respect to some Policies. The Company may, from time to time,
adjust the extent to which premiums or Cash Value may be allocated to the
General Account (the "maximum allocation percentage"). Such adjustments may
not be uniform as to all Policies. General American may at any time modify
the General Account maximum allocation percent. Subject to this maximum, an
Owner may elect to allocate Net Premiums to the General Account, the Separate
Account, or both. Subject to this maximum, the Owner may also transfer Cash
Value from the Divisions of the Separate Account to the General Account, or
from the General Account to the Divisions of the Separate Account. The
allocation of Net Premiums or the transfer of Cash Value to the General
Account does not entitle an Owner to share in the investment experience of
the General Account. Instead, General American guarantees that Cash Value
allocated to the General Account will accrue interest at a rate of at least
4%, compounded annually, independent of the actual investment experience of
the General Account.
The Loan Account is part of the General Account.
The Policy
This Prospectus describes a flexible premium variable life insurance
policy. This Prospectus is generally intended to serve as a disclosure
document only for the aspects of the Policy relating to the Separate Account.
For complete details regarding the General Account, see the Policy itself.
General Account Benefits
If the Owner allocates all Net Premiums only to the General Account and
makes no transfers, partial withdrawals, pro rata surrenders, or Policy
Loans, the entire investment risk will be borne by General American, and
General American guarantees that it will pay at least a minimum specified
death benefit. The Owner may select Death Benefit Option A, B or C under the
Policy and may change the Policy's Face Amount subject to satisfactory
evidence of insurability.
General Account Cash Value
Net Premiums allocated to the General Account are credited to the Cash
Value. General American bears the full investment risk for these amounts and
guarantees that interest will be credited to each Owner's Cash Value in the
General Account at a rate of no less than 4% per year, compounded annually.
General American may, AT ITS SOLE DISCRETION, credit a higher rate of
interest, although it is not obligated to credit interest in excess of 4% per
year, and might not do so. ANY INTEREST CREDITED ON THE POLICY'S CASH VALUE
IN THE GENERAL ACCOUNT IN EXCESS OF THE GUARANTEED MINIMUM RATE OF 4% PER
YEAR WILL BE DETERMINED IN THE SOLE DISCRETION OF GENERAL AMERICAN. THE
POLICY OWNER ASSUMES THE RISK THAT INTEREST CREDITED MAY NOT EXCEED THE
GUARANTEED MINIMUM RATE OF
27
<PAGE> 35
4% PER YEAR. If excess interest is credited, a different rate of interest
may be applied to the Cash Value in the Loan Account. The Cash Value in the
General Account will be calculated on each Monthly Anniversary of the
Policy.
General American guarantees that, on each Valuation Date, the Cash
Value in the General Account will be the amount of the Net Premiums allocated
or Cash Value transferred to the General Account, plus interest at the rate
of 4% per year, plus any excess interest which General American credits and
any amounts transferred into the General Account, less the sum of all Policy
charges allocable to the General Account and any amounts deducted from the
General Account in connection with partial withdrawals, pro rata surrenders,
surrender charges or transfers to the Separate Account.
Transfers, Surrenders, Partial Withdrawals and Policy Loans
After the first Policy Year and prior to the Maturity Date, a portion
of Cash Value may be withdrawn from the General Account or transferred from
the General Account to the Separate Account. A maximum total of four partial
withdrawals and transfers from the General Account is permitted in a Policy
Year. A partial withdrawal, net of any applicable surrender charges, and any
transfer must be at least $500 or, the Policy's entire Cash Value in the
General Account if less than $500. No amount may be withdrawn from the
General Account that would result in there being insufficient Cash Value to
meet any surrender charges that would be payable immediately following the
withdrawal upon the surrender of the remaining Cash Value of the Policy. The
total amount of transfers and withdrawals in a Policy Year may not exceed a
Maximum Amount equal to the greater of (a) 25% of a Policy's Cash Surrender
Value in the General Account at the beginning of the Policy Year, (b) $5,000,
or (c) the previous Policy Year's Maximum Amount (not to exceed the total
Cash Surrender Value of the Policy).
Transfers to the General Account are limited by the maximum allocation
percentage (described below) in effect for a Policy at the time a transfer
request is made.
Policy Loans may also be made from the Policy's Cash Value in the
General Account.
Loans and withdrawals from the General Account may have Federal income
tax consequences. (See Federal Tax Matters.)
No transfer charge currently is imposed on transfers to or from the
General Account. However, such a charge may be imposed in the future.
General American may revoke or modify the privilege of transferring amounts
to or from the General Account at any time. Partial withdrawals and pro rata
surrenders will result in the imposition of the applicable surrender charge.
Transfers, surrenders, partial withdrawals and pro rata surrenders
payable from the General Account and the payment of Policy Loans allocated to
the General Account may, subject to certain limitations, be delayed for up to
six months. However, if payment is deferred for 30 days or more, General
American will pay interest at the rate of 2.5% per year for the period of the
deferment. Amounts from the General Account used to pay premiums on policies
with General American will not be delayed.
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<PAGE> 36
GENERAL MATTERS
Postponement of Payments from the Separate Account
The Company usually pays amounts payable on partial withdrawal, pro
rata surrender, surrender, or Policy Loan allocated to the Separate Account
Divisions within seven days after written notice is received. Payment of any
amount payable from the Divisions of the Separate Account upon surrender,
partial withdrawals, pro rata surrender, death of Insured, or the Maturity
Date, as well as payments of a Policy Loan and transfers, may be postponed
whenever: (1) the New York Stock Exchange is closed other than customary
weekend and holiday closings, or trading on the New York Stock Exchange is
restricted as determined by the SEC; (2) the SEC by order permits
postponement for the protection of Owners; or (3) an emergency exists, as
determined by the SEC, as a result of which disposal of securities is not
reasonably practicable or it is not reasonably practicable to determine the
value of the Separate Account's net assets. The Company may defer payment of
the portion of any Policy Loan from the General Account for not more than six
months.
Payments under the Policy of any amounts derived from premiums paid by
check may be delayed until the Owner's check has cleared the bank upon which
it was drawn.
The Contract
The Policy, the attached application, any riders, endorsements, any
application for an increase in Face Amount, and any application for
reinstatement constitute the entire contract. All statements made by the
Insured in the application and any supplemental applications can be used to
contest a claim or the validity of the Policy. Any change to the Policy must
be in writing and approved by the President, a Vice President, or the
Secretary of the Company. No agent has the authority to alter or modify any
of the terms, conditions, or agreements of the Policy or to waive any of its
provisions.
Control of Policy
The Insured is the Owner of the Policy unless another person or entity
is shown as the Owner in the application. Ownership may be changed, however,
as described below. The Owner is entitled to all rights provided by the
Policy, prior to its Maturity Date. After the Maturity Date, the Owner cannot
change the payee nor the mode of payment, unless otherwise provided in the
Policy. Any person whose rights of ownership depend upon some future event
does not possess any present rights of ownership. If there is more than one
Owner at a given time, all Owners must exercise the rights of ownership by
joint action. If the Owner dies, and the Owner is not the Insured, the
Owner's interest in the Policy becomes the property of his or her estate
unless otherwise provided. Unless otherwise provided, the Policy is jointly
owned by all Owners named in the Policy or by the survivors of those joint
Owners. Unless otherwise stated in the Policy, the final Owner is the estate
of the last joint Owner to die. The Company may rely on the written request
of any trustee of a trust which is the Owner of the Policy, and the Company
is not responsible for the proper administration of any such trust.
Beneficiary
The Beneficiary(ies) is (are) the person(s) specified in the
application or by later designation. Unless otherwise stated in the Policy,
the Beneficiary has no rights in a Policy before the death of the Insured. If
there is more than one Beneficiary at the death of the Insured, each
Beneficiary will receive equal payments unless otherwise provided by the
Owner. If no Beneficiary is living at the death of the Insured, the proceeds
will be payable to the Owner or, if the Owner is not living, to the Owner's
estate.
The Company permits the designation of various types of trusts as
Beneficiary(ies), including trusts for minor beneficiaries, trusts under a
will, and trusts under a separate written agreement. An Owner is also
permitted to designate several types of beneficiaries, including business
beneficiaries.
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<PAGE> 37
Change of Owner or Beneficiary
The Owner may change the ownership and/or Beneficiary designation by
written request in a form acceptable to the Company at any time during the
Insured's lifetime subject to any restrictions stated in the Policy and this
Prospectus. The Company may require that the Policy be returned for
endorsement of any change. If acceptable to us, the change will take effect
as of the date the request is signed, whether or not the Insured is living
when the request is received at the Company's Home Office. The Company is not
liable for any payment made or action taken before the Company received the
written request for change. If the Owner is also a Beneficiary of the Policy
at the time of the Insured's death, the Owner may, within sixty days of the
Insured's death, designate another person to receive the Policy proceeds. Any
change will be subject to any assignment of the Policy or any other legal
restrictions.
Policy Changes
The Company reserves the right to limit the number of changes to a
Policy to one per Policy Year and to restrict changes in the first Policy
Year. Currently, only one change is permitted during any Policy Year and no
change may be made during the first Policy Year. For this purpose, changes
include increases or decreases in Face Amount and changes in the death
benefit option. No change will be permitted, if as a result, the Policy would
fail to satisfy the definition of life insurance in Section 7702 of the
Internal Revenue Code or any applicable successor provision.
Conformity with Statutes
If any provision in a Policy is in conflict with the laws of the state
governing the Policy, the provision will be deemed to be amended to conform
to such laws. In addition, the Company reserves the right to change the
Policy if it determines that a change is necessary to cause this Policy to
comply with, or give the Owner the benefit of any Federal or state statute,
rule, or regulation, including, but not limited to, requirements of the
Internal Revenue Code, or its regulations or published rulings.
Claims of Creditors
To the extent permitted by law, neither the Policy nor any payment
under it will be subject to the claims of creditors or to any legal process.
Incontestability
The Policy is incontestable after it has been in force for two years
from the Issue Date during the lifetime of the Insured. An increase in Face
Amount or addition of a rider after the Issue Date is incontestable after
such increase or addition has been in force for two years from its effective
date during the lifetime of the Insured. Any reinstatement of a Policy is
incontestable only after it has been in force during the lifetime of the
Insured for two years after the effective date of the reinstatement.
Assignment
The Company will be bound by an assignment of a Policy only if: (a) the
assignment is in writing; (b) the original assignment instrument or a
certified copy thereof is filed with the Company at its Home Office; and (c)
the Company returns an acknowledged copy of the assignment instrument to the
Owner. The Company is not responsible for determining the validity of any
assignment. Payment of Policy proceeds is subject to the rights of any
assignee of record. If a claim is based on an assignment, the Company may
require proof of the interest of the claimant. A valid assignment will take
precedence over the claim of any Beneficiary.
Suicide
Suicide within two years of the Issue Date is not covered by the
Policy. If the Insured dies by suicide, while sane or insane, within two
years from the Issue Date (or within the maximum period permitted by the laws
of the state in which the Policy was delivered, if less than two years), the
amount payable will be limited to premiums paid, less any partial withdrawals
and outstanding Indebtedness subject to certain limitations, if the Insured,
while
30
<PAGE> 38
sane or insane, dies by suicide within two years after the effective
date of an increase in Face Amount, the death benefit for that increase will
be limited to the amount of the monthly deductions for the increase.
If the Insured is a Missouri citizen when the Policy is issued, this
provision does not apply on the Issue Date of the Policy, or on the effective
date of any increase in Face Amount, unless the Insured intended suicide when
the Policy, or the increase in Face Amount, was applied for.
Misstatement of Age or Sex and Corrections
If the age or sex (except any Policies sold in Montana: (See Unisex
Requirements Under Montana Law) of the Insured has been misstated in the
application, the amount of the death benefit will be that which the most
recent cost of insurance charge would have purchased for the correct age and
sex.
Any payment or Policy changes made by the Company in good faith,
relying on its records or evidence supplied with respect to such payment,
will fully discharge the Company's duty. The Company reserves the right to
correct any errors in the Policy.
Change in Rate Class
Sixty days prior to the Policy Anniversary on which the Insured attains
age 20, a letter will be sent to the Owner notifying the Owner of the
opportunity to apply for a change in the Insured's Rate Class from Smoker to
Non-Smoker. Upon receipt of the forms requested for a Non-Smoker risk
classification and proof satisfactory to the Company, the Rate Class will be
Non-Smoker. If the Owner does not apply for a Rate Class change, the Rate
Class will remain Smoker.
Additional Insurance Benefits
Subject to certain requirements, one or more of the following
additional insurance benefits may be added to a Policy by rider. The
descriptions below are intended to be general; the terms of the Policy riders
providing the additional benefits may vary from state to state, and the
Policy should be consulted. The cost of any additional insurance benefits
which require additional charges will be deducted as part of the monthly
deduction from the Policy's Cash Value. (See Charges and Deductions - Monthly
Deduction.) Certain restrictions may apply and are described in the
applicable rider. An insurance agent authorized to sell the Policy can
describe these extra benefits further. Samples of the provisions are
available from General American upon written request.
Waiver of Monthly Deduction Rider. Provides for the waiver of the
monthly deductions while the Insured is totally disabled, subject to certain
limitations described in the rider. The Insured must have become disabled
after age 5 and before age 65.
Waiver of Specified Premium Rider. Provides for crediting the Policy's
Cash Value with a specified monthly premium while the Insured is totally
disabled. The monthly premium selected at issue is not guaranteed to keep the
Policy in force. The Insured must have become disabled after age 5 and
before age 65.
Increasing Benefit Option Rider. Allows the Owner to increase the Face
Amount of the Policy without evidence of insurability. The increase is made
on each Policy Anniversary.
Records and Reports
The Company will maintain all records relating to the Separate Account
and will mail to the Owner once each Policy Year, at the last known address
of record, a report which shows the current Policy values, premiums paid,
deductions made since the last report, and any outstanding Policy Loans. The
Owner will also be sent a periodic report for the Capital Company, RIF, VIP,
VIP II, and Van Eck and a list of the securities held in each Fund. Receipt
of premium payments, transfers, partial withdrawals, pro rata surrenders,
Policy Loans, loan repayments, changes in death benefit options, increases or
decreases in Face Amount, surrenders and reinstatements will be confirmed
promptly following each transaction.
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<PAGE> 39
An Owner may request in writing a projection of illustrated future Cash
Surrender Values and death benefits. This projection will be furnished by the
Company for a nominal fee which will not exceed $25.
DISTRIBUTION OF THE POLICIES
The Policy will be sold by individuals who, in addition to being
licensed as life insurance agents for the Company, are also registered
representatives of Walnut Street Securities, Inc. ("Walnut Street"), the
principal underwriter of the Policy, or of broker-dealers who have entered
into written sales agreements with Walnut Street. Walnut Street was
incorporated under the laws of Missouri in 1984 and is a wholly-owned
subsidiary of General American Holding Company, which is, in turn, a
wholly-owned subsidiary of the Company. Walnut Street is registered with the
SEC under the Securities Exchange Act of 1934 as a broker-dealer and is a
member of the National Association of Securities Dealers, Inc. No director
or officer of Walnut Street owns any units in the Separate Account.
Writing agents will receive commissions based on a commission schedule
and rules. Currently, agent first-year commissions equal 7.50% of target
premiums paid in Policy Year 1. In renewal years, the agent commissions equal
4.0% of premiums paid in years 2 through 10. A 2.50% of premium service fee
is paid after Policy year 10. For Policy years after Policy Year 1, a
commission of .20% of the average monthly Cash Value for each Policy Year is
paid. These are maximum commissions, and reductions may be possible under the
circumstances outlined in the section entitled Reduction of Charges. General
Agents receive compensation which may be in part based on the level of agent
commissions in their agencies.
As principal underwriter for the Policies, Walnut Street received
$1,792,210 in commission income on total premium payments of $5,063,967 in
1996. Walnut Street receives no administrative fees, management fees, or
other fee income from sales of the Policies.
The general agent commission schedules and rules differ for different
types of agency contracts.
FEDERAL TAX MATTERS
Introduction
The following summary provides a general description of the Federal
income tax considerations associated with the Policy and does not purport to
be complete or to cover all situations. This discussion is not intended as
tax advice. Counsel or other competent tax advisors should be consulted for
more complete information. This discussion is based upon General American's
understanding of the present Federal income tax laws as they are currently
interpreted by the Internal Revenue Service. No representation is made as to
the likelihood of continuation of the present Federal income tax laws or of
the current interpretations by the Internal Revenue Service.
Tax Status of the Policy
Section 7702 of the Internal Revenue Code of 1986, as amended (the
"Code") includes a definition of a life insurance contract for Federal tax
purposes. The Secretary of the Treasury (the "Treasury") issued proposed
regulations which specify what will be considered reasonable mortality
charges under Section 7702. Guidance as to how Section 7702 is to be applied
is, however, limited. If a Policy were determined not to be a life insurance
contract for purposes of Section 7702, such Policy would not provide most of
the tax advantages normally provided by a life insurance policy.
With respect to a Policy issued on a basis of a standard premium class
or on a guaranteed or simplified issue basis, while there is some uncertainty
due to the limited guidance under Section 7702, the Company believes that
such a Policy should meet the Section 7702 definition of a life insurance
contract. However, with respect to a Policy issued on a substandard basis
(i.e., a premium class involving higher than standard mortality risk), it is
not clear whether such a Policy would satisfy Section 7702, particularly if
the Owner pays the full amount of premiums permitted under the Policy.
If it is subsequently determined that a Policy does not satisfy Section
7702, the Company will take whatever steps are appropriate and necessary to
attempt to cause such a Policy to comply with Section 7702,
32
<PAGE> 40
including possibly refunding any premiums paid that exceed the limitations
allowable under Section 7702 (together with interest or other earnings on
any such premiums refunded as required by law). For these reasons, the
Company reserves the right to modify the Policy as necessary to attempt to
qualify it as a life insurance contract under Section 7702.
Section 817(h) of the Code authorizes the Treasury to set standards by
regulation or otherwise for the investments of the Separate Account to be
"adequately diversified" in order for the Policy to be treated as a life
insurance contract for Federal tax purposes. The Separate Account, intends to
comply with the diversification requirements prescribed by the Treasury in
Regulation Section 1.817-5, which affect how assets may be invested. Although
General American does not control Capital Company, RIF, VIP, VIP II, or Van
Eck, it has entered into agreements, which require these investment companies
to be operated in compliance with the requirements prescribed by the
Treasury.
The IRS has stated in published rulings that a variable contract owner
will be considered the owner of separate account assets, for federal income
tax purposes, if the contract owner possesses incidents of ownership in those
assets, such as the ability to exercise investment control over the assets.
If that were to be determined to be the case, income and gains from the
separate account assets would be includible in the variable contract owner's
gross income. The Treasury Department has also announced, in connection with
the issuance of regulations concerning diversification, that those
regulations "do not provide guidance concerning the circumstances in which
investor control of the investments of a segregated asset account may cause
the investor (i.e., the Owner), rather than the insurance company, to be
treated as the owner of the assets in the account." This announcement also
stated that guidance would be issued by way of regulations or rulings on the
"extent to which policyholders may direct their investments to particular
subaccounts without being treated as owners of the underlying assets."
The ownership rights under the Policy are different in certain respects
from those described by the IRS in rulings in which it was determined that
policy owners were not owners of separate account assets. For example, the
Owner has additional flexibility in allocating Premium payments and Policy
Values. These differences could result in an Owner being treated as the
owner of a pro rata portion of the assets of the Separate Account. In
addition, the Company does not know what standards will be set forth, if any,
in the regulations or rulings which the Treasury Department has stated it
expects to issue. The Company therefore reserves the right to modify the
Policy as necessary to attempt to prevent an Owner from being considered the
owner of a pro rata share of the assets of the Separate Account.
The following discussion assumes that the Policy will qualify as a life
insurance contract for Federal income tax purposes.
l. Tax Treatment of Policy Benefits. In general, the Company
believes that the proceeds and Cash Value increases of a Policy should be
treated in a manner consistent with a fixed-benefit life insurance policy for
Federal income tax purposes. Thus, the death benefit under the Policy should
be excludable from the gross income of the Beneficiary under Section
101(a)(1) of the Code, unless a transfer for value (generally a sale of the
policy) has occurred.
Many changes or transactions involving a Policy may have tax
consequences, depending on the circumstances. Such changes include, but are
not limited to, the exchange of the Policy, a change of the Policy's Face
Amount, a Policy Loan, an additional premium payment, a Policy lapse with an
outstanding Policy Loan, a partial withdrawal, or a surrender of the Policy.
In addition, Federal estate and state and local estate, inheritance, and
other tax consequences of ownership or receipt of Policy proceeds depend upon
the circumstances of each Owner or Beneficiary. A competent tax advisor
should be consulted for further information.
A Policy may also be used in various arrangements, including
non-qualified deferred compensation or salary continuation plans, split
dollar insurance plans, executive bonus plans, retiree medical benefit plans
and others. The tax consequences of such plans may vary depending on the
particular facts and circumstances of each individual arrangement.
Therefore, if you are contemplating the use of a Policy in any arrangement
the value of which depends in part on its tax consequences, you should be
sure to consult a qualified tax advisor regarding the tax attributes of the
particular arrangement.
33
<PAGE> 41
Generally, the Owner will not be deemed to be in constructive receipt
of the Policy's Cash Value, including increments thereof, under the Policy
until there is a distribution. The tax consequences of distributions from,
and Policy Loans taken from or secured by, a Policy depend upon whether the
Policy is classified as a "modified endowment contract". However, upon a
complete surrender or lapse of any Policy, or when benefits are paid at such
a Policy's maturity date, if the amount received plus the amount of
outstanding Indebtedness exceeds the total investment in the Policy, the
excess will generally be treated as ordinary income subject to tax.
2. Modified Endowment Contracts. A policy may be treated as a
modified endowment contract depending upon the amount of premiums paid in
relation to the death benefit provided under such Policy. The premium
limitation rules for determining whether a Policy is a modified endowment
contract are extremely complex. In general, however, 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.
In addition, if a Policy is "materially changed" it may cause such
Policy to be treated as a modified endowment contract. The material change
rules for determining whether a Policy is a modified endowment contract are
also extremely complex. In general, however, the determination of whether a
Policy will be a modified endowment contract after a material change
generally depends upon the relationship among the death benefit at the time
of such change, the Cash Value at the time of the change and the additional
premiums paid in the seven Policy Years starting with the date on which the
material change occurs.
Moreover, a life insurance contract received in exchange for a life
insurance contract classified as a modified endowment contract will also be
treated as a modified endowment contract. A reduction in a Policy's benefits
may also cause such Policy to become a modified endowment contract.
Due to the Policy's flexibility, classification of a Policy as a
modified endowment contract will depend upon the circumstances of each
Policy. The Company has, however, adopted administrative steps designed to
protect an Owner against the possibility that the Policy might become a
modified endowment contract. The Company believes the safeguards are adequate
for most situations, but it cannot provide complete assurance that a Policy
will not be classified as a modified endowment contract. At the time a
premium is credited which would cause the Policy to become a modified
endowment contract, the Company will notify the Owner that unless a refund of
the excess premium is requested by the Owner, the Policy will become a
modified endowment contract. The Owner will have 30 days after receiving such
notification to request the refund. The excess premium paid will be returned
to the Owner upon receipt by the Company of the refund request. The amount to
be refunded will be deducted from the Policy Cash Value in the Divisions of
the Separate Account and in the General Account in the same proportion as the
premium payment was allocated to such Divisions.
Accordingly, a prospective Owner should contact a competent tax advisor
before purchasing a Policy to determine the circumstances under which the
Policy would be a modified endowment contract. In addition, an Owner should
contact a competent tax advisor before paying any additional premiums or
making any other change to, including an exchange of, a Policy to determine
whether such premium or change would cause the Policy (or the new Policy in
the case of an exchange) to be treated as a modified endowment contract.
3. Distributions from Policies Classified as Modified Endowment
Contract. Policies classified as modified endowment contracts will be subject
to the following tax rules: First, all distributions, including distributions
upon surrender and benefits paid at maturity, from such a Policy are treated
as ordinary income subject to tax up to the amount equal to the excess (if
any) of the Cash Value immediately before the distribution over the
investment in the Policy (described below) at such time. Second, Policy Loans
taken from, or secured by, such a Policy, as well as due but unpaid interest
thereon, are treated as distributions from such a Policy and taxed
accordingly. Third, a 10 percent additional income tax is imposed on the
portion of any distribution from, or Policy Loan taken from or secured by,
such a Policy that (a) is included in income, except where the distribution
or Policy Loan is made on or after the Owner attains age 59 1/2, (b) is
attributable to the Owner's becoming disabled, or (c) is part of a series of
substantially equal periodic payments 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.
34
<PAGE> 42
4. Distributions From Policies Not Classified as Modified Endowment
Contract. Distributions from Policies not classified as a modified endowment
contracts are generally treated as first recovering the investment in the
Policy (described below) and then, only after the return of all such
investment in the Policy, as distributing taxable income. An exception to
this general rule occurs in the case of a decrease in the Policy's death
benefit (possibly including a partial withdrawal) or any other change that
reduces benefits under the Policy in the first 15 years after the Policy is
issued and that results in cash distribution to the Owner in order for the
Policy to continue complying with the Section 7702 definitional limits. 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.
Policy Loans from, or secured by, a Policy that is not a modified
endowment contract are not treated as distributions. Instead. such loans are
treated as indebtedness of the Owner.
Upon a complete surrender or lapse of a Policy that is not a modified
endowment contract, or when benefits are paid at such a Policy's maturity
date, if the amount received plus the amount of indebtedness exceeds the
total investment in the Policy, the excess will generally be treated as
ordinary income subject to tax.
Neither distributions (including distributions upon surrender or lapse)
nor Policy Loans from, or secured by, a Policy that is not a modified
endowment contract are subject to the 10 percent additional income tax.
If a Policy which is not a modified endowment contract subsequently
becomes a modified endowment contract, then any distribution made from the
Policy within two years prior to the date of such change in status may become
taxable.
5. Policy Loan Interest. Generally, interest paid on any loan under
a life insurance Policy owned by an individual is not deductible. In
addition, interest on any loan under a life insurance Policy owned by a
business taxpayer on the life of any individual who is an officer of or is
financially interested in the business carried on by that taxpayer is
deductible only under certain very limited circumstances. An Owner should
consult a competent tax adviser before deducting any loan interest.
6. Investment in the Policy. 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 Policy 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 Policy 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.
7. Multiple Policies. All modified endowment contracts that are
issued by the Company (or its affiliates) to the same Owner during any
calendar year are treated as one modified endowment contract for purposes of
determining the amount includible in gross income under Section 72(e) of the
Code.
8. Possible Charge for Taxes. At the present time, the Company makes
no charge to the Separate Account for any Federal, state, or local taxes (as
opposed to Premium Tax Charges which are deducted from premium payments) that
it incurs which may be attributable to such Separate Account 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.
UNISEX REQUIREMENTS UNDER MONTANA LAW
The State of Montana generally prohibits the use of actuarial tables
that distinguish between men and women in determining premiums and Policy
benefits for policies issued on the lives of their residents. Therefore, all
Policies offered by this Prospectus to insure residents of Montana will have
premiums and benefits which are based on actuarial tables that do not
differentiate on the basis of sex.
35
<PAGE> 43
SAFEKEEPING OF THE SEPARATE ACCOUNT'S ASSETS
General American holds the assets of the Separate Account in a
custodial account in its name at the Bank of New York. The Company maintains
records of all purchases and redemptions of applicable Fund shares by each of
the Divisions. Additional protection for the assets of the Separate Account
is afforded by a blanket fidelity bond issued by Lloyd's Underwriters in the
amount of five million dollars, covering all officers and employees of the
Company who have access to the assets of the Separate Account.
VOTING RIGHTS
Based on its understanding of current applicable legal requirements,
the Company will vote the shares of the Funds held in the Separate Account at
regular and special shareholder meetings of the mutual funds in accordance
with the instructions received from persons having voting interests in the
corresponding Divisions of the Separate Account. If, however, the 1940 Act or
any regulation thereunder should be amended or if the present interpretation
thereof should change, and as a result the Company determines that it is
permitted to vote shares of the Fund in its own right, it may elect to do so.
No voting privileges apply to the Policies with respect to Cash Value removed
from the Separate Account as a result of a Policy Loan.
The number of votes which an Owner has the right to instruct will be
calculated separately for each Division. Voting rights reflect the dollar
value of the total number of units of each Division of the Separate Account
credited to the Owner at the record date, rather than the number of units
alone. Fractional shares will be counted. The number of votes of the Fund
which the Owner has the right to instruct will be determined as of the date
coincident with the date established by that Fund for determining
shareholders eligible. Voting instructions will be solicited by written
communications prior to such meeting in accordance with procedures
established by the mutual funds.
The company will vote shares of a Fund for which no timely instructions
are received in proportion to the voting instructions which are received with
respect to that Fund. The Company will also vote any shares of the Funds
which are not attributable to Policies in the same proportion.
Each person having a voting interest in a Division will receive any
proxy material, reports, and other materials relating to the appropriate
Fund.
Disregard of Voting Instructions. The Company may, when required by
state insurance regulatory authorities, disregard voting instructions if the
instructions require that the shares be voted so as to cause a change in the
subclassification or investment objective of the Fund or to approve or
disapprove an investment advisory contract for a Fund. In addition, the
Company itself may disregard voting instructions in favor of changes
initiated by an Owner in the investment policy or the investment advisor or
sub-advisor of a Fund if the Company reasonably disapproves of such changes.
A proposed change would be disapproved only if the proposed change is
contrary to state law or prohibited by state regulatory authorities, or the
Company determined that the change would have an adverse effect on its
General Account in that the proposed investment policy for a Fund may result
in overly speculative or unsound investments. If the Company disregards
voting instructions, a summary of that action and the reasons for such action
will be included in the next annual report to Owners.
STATE REGULATION OF THE COMPANY
The Company, a mutual life insurance company organized under the laws
of Missouri, and the Separate Account are subject to regulation by the
Missouri Department of Insurance. An annual statement is filed with the
Director of Insurance on or before March 1st of each year covering the
operations and reporting on the financial condition of the Company as of
December 31 of the preceding year. Periodically, the Director of Insurance
examines the liabilities and reserves of the Company and the Separate Account
and certifies their adequacy, and a full examination of the Company's
operations is conducted by the National Association of Insurance
Commissioners at least once every three years.
In addition, the Company is subject to the insurance laws and
regulations of other states within which it is licensed or may become
licensed to operate. Generally, the insurance departments of other states
apply the laws of the state of domicile in determining permissible
investments.
36
<PAGE> 44
<TABLE>
MANAGEMENT OF THE COMPANY
<CAPTION>
Principal Occupation(s)
Name During Past Five Years<F*>
---- --------------------------
Principal Officers <F**>
- ------------------------
<C> <S>
Richard A. Liddy Chairman, President and CEO, 1/95-present; Chairman of
the Executive Committee, 5/92-present. Formerly
President and CEO, 5/92-1/95; President and Chief
Operating Officer, 5/88-5/92.
Robert J. Banstetter, Sr. Vice President, General Counsel and Secretary, 2/91-
present. Formerly Vice President and General
Counsel, 1/83-2/91.
John W. Barber Vice President and Controller, 12/84-present.
O'Neil P. Boudreaux Vice President-Sales and Marketing, 10/96-present.
Formerly Vice President-Group Field Accounts,
4/87-10/96.
E. Thomas Hughes Corporate Actuary and Treasurer, 10/94-present.
Formerly Executive Vice President-Group Pensions,
3/90-10/94
Michael P. Ingrassia Vice President-Group Executive Accounts, 3/92-present.
Formerly Vice President-Group Operations,
5/84-2/92.
George T. Lacy Vice President-Group Field Sales, 6/83-present.
Barbara L. Snyder Vice President-Product Division, 4/95-present.
Formerly Vice President and Chief Actuary,
American Bankers Insurance Company, Miami, FL.
Warren J. Winer Executive Vice President-Group Life and Health, 8/95-
present. Formerly Managing Director, William M.
Mercer, Inc., 7/93-8/95; President and Chief
Operating Officer, W. F. Corroon, 1986-7/93.
Bernard H. Wolzenski Executive Vice President-Individual Insurance, 10/91-
present. Formerly Vice President-Life Product
Management, 5/86-10/91.
A. Greig Woodring President and Chief Executive Officer, Reinsurance
Group of America, 12/92-present. Executive Vice
President-Reinsurance, 3/90-present.
<FN>
<F*> All positions listed are with General American unless otherwise
indicated.
<F**> The principal business address of Messrs. Banstetter, Hughes, and
Liddy, is General American Life Insurance Company, 700 Market
Street, St. Louis, Missouri 63101. The principal business address
for Messrs. Barber, Boudreaux, Ingrassia, Lacy, Winer and
Wolzenski and for Ms. Snyder is 13045 Tesson Ferry Road, St.
Louis, Missouri 63128. The principal business address for Mr.
Woodring is 660 Mason Ridge Center Drive, Suite 300, St. Louis,
Missouri 63141.
</TABLE>
37
<PAGE> 45
<TABLE>
<CAPTION>
Name Principal Occupations(s)
---- During Past Five Years<F*>
--------------------------
Directors
- ---------
<C> <S>
August A. Busch III Chairman of the Board and
Anheuser-Busch Companies, Inc. President, Anheuser-Busch
One Busch Place Companies, Inc. (beer
St. Louis, Missouri 63118 business).
William E. Cornelius Retired Chairman and Chief
Union Electric Company Executive Officer, Union
P.O. Box 149 Electric Company (electric
St. Louis, Missouri 63166 utility business). Prior to
1993, Chairman and Chief
Executive Officer.
John C. Danforth Partner. Formerly, U. S.
Bryan Cave Senator, State of Missouri.
One Metropolitan Square, Suite 3600
St. Louis, Missouri 63102
Bernard A. Edison Past President, Edison Brothers
Edison Brothers Stores, Inc. Stores, Inc. (retail specialty
P.O. Box 14020 stores).
St. Louis, Missouri 63178
Richard A. Liddy Chairman, President and CEO,
General American Life Insurance Co. General American
700 Market Street
St. Louis, MO 63101
William E. Maritz Chairman and Chief Executive
Maritz, Inc. Officer, Maritz, Inc.
1375 North Highway Drive (motivation, travel,
Fenton, Missouri 63099 communications, training and
marketing research business).
Craig D. Schnuck Chairman and Chief Executive
Schnuck Markets, Inc. Officer, Schnuck Markets, Inc.
11420 Lackland Road (retail supermarket chain).
P.O. Box 46928 Prior to 1991, President and
St. Louis, Missouri 63146 Chief Executive Officer
William P. Stiritz Chairman, Chief Executive
Ralston Purina Company Officer and President, Ralston
Checkerboard Square Purina Company (pet food,
St. Louis, Missouri 63164 batteries, and bread business);
Chairman, Ralcorp Holdings,
Inc. (ready-to-eat cereal, baby
food, ski resorts).
Andrew C. Taylor Chief Executive Officer and
Enterprise Rent-A-Car President, Enterprise
600 Corporate Park Drive Rent-A-Car (car rental). Prior
St. Louis, Missouri 63105 to May, 1991, President.
38
<PAGE> 46
<CAPTION>
Name Principal Occupations(s)
---- During Past Five Years<F*>
--------------------------
Directors (continued)
- ---------------------
<C> <S>
H. Edwin Trusheim Retired Chairman and Chief Executive
General American Life Insurance Co. Officer
P.O. Box 396
St. Louis, MO 63166
Robert L. Virgil Principal, Edward Jones (investments).
Edward Jones Prior to 1993, Dean, the John M. Olin
12555 Manchester School of Business, Washington
St. Louis, Missouri 63131-3729 University (business education)
Virginia V. Weldon, M.D. Senior Vice President, Public Policy,
Monsanto Company Monsanto Company (chemicals diversified
800 North Lindbergh industry, pharmaceuticals, life science
St. Louis, Missouri 63167 products, and food ingredients
business). Prior to 1993, Vice
President, Public Policy.
Ted C. Wetterau President, Wetterau Associates, L.L.C.
Wetterau Associates, L.L.C. Retired Chairman and Chief Executive
7700 Bonhomme, Suite 750 Officer, Wetterau Incorporated (retail
St. Louis, Missouri 63105 and wholesale grocery, manufacturing
business).
<FN>
<F*> All positions listed are with General American unless otherwise indicated.
</TABLE>
39
<PAGE> 47
LEGAL MATTERS
All matters of Missouri law pertaining to the Policy, including
the validity of the Policy and General American's right to issue the Policy
under Missouri insurance law, have been passed upon by Robert J. Banstetter,
Vice President, General Counsel, and Secretary of General American.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Separate Account is a party
or to which the assets of the Separate Account are subject. General American
is not involved in any litigation that is of material importance in relation
to its total assets or that relates to the Separate Account.
EXPERTS
The audited financial statements of General American and the Separate
Account have been included in this Prospectus in reliance on the reports of
KPMG Peat Marwick LLP independent certified public accountants, and on the
authority of said firm as experts in accounting and auditing.
The report of KPMG Peat Marwick LLP covering the December 31, 1996,
financial statements of General American, refers to the adoption of
Statement of Financial Accounting Standards No. 120, Accounting and Reporting
by Mutual Life Insurance Enterprises and by Insurance Enterprises for Certain
Long-Duration Participating Contracts.
Actuarial matters included in this Prospectus have been examined by
Alan J. Hobbs, FSA, MAAA, LLIF, Second Vice President & Financial Actuary of
General American, as stated in the opinion filed as an exhibit to the
registration statement.
ADDITIONAL INFORMATION
A registration statement has been filed with the Securities and
Exchange Commission, under the Securities Act of 1933, as amended, with
respect to the Policy offered hereby. This Prospectus does not contain all
the information set forth in the registration statement and the amendments
and exhibits to the registration statement, to all of which reference is made
for further information concerning the Separate Account, General American and
the Policy offered hereby. Statements contained in this Prospectus as to the
contents of the Policy and other legal instruments are summaries. For a
complete statement of the terms thereof reference is made to such instruments
as filed.
FINANCIAL STATEMENTS
The financial statements of General American which are included in this
Prospectus should be distinguished from the financial statements of the
Separate Account, and should be considered only as bearing on the ability of
General American to meet its obligations under the Policy. They should not be
considered as bearing on the investment performance of the assets held in the
Separate Account. Financial information is not provided for four of the
seventeen Divisions of the Separate Account because those Divisions have only
recently been established, and therefore no operating history exists for
those Divisions.
40
<PAGE> 48
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Contractholders
General American Life Insurance Company:
We have audited the statements of assets and liabilities, including the
schedule of investments, of the S & P 500 Index, Money Market, Bond Index,
Managed Equity, Asset Allocation, International Equity, Special Equity,
Equity-Income, Growth, Overseas, Asset Manager, High Income, and Gold and
Natural Resources Fund Divisions of General American Separate Account Eleven
as of December 31, 1996, and the related statements of operations and changes
in net assets for each of the periods presented. These financial statements
are the responsibility of the Separate Account's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
The investments owned as of December 31, 1996 were verified by audit of the
statements of assets and liabilities of the underlying portfolios of General
American Capital Company and confirmation by correspondence with respect to
the Variable Insurance Products Fund and the Variable Insurance Products Fund
II sponsored by Fidelity Investments, and the Van Eck World Wide Insurance
Trust sponsored by Van Eck Associates Corporation. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the S & P 500 Index, Money
Market, Bond Index, Managed Equity, Asset Allocation, International Equity,
Special Equity, Equity-Income, Growth, Overseas, Asset Manager, High Income,
and Gold and Natural Resources Fund Divisions of General American Separate
Account Eleven as of December 31, 1996, and the results of their operations
and changes in their net assets for the periods presented, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
St. Louis, Missouri
February 14, 1997
<PAGE> 49
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<CAPTION>
S & P 500 MONEY BOND MANAGED ASSET
INDEX MARKET INDEX EQUITY ALLOCATION
FUND DIVISION<F*> FUND DIVISION FUND DIVISION FUND DIVISION FUND DIVISION
----------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Assets:
Investments in General American
Capital Company, at market value
(see Schedule of Investments): $14,490,435 $ 8,200,563 $ 6,766,875 $ 2,790,019 $ 8,056,468
----------- ----------- ----------- ----------- -----------
Total assets 14,490,435 8,200,563 6,766,875 2,790,019 8,056,468
----------- ----------- ----------- ----------- -----------
Liabilities:
Payable to General American Life
Insurance Company 7,303 38,137 3,293 20,163 21,792
----------- ----------- ----------- ----------- -----------
Total net assets $14,483,132 $ 8,162,426 $ 6,763,582 $ 2,769,856 $ 8,034,676
=========== =========== =========== =========== ===========
Total net assets represented by:
Individual Variable Universal Life cash
value invested in Separate Account $ 5,316,476 $ 940,245 $ 1,397,307 $ 2,130,543 $ 6,811,743
Individual Variable General Select Plus
cash value invested in Separate Account 7,147,078 5,740,881 5,061,218 413,080 901,156
Individual Variable Universal Life-100
cash value invested in Separate Account 2,019,578 1,481,300 305,057 226,233 321,777
----------- ----------- ----------- ----------- -----------
Total net assets $14,483,132 $ 8,162,426 $ 6,763,582 $ 2,769,856 $ 8,034,676
=========== =========== =========== =========== ===========
Total units held - VUL-95 195,587 58,805 71,443 91,667 274,368
Total units held - VGSP 407,634 494,355 422,341 25,596 61,197
Total units held - VUL-100 122,221 134,892 25,326 14,277 21,970
VUL-95 Net unit value $ 27.18 $ 15.99 $ 19.56 $ 23.24 $ 24.83
VGSP Net unit value $ 17.53 $ 11.61 $ 11.98 $ 16.14 $ 14.73
VUL-100 Net unit value $ 16.52 $ 10.98 $ 12.05 $ 15.85 $ 14.65
Cost of investments $12,508,220 $ 8,457,415 $ 7,001,534 $ 2,673,250 $ 7,398,734
<FN>
<F*> This fund was formerly known as the Equity Index Fund.
See accompanying notes to the financial statements.
(continued)
</TABLE>
<PAGE> 50
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<CAPTION>
INTERNATIONAL SPECIAL
EQUITY EQUITY EQUITY-INCOME GROWTH OVERSEAS
FUND DIVISION FUND DIVISION FUND DIVISION FUND DIVISION FUND DIVISION
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Assets:
Investments in General American
Capital Company, at market value
(see Schedule of Investments): $ 6,792,249 $ 4,089,552 $ 0 $ 0 $ 0
Investments in Variable Insurance
Products Fund, at market value
(see Schedule of Investments): 0 0 10,317,272 13,347,649 5,440,850
Receivable from General American
Life Insurance Company 0 0 35,536 22,963 5,080
----------- ----------- ----------- ----------- -----------
Total assets 6,792,249 4,089,552 10,352,808 13,370,612 5,445,930
----------- ----------- ----------- ----------- -----------
Liabilities:
Payable to General American Life
Insurance Company 2,851 4,375 0 0 0
----------- ----------- ----------- ----------- -----------
Total net assets $ 6,789,398 $ 4,085,177 $10,352,808 $13,370,612 $ 5,445,930
=========== =========== =========== =========== ===========
Total net assets represented by:
Individual Variable Universal Life cash
value invested in Separate Account $ 2,554,237 $ 2,878,175 $ 5,046,288 $ 6,456,539 $ 3,171,627
Individual Variable General Select Plus
cash value invested in Separate Account 604,901 748,827 2,820,807 3,877,999 1,603,303
Individual Variable Universal Life-100
cash value invested in Separate Account 488,644 458,175 2,485,713 3,036,074 671,000
General American Life Insurance
Company seed money 3,141,616 0 0 0 0
----------- ----------- ----------- ----------- -----------
Total net assets $ 6,789,398 $ 4,085,177 $10,352,808 $13,370,612 $ 5,445,930
=========== =========== =========== =========== ===========
Total units held - VUL-95 164,557 185,140 287,907 367,037 202,771
Total units held - VGSP 45,125 48,209 160,791 233,747 114,696
Total units held - VUL-100 42,748 32,239 163,860 198,998 55,007
Total units held - Seed Money 200,000 0 0 0 0
VUL-95 Net unit value $ 15.52 $ 15.55 $ 17.53 $ 17.59 $ 15.64
VGSP Net unit value $ 13.41 $ 15.53 $ 17.54 $ 16.59 $ 13.98
VUL-100 Net unit value $ 11.43 $ 14.21 $ 15.17 $ 15.26 $ 12.20
Cost of investments $ 6,523,918 $ 4,065,431 $ 8,788,329 $11,308,224 $ 4,801,413
See accompanying notes to the financial statements. (continued)
</TABLE>
<PAGE> 51
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<CAPTION>
ASSET HIGH GOLD & NATURAL
MANAGER INCOME RESOURCES FUND
FUND DIVISION FUND DIVISION DIVISION
------------- ------------- --------------
<S> <C> <C> <C>
Assets:
Investments in Variable Insurance
Products Fund, at market value
(see Schedule of Investments): $ 0 $ 1,190,177 $ 0
Investments in Variable Insurance
Products Fund II, at market value
(see Schedule of Investments): 276,901 0 0
Investments in Van Eck Worldwide
Insurance Trust at market value
(see Schedule of Investments): 0 0 186,275
Receivable from General American
Life Insurance Company 0 854 44
--------- ----------- ---------
Total assets 276,901 1,191,031 186,319
--------- ----------- ---------
Liabilities:
Payable to General American Life
Insurance Company 437 0 0
--------- ----------- ---------
Total net assets $ 276,464 $ 1,191,031 $ 186,319
========= =========== =========
Total net assets represented by:
Individual Variable Universal Life
cash value invested in Separate Account $ 17,461 $ 260,284 $ 68,992
Individual Variable General Select Plus
cash value invested in Separate Account 51,077 448,378 48,169
Individual Variable Universal Life-100
cash value invested in Separate Account 207,926 482,369 69,158
--------- ----------- ---------
Total net assets $ 276,464 $ 1,191,031 $ 186,319
========= =========== =========
Total units held - VUL-95 1,443 21,331 5,927
Total units held - VGSP 4,211 36,657 4,130
Total units held - VUL-100 17,193 39,563 5,945
VUL-95 Net unit value $ 12.10 $ 12.09 $ 11.64
VGSP Net unit value $ 12.13 $ 12.23 $ 11.66
VUL-100 Net unit value $ 12.09 $ 12.19 $ 11.63
Cost of investments $ 257,108 $ 1,133,115 $ 182,929
See accompanying notes to the financial statements.
</TABLE>
<PAGE> 52
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<CAPTION>
S & P 500 INDEX MONEY MARKET
FUND DIVISION<F*> FUND DIVISION
---------------------------------- ----------------------------------
1996 1995 1994 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income<F**> $ -- $ -- $ -- $ -- $ -- $ --
Expenses:
Mortality and expense charges - VUL-95 $ (38,288) (31,973) (25,046) (8,690) (13,058) (14,631)
Mortality and expense charges - VGSP (16,887) (3,459) (1,323) (21,323) (8,747) (2,628)
Mortality and expense charges - VUL-100 (9,712) (233) 0 (10,113) (1,350) 0
---------- ---------- ---------- ---------- ---------- ----------
Total expenses (64,887) (35,665) (26,369) (40,126) (23,155) (17,259)
---------- ---------- ---------- ---------- ---------- ----------
Net investment expense (64,887) (35,665) (26,369) (40,126) (23,155) (17,259)
---------- ---------- ---------- ---------- ---------- ----------
Net realized gain on investments:
Realized gain from distributions 435,253 128,459 113,854 363,544 231,929 64,413
Realized gain on sales 244,401 339,252 62,974 14,173 65,400 14,509
---------- ---------- ---------- ---------- ---------- ----------
Net realized gain on investments 679,654 467,711 176,828 377,717 297,329 78,922
---------- ---------- ---------- ---------- ---------- ----------
Net unrealized gain (loss) on investments:
Unrealized gain (loss) on investments,
beginning of period 851,246 (10,068) 133,360 (158,740) (31,189) (40,988)
Unrealized gain (loss) on investments,
end of period 1,982,215 851,246 (10,068) (256,852) (158,740) (31,189)
---------- ---------- ---------- ---------- ---------- ----------
Net unrealized gain (loss) on investments 1,130,969 861,314 (143,428) (98,112) (127,551) 9,799
---------- ---------- ---------- ---------- ---------- ----------
Net gain on investments 1,810,623 1,329,025 33,400 279,605 169,778 88,721
---------- ---------- ---------- ---------- ---------- ----------
Net increase in net assets resulting
from operations $1,745,736 $1,293,360 $ 7,031 $ 239,479 $ 146,623 $ 71,462
========== ========== ========== ========== ========== ==========
<FN>
<F*>This fund was formerly known as the Equity Index Fund.
<F**>See Note 2C.
See accompanying notes to the financial statements.
(continued)
</TABLE>
<PAGE> 53
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<CAPTION>
BOND INDEX MANAGED EQUITY
FUND DIVISION FUND DIVISION
---------------------------------- ----------------------------------
1996 1995 1994 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income<F**> $ -- $ -- $ -- $ -- $ -- $ --
Expenses:
Mortality and expense charges - VUL-95 (11,376) (18,478) (19,171) (16,463) (16,717) (16,186)
Mortality and expense charges - VGSP (10,234) (153) (19) (1,751) (208) (43)
Mortality and expense charges - VUL-100 (1,802) (24) 0 (1,080) (40) 0
---------- ---------- ---------- ---------- ---------- ----------
Total expenses (23,412) (18,655) (19,190) (19,294) (16,965) (16,229)
---------- ---------- ---------- ---------- ---------- ----------
Net investment expense (23,412) (18,655) (19,190) (19,294) (16,965) (16,229)
---------- ---------- ---------- ---------- ---------- ----------
Net realized gain on investments:
Realized gain from distributions 496,106 70,070 253,405 292,621 193,544 309,279
Realized gain (loss) on sales (15,797) (31,850) 756 11,431 (1,087) 10,562
---------- ---------- ---------- ---------- ---------- ----------
Net realized gain on investments 480,309 38,220 254,161 304,052 192,457 319,841
---------- ---------- ---------- ---------- ---------- ----------
Net unrealized gain (loss) on investments:
Unrealized gain (loss) on investments,
beginning of period 19,005 (313,506) 32,498 (26,912) (408,116) (14,824)
Unrealized gain (loss) on investments,
end of period (234,659) 19,005 (313,506) 116,769 (26,912) (408,116)
---------- ---------- ---------- ---------- ---------- ----------
Net unrealized gain (loss) on investments (253,664) 332,511 (346,004) 143,681 381,204 (393,292)
---------- ---------- ---------- ---------- ---------- ----------
Net gain (loss) on investments 226,645 370,731 (91,843) 447,733 573,661 (73,451)
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) in net assets
resulting from operations $ 203,233 $ 352,076 $ (111,033) $ 428,439 $ 556,696 $ (89,680)
========== ========== ========== ========== ========== ==========
<FN>
<F**>See Note 2C.
See accompanying notes to the financial statements.
(continued)
</TABLE>
<PAGE> 54
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<CAPTION>
ASSET ALLOCATION INTERNATIONAL EQUITY
FUND DIVISION FUND DIVISION
---------------------------------- ----------------------------------
1996 1995 1994 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income<F**> $ -- $ -- $ -- $ -- $ -- $ --
Expenses:
Mortality and expense charges - VUL-95 (52,462) (46,892) (34,698) (19,773) (13,991) (8,440)
Mortality and expense charges - VGSP (5,214) (5,214) (6,461) (3,014) (2,260) (1,125)
Mortality and expense charges - VUL-100 (1,078) (10) 0 (2,475) (66) 0
Administrative expense charges - Seed Money 0 0 0 (25,684) (23,784) (23,655)
---------- ---------- ---------- ---------- ---------- ----------
Total expenses (58,754) (52,116) (41,159) (50,946) (40,101) (33,220)
---------- ---------- ---------- ---------- ---------- ----------
Net investment expense (58,754) (52,116) (41,159) (50,946) (40,101) (33,220)
---------- ---------- ---------- ---------- ---------- ----------
Net realized gain (loss) on investments:
Realized gain from distributions 554,498 474,238 436,647 164,186 514,927 329,985
Realized gain (loss) on sales 36,291 131,272 (20,756) 43,830 41,508 71,523
---------- ---------- ---------- ---------- ---------- ----------
Net realized gain on investments: 590,789 605,510 415,891 208,016 556,435 401,508
---------- ---------- ---------- ---------- ---------- ----------
Net unrealized gain (loss) on investments:
Unrealized gain (loss) on investments,
beginning of period 197,823 (765,423) (146,386) 40,286 198,307 400,379
Unrealized gain (loss) on investments,
end of period 657,734 197,823 (765,423) 268,331 40,286 198,307
---------- ---------- ---------- ---------- ---------- ----------
Net unrealized gain (loss) on investments 459,911 963,246 (619,037) 228,045 (158,021) (202,072)
---------- ---------- ---------- ---------- ---------- ----------
Net gain (loss) on investments 1,050,700 1,568,756 (203,146) 436,061 398,414 199,436
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) in net
assets resulting from operations $ 991,946 $1,516,640 $ (244,305) $ 385,115 $ 358,313 $ 166,216
========== ========== ========== ========== ========== ==========
<FN>
<F**>See Note 2C.
See accompanying notes to the financial statements.
(continued)
</TABLE>
<PAGE> 55
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<CAPTION>
SPECIAL EQUITY EQUITY-INCOME
FUND DIVISION FUND DIVISION
---------------------------------- ----------------------------------
1996 1995 1994 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividend income<F**> $ -- $ -- $ -- $ 9,260 $ 94,314 $ 36,567
Expenses:
Mortality and expense charges - VUL-95 (21,527) (16,741) (9,881) (38,120) (24,157) (9,487)
Mortality and expense charges - VGSP (4,349) (3,645) (1,556) (13,918) (6,731) (1,631)
Mortality and expense charges - VUL-100 (2,084) (72) 0 (10,210) (378) 0
Administrative expense charges - Seed Money (5,213) (11,191) (9,556) 0 0 0
---------- ---------- ---------- ---------- ---------- ----------
Total expenses (33,173) (31,649) (20,993) (62,248) (31,266) (11,118)
---------- ---------- ---------- ---------- ---------- ----------
Net investment income (loss) (33,173) (31,649) (20,993) (52,988) 63,048 25,449
---------- ---------- ---------- ---------- ---------- ----------
Net realized gain on investments:
Realized gain from distributions 805,221 210,225 62,272 265,454 125,686 31,411
Realized gain on sales 417,832 121,217 16,038 130,118 67,467 8,414
---------- ---------- ---------- ---------- ---------- ----------
Net realized gain on investments: 1,223,053 331,442 78,310 395,572 193,153 39,825
---------- ---------- ---------- ---------- ---------- ----------
Net unrealized gain (loss) on investments:
Unrealized gain on investments,
beginning of period 464,281 75,550 165,807 868,207 17,485 12,226
Unrealized gain on investments,
end of period 24,121 464,281 75,550 1,528,943 868,207 17,485
---------- ---------- ---------- ---------- ---------- ----------
Net unrealized gain (loss) on investments (440,160) 388,731 (90,257) 660,736 850,722 5,259
---------- ---------- ---------- ---------- ---------- ----------
Net gain (loss) on investments 782,893 720,173 (11,947) 1,056,308 918,189 13,673
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) in net assets resulting
from operations $ 749,720 $ 688,524 $ (32,940) $1,003,320 $1,106,923 $ 70,533
========== ========== ========== ========== ========== ==========
<FN>
<F**>See Note 2C.
See accompanying notes to the financial statements.
(continued)
</TABLE>
<PAGE> 56
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<CAPTION>
GROWTH OVERSEAS
FUND DIVISION FUND DIVISION
---------------------------------- ----------------------------------
1996 1995 1994 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividend income $ 21,639 $ 21,771 $ 6,373 $ 41,332 $ 8,707 $ 3,448
Expenses:
Mortality and expense charges - VUL-95 (51,026) (34,577) (13,498) (24,616) (17,340) (8,858)
Mortality and expense charges - VGSP (19,582) (11,893) (4,366) (8,371) (5,232) (1,870)
Mortality and expense charges - VUL-100 (14,179) (439) 0 (3,542) (152) 0
---------- ---------- ---------- ---------- ---------- ----------
Total expenses (84,787) (46,909) (17,864) (36,529) (22,724) (10,728)
---------- ---------- ---------- ---------- ---------- ----------
Net investment income (loss) (63,148) (25,138) (11,491) 4,803 (14,017) (7,280)
---------- ---------- ---------- ---------- ---------- ----------
Net realized gain (loss) on investments:
Realized gain from distributions 546,396 0 67,449 45,464 8,707 0
Realized gain (loss) on sales 254,460 176,048 (6,807) 42,658 19,162 28,436
---------- ---------- ---------- ---------- ---------- ----------
Net realized gain on investments: 800,856 176,048 60,642 88,122 27,869 28,436
---------- ---------- ---------- ---------- ---------- ----------
Net unrealized gain (loss) on investments:
Unrealized gain (loss) on investments,
beginning of period 1,501,642 51,539 40,113 210,998 (36,045) 23,986
Unrealized gain (loss) on investments,
end of period 2,039,425 1,501,642 51,539 639,437 210,998 (36,045)
---------- ---------- ---------- ---------- ---------- ----------
Net unrealized gain (loss) on investments 537,783 1,450,103 11,426 428,439 247,043 (60,031)
---------- ---------- ---------- ---------- ---------- ----------
Net gain (loss) on investments 1,338,639 1,626,151 4,619 516,561 266,205 (31,595)
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) in
net assets resulting from operations $1,275,491 $1,601,013 $ 60,577 $ 521,364 $ 260,895 $ (38,875)
========== ========== ========== ========== ========== ==========
See accompanying notes to the financial statements.
(continued)
</TABLE>
<PAGE> 57
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF OPERATIONS
PERIOD ENDED DECEMBER 31, 1996, and 1995
<CAPTION>
ASSET MANAGER HIGH INCOME GOLD & NATURAL RESOURCES
FUND DIVISION FUND DIVISION FUND DIVISION
1996 1995<F*> 1996 1995<F*> 1996 1995<F*>
---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividend income $ 2,632 $ 0 $ 28,732 $ 0 $ 1,298 $ 32
Expenses:
Mortality and expense charges - VUL-95 (126) (3) (1,639) (122) (389) (3)
Mortality and expense charges - VGSP (193) (20) (1,456) (55) (214) 0
Mortality and expense charges - VUL-100 (1,031) (29) (2,645) (76) (410) (11)
---------- ---------- ---------- ---------- ---------- -----------
Total expenses (1,350) (52) (5,740) (253) (1,013) (14)
---------- ---------- ---------- ---------- ---------- -----------
Net investment income (loss) 1,282 (52) 22,992 (253) 285 18
---------- ---------- ---------- ---------- ---------- -----------
Net realized gain (loss) on investments:
Realized gain from distributions 2,171 0 5,621 0 1,273 0
Realized gain (loss) on sales 1,016 13 (202) 1,132 1,682 (5)
---------- ---------- ---------- ---------- ---------- -----------
Net realized gain (loss) on investments: 3,187 13 5,419 1,132 2,955 (5)
---------- ---------- ---------- ---------- ---------- -----------
Net unrealized gain on investments:
Unrealized gain on investments,
beginning of period 1,779 0 2,337 0 370 0
Unrealized gain on investments,
end of period 19,793 1,779 57,062 2,337 3,346 370
---------- ---------- ---------- ---------- ---------- -----------
Net unrealized gain on investments 18,014 1,779 54,725 2,337 2,976 370
---------- ---------- ---------- ---------- ---------- -----------
Net gain on investments 21,201 1,792 60,144 3,469 5,931 365
---------- ---------- ---------- ---------- ---------- -----------
Net increase in net assets resulting
from operations $ 22,483 $ 1,740 $ 83,136 $ 3,216 $ 6,216 $ 383
========== ========== ========== ========== ========== ===========
<FN>
<F*> The Asset Manager Fund, High Income Fund, and Gold & Natural Resources Fund began operations on July 19, May 24, and
August 9, 1995, respectively.
See accompanying notes to the financial statements.
</TABLE>
<PAGE> 58
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<CAPTION>
S & P 500 INDEX MONEY MARKET
FUND DIVISION<F*> FUND DIVISION
----------------------------------- ----------------------------------
1996 1995 1994 1996 1995 1994
----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment expense $ (64,887) $ (35,665) $ (26,369) $ (40,126) $ (23,155) $ (17,259)
Net realized gain on investments 679,654 467,711 176,828 377,717 297,329 78,922
Net unrealized gain (loss) on investments 1,130,969 861,314 (143,428) (98,112) (127,551) 9,799
----------- ---------- ---------- ---------- ---------- ----------
Net increase in net assets
resulting from operations 1,745,736 1,293,360 7,031 239,479 146,623 71,462
Net deposits into (withdrawals from)
Separate Account 8,067,322 (145,477) 571,671 3,557,381 2,340,021 177,261
----------- ---------- ---------- ---------- ---------- ----------
Increase in net assets 9,813,058 1,147,883 578,702 3,796,860 2,486,644 248,723
Net assets, beginning of period 4,670,074 3,522,191 2,943,489 4,365,566 1,878,922 1,630,199
----------- ---------- ---------- ---------- ---------- ----------
Net assets, end of period $14,483,132 $4,670,074 $3,522,191 $8,162,426 $4,365,566 $1,878,922
=========== ========== ========== ========== ========== ==========
<FN>
<F*>This fund was formerly known as the Equity Index Fund.
See accompanying notes to the financial statements.
(continued)
</TABLE>
<PAGE> 59
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<CAPTION>
BOND INDEX MANAGED EQUITY
FUND DIVISION FUND DIVISION
----------------------------------- ----------------------------------
1996 1995 1994 1996 1995 1994
---------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment expense $ (23,412) $ (18,655) $ (19,190) $ (19,294) $ (16,965) $ (16,229)
Net realized gain on investments 480,309 38,220 254,161 304,052 192,457 319,841
Net unrealized gain (loss) on investments (253,664) 332,511 (346,004) 143,681 381,204 (393,292)
---------- ----------- ---------- ---------- ---------- ----------
Net increase (decrease) in net assets
resulting from operations 203,233 352,076 (111,033) 428,439 556,696 (89,680)
Net deposits into (withdrawals from)
Separate Account 5,128,242 (1,271,114) 143,229 436,005 (487,360) (55,715)
---------- ----------- ---------- ---------- ---------- ----------
Increase (decrease) in net assets 5,331,475 (919,038) 32,196 864,444 69,336 (145,395)
Net assets, beginning of period 1,432,107 2,351,145 2,318,949 1,905,412 1,836,076 1,981,471
---------- ----------- ---------- ---------- ---------- ----------
Net assets, end of period $6,763,582 $ 1,432,107 $2,351,145 $2,769,856 $1,905,412 $1,836,076
========== =========== ========== ========== ========== ==========
See accompanying notes to the financial statements.
(continued)
</TABLE>
<PAGE> 60
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<CAPTION>
ASSET ALLOCATION INTERNATIONAL EQUITY
FUND DIVISION FUND DIVISION
---------------------------------- ----------------------------------
1996 1995 1994 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment expense $ (58,754) $ (52,116) $ (41,159) $ (50,946) $ (40,101) $ (33,220)
Net realized gain on investments 590,789 605,510 415,891 208,016 556,435 401,508
Net unrealized gain (loss) on investments 459,911 963,246 (619,037) 228,045 (158,021) (202,072)
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) in net assets
resulting from operations 991,946 1,516,640 (244,305) 385,115 358,313 166,216
Net deposits into (withdrawals from)
Separate Account 1,086,684 (709,124) 649,032 1,016,960 789,597 775,500
---------- ---------- ---------- ---------- ---------- ----------
Increase in net assets 2,078,630 807,516 404,727 1,402,075 1,147,910 941,716
Net assets, beginning of period 5,956,046 5,148,530 4,743,803 5,387,323 4,239,413 3,297,697
---------- ---------- ---------- ---------- ---------- ----------
Net assets, end of period $8,034,676 $5,956,046 $5,148,530 $6,789,398 $5,387,323 $4,239,413
========== ========== ========== ========== ========== ==========
See accompanying notes to the financial statements.
(continued)
</TABLE>
<PAGE> 61
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<CAPTION>
SPECIAL EQUITY EQUITY-INCOME
FUND DIVISION FUND DIVISION
---------------------------------- -----------------------------------
1996 1995 1994 1996 1995 1994
---------- ---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment income (loss) $ (33,173) $ (31,649) $ (20,993) $ (52,988) $ 63,048 $ 25,449
Net realized gain on investments 1,223,053 331,442 78,310 395,572 193,153 39,825
Net unrealized gain (loss) on investments (440,160) 388,731 (90,257) 660,736 850,722 5,259
---------- ---------- ---------- ----------- ---------- ----------
Net increase (decrease) in net assets
resulting from operations 749,720 688,524 (32,940) 1,003,320 1,106,923 70,533
Net deposits into (withdrawals from)
Separate Account (860,933) 229,832 1,309,438 3,869,404 2,068,778 1,686,138
---------- ---------- ---------- ----------- ---------- ----------
Increase (decrease) in net assets (111,213) 918,356 1,276,498 4,872,724 3,175,701 1,756,671
Net assets, beginning of period 4,196,390 3,278,034 2,001,536 5,480,084 2,304,383 547,712
---------- ---------- ---------- ----------- ---------- ----------
Net assets, end of period $4,085,177 $4,196,390 $3,278,034 $10,352,808 $5,480,084 $2,304,383
========== ========== ========== =========== ========== ==========
See accompanying notes to the financial statements.
(continued)
</TABLE>
<PAGE> 62
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<CAPTION>
GROWTH OVERSEAS
FUND DIVISION FUND DIVISION
---------------------------------------- -----------------------------------------
1996 1995 1994 1996 1995 1994
------------ ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment income (loss) $ (63,148) $ (25,138) $ (11,491) $ 4,803 $ (14,017) $ (7,280)
Net realized gain on investments 800,856 176,048 60,642 88,122 27,869 28,436
Net unrealized gain (loss) on investments 537,783 1,450,103 11,426 428,439 247,043 (60,031)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations 1,275,491 1,601,013 60,577 521,364 260,895 (38,875)
Net deposits into Separate Account 4,760,220 1,991,002 2,588,073 1,491,289 1,053,659 1,672,381
------------ ------------ ------------ ------------ ------------ ------------
Increase in net assets 6,035,711 3,592,015 2,648,650 2,012,653 1,314,554 1,633,506
Net assets, beginning of period 7,334,901 3,742,886 1,094,236 3,433,277 2,118,723 485,217
------------ ------------ ------------ ------------ ------------ ------------
Net assets, end of period $ 13,370,612 $ 7,334,901 $ 3,742,886 $ 5,445,930 $ 3,433,277 $ 2,118,723
============ ============ ============ ============ ============ ============
See accompanying notes to the financial statements. (continued)
<PAGE> 63
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF CHANGES IN NET ASSETS
PERIOD ENDED DECEMBER 31, 1996 AND 1995
<CAPTION>
ASSET MANAGER HIGH INCOME GOLD & NATURAL RESOURCES
FUND DIVISION FUND DIVISION FUND DIVISION
---------------------- ------------------------ -----------------------
1996 1995<F*> 1996 1995<F*> 1996 1995<F*>
--------- --------- ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment income (loss) $ 1,282 $ (52) $ 22,992 $ (253) $ 285 $ 18
Net realized gain (loss) on investments 3,187 13 5,419 1,132 2,955 (5)
Net unrealized gain on investments 18,014 1,779 54,725 2,337 2,976 370
--------- -------- ----------- --------- --------- --------
Net increase in net assets
resulting from operations 22,483 1,740 83,136 3,216 6,216 383
Net deposits into Separate Account 202,863 49,378 904,946 199,733 170,306 9,414
--------- -------- ----------- --------- --------- --------
Increase in net assets 225,346 51,118 988,082 202,949 176,522 9,797
Net assets, beginning of period 51,118 0 202,949 0 9,797 0
--------- -------- ----------- --------- --------- --------
Net assets, end of period $ 276,464 $ 51,118 $ 1,191,031 $ 202,949 $ 186,319 $ 9,797
========= ======== =========== ========= ========= ========
<FN>
<F*> The Asset Manager Fund, High Income Fund, and Gold & Natural Resources Fund
began operations on July 19, May 24, and August 9, 1995, respectively.
See accompanying notes to the financial statements.
</TABLE>
<PAGE> 64
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996
<CAPTION>
No. of Shares Market Value
----------------- ----------------
<S> <C> <C>
S & P 500 Index Fund <F**>
General American Capital Company<F*> 488,464 $14,490,435
Money Market Fund
General American Capital Company<F*> 475,589 8,200,563
Bond Index Fund
General American Capital Company<F*> 318,998 6,766,875
Managed Equity Fund
General American Capital Company<F*> 110,250 2,790,019
Asset Allocation Fund
General American Capital Company<F*> 300,232 8,056,468
International Equity Fund
General American Capital Company<F*> 418,579 6,792,249
Special Equity Fund
General American Capital Company<F*> 249,107 4,089,552
Equity-Income Fund
Variable Insurance Products Fund 490,598 10,317,272
Growth Fund
Variable Insurance Products Fund 428,634 13,347,649
Overseas Fund
Variable Insurance Products Fund 288,792 5,440,850
Asset Manager Fund
Variable Insurance Products Fund II 16,356 276,901
High Income Fund
Variable Insurance Products Fund 95,062 1,190,177
Gold & Natural Resources Fund
Van Eck Worldwide Insurance Trust 11,141 186,275
<FN>
<F*>These funds use consent dividending. See Note 2C.
<F**>This fund was formerly known as the Equity Index Fund.
See accompanying notes to the financial statements.
</TABLE>
<PAGE> 65
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 1 - ORGANIZATION
General American Separate Account Eleven (the Separate Account) commenced
operations on September 15, 1987 and is registered under the Investment
Company Act of 1940 (1940 Act) as a unit investment trust. The Separate
Account offers three products: Variable Universal Life (VUL-95), Variable
General Select Plus (VGSP), and Variable Universal Life (VUL-100) that
receive and invest net premiums for flexible premium variable life insurance
policies that are issued by General American Life Insurance Company (General
American). The Separate Account is divided into thirteen Divisions. Each
Division invests exclusively in shares of a single Fund of either General
American Capital Company, Variable Insurance Products Fund, Variable
Insurance Products Fund II, or Van Eck Worldwide Insurance Trust which are
open-end, diversified management companies. The Funds of the General
American Capital Company, sponsored by General American, are the S & P 500
Index (formerly Equity Index), Money Market, Bond Index, Managed Equity,
Asset Allocation, International Equity, and the Special Equity Fund
Divisions. The funds of the Variable Insurance Products Fund, managed by
Fidelity Management & Research Company, are the Equity-Income, Growth,
Overseas, and the High Income Fund Divisions. The fund of the Variable
Insurance Products Fund II, managed by Fidelity Management and Research
Company is the Asset Manager Fund. The fund of the Van Eck Worldwide
Insurance Trust, managed by Van Eck Associates Corporation, is the Gold and
Natural Resources Fund. Policyholders have the option of directing their
premium payments into one or all of the Funds as well as into the general
account of General American, which is not generally subject to regulation
under the Securities Act of 1933 or the 1940 Act.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Separate Account in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
A. Investments
The Separate Accounts' investments in the thirteen Funds are valued
daily based on the net asset values of the respective Fund shares held
as reported to General American by General American Capital Company,
Variable Insurance Products Fund, Variable Insurance Products Fund II,
and Van Eck Worldwide Insurance Trust. The specific identification
method is used in determining the cost of shares sold on withdrawals
by the Separate Account. Share transactions are recorded on the trade
date, which is the same as the settlement date.
B. Federal Income Taxes
Under current federal income tax law, capital gains from sales of
investments of the Separate Account are not taxable. Therefore, no
federal income tax expense has been provided.
C. Distribution of Income and Realized Capital Gains
General American Capital Company follows the federal income tax
practice known as consent dividending, whereby substantially all of
its net investment income and realized gains are deemed to be passed
through to the Separate Account. As a result, General American
Capital Company does not pay any dividends or capital gain
distributions. During December of each year, accumulated investment
income and capital gains of the underlying Capital Company Fund are
allocated to the Separate Account by increasing the cost basis and
recognizing a capital gain in the Separate Account. This adjustment
has no impact on the net assets of the separate account.
<PAGE> 66
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
The Variable Insurance Products Fund, Variable Insurance Products Fund
II, and Van Eck Worldwide Insurance Trust intend to pay out all of its
net investment income and net realized capital gains each year.
Dividends from the funds are distributed at least annually on a per
share basis and are recorded on the ex dividend date. Normally, net
realized capital gains, if any, are distributed each year for each
fund. Such income and capital gain distributions are automatically
reinvested in additional shares of the funds.
D. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of increase
and decrease in net assets from operations during the period. Actual
results could differ from those estimates.
NOTE 3 - POLICY CHARGES
Charges are deducted from premiums and paid to General American for providing
the insurance benefits set forth in the contracts and any additional benefits
added by rider, administering the policies, reimbursement of expenses
incurred in distributing the policies, and assuming certain risks in
connection with the policies.
Prior to the allocation of net premiums among General American's general
account and the Fund Divisions of the Separate Account, premium payments are
reduced by premium expense charges, which consist of a sales charge and a
charge for premium taxes. The premium payment, less the premium expense
charge, equals the net premium.
Sales Charge: A sales charge equal to 6% is deducted from each
-------------
VUL-95 premium paid. A sales charge of 5% in years one through ten and
2.25% thereafter is deducted from each VGSP premium paid. This charge
is deducted to partially reimburse General American for expenses
incurred in distributing the policy and any additional benefits
provided by rider. No sales charge is deducted from VUL-100 premiums.
Premium Taxes: Various state and political subdivisions impose a tax
--------------
on premiums received by insurance companies. Premium taxes vary from
state to state. A deduction of 2% of each VUL-95 premium, 2.5% of each
VGSP premium, and 2.10% of each VUL-100 premium is made from each
premium payment for these taxes. In addition, a 1.25% deduction is
taken from VUL-100 premiums to cover the company's Federal income tax
costs attributable to the amount of premium received.
Charges are deducted monthly from the cash value of each policy to compensate
General American for (a) certain administrative costs; (b) insurance
underwriting and acquisition expenses in connection with issuing a policy;
(c) the cost of insurance, and (d) the cost of optional benefits added by
rider.
Administrative Charge: General American has responsibility for the
----------------------
administration of the policies and the Separate Account. As
reimbursement for administrative expenses related to the maintenance
of each policy and the Separate Account, General American assesses a
monthly administrative charge against each policy. This charge is
$10 per month for a standard policy and $12 per month for a pension
policy during the first 12 policy months and $4 (standard) and $6
(pension) per month for all policy months beyond the 12th for VUL-95
contracts. The charge is $4 per month for VGSP contracts. The
charge is $13 per month during the first 12 policy months and $6 per
month thereafter for VUL-100 contracts.
Insurance Underwriting and Acquisition Expense Charge: An
------------------------------------------------------
additional administrative charge is deducted from policy cash value
for VUL-95 as part of the monthly deduction during the first 12
policy months and for the first 12 policy months following an
increase in the face amount. The charge is $0.08 per month
multiplied by the face amount divided by 1,000. For VUL-100, the
charge during the first 12 policy months is $0.16 per month
multiplied by the face amount divided by 1,000, and in all policy
years thereafter, the charge is $0.01 per month multiplied by the
face amount divided by 1,000.
<PAGE> 67
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
Cost of Insurance: The cost of insurance is deducted on each
------------------
monthly anniversary date for the following policy month. Because the
cost of insurance depends upon a number of variables, the cost varies
for each policy month. The cost of insurance is determined
separately for the initial face amount and for any subsequent
increases in face amount. General American determines the monthly
cost of insurance charge by multiplying the applicable cost of
insurance rate or rates by the net amount at risk for each policy
month.
Optional Rider Benefits Charge: This monthly deduction includes
-------------------------------
charges for any additional benefits provided by rider.
Contingent Deferred Sales Charge: During the first ten policy
---------------------------------
years for VUL-95 and VGSP, and the first fifteen years for VUL-100,
General American also assesses a charge upon surrender or lapse of a
Policy, a requested decrease in face amount, or a partial withdrawal
that causes the face amount to decrease. The amount of the charge
assessed depends on a number of factors, including whether the event
is a full surrender or lapse or only a decrease in face amount, the
amount of premiums received to date by General American, and the
policy year in which the surrender or other event takes place.
Mortality and Expense Charge: In addition to the above charges, a
-----------------------------
daily charge is made for the mortality and expense risks assumed by
General American. General American deducts a daily charge from the
Separate Account at the rate of .002319% for VUL-95, .0019111% for
VGSP, and .002455% for VUL-100 of the net assets of each division of
the Separate Account, which equals an annual rate of .85%, .70%, and
.90% for VUL-95, VGSP, and VUL-100 respectively. VUL-95, VGSP, and
VUL-100 mortality and expense charges for 1996 were $315,392,
$106,506, and $60,361, respectively. The mortality risk assumed by
General American is the risk that those insured may die sooner than
anticipated and therefore, that General American will pay an
aggregate amount of death benefits greater than anticipated. The
expense risk assumed is that expenses incurred in issuing and
administering the policy will exceed the amounts realized from the
administrative charges assessed against the policy.
NOTE 4 - INVESTMENT OBJECTIVES AND MANAGER CHANGES
Effective January 1, 1997, the names, investment objectives and portfolio
managers of the underlying General American Capital Company International
Equity Fund and the Special Equity Fund changed. In addition, the portfolio
manager of the underlying General American Capital Company Managed Equity
Fund changed effective March 1, 1997.
The International Equity Fund became the International Index Fund. The
investment objective of the International Index Fund is to obtain investment
results that parallel the price and yield performance of publicly-traded
common stocks in the Morgan Stanley Capital International Europe, Australia,
and Far East Index ("EAFE Index"). The portfolio manager of the
International Index Fund is Conning Asset Management Company and the
management fee for the fund is .50% on the first $10 million in assets, .40%
on the balance over $10 million and less than $20 million and .30% on any
balance in excess of $20 million.
The Special Equity Fund became the Mid-Cap Equity Fund. The investment
objective of the Mid-Cap Equity Fund is to seek sustained growth of capital
by investing primarily in common stocks of United States-based publicly
traded companies with "medium market capitalizations". "Medium market
capitalization companies" are those whose market capitalization falls within
the range of the S&P MidCap 400 at the time of the Fund's investment. The
portfolio manager of the Mid-Cap Equity Fund is Conning Asset Management
Company and the total management fee rate remains unchanged from that of the
Special Equity Fund.
On March 1, 1997, the Managed Equity Fund will be managed by Conning Asset
Management Company. The management fee will be reduced to .40% on the first
$10 million in assets, .30% on the balance over $10 million and less than $30
million, and .25% on the balance in excess of $30 million.
<PAGE> 68
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 5 - PURCHASES AND SALES OF SHARES
During the year ended December 31, 1996, purchases including net realized
gain and income from distribution and proceeds from sales of General American
Capital Company shares were as follows:
<TABLE>
<CAPTION>
S & P 500 MONEY BOND MANAGED ASSET INTERNATIONAL SPECIAL
INDEX MARKET INDEX EQUITY ALLOCATION EQUITY EQUITY
FUND FUND FUND FUND FUND FUND FUND
---------- ----------- ---------- -------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Purchases $9,312,469 $20,770,171 $6,181,356 $969,926 $2,265,163 $ 1,461,465 $1,931,306
========== =========== ========== ======== ========== ============= ==========
Sales $ 857,995 $16,799,059 $ 546,453 $241,099 $ 681,085 $ 334,947 $2,027,557
========== =========== ========== ======== ========== ============= ==========
</TABLE>
During the year ended December 31, 1996, purchases (including dividend
reinvestment) and proceeds from sales of Variable Insurance Products Fund
Shares were as follows:
<TABLE>
<CAPTION>
EQUITY-INCOME GROWTH OVERSEAS HIGH INCOME
FUND FUND FUND FUND
------------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Purchases $4,596,809 $6,161,366 $2,021,322 $1,088,473
========== ========== ========== ==========
Sales $ 538,346 $ 926,936 $ 486,089 $ 153,055
========== ========== ========== ==========
</TABLE>
During the year ended December 31, 1996, purchases (including dividend
reinvestment) and proceeds from sales of Variable Insurance Products Fund II
shares were as follows:
<TABLE>
<CAPTION>
ASSET MANAGER
FUND
-------------
<S> <C>
Purchases $ 247,326
=========
Sales $ 39,382
=========
</TABLE>
During the year ended December 31, 1996, purchases (including dividend
reinvestment) and proceeds from sales of Van Eck Worldwide Insurance Trust
shares were as follows:
<TABLE>
<CAPTION>
GOLD AND NATURAL
RESOURCES FUND
----------------
<S> <C>
Purchases $ 191,637
=========
Sales $ 19,821
=========
</TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 6 - ACCUMULATION UNIT ACTIVITY
The following is a summary of the accumulation unit activity for the years
ended December 31, 1996, 1995, and 1994:
<TABLE>
<CAPTION>
S & P 500 INDEX MONEY MARKET
FUND DIVISION<F*> FUND DIVISION
------------------------------- ----------------------------------
1996 1995 1994 1996 1995 1994
------- -------- ------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Variable Universal Life-95:
Deposits 56,960 78,391 78,329 52,946 206,798 326,065
Withdrawals (32,408) (101,054) (61,101) (79,319) (215,226) (343,656)
Outstanding units, beginning of period 171,035 193,698 176,470 85,178 93,606 111,197
------- -------- ------- ---------- -------- --------
Outstanding units, end of period 195,587 171,035 193,698 58,805 85,178 93,606
======= ======== ======= ========== ======== ========
Variable General Select Plus:
Deposits 376,931 30,100 27,980 1,489,642 344,162 226,931
Withdrawals (16,019) (15,451) (843) (1,173,354) (215,211) (184,184)
Outstanding units, beginning of period 46,722 32,073 4,936 178,067 49,116 6,369
------- -------- ------- ---------- -------- --------
Outstanding units, end of period 407,634 46,722 32,073 494,355 178,067 49,116
======= ======== ======= ========== ======== ========
Variable Univeral Life-100:<F**>
Deposits 151,173 14,240 729,350 214,797
Withdrawals (42,505) (687) (698,266) (110,989)
Outstanding units, beginning of period 13,553 0 103,808 0
------- -------- ---------- --------
Outstanding units, end of period 122,221 13,553 134,892 103,808
======= ======== ========== ========
<FN>
<F*> This fund was formerly known as the Equity Index Fund
<F**>The Variable Universal Life 100 product was introduced in 1995, and the
first deposit was received on June 7, 1995.
</TABLE>
(continued)
<PAGE> 69
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 6 - ACCUMULATION UNIT ACTIVITY (CONTINUED)
The following is a summary of the accumulation unit activity for the years
ended December 31, 1996, 1995, and 1994:
<TABLE>
<CAPTION>
BOND INDEX MANAGED EQUITY
FUND DIVISION FUND DIVISION
------------------------------- -------------------------------
1996 1995 1994 1996 1995 1994
------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Variable Universal Life-95:
Deposits 20,690 28,341 34,979 22,639 37,042 38,637
Withdrawals (19,502) (102,229) (26,804) (23,620) (68,803) (43,454)
Outstanding units, beginning of period 70,255 144,143 135,968 92,948 124,409 129,226
------- -------- ------- ------- ------- -------
Outstanding units, end of period 71,443 70,255 144,143 91,667 92,648 124,409
======= ======== ======= ======= ======= =======
Variable General Select Plus:
Deposits 422,790 5,765 1,257 20,875 5,835 1,260
Withdrawals (6,268) (1,249) (35) (1,816) (595) (43)
Outstanding units, beginning of period 5,819 1,303 81 6,537 1,297 80
------- -------- ------- ------- ------- -------
Outstanding units, end of period 422,341 5,819 1,303 25,596 6,537 1,297
======= ======== ======= ======= ======= =======
Variable Univeral Life-100:<F**>
Deposits 31,945 1,670 15,297 1,823
Withdrawals (8,214) (75) (2,675) (168)
Outstanding units, beginning of period 1,595 0 1,655 0
------- -------- ------- -------
Outstanding units, end of period 25,326 1,595 14,277 1,655
======= ======== ======= =======
<FN>
<F**>The Variable Universal Life 100 product was introduced in 1995, and the
first deposit was received on June 7, 1995.
</TABLE>
(continued)
<PAGE> 70
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 6 - ACCUMULATION UNIT ACTIVITY, (CONTINUED)
The following is a summary of the accumulation unit activity for the years
ended December 31, 1996, 1995, and 1994:
<TABLE>
<CAPTION>
ASSET ALLOCATION INTERNATIONAL EQUITY
FUND DIVISION FUND DIVISION
------------------------------- -------------------------------
1996 1995 1994 1996 1995 1994
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Variable Universal Life-95:
Deposits 67,461 80,183 101,360 60,637 74,018 71,731
Withdrawals (33,247) (98,461) (49,338) (32,650) (28,390) (31,331)
Outstanding units, beginning of period 240,154 258,432 206,410 136,570 90,942 50,542
------- ------- ------- ------- ------- -------
Outstanding units, end of period 274,368 240,154 258,432 164,557 136,570 90,942
======= ======= ======= ======= ======= =======
Variable General Select Plus:
Deposits 21,668 12,925 18,605 24,970 16,837 18,803
Withdrawals (18,560) (31,947) (43,756) (12,229) (6,722) (730)
Outstanding units, beginning of period 58,089 77,111 102,262 32,384 22,269 4,196
------- ------- ------- ------- ------- -------
Outstanding units, end of period 61,197 58,089 77,111 45,125 32,384 22,269
======= ======= ======= ======= ======= =======
Variable Univeral Life-100:<F**>
Deposits 23,767 1,072 46,973 4,468
Withdrawals (2,830) (39) (7,916) (777)
Outstanding units, beginning of period 1,033 0 3,691 0
------- ------- ------- -------
Outstanding units, end of period 21,970 1,033 42,748 3,691
======= ======= ======= =======
General American Life Insurance Company
seed money:
Deposits 0 0 0 0 0 200,000
Withdrawals 0 0 0 0 0 0
Outstanding units, beginning of period 0 0 0 200,000 200,000 0
------- ------- ------- ------- ------- -------
Outstanding units, end of period 0 0 0 200,000 200,000 200,000
======= ======= ======= ======= ======= =======
<FN>
<F**>The Variable Universal Life 100 product was introduced in 1995, and the
first deposit was received on June 7, 1995.
</TABLE>
(continued)
<PAGE> 71
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 6 - ACCUMULATION UNIT ACTIVITY, (CONTINUED)
The following is a summary of the accumulation unit activity for the years
ended December 31, 1996, 1995, and 1994:
<TABLE>
<CAPTION>
SPECIAL EQUITY EQUITY-INCOME
FUND DIVISION FUND DIVISION
------------------------------- -------------------------------
1996 1995 1994 1996 1995 1994
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Variable Universal Life-95:
Deposits 67,217 94,909 119,434 100,383 143,543 139,841
Withdrawals (50,100) (88,190) (31,453) (61,252) (48,670) (28,685)
Outstanding units, beginning of period 168,023 161,304 73,323 248,776 153,903 42,747
------- ------- ------- ------- ------- -------
Outstanding units, end of period 185,140 168,023 161,304 287,907 248,776 153,903
======= ======= ======= ======= ======= =======
Variable General Select Plus:
Deposits 17,983 22,352 33,038 95,653 78,040 51,432
Withdrawals (16,026) (12,685) (1,030) (24,220) (34,513) (13,273)
Outstanding units, beginning of period 46,252 36,585 4,577 89,358 45,831 7,672
------- ------- ------- ------- ------- -------
Outstanding units, end of period 48,209 46,252 36,585 160,791 89,358 45,831
======= ======= ======= ======= ======= =======
Variable Univeral Life-100:<F**>
Deposits 35,395 4,498 167,806 20,481
Withdrawals (6,929) (725) (22,709) (1,718)
Outstanding units, beginning of period 3,773 0 18,763 0
------- ------- ------- -------
Outstanding units, end of period 32,239 3,773 163,860 18,763
======= ======= ======= =======
General American Life Insurance Company
seed money:
Deposits 0 0 100,000 0 0 0
Withdrawals 100,000 0 0 0 0 0
Outstanding units, beginning of period 100,000 100,000 0 0 0 0
------- ------- ------- ------- ------- -------
Outstanding units, end of period 0 100,000 100,000 0 0 0
======= ======= ======= ======= ======= =======
<FN>
<F**>The Variable Universal Life 100 product was introduced in 1995, and the
first deposit was received on June 7, 1995.
</TABLE>
(continued)
<PAGE> 72
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 6 - ACCUMULATION UNIT ACTIVITY, (CONTINUED)
The following is a summary of the accumulation unit activity for the years
ended December 31, 1996, 1995, and 1994:
<TABLE>
<CAPTION>
GROWTH OVERSEAS
FUND DIVISION FUND DIVISION
-------------------------------- -------------------------------
1996 1995 1994 1996 1995 1994
-------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Variable Universal Life-95:
Deposits 141,831 181,296 202,047 86,129 97,609 116,391
Withdrawals (101,041) (80,832) (42,320) (57,328) (42,775) (31,173)
Outstanding units, beginning of period 326,247 225,783 66,056 173,970 119,136 33,918
-------- ------- ------- ------- ------- -------
Outstanding units, end of period 367,037 326,247 225,783 202,771 173,970 119,136
======== ======= ======= ======= ======= =======
Variable General Select Plus:
Deposits 136,928 90,761 95,218 59,185 46,058 56,343
Withdrawals (38,737) (60,661) (19,705) (18,099) (24,367) (9,246)
Outstanding units, beginning of period 135,556 105,456 29,943 73,610 51,919 4,822
-------- ------- ------- ------- ------- -------
Outstanding units, end of period 233,747 135,556 105,456 114,696 73,610 51,919
======== ======= ======= ======= ======= =======
Variable Univeral Life-100:<F**>
Deposits 213,702 25,375 59,253 9,829
Withdrawals (38,214) (1,865) (12,929) (1,146)
Outstanding units, beginning of period 23,510 0 8,683 0
-------- ------- ------- -------
Outstanding units, end of period 198,998 23,510 55,007 8,683
======== ======= ======= =======
<FN>
<F**>The Variable Universal Life 100 product was introduced in 1995, and the
first deposit was received on June 7, 1995.
</TABLE>
(continued)
<PAGE> 73
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 6 - ACCUMULATION UNIT ACTIVITY, (CONTINUED)
The following is a summary of the accumulation unit activity for the year
ended December 31, 1996, and the period ended December 31, 1995:
<TABLE>
<CAPTION>
ASSET MANAGER HIGH INCOME GOLD AND NATURAL RESOURCES
FUND DIVISION FUND DIVISION FUND DIVISION
-------------------- -------------------- --------------------------
1996 1995<F*> 1996 1995<F*> 1996 1995<F*>
------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Variable Universal Life-95:
Deposits 1,196 331 18,576 6,217 6,777 135
Withdrawals (80) (4) (3,225) (237) (976) (9)
Outstanding units, beginning of period 327 0 5,980 0 126 0
------ ----- ------ ----- ------ ---
Outstanding units, end of period 1,443 327 21,331 5,980 5,927 126
====== ===== ====== ===== ====== ===
Variable General Select Plus:
Deposits 4,133 1,534 32,705 6,436 4,222 0
Withdrawals (1,450) (6) (2,369) (115) (92) 0
Outstanding units, beginning of period 1,528 0 6,321 0 0 0
------ ----- ------ ----- ------ ---
Outstanding units, end of period 4,211 1,528 36,657 6,321 4,130 0
====== ===== ====== ===== ====== ===
Variable Univeral Life-100:<F**>
Deposits 17,799 3,044 41,415 6,662 6,746 890
Withdrawals (3,550) (100) (8,355) (159) (1,660) (31)
Outstanding units, beginning of period 2,944 0 6,503 0 859 0
------ ----- ------ ----- ------ ---
Outstanding units, end of period 17,193 2,944 39,563 6,503 5,945 859
====== ===== ====== ===== ====== ===
<FN>
<F*> The Asset Manager Fund, High Income Fund, and Gold & Natural Resources Fund
began operations on July 19, May 24, and August 9, 1995, respectively.
<F**>The Variable Universal Life 100 product was introduced in 1995, and the
first deposit was received on June 7, 1995.
</TABLE>
<PAGE> 74
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT
Deposits into the Separate Account are used to purchase shares in the Capital
Company, Variable Insurance Products Funds, Variable Insurance Products Fund
II, or Van Eck Worldwide Insurance Trust. Net deposits represent the amounts
available for investment in such shares after deduction of sales charges,
premium taxes, administrative costs, insurance, underwriting and acquisition
expense, cost of insurance, and cost of optional benefits by rider. Realized
and unrealized capital gains (losses) have been excluded from net deposits
into the Separate Account because they have been included in increase
(decrease) in net assets resulting from operations in the Statements or
Changes in Net Assets.
Variable Universal Life-95:
- ---------------------------
<TABLE>
<CAPTION>
S & P 500 INDEX MONEY MARKET
FUND DIVISION<F*> FUND DIVISION
------------------------------------ -------------------------------------
1996 1995 1994 1996 1995 1994
---------- ----------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $1,063,999 $ 919,322 $ 712,059 $ 575,302 $ 2,001,421 $ 4,699,999
Transfers between fund divisions and
General American 139,650 472,868 (7,433) (728,445) (1,597,558) (3,475,334)
Surrenders and withdrawals (82,719) (1,380,995) (162,056) (107,442) (346,828) (274,623)
---------- ----------- --------- --------- ----------- -----------
Total gross deposits, transfers, and
surrenders between fund divisions 1,120,930 11,195 542,570 (260,585) 57,035 950,042
---------- ----------- --------- --------- ----------- -----------
Deductions:
Premium load charges 84,266 82,459 83,216 46,330 194,508 398,298
Cost of insurance and administrative expenses 430,221 435,147 418,871 105,165 329,711 819,312
---------- ----------- --------- --------- ----------- -----------
Total deductions 514,487 517,606 502,087 151,495 524,219 1,217,610
---------- ----------- --------- --------- ----------- -----------
Net deposits into (withdrawals from)
Separate Account $ 606,443 $ (506,411) $ 40,483 $(412,080) $ (467,184) $ (267,568)
========== =========== ========= ========= =========== ===========
<FN>
<F*>This fund was formerly known as the Equity Index Fund.
</TABLE>
(continued)
<PAGE> 75
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT,
(CONTINUED)
Variable Universal Life-95:
- ---------------------------
<TABLE>
<CAPTION>
BOND INDEX MANAGED EQUITY
FUND DIVISION FUND DIVISION
------------------------------------ ---------------------------------
1996 1995 1994 1996 1995 1994
---------- ----------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $ 321,458 $ 421,967 $ 496,821 $ 395,649 $ 465,063 $ 552,307
Transfers between fund divisions and
General American 20,627 62,346 (54,209) (120,443) (121,086) (157,877)
Surrenders and withdrawals (171,083) (1,586,477) (64,076) (83,215) (647,675) (144,799)
---------- ----------- --------- --------- --------- ---------
Total gross deposits, transfers, and
surrenders between fund divisions 171,002 (1,102,164) 378,536 191,991 (303,698) 249,631
---------- ----------- --------- --------- --------- ---------
Deductions:
Premium load charges 25,685 32,747 40,004 31,741 38,137 47,457
Cost of insurance and administrative expenses 119,034 206,477 207,751 187,326 234,100 270,685
---------- ----------- --------- --------- --------- ---------
Total deductions 144,719 239,224 247,755 219,067 272,237 318,142
---------- ----------- --------- --------- --------- ---------
Net deposits into (withdrawals from)
Separate Account $ 26,283 $(1,341,388) $ 130,781 $ (27,076) $(575,935) $ (68,511)
========== =========== ========= ========= ========= =========
</TABLE>
(continued)
<PAGE> 76
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT,
(CONTINUED)
Variable Universal Life-95:
- --------------------------
<TABLE>
<CAPTION>
ASSET ALLOCATION INTERNATIONAL EQUITY
FUND DIVISION FUND DIVISION
-------------------------------------- ---------------------------------
1996 1995 1994 1996 1995 1994
---------- ----------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $1,478,021 $ 1,361,239 $ 1,682,596 $ 657,882 $ 635,309 $ 608,033
Transfers between fund divisions and
General American (26,293) (10,959) 83,984 132,812 302,360 246,711
Surrenders and withdrawals (117,682) (1,175,619) (186,438) (102,036) (45,598) (44,700)
---------- ----------- ----------- --------- --------- ---------
Total gross deposits, transfers, and
surrenders between fund divisions 1,334,046 174,661 1,580,142 688,658 892,071 810,044
---------- ----------- ----------- --------- --------- ---------
Deductions:
Premium load charges 113,909 115,321 130,253 52,174 54,639 48,119
Cost of insurance and administrative expenses 467,810 559,425 604,611 215,112 211,351 197,926
---------- ----------- ----------- --------- --------- ---------
Total deductions 581,719 674,746 734,864 267,286 265,990 246,045
---------- ----------- ----------- --------- --------- ---------
Net deposits into (withdrawals from)
Separate Account $ 752,327 $ (500,085) $ 845,278 $ 421,372 $ 626,081 $ 563,999
========== =========== =========== ========= ========= =========
</TABLE>
(continued)
<PAGE> 77
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT,
(CONTINUED)
Variable Universal Life-95:
- --------------------------
<TABLE>
<CAPTION>
SPECIAL EQUITY EQUITY-INCOME
FUND DIVISION FUND DIVISION
-------------------------------------- --------------------------------------
1996 1995 1994 1996 1995 1994
----------- ---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $ 927,388 $ 713,819 $ 746,886 $ 1,399,658 $ 1,217,315 $ 783,048
Transfers between fund
divisions and General
American (325,567) (319,339) 562,587 10,733 565,593 832,642
Surrenders and withdrawals (74,752) (35,191) (53,731) (186,491) (37,075) (20,500)
Seed withdrawals <F*> (1,494,837) 0 0 0 0 0
----------- ---------- ----------- ----------- ----------- -----------
Total gross deposits, transfers,
and surrenders between fund divisions (967,768) 359,289 1,255,742 1,223,900 1,745,833 1,595,190
----------- ---------- ----------- ----------- ----------- -----------
Deductions:
Premium load charges 73,857 57,765 62,347 111,476 101,562 59,726
Cost of insurance and administrative
expenses 224,222 228,560 231,519 473,165 406,596 287,052
----------- ---------- ----------- ----------- ----------- -----------
Total deductions 298,079 286,325 293,866 584,641 508,158 346,778
----------- ---------- ----------- ----------- ----------- -----------
Net deposits into (withdrawals from)
Separate Account $(1,265,847) $ 72,964 $ 961,876 $ 639,259 $ 1,237,675 $ 1,248,412
=========== ========== =========== =========== =========== ===========
<FN>
<F*> Represents funds distributed to General American Life Insurance Company in repayment of seed money used to start
the Special Equity Fund in 1993.
</TABLE>
(continued)
<PAGE> 78
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT,
(CONTINUED)
Variable Universal Life-95:
- --------------------------
<TABLE>
<CAPTION>
GROWTH OVERSEAS
FUND DIVISION FUND DIVISION
-------------------------------------- ---------------------------------------
1996 1995 1994 1996 1995 1994
------------ ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $ 2,077,054 $ 1,771,614 $ 1,291,793 $ 1,128,054 $ 978,388 $ 795,752
Transfers between fund divisions and
General American (252,029) 348,401 1,055,928 (173,088) 156,839 677,421
Surrenders and withdrawals (286,745) (61,341) (16,988) (163,405) (33,911) (5,052)
----------- ----------- ----------- ----------- ----------- -----------
Total gross deposits, transfers, and
surrenders between fund divisions 1,438,280 2,058,674 2,330,733 791,561 1,101,316 1,468,121
----------- ----------- ----------- ----------- ----------- -----------
Deductions:
Premium load charges 165,735 145,300 104,397 89,820 79,076 65,305
Cost of insurance and administrative
expenses 610,838 588,684 439,902 289,700 317,551 278,619
----------- ----------- ----------- ----------- ----------- -----------
Total deductions 776,573 733,984 544,299 379,520 396,627 343,924
----------- ----------- ----------- ----------- ----------- -----------
Net deposits into Separate Account $ 661,707 $ 1,324,690 $ 1,786,434 $ 412,041 $ 704,689 $ 1,124,197
=========== =========== =========== =========== =========== ===========
</TABLE>
(continued)
<PAGE> 79
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT, (CONTINUED)
Variable Universal Life-95:
- --------------------------
<TABLE>
<CAPTION>
ASSET MANAGER HIGH INCOME GOLD & NATURAL RESOURCES
FUND DIVISION FUND DIVISION FUND DIVISION
-------------------- -------------------- ------------------------
1996 1995<F*> 1996 1995<F*> 1996 1995<F*>
------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $ 3,210 $ 24 $ 47,325 $ 6,373 $ 7,990 $ 1,007
Transfers between fund
divisions and General American 10,046 3,317 146,648 59,489 63,119 387
------- ------ -------- ------- ------- -------
Total gross deposits, transfers,
and surrenders between fund
divisions 13,256 3,341 193,973 65,862 71,109 1,394
------- ------ -------- ------- ------- -------
Deductions:
Premium load charges 248 3 3,747 499 595 81
Cost of insurance and administrative expenses 896 39 16,948 2,512 3,272 87
------- ------ -------- ------- ------- -------
Total deductions 1,144 42 20,695 3,011 3,867 168
------- ------ -------- ------- ------- -------
Net deposits into Separate Account $12,112 $3,299 $173,278 $62,851 $67,242 $ 1,226
======= ====== ======== ======= ======= =======
<FN>
<F*>The Asset Manager Fund, High Income Fund, and Gold & Natural Resources Fund
began operations on July 19, May 24, and August 9, 1995, respectively.
(continued)
</TABLE>
<PAGE> 80
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT, (CONTINUED)
Variable General Select Plus:
- -----------------------------
<TABLE>
<CAPTION>
S & P 500 INDEX MONEY MARKET
FUND DIVISION<F*> FUND DIVISION
---------------------------------- ----------------------------------------
1996 1995 1994 1996 1995 1994
---------- -------- -------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $ 475,955 $ 47,504 $453,179 $ 18,203,638 $ 3,333,097 $ 2,408,387
Transfers between fund divisions
and General American 5,512,487 182,278 116,566 (13,115,248) (1,350,435) (1,573,558)
Surrenders and withdrawals (28,210) (15,259) (1,470) (15,934) (10,440) 0
---------- -------- -------- ------------ ----------- -----------
Total gross deposits, transfers, and
surrenders between fund divisions 5,960,232 214,523 568,275 5,072,456 1,972,222 834,829
---------- -------- -------- ------------ ----------- -----------
Deductions:
Premium load charges 35,750 11,884 15,406 1,315,430 232,745 181,024
Cost of insurance and administrative
expenses 63,207 21,050 21,681 126,052 88,973 208,976
---------- -------- -------- ------------ ----------- -----------
Total deductions 98,957 32,934 37,087 1,441,482 321,718 390,000
---------- -------- -------- ------------ ----------- -----------
Net deposits into Separate Account $5,861,275 $181,589 $531,188 $ 3,630,974 $ 1,650,504 $ 444,829
========== ======== ======== ============ =========== ===========
<FN>
<F*> This fund was formerly known as the Equity Index Fund.
(continued)
</TABLE>
<PAGE> 81
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT, (CONTINUED)
Variable General Select Plus:
- -----------------------------
<TABLE>
<CAPTION>
BOND INDEX MANAGED EQUITY
FUND DIVISION FUND DIVISION
--------------------------------- ---------------------------------
1996 1995 1994 1996 1995 1994
---------- -------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $ 68,383 $ 9,129 $ 2,394 $131,764 $ 9,302 $ 3,900
Transfers between fund divisions
and General American 4,780,139 57,441 10,690 170,404 60,563 9,776
Surrenders and withdrawals (5,060) (12,416) 0 0 0 0
---------- -------- ------- -------- ------- -------
Total gross deposits, transfers, and
surrenders between fund divisions 4,843,462 54,154 13,084 302,168 69,865 13,676
---------- -------- ------- -------- ------- -------
Deductions:
Premium load charges 5,137 614 152 9,560 645 226
Cost of insurance and administrative
expenses 16,027 1,862 484 11,739 1,602 654
---------- -------- ------- -------- ------- -------
Total deductions 21,164 2,476 636 21,299 2,247 880
---------- -------- ------- -------- ------- -------
Net deposits into Separate Account $4,822,298 $ 51,678 $12,448 $280,869 $67,618 $12,796
========== ======== ======= ======== ======= =======
(continued)
</TABLE>
<PAGE> 82
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT, (CONTINUED)
Variable General Select Plus:
- -----------------------------
<TABLE>
<CAPTION>
ASSET ALLOCATION INTERNATIONAL EQUITY
FUND DIVISION FUND DIVISION
---------------------------------- ---------------------------------
1996 1995 1994 1996 1995 1994
-------- --------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $170,662 $ (34,323) $ 48,281 $181,044 $ 76,251 $ 92,237
Transfers between fund divisions
and General American (27,308) (131,408) (183,023) 32,353 76,707 141,207
Surrenders and withdrawals (26,276) (10,179) (22,704) (10,048) (4,465) (489)
-------- --------- --------- -------- -------- --------
Total gross deposits, transfers, and
surrenders between fund divisions 117,078 (175,910) (157,446) 203,349 148,493 232,955
-------- --------- --------- -------- -------- --------
Deductions:
Premium load charges 12,611 6,512 1,704 13,690 7,697 6,884
Cost of insurance and administrative
expenses 52,342 39,594 37,096 23,940 16,684 14,570
-------- --------- --------- -------- -------- --------
Total deductions 64,953 46,106 38,800 37,630 24,381 21,454
-------- --------- --------- -------- -------- --------
Net deposits into (withdrawals from)
Separate Account $ 52,125 $(222,016) $(196,246) $165,719 $124,112 $211,501
======== ========= ========= ======== ======== ========
(continued)
</TABLE>
<PAGE> 83
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT, (CONTINUED)
Variable General Select Plus:
- -----------------------------
<TABLE>
<CAPTION>
SPECIAL EQUITY EQUITY-INCOME
FUND DIVISION FUND DIVISION
-------------------------------- ----------------------------------
1996 1995 1994 1996 1995 1994
-------- -------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $191,049 $ 81,787 $206,659 $ 673,157 $285,714 $170,100
Transfers between fund divisions
and General American (58,467) 76,580 181,915 638,476 446,973 312,672
Surrenders and withdrawals (52,717) (11,584) (1,182) (10,403) (62,763) 0
-------- -------- -------- ---------- -------- --------
Total gross deposits, transfers, and
surrenders between fund divisions 79,865 146,783 387,392 1,301,230 669,924 482,772
-------- -------- -------- ---------- -------- --------
Deductions:
Premium load charges 13,676 12,214 15,456 53,024 20,534 12,452
Cost of insurance and administrative
expenses 26,565 21,651 24,374 112,967 58,881 32,594
-------- -------- -------- ---------- -------- --------
Total deductions 40,241 33,865 39,830 165,991 79,415 45,046
-------- -------- -------- ---------- -------- --------
Net deposits into Separate Account $ 39,624 $112,918 $347,562 $1,135,239 $590,509 $437,726
======== ======== ======== ========== ======== ========
(continued)
</TABLE>
<PAGE> 84
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT, (CONTINUED)
Variable General Select Plus:
- -----------------------------
<TABLE>
<CAPTION>
GROWTH OVERSEAS
FUND DIVISION FUND DIVISION
---------------------------------- --------------------------------
1996 1995 1994 1996 1995 1994
---------- --------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $ 899,999 $ 392,035 $372,501 $385,284 $154,142 $191,494
Transfers between fund divisions
and General American 888,367 225,243 514,277 271,694 200,230 399,196
Surrenders and withdrawals (48,837) (161,933) (1,272) (45,712) (55,346) (583)
---------- --------- -------- -------- -------- --------
Total gross deposits, transfers, and
surrenders between fund divisions 1,739,529 455,345 885,506 611,266 299,026 590,107
---------- --------- -------- -------- -------- --------
Deductions:
Premium load charges 69,694 34,454 27,464 29,621 13,147 14,571
Cost of insurance and administrative
expenses 136,072 82,849 56,403 46,151 31,516 27,352
---------- --------- -------- -------- -------- --------
Total deductions 205,766 117,303 83,867 75,772 44,663 41,923
---------- --------- -------- -------- -------- --------
Net deposits into Separate Account $1,533,763 $ 338,042 $801,639 $535,494 $254,363 $548,184
========== ========= ======== ======== ======== ========
(continued)
</TABLE>
<PAGE> 85
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
<TABLE>
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT, (CONTINUED)
Variable General Select Plus:
- -----------------------------
<CAPTION>
ASSET MANAGER HIGH INCOME GOLD AND NATURAL RESOURCES
FUND DIVISION FUND DIVISION FUND DIVISION
-------------------- -------------------- --------------------------
1996 1995<F*> 1996 1995<F*> 1996 1995<F*>
-------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $ 8,754 $ 255 $ 91,307 $ 603 $ 1,869 $ 0
Transfers between fund divisions
and General American 26,425 15,583 278,491 68,178 45,785 0
Surrenders and withdrawals (2,067) 0 0 0 0 0
-------- --------- -------- --------- -------- ---------
Total gross deposits, transfers, and
surrenders between fund divisions 33,112 15,838 369,798 68,781 47,654 0
-------- --------- -------- --------- -------- ---------
Deductions:
Premium load charges 670 10 7,156 37 175 0
Cost of insurance and administrative expenses 1,631 56 12,823 1,198 1,041 0
-------- --------- -------- --------- -------- ---------
Total deductions 2,301 66 19,979 1,235 1,216 0
-------- --------- -------- --------- -------- ---------
Net deposits into Separate Account $ 30,811 $ 15,772 $349,819 $ 67,546 $ 46,438 $ 0
======== ========= ======== ========= ======== =========
<FN>
<F*>The Asset Manager Fund, High Income Fund, and Gold & Natural Resources Fund
began operations on July 19, May 24, and August 9, 1995, respectively.
(continued)
</TABLE>
<PAGE> 86
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
<TABLE>
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT, (CONTINUED)
Variable Universal Life-100:<F*>
- --------------------------------
<CAPTION>
S & P 500 INDEX MONEY MARKET BOND INDEX
FUND DIVISION FUND DIVISION FUND DIVISION
----------------------- ------------------------ ------------------------
1996 1995 1996 1995 1996 1995
----------- ---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $ 606,419 $ 16,519 $ 7,989,872 $ 2,385,983 $ 58,468 $ 2,634
Transfers between fund divisions
and General American 1,285,071 172,340 (6,898,282) (1,031,031) 257,285 16,903
Surrenders and withdrawals (12,850) 0 (242) 0 (2,419) 0
----------- ---------- ----------- ----------- ----------- -----------
Total gross deposits, transfers, and
surrenders between fund divisions 1,878,640 188,859 1,091,348 1,354,952 313,334 19,537
----------- ---------- ----------- ----------- ----------- -----------
Deductions:
Premium load charges 20,294 458 250,193 73,630 1,906 79
Cost of insurance and administrative expenses 258,742 9,056 502,668 124,621 31,767 862
----------- ---------- ----------- ----------- ----------- -----------
Total deductions 279,036 9,514 752,861 198,251 33,673 941
----------- ---------- ----------- ----------- ----------- -----------
Net deposits into Separate Account $ 1,599,604 $ 179,345 $ 338,487 $ 1,156,701 $ 279,661 $ 18,596
=========== ========== =========== =========== =========== ===========
<FN>
<F*>The Variable Universal Life 100 product was introduced in 1995, and the
first deposit was received on June 7, 1995.
(continued)
</TABLE>
<PAGE> 87
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
<TABLE>
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT, (CONTINUED)
Variable Universal Life-100:<F*>
- --------------------------------
<CAPTION>
MANAGED EQUITY ASSET ALLOCATION INTERNATIONAL EQUITY
FUND DIVISION FUND DIVISION FUND DIVISION
----------------------- ------------------------ ------------------------
1996 1995 1996 1995 1996 1995
----------- ---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $ 102,809 $ 1,658 $ 91,429 $ 926 $ 202,195 $ 20,494
Transfers between fund divisions
and General American 120,203 21,497 233,391 12,569 315,663 27,674
Surrenders and withdrawals (413) 0 (906) 0 (2,005) 0
----------- ---------- ----------- ----------- ----------- -----------
Total gross deposits, transfers, and
surrenders between fund divisions 222,599 23,155 323,914 13,495 515,853 48,168
----------- ---------- ----------- ----------- ----------- -----------
Deductions:
Premium load charges 3,442 48 3,162 30 6,724 656
Cost of insurance and administrative expenses 36,945 2,150 38,520 488 79,260 8,108
----------- ---------- ----------- ----------- ----------- -----------
Total deductions 40,387 2,198 41,682 518 85,984 8,764
----------- ---------- ----------- ----------- ----------- -----------
Net deposits into Separate Account $ 182,212 $ 20,957 $ 282,232 $ 12,977 $ 429,869 $ 39,404
=========== ========== =========== =========== =========== ===========
<FN>
<F*>The Variable Universal Life 100 product was introduced in 1995, and the
first deposit was received on June 7, 1995.
(continued)
</TABLE>
<PAGE> 88
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
<TABLE>
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT, (CONTINUED)
Variable Universal Life-100:<F*>
- --------------------------------
<CAPTION>
SPECIAL EQUITY EQUITY-INCOME GROWTH OVERSEAS
FUND DIVISION FUND DIVISION FUND DIVISION FUND DIVISION
------------------- ---------------------- ---------------------- --------------------
1996 1995 1996 1995 1996 1995 1996 1995
--------- -------- ----------- --------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total gross deposits $ 232,270 $ 18,525 $ 914,095 $ 44,385 $ 1,361,304 $ 50,500 $ 373,593 $ 25,338
Transfers between fund divisions
and General American 228,709 34,407 1,521,792 219,488 1,759,062 304,735 307,488 82,196
Surrenders and withdrawals (5,591) 0 (7,812) 0 (38,619) 0 (13,206) 0
--------- -------- ----------- --------- ----------- --------- --------- ---------
Total gross deposits, transfers, and
surrenders between fund divisions 455,388 52,932 2,428,075 263,873 3,081,747 355,235 667,875 107,534
--------- -------- ----------- --------- ----------- --------- --------- ---------
Deductions:
Premium load charges 7,772 598 29,267 1,400 44,819 1,424 11,611 762
Cost of insurance and administrative
expenses 82,326 8,384 303,902 21,879 472,178 25,541 112,510 12,165
--------- -------- ----------- --------- ----------- --------- --------- ---------
Total deductions 90,098 8,982 333,169 23,279 516,997 26,965 124,121 12,927
--------- -------- ----------- --------- ----------- --------- --------- ---------
Net deposits into Separate Account $ 365,290 $ 43,950 $ 2,094,906 $ 240,594 $ 2,564,750 $ 328,270 $ 543,754 $ 94,607
========= ======== =========== ========= =========== ========= ========= =========
<FN>
<F*>The Variable Universal Life 100 product was introduced in 1995, and the
first deposit was received on June 7, 1995.
(continued)
</TABLE>
<PAGE> 89
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
<TABLE>
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT, (CONTINUED)
Variable Universal Life-100:<F**>
- ---------------------------------
<CAPTION>
ASSET MANAGER HIGH INCOME GOLD AND NATURAL RESOURCES
FUND DIVISION FUND DIVISION FUND DIVISION
-------------------- -------------------- --------------------------
1996 1995<F*> 1996 1995<F*> 1996 1995<F*>
--------- -------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $ 50,502 $ 964 $ 158,842 $ 5,221 $ 22,003 $ 193
Transfers between fund divisions
and General American 137,452 30,404 297,097 65,982 53,910 8,300
Surrenders and withdrawals (2,165) 0 (11,551) 0 (5,154) 0
--------- -------- --------- -------- -------- --------
Total gross deposits, transfers, and
surrenders between fund divisions 185,789 31,368 444,388 71,203 70,759 8,493
--------- -------- --------- -------- -------- --------
Deductions:
Premium load charges 1,674 28 4,982 174 712 8
Cost of insurance and administrative expenses 24,175 1,033 57,557 1,693 13,421 297
--------- -------- --------- -------- -------- --------
Total deductions 25,849 1,061 62,539 1,867 14,133 305
--------- -------- --------- -------- -------- --------
Net deposits into Separate Account $ 159,940 $ 30,307 $ 381,849 $ 69,336 $ 56,626 $ 8,188
========= ======== ========= ======== ======== ========
<FN>
<F*>The Asset Manager Fund, High Income Fund, and Gold & Natural Resources Fund
began operations on July 19, May 24, and August 9, 1995, respectively.
<F**>The Variable Universal Life 100 product was introduced in 1995, and the
first deposit was received on June 7, 1995.
</TABLE>
<PAGE> 90
LEGAL COUNSEL
Stephen E. Roth
Sutherland, Asbill & Brennan, Washington, D.C.
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
If distributed to prospective investors, this report must be preceded or
accompanied by a current prospectus.
The prospectus is incomplete without reference to the financial data
contained in the annual report.
<PAGE> 91
Independent Auditors' Report
The Board of Directors and Policyholders
General American Life Insurance Company:
We have audited the accompanying consolidated balance sheets of General
American Life Insurance Company and subsidiaries as of December 31, 1996 and
1995, and the related consolidated statements of operations, policyholders'
surplus, and cash flows for each of the years in the three-year period ended
December 31, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of General American Life Insurance Company and subsidiaries as of December
31, 1996 and 1995, and the results of their consolidated operations and their
consolidated cash flows for each of the years in the three-year period ended
December 31, 1996, in conformity with generally accepted accounting
principles.
As discussed in Note 1 to the consolidated financial statements, the
Company adopted Statement of Financial Accounting Standards No. 120,
Accounting and Reporting by Mutual Life Insurance Enterprises and by
Insurance Enterprises for Certain Long-Duration Participating Contracts in
1996.
/s/ KPMG Peat Marwick LLP
St. Louis, Missouri
March 5, 1997
[PHOTO]
[PHOTO]
<PAGE> 92
Consolidated Balance Sheets
(in thousands)
<TABLE>
<CAPTION>
As of December 31
Assets 1996 1995
- --------------------------------------------------
<S> <C> <C>
Fixed maturities:
Available-for-sale, at fair value $ 6,758,309 5,621,482
Mortgage loans, net 2,273,627 1,709,115
Real estate, net 203,767 210,170
Equity securities, at fair value 20,905 17,087
Policy loans 1,917,861 1,707,237
Short-term investments 55,594 36,141
Other invested assets 183,612 150,885
------------ ----------
Total investments 11,413,675 9,452,117
Cash and cash equivalents 142,724 144,897
Accrued investment income 148,419 132,144
Reinsurance recoverables 3,515,640 3,104,931
Deferred policy acquisition costs 652,251 526,939
Other assets 406,943 383,975
Separate account assets 2,833,258 2,182,101
------------ ----------
Total assets $ 19,112,910 15,927,104
============ ==========
Liabilities and Policyholders' Surplus
- -------------------------------------------------
Policy and contract liabilities:
Future policy benefits $ 4,238,033 3,907,522
Policyholder account balances:
Universal life 1,419,184 1,198,298
Annuities 4,300,070 4,314,642
Pension funds 3,306,351 1,798,514
Policy and contract claims 352,433 337,781
Dividends payable to policyholders 103,019 90,323
------------ ----------
Total policy and contract liabilities 13,719,090 11,647,080
Amounts payable to reinsurers 393,657 149,735
Notes payable 295,614 208,118
Other liabilities and accrued expenses 670,109 581,416
Deferred tax liability 43,277 50,391
Separate account liabilities 2,810,907 2,168,933
------------ ----------
Total liabilities 17,932,654 14,805,673
Minority interests 182,469 164,348
Policyholders' surplus:
Unassigned funds 983,222 893,887
Foreign currency translation adjustments (35,802) (34,259)
Unrealized gain on investments, net of taxes 50,367 97,455
------------ ----------
Total policyholders' surplus 997,787 957,083
------------ ----------
Total liabilities and policyholders' surplus $ 19,112,910 15,927,104
============ ==========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 93
Consolidated Statements of Operations
(in thousands)
<TABLE>
<CAPTION>
Years ended December 31
Revenues 1996 1995 1994
- -------------------------------------------------
<S> <C> <C> <C>
Insurance premiums and other considerations $ 1,623,228 1,498,013 1,597,814
Net investment income 790,897 669,443 551,471
Ceded commissions 27,538 14,908 31,208
Other income 274,277 176,662 150,305
Net realized investment gains (losses) 24,531 280,756 (50,066)
------------ --------- ---------
Total revenues 2,740,471 2,639,782 2,280,732
Benefits and Expenses
- -------------------------------------------------
Policy benefits 934,369 831,811 955,683
Interest credited to policyholder account balances 301,678 227,512 167,625
------------ --------- ---------
Total policyholder benefits 1,236,047 1,059,323 1,123,308
Dividends to policyholders 171,904 264,658 141,546
Policy acquisition costs 143,094 138,811 105,288
Other insurance and operating expenses 1,026,412 790,266 808,317
------------ --------- ---------
Total benefits and expenses 2,577,457 2,253,058 2,178,459
------------ --------- ---------
Income before provision for income taxes
and minority interest 163,014 386,724 102,273
------------ --------- ---------
Provision for income taxes:
Current 45,902 115,769 61,508
Deferred 13,992 29,411 (8,839)
------------ --------- ---------
Total provision for income taxes 59,894 145,180 52,669
------------ --------- ---------
Income before minority interest 103,120 241,544 49,604
Minority interest in earnings of consolidated
subsidiaries (19,888) (17,512) (21,732)
------------ --------- ---------
Net income $ 83,232 224,032 27,872
============ ========= =========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 94
Consolidated Statements of Policyholders' Surplus
(in thousands)
<TABLE>
<CAPTION>
Years ended December 31
Foreign Unrealized
currency gain (loss) on Total
Unassigned translation investments, policyholders'
funds adjustments net of taxes surplus
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1993 $ 641,315 (36,219) (356) 604,740
Implementation of SFAS No. 115 79,152 79,152
Net income 27,872 27,872
Foreign currency translation adjustments (3,948) (3,948)
Change in unrealized gain (loss) on
investments, net of tax (144,205) (144,205)
Other, net (2,468) (2,468)
----------------------------------------------------------------
Balance at December 31, 1994 666,719 (40,167) (65,409) 561,143
Net income 224,032 224,032
Foreign currency translation adjustments 5,908 5,908
Change in unrealized gain (loss) on
investments, net of tax 162,864 162,864
Other, net 3,136 3,136
---------------------------------------------------------------
Balance at December 31, 1995 893,887 (34,259) 97,455 957,083
Net income 83,232 83,232
Foreign currency translation adjustments (1,543) (1,543)
Change in unrealized gain (loss) on
investments, net on tax (47,088) (47,088)
Other, net 6,103 6,103
---------------------------------------------------------------
Balance at December 31, 1996 $ 983,222 (35,802) 50,367 997,787
===============================================================
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 95
Consolidated Statements of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
Years ended December 31
Cash flows from operating activities 1996 1995 1994
- -------------------------------------------------
<S> <C> <C> <C>
Net income $ 83,232 224,032 27,872
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Change in:
Accrued investment income (16,275) (22,202) (25,489)
Reinsurance recoverables (410,709) 262,054 (92,099)
Deferred policy acquisition costs (87,249) (23,141) (47,268)
Other assets (16,248) (67,650) 8,401
Future policy benefits 330,511 399,261 466,069
Policy and contract claims 14,652 74,173 54,108
Other liabilities and accrued expenses 315,667 184,756 (222,015)
Deferred income taxes 14,505 29,411 (8,839)
Policyholder considerations (144,748) (140,475) (113,557)
Interest credited to policyholder account balances 301,678 227,512 167,625
Amortization and depreciation 28,375 19,196 19,116
Net realized investment (gains) losses (24,531) (280,756) 50,066
Other, net (14,554) 2,488 12,527
----------- ----------- -----------
Net cash provided by operating activities 374,306 888,659 296,517
----------- ----------- -----------
Cash flows from investing activities
- -------------------------------------------------
Proceeds from investments sold or redeemed:
Fixed maturities available-for-sale 1,822,169 1,482,122 816,952
Mortgage loans 182,650 206,520 135,503
Equity securities 13,427 468,143 38,868
Short-term and other invested assets 84,748 414,102 59,429
Cost of investments purchased in:
Fixed maturities available-for-sale (3,428,943) (3,010,016) (1,245,700)
Fixed maturities held-to-maturity - (3,068) (45,263)
Equity securities (39,553) (89,062) (16,822)
Short-term and other invested assets (97,426) (16,471) (17,316)
Mortgage loan originations (593,438) (431,043) (309,433)
Maturity of fixed maturities held-to-maturity - 6,365 9,002
Maturity of fixed maturities available-for-sale 225,087 75,518 62,716
Increase in policy loans, net (210,624) (211,526) (168,547)
Investments in subsidiaries (4,807) (126,363) -
----------- ----------- -----------
Net cash used in investing activities (2,046,710) (1,234,779) (680,611)
----------- ----------- -----------
Cash flows from financing activities
- -------------------------------------------------
Net deposits 1,558,153 259,695 445,279
Issuance of debt 106,903 100,219 107,000
Repayment of debt (19,497) (4,800) (37,285)
Dividends (1,832) (4,376) (4,124)
Other, net 26,770 17,498 21,563
----------- ----------- -----------
Net cash provided by financing activities 1,670,497 368,236 532,433
----------- ----------- -----------
Effect of exchange rate changes (266) 5,908 (7,922)
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents (2,173) 28,024 140,417
Cash and cash equivalents at beginning of year 144,897 116,873 (23,544)
----------- ----------- -----------
Cash and cash equivalents at end of year $ 142,724 144,897 116,873
=========== =========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 96
Notes to Consolidated Financial Statements
(1) Basis of Presentation and Summary of Significant Accounting Policies
General American Life Insurance Company (General American or the Company) is
a mutual life insurance company originally incorporated as a stock life
insurance company under the laws of Missouri in 1933, which began operations
as a mutual company in 1936. The consolidated financial statements include
the assets, liabilities, and results of operations of General American and
its wholly owned subsidiaries, General American Holding Company, a
non-insurance holding company; Cova Corporation, an insurance holding
company; Paragon Life Insurance Company; Security Equity Life Insurance
Company; General Life Insurance Company of America; General Life Insurance
Company and its 63 percent owned subsidiary, Reinsurance Group of America,
Incorporated (RGA), an insurance holding company. All significant intercompany
balances and transactions have been eliminated.
The Company's principal lines of business, conducted through General American
or one of its subsidiaries, are: Individual Life Insurance, Annuities, Group
Life and Health Insurance, Asset Management, and Reinsurance. General
American distributes its products and services primarily through a nationwide
network of general agencies, independent brokers, and group sales and claims
offices. General American (including its subsidiaries) is licensed to do
business in all fifty states, twelve Canadian provinces, Puerto Rico, and the
District of Columbia. Through its subsidiaries, the Company has operations
in Europe, Pacific Rim countries, and Latin America.
In January 1996, General American and Security Mutual Life Insurance Company
(a New York mutual company) entered into a strategic alliance agreement to
market life insurance products more efficiently and to achieve long-term
growth objectives. The agreement includes sharing expertise such as
consulting services, technology sharing, and investment advisory services.
The accompanying consolidated financial statements are prepared on the basis
of generally accepted accounting principles (GAAP). The preparation of
financial statements requires the use of estimates by management which affect
the amounts reflected in the financial statements. Actual results could
differ from those estimates. Accounts that the Company deems to be sensitive
to changes in estimates include future policy benefits and policy and
contract claims, deferred acquisition costs, as well as certain investments.
In April 1993, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 40, Applicability of Generally Accepted Accounting
Principles to Mutual Life Insurance and Other Enterprises. This
interpretation requires mutual life insurance enterprises which have
traditionally issued statutory based financial statements that have been
reported to be in conformity with GAAP, to apply all authoritative accounting
pronouncements in preparing those statements, effective for periods beginning
after December 31, 1994. In January 1995, the FASB issued Statement of
Financial Accounting Standards No. 120 (SFAS 120), Accounting and Reporting
by Mutual Life Insurance Enterprises and by Insurance Enterprises for Certain
Long Duration Participating Contracts, and the American Institute of
Certified Public Accountants (AICPA) issued Statement of Position 95-1 (SOP
95-1), Accounting for Certain Insurance Activities of Mutual Life
Enterprises, which together define the GAAP model for mutual life insurance
enterprises. These pronouncements define the enterprises and method of
accounting for certain participating life insurance contracts of mutual and
stock life insurance companies that meet the criteria defined in SOP 95-1.
SFAS 120 also deferred implementation of Interpretation No. 40 to be
concurrent with implementation of SFAS 120. SFAS 120 and SOP 95-1 are
effective for financial statements issued for fiscal years beginning after
December 15, 1995. The effect of initially applying this new accounting
model has been reported retroactively through restatement of all periods
presented. The cumulative effect was recorded effective January 1, 1993.
The significant accounting policies of the Company are as follows:
Recognition of Policy Revenue and Related Expenses
For traditional life policies, including participating businesses, premiums
are recognized when due, less allowances for estimated uncollectible
balances. For limited payment contracts, net premiums are recorded as
revenue, and the difference between the gross premium and the net premium is
deferred and recognized in income in a constant relationship to insurance in
force over the estimated policy life.
For universal life and annuity products, contract charges for mortality,
surrender, and expense, other than front-end expense charges, are reported as
income when charged to policyholders' accounts. Expenses consist primarily
of benefit payments in excess of policyholder account values and interest
credited to policyholder accounts. Profits are recognized over the life of
the universal life type contracts through amortization of deferred policy
acquisition costs in relation to the present value of estimated gross profits
from mortality, interest, surrender, and expense charges.
Invested Assets
Fixed Maturity and Equity Securities: Investment securities are accounted for
in accordance with SFAS 115, Accounting for Certain Investments in Debt and
Equity Securities. SFAS 115 requires debt and equity securities to be
classified into categories of available-for-sale, trading securities, or
held-to-maturity depending on an entity's ability and positive intent to hold
a security to maturity. Fixed maturities held-to-maturity, including
mortgage-backed and asset-backed securities, are reported at amortized cost
and are classified as such based on the Company's ability and positive intent
to hold such securities to maturity. Fixed maturities available-for-sale are
reported at fair value and are so classified based on the possibility that
such securities could be sold prior to maturity if that action enables the
Company to execute its investment philosophy and appropriately match
investment results to operating and liquidity needs. Effective December 31,
1995, the Company reclassified the entire portfolio of fixed maturities
held-to-maturity to available-for-sale in accordance with the FASB's Guide to
Implementation of Statement 115 on Accounting for Certain Investments in Debt
and Equity Securities, which was issued during November 1995. This
reclassification gives the Company an added measure of flexibility in
managing credit quality in coordination with appropriate asset/liability
matching. Equity securities are carried at fair value.
Realized gains or losses on the sale of securities are determined on the
basis of specific identification and include the impact of any related
amortization of premiums or accretion of discounts which is generally
computed consistent with the interest method. Unrealized gains and losses
are recorded, net of related income tax effects, in a separate component of
policyholders' surplus.
<PAGE> 97
Mortgage Loans: Mortgage loans on real estate are stated at an unpaid
principal balance, net of unamortized discounts and valuation allowances.
The valuation allowances on mortgage loans are based on losses expected by
management to be realized on transfers of mortgage loans to real estate, on
the disposition or settlement of mortgage loans and on mortgage loans which
management believes will not be collectible in full. It is the Company's
policy to discontinue the accrual of interest on mortgage loans which are
more than 90 days delinquent. Interest received on nonaccrual mortgage loans
is generally reported as interest income.
Policy Loans, Real Estate and Other Invested Assets: Policy loans are carried
at an unpaid principal balance and are generally secured. Investment real
estate which the Company has the intent to hold for the production of income
is carried at depreciated cost plus capital additions, net of writedowns for
other than temporary declines in fair value and net of encumbrances.
Properties held for sale (primarily acquired through foreclosure) are carried
at the lower of depreciated cost (fair value at foreclosure plus capital
additions less accumulated depreciation and encumbrances) or fair value less
estimated selling costs. Adjustments to carrying value of properties held
for sale are recorded in a valuation reserve when the fair value less
estimated selling costs is below depreciated cost. The accumulated
depreciation and encumbrances on real estate amounted to $53.0 million and
$55.2 million at December 31, 1996 and 1995, respectively. Direct valuation
allowances amounted to $15.7 million and $25.4 million at December 31, 1996
and 1995, respectively. Other invested assets are recorded at amortized cost
less allowances for other than temporary declines in value.
Short-term Investments: Short-term investments, consisting primarily of money
market instruments and other debt issues purchased with a maturity of less
than a year, are carried at amortized cost, which approximates fair value.
Invested Asset Impairment and Valuation Allowances: Invested assets are
considered impaired when General American determines that collection of all
amounts due under the contractual terms is doubtful. General American
adjusts invested assets to their estimated net realizable value at the point
at which it determines an impairment is other than temporary. In addition,
General American has established valuation allowances for mortgage loans and
other invested assets. Valuation allowances for other than temporary
impairments in value are netted against the asset categories to which they
apply. Additions to valuation allowances are included in net investment
income.
Cash and Cash Equivalents: For purposes of reporting cash flows, cash and
cash equivalents represent cash, demand deposits and highly liquid short-term
investments, which include U.S. Treasury bills, commercial paper, and
repurchase agreements with original or remaining maturities of 90 days or
less when purchased.
Investment Income
Bond premium and discounts are amortized into income using the scientific
yield method over the term of the security. Amortization of the premium or
discount on mortgage-backed securities is recognized using a scientific yield
method which considers the estimated timing and amount of prepayments of
underlying mortgage loans. Actual prepayment experience is periodically
reviewed and effective yields are recalculated when differences arise between
the prepayments originally anticipated and the actual prepayments received
and currently anticipated. When such differences occur, the net investment
in the mortgage-backed security is adjusted to the amount that would have
existed had the new effective yield been applied since the acquisition of the
security with a corresponding charge or credit to interest income (the
"retrospective method").
Policy and Contract Liabilities
For traditional life insurance policies, future policy benefits and dividend
liabilities are computed using a net level premium method with actuarial
assumptions as to mortality, persistency, and interest established at policy
issue. Assumptions established at policy issue as to mortality and
persistency are based on industry standards and General American's historical
experience which, together with interest and expense assumptions, provide a
margin for adverse deviation. Interest rate assumptions generally range from
2.5 percent to 11.0 percent. When the liabilities for future policy benefits
plus the present value of expected future gross premiums are insufficient to
provide for expected policy benefits and expenses, unrecoverable deferred
policy acquisition costs are written off and thereafter a premium deficiency
reserve is established through a charge to earnings.
For participating policies, future policy benefits are computed using a net
level premium method based on the guaranteed cash value basis for mortality
and interest. Mortality rates are similar to those used for statutory
valuation purposes. Interest rates generally range from 2.5 percent to 6.0
percent. Dividend liabilities are established by taking the pro rata portion
of the following policy year dividend earned but unpaid. When the liabilities
less unamortized acquisition expenses are insufficient to provide for future
policy benefits and expenses under best estimate assumptions, the
unrecoverable deferred policy acquisition costs are written off and, if
necessary, an additional reserve established.
Policyholder account balances for universal life and annuity policies are
equal to the policyholder account value before deduction of any surrender
charges. The policyholder account value represents an accumulation of gross
premium payments plus credited interest less expense and mortality charges
and withdrawals. These expense charges are recognized in income as earned.
Weighted average interest crediting rates were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Universal life 6.00-7.56 % 6.00-7.87 % 6.00-7.36 %
Annuities 5.70-6.00 % 5.69-6.29 % 5.87 %
</TABLE>
Accident and health benefits for active lives are calculated using the net
level premium method and assumptions as to future morbidity, withdrawals, and
interest which provide a margin for adverse deviation. Benefit liabilities
for disabled lives are calculated using the present value of benefits method
and experience assumptions for claim termination, expense, and interest which
also provide a margin for adverse deviation.
Policy and Contract Claims
General American establishes a liability for unpaid claims based on estimates
of the ultimate cost of claims incurred, which is comprised of aggregate case
basis estimates, average claim costs for reported claims, and estimates of
unreported losses based on past experience. Policy and contract claims
include a provision for both life and accident and health claims. Management
believes the liabilities for unpaid claims are adequate to cover the ultimate
liability; however, due to the underlying risks and the high degree of
uncertainty associated with the determination of the liability for unpaid
claims, the amounts which will ultimately be paid to settle these liabilities
cannot be determined precisely and may vary from the estimated amount
included in the consolidated balance sheets.
<PAGE> 98
Deferred Policy Acquisition Costs
The costs of acquiring new business, which vary with and are primarily
related to the production of new business, have been deferred to the extent
that such costs are deemed recoverable from future estimated gross profits of
the underlying business. Such costs include commissions, premium taxes, as
well as certain other costs of policy issuance and underwriting.
For limited payment and other nonparticipating traditional life insurance
policies, the deferred policy acquisition costs are amortized in proportion
to the ratio of the expected annual premium revenue to the expected total
premium revenue. Expected future premium revenue is estimated with the same
assumptions used for computing liabilities for future policy benefits for
these policies.
For participating life insurance, universal life, and annuity type contracts,
the deferred policy acquisition costs are amortized over a period of not more
than thirty years in relation to the present value of estimated gross margins
arising from estimates of mortality, interest, expense, and surrender
experience.
The average rates of assumed interest used in estimated gross margins were as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Participating life 8.70 % 7.81 % 6.80 %
Universal life 6.00-8.20 % 6.00-7.56 % 7.45-7.75 %
Annuities 7.83 % 8.04 % 7.31 %
</TABLE>
The estimates of expected gross margins are evaluated regularly and are
revised if actual experience or other evidence indicates that revision is
appropriate. Upon revision, total amortization recorded to date is adjusted
by a charge or credit to current earnings. Under SFAS 115, deferred policy
acquisition costs are adjusted for the impact on estimated gross margins of
net unrealized gains and losses on securities.
Reinsurance
In the normal course of business, the Company seeks to limit its exposure to
loss on any single insured by ceding risks to other insurance enterprises or
reinsurers under various types of contracts including coinsurance and excess
coverage. The Company's retention level per individual life ranges between
$.1 million and $2.5 million depending on the entity writing the policy.
Reinsurance activities are accounted for consistent with terms of the risk
transfer reinsurance contracts. Premiums ceded to other companies have been
reported as a reduction of premiums. Amounts applicable to reinsurance ceded
for future policy benefits and claim liabilities have been reported as assets
for these items, and commissions and expense allowances received in
connection with reinsurance ceded have been accounted for in income as
earned. Reinsurance does not relieve the Company from its primary
responsibility to meet claim obligations. The Company evaluates the
financial conditions of its reinsurers annually.
Federal Income Taxes
General American and certain of its U.S. subsidiaries file a consolidated
federal income tax return. In order to consolidate, General American must
possess both 80 percent of the total voting power and 80 percent of the value
of the stock of the subsidiary. Further, even if it meets the 80 percent
test, any acquired life insurance company is not included in the consolidated
return until the acquired company has been a member of the group for five
years. Prior to satisfying the five-year requirement, the subsidiary files a
separate federal return. RGA Barbados also files a U.S. tax return. The
Company's Canadian, Argentine, Australian, Chilean, Mexican, and Spanish
subsidiaries are taxed under applicable local statutes.
The Company uses the asset and liability method to record deferred income
taxes. Accordingly, deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases, using enacted tax rates.
Separate Account Business
The assets and liabilities of the separate accounts represent segregated
funds administered and invested by the Company for purposes of funding
variable life insurance and annuity contracts for the exclusive benefit of
the contract holders. The Company charges the separate accounts for risks it
assumes in issuing a contract and retains varying amounts of withdrawal
charges to cover expenses in the event of early withdrawals by contract
holders. The assets and liabilities of the separate account are carried at
fair value. The Company's participation in the separate accounts (seed
money) is carried at its fair value in the separate account, and amounted to
$22.3 million and $13.2 million at December 31, 1996, and 1995, respectively.
Fair Value of Financial Instruments
Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. These
estimates do not reflect any premium or discount that could result from
offering for sale at one time the Company's entire holdings of a particular
financial instrument. Although fair value estimates are calculated using
assumptions that management believes are appropriate, changes in assumptions
could significantly affect the estimates and such estimates should be used
with care. The following assumptions were used to estimate the fair value of
each class of financial instrument for which it was practicable to estimate
fair value:
Investment securities: Fixed maturities are valued using quoted market
prices, if available. For securities not actively traded, fair values are
estimated using values obtained from independent pricing services or, in the
case of private placements, are estimated by discounting expected future cash
flows using a current market rate applicable to the yield, credit quality,
and maturity of investments. Prepayments are assumed to occur at the same
rate as in previous periods when interest rates were at levels similar to
current levels. The fair values of equity securities are based on quoted
market prices.
Mortgage loans: The fair values of mortgage loans are estimated using
discounted cash flow analyses and using interest rates currently being
offered for similar loans to borrowers with similar credit ratings. Loans
with similar characteristics are aggregated for purposes of the calculations.
Real estate: The fair value of real estate is based on market values for
comparable local real estate.
Policy loans: The fair value of policy loans approximates the carrying value.
The majority of these loans are indexed, with yield tied to a stated return.
Policyholder account balances on investment type contracts: Fair values for
the Company's liabilities under investment-type contracts are estimated using
discounted cash flow calculations based on interest rates currently being
offered for similar contracts with maturities consistent with those remaining
for the contracts being valued.
Separate account assets and liabilities: The separate account assets and
liabilities are carried at fair value as determined by the market value of
the underlying segregated investments.
Short-term investments and cash and cash equivalents: The carrying amount is
considered a reasonable estimate of fair value.
<PAGE> 99
Notes payable: The fair value of notes payable is estimated using discounted
cash flow calculations based on interest rates currently being offered for
similar instruments.
(2) Acquisitions and Divestitures
On June 1, 1995, the Company acquired Xerox Life Insurance Companies, now
known as Cova Corporation (Cova). At acquisition, Cova had total assets of
approximately $635.6 million. The purchase price of approximately $107.7
million was funded from the Company's operations.
Effective July 31, 1995, the Company entered into a merger arrangement with
Conning Corporation and Subsidiaries (Conning), an investment management
firm, whereby the Company acquired Conning and subsequently contributed
Conning and General American Investment Management Company, a wholly owned
subsidiary, to form Conning Asset Management Company (CAM). At acquisition,
Conning had total assets of approximately $16.0 million. The purchase price
consisted of approximately $13.0 million in cash (from the Company's
operations) and 3.2 million shares of CAM convertible redeemable preferred
stock, with fair value of approximately $17.0 million.
These transactions were accounted for using the purchase method of
accounting. The results of operations of the acquired entities are included
in the consolidated financial statements subsequent to the respective
acquisition dates. The excess of cost over fair value of net assets acquired
amounted to approximately $56.6 million and $23.1 million for Cova and
Conning, respectively, and is being amortized over approximately 20 years.
On January 3, 1995, the Company sold its 72 percent ownership in GenCare
Health Systems, Inc. to United HealthCare Corporation. Proceeds received net
of expenses were $365.0 million and the net realized gain on sale was $170.2
million.
(3) Investments
Fixed maturities and equity securities
The amortized cost and estimated fair value of fixed maturity and equity
securities at December 31, 1996 and 1995 are as follows (in thousands):
<TABLE>
<CAPTION>
1996
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
<S> <C> <C> <C> <C>
Available-for-sale:
U. S. Treasury securities $ 28,980 368 (151) 29,197
Government agency obligations 343,945 41,324 (970) 384,299
Corporate securities 4,071,775 158,361 (39,623) 4,190,513
Mortgage-backed securities 1,949,717 18,927 (14,386) 1,954,258
Asset-backed securities 198,934 1,599 (491) 200,042
-----------------------------------------------------------
Total fixed maturities
available-for-sale $ 6,593,351 220,579 (55,621) 6,758,309
===========================================================
Equity securities $ 21,460 1,137 (1,692) 20,905
===========================================================
<CAPTION>
1996
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
<S> <C> <C> <C> <C>
Available-for-sale:
U. S. Treasury securities $ 37,216 1,089 (12) 38,293
Government agency obligations 444,936 39,406 (1,151) 483,191
Corporate securities 3,500,376 252,109 (18,477) 3,734,008
Mortgage-backed securities 1,213,081 34,343 (2,071) 1,245,353
Asset-backed securities 118,004 2,660 (27) 120,637
-----------------------------------------------------------
Total fixed maturities
available-for-sale $ 5,313,613 329,607 (21,738) 5,621,482
===========================================================
Equity securities $ 14,239 5,190 (2,342) 17,087
===========================================================
</TABLE>
General American manages its credit risk associated with fixed maturities by
diversifying its portfolio. At December 31, 1996, General American held no
corporate debt securities or foreign government debt securities of a single
issuer which had a carrying value in excess of 10 percent of policyholders'
surplus.
The carrying value of the Company's investments in principal-only securities
and interest-only securities totaled approximately $7.4 million and $14.9
million or approximately .05 percent and .1 percent of total invested assets
at December 31, 1996 and 1995, respectively.
The amortized cost and estimated fair value of fixed maturities at December
31, 1996, by contractual maturity, are shown below (in thousands). Expected
maturities may differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
Estimated
Amortized fair
cost value
<S> <C> <C>
Due in one year or less $ 67,398 68,130
Due after one year through five years 937,312 953,122
Due after five years through ten years 1,664,499 1,683,183
Due after ten years through twenty years 1,974,425 2,099,616
Mortgage-backed securities 1,949,717 1,954,258
----------------------------
Total $ 6,593,351 6,758,309
============================
</TABLE>
The sources of net investment income follow (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Fixed maturities $ 471,038 373,564 299,096
Mortgage loans 171,781 143,047 139,392
Real estate 39,062 37,108 41,498
Equity securities 755 622 544
Policy loans 133,511 127,920 104,437
Short-term investments 13,979 26,920 10,059
Other 9,705 (369) 1,019
----------------------------------------
Investment revenue 839,831 708,812 596,045
Investment expenses (48,934) (39,369) (44,574)
----------------------------------------
Net investment income $ 790,897 669,443 551,471
========================================
</TABLE>
<PAGE> 100
Net realized gains (losses) from sales of investments consist of the
following (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
<S>
Fixed maturities: <C> <C> <C>
Realized gains $ 27,928 30,139 14,304
Realized losses (10,398) (9,000) (29,761)
Equity securities:
Realized gains 6,146 306,142 5,649
Realized losses (288) (5,259) (2,282)
Other investments, net 1,143 (41,266) (37,976)
-----------------------------------------
Net realized investment gains (losses) $ 24,531 280,756 (50,066)
=========================================
</TABLE>
A summary of the components of the net unrealized appreciation (depreciation)
on invested assets carried at fair value is as follows
(in thousands):
<TABLE>
<CAPTION>
1996 1995
<S>
Unrealized appreciation (depreciation): <C> <C>
Fixed maturities available-for-sale $ 164,957 308,203
Equity securities and short-term investments 605 (8)
Deferred policy acquisition costs (70,038) (130,091)
Effect on present value of future profits 1,986 (7,021)
Deferred income taxes (36,705) (61,414)
Minority interest, net of taxes (10,438) (12,214)
----------------------------
Net unrealized appreciation $ 50,367 97,455
============================
</TABLE>
The Company has securities on deposit with various state insurance
departments and regulatory authorities with an amortized cost of
approximately $278.6 million and $202.2 million at December 31, 1996, and
1995, respectively.
Mortgage loans
The Company originates mortgage loans on income-producing properties, such as
apartments, retail and office buildings, light warehouses, and light
industrial facilities. Loan to value ratios at the time of loan approval are
80 percent or less. The Company monitors creditworthiness of the borrowers
by using controls that include credit approvals, limits, and other monitoring
mechanisms. The Company minimizes risk through geographic and property type
diversification. The Company's mortgage loans were distributed as follows
(in thousands):
<TABLE>
<CAPTION>
1996 1995
Carrying Percent of Carrying Percent of
Value Total Value Total
<S> <C> <C> <C> <C>
Arizona $ 185,575 8.0 % $ 113,555 6.5 %
California 378,376 16.4 281,191 16.1
Colorado 226,531 9.8 212,295 12.1
Florida 193,570 8.4 189,967 10.8
Georgia 141,442 6.1 58,448 3.3
Illinois 183,883 8.0 162,072 9.3
Maryland 99,944 4.3 85,057 4.9
Missouri 102,111 4.4 85,669 4.9
Texas 225,697 9.8 156,528 8.9
Virginia 92,663 4.0 82,705 4.7
Other 481,546 20.8 323,448 18.5
------------------------------------------------------
Subtotal 2,311,338 100.0 % 1,750,935 100.0 %
Valuation reserve (37,711) (41,820)
------------------------------------------------------
Total $ 2,273,627 $ 1,709,115
======================================================
<CAPTION>
1996 1995
Carrying Percent of Carrying Percent of
Value Total Value Total
<S> <C> <C> <C> <C>
Property Type
Apartment $ 131,352 5.7 % $ 96,209 5.5 %
Retail 966,298 41.8 681,740 38.9
Office building 641,204 27.7 487,763 27.9
Industrial 479,755 20.8 416,354 23.8
Other commercial 92,729 4.0 68,869 3.9
------------------------------------------------------
Subtotal 2,311,338 100.0 % 1,750,935 100.0 %
Valuation reserve (37,711) (41,820)
------------------------------------------------------
Total $ 2,273,627 $ 1,709,115
======================================================
</TABLE>
SFAS 114, Accounting by Creditors for Impairment of a Loan, which was amended
by SFAS 118, Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosures, requires that an impaired loan be measured at
the present value of expected future cash flows or, alternatively, the
observable market price or the fair value of the collateral. General
American adopted these standards as of January 1, 1995, with no material
impact.
Mortgage loans which have been non-income producing for the preceding twelve
months were $5.1 million and $25.8 million at December 31, 1996 and 1995,
respectively. At December 31, 1996 and 1995, the recorded investment in
mortgage loans that were considered impaired under SFAS 114 was $86.5 million
and $129.3 million, respectively, with related allowances for credit losses
of $8.0 million and $16.9 million, respectively. The average recorded
investment in impaired loans during 1996 and 1995 was $107.9 million and
$174.9 million, respectively. For the years ended December 31, 1996 and
1995, the Company recognized $6.6 million and $11.9 million, respectively, of
interest income on those impaired loans, which included $6.7 million and
$12.0 million, respectively, of interest income recognized using the cash
basis method of income recognition.
The Company has outstanding mortgage loan commitments as of December 31, 1996
totalling $227.0 million. During 1995, the Company entered into an agreement
whereby approximately $109.8 million of mortgage loans were sold by the
Company for securitization and resale by a financial institution as mortgage
pass-through certificates. In conjunction with this transaction, the Company
entered into futures positions to hedge against interest rate risk. The sale
of these mortgage loans resulted in a net loss of approximately $.4 million.
In addition, the close-out of the futures positions related to this
transaction resulted in a net loss of approximately $6.4 million.
Derivatives
The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. The Company is
sensitive to interest rate changes, as its liabilities may reprice or mature
before interest-earning assets. The Company manages interest rate risk on
certain contracts, primarily through the utilization of interest rate swaps.
Under interest rate swaps, the Company agrees with counterparties to
exchange, at specified intervals, the payments between floating and
fixed-rate interest amounts calculated by reference to notional amounts. Net
interest payments are recognized within net investment income in the
consolidated statements of operations.
At December 31, 1996, the Company has eight outstanding interest rate swap
agreements which expire at various dates through 2026. Under four of the
agreements, the Company receives a fixed rate ranging from 5.8 percent to 6.9
percent on $15.4 million and pays a floating rate based on the London
Interbank Offered Rate (LIBOR).
<PAGE> 101
Under the remaining four agreements, the Company receives a floating rate
based on LIBOR on $25.0 million and pays a fixed rate ranging from 6.5 percent
to 8.3 percent. The estimated fair value of the agreements was a net loss of
approximately $2.0 million, which is not recognized in the accompanying
consolidated balance sheet. At December 31, 1995 the Company's exposure to
derivative financial instruments was not material.
The Company is exposed to credit related risk in the event of nonperformance
by counterparties to financial instruments but does not expect any
counterparties to fail to meet their obligations. Where appropriate, master
netting agreements are arranged and collateral is obtained in the form of
rights to securities to lower the Company's exposure to credit risk. It is
the Company's policy to deal only with highly rated companies.
(4) Fair Value of Financial Instruments
The following table presents the carrying amounts and estimated fair values
of the Company's financial instruments at December 31, 1996 and 1995. SFAS
107, Disclosures about the Fair Value of Financial Instruments, defines fair
value of a financial instrument as the amount at which the instrument could
be exchanged in a current transaction between willing parties (in thousands):
<TABLE>
<CAPTION>
1996 1995
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
<S>
Assets: <C> <C> <C> <C>
Fixed maturities $ 6,758,309 6,758,309 5,621,482 5,621,482
Mortgage loans 2,273,627 2,354,072 1,709,115 1,825,000
Real estate 203,767 254,387 210,170 259,664
Equity securities 20,905 20,905 17,087 17,087
Policy loans 1,917,861 1,917,861 1,707,237 1,707,237
Short-term investments 55,594 55,594 36,141 36,141
Other invested assets 183,612 183,628 150,885 150,885
Separate account assets 2,833,258 2,833,258 2,182,101 2,182,101
Liabilities:
Policyholder account
balances relating to
investment contracts 5,920,651 5,829,603 5,212,444 5,138,433
Notes payable 295,614 293,913 208,118 215,969
Separate account liabilities 2,810,907 2,810,907 2,168,933 2,168,933
</TABLE>
(5) Reinsurance
The Company is a major reinsurer to the life and health industry. The effect
of reinsurance on premiums and other considerations is as follows (in
thousands):
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Direct $ 1,097,340 1,069,248 1,245,112
Assumed 827,171 700,152 615,870
Ceded (301,283) (271,387) (263,168)
------------------------------------
Net insurance premiums and
other considerations $ 1,623,228 1,498,013 1,597,814
====================================
</TABLE>
Reinsurance assumed represents approximately $160.0 billion, $157.9 billion,
and $160.0 billion, of insurance in force at December 31, 1996, 1995, and
1994, respectively. The amount of ceded insurance in force, including
retrocession, was $53.2 billion, $48.7 billion, and $46.3 billion, for 1996,
1995, and 1994, respectively.
On July 1, 1995 RGA entered into reinsurance agreements with another company,
wherein RGA assumed virtually all of the life, health, and annuity financial
reinsurance inforce retained by the other company at that time. RGA
simultaneously entered into reinsurance agreements wherein RGA retroceded to
various retrocessionaires all of the financial reinsurance assumed under the
above clients, while retaining a net risk charge margin.
(6) Federal Income Taxes
Income tax expense (benefit) attributable to income from continuing
operations consists of the following (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Current income tax expense $ 45,902 115,769 61,508
Deferred income tax expense (benefit) 13,992 29,411 (8,839)
---------------------------------
Provision for income taxes $ 59,894 145,180 52,669
=================================
</TABLE>
Income tax expense attributable to income from operations differed from the
amounts computed by applying the U.S. federal income tax rate of 35 percent
to pre-tax income as a result of the following (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Computed "expected" tax expense $ 57,055 135,353 35,796
Increase (decrease) in income tax
resulting from:
Surplus tax on mutual life
insurance companies 4,777 - 15,674
Foreign tax rate in excess of
U.S. tax rate 941 763 683
Tax preferred investment income (7,318) (5,784) (2,660)
State tax net of federal benefit 971 292 296
GAAP/tax basis difference on GenCare - 15,710 -
Goodwill amortization 895 567 609
Difference in book vs. tax basis in
domestic subsidiaries 2,230 1,547 -
Other, net 343 (3,268) 2,271
---------------------------------
Provision for income taxes $ 59,894 145,180 52,669
=================================
</TABLE>
Total income taxes were allocated as follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Provision for income taxes from
continuing operations $ 59,894 145,180 52,669
Income tax from policyholders' surplus:
Unrealized holding gain or loss on debt
and equity securities recognized for
financial reporting purposes (24,612) 99,871 (38,420)
Other (1,023) - -
---------------------------------
Total income tax $ 34,259 245,051 14,249
=================================
</TABLE>
<PAGE> 102
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities at December 31, 1996 and 1995
are presented below (in thousands):
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Deferred tax assets:
Reserve for future policy benefits $ 138,848 130,043
Deferred acquisition costs capitalized for tax 95,332 88,099
Difference in basis of post retirement benefits 13,993 -
Net operating loss 22,789 11,578
Other, net 106,263 192,305
----------------------
Gross deferred tax assets 377,225 422,025
Less valuation allowance 1,299 778
----------------------
Total deferred tax asset after valuation allowance 375,926 421,247
======================
Deferred tax liabilities:
Unrealized gain on investments 63,204 109,720
Deferred acquisition costs capitalized
for financial reporting 246,858 187,709
Difference in the tax basis of cash
and invested assets 19,222 20,609
Other, net 89,919 153,600
----------------------
Total deferred tax liabilities 419,203 471,638
----------------------
Net deferred liability $ 43,277 50,391
======================
</TABLE>
The Company has not recognized a deferred tax liability for the undistributed
earnings of its wholly owned domestic and foreign subsidiaries because the
Company currently does not expect those unremitted earnings to become taxable
to the Company in the foreseeable future. This is because the unremitted
earnings will not be repatriated in the foreseeable future, or because those
unremitted earnings that may be repatriated will not be taxable through the
application of tax planning strategies that management would utilize.
As of December 31, 1996, the Company has provided for a 100 percent valuation
allowance against the deferred tax asset related to the net operating losses
of RGA's Australian, Argentine, and UK subsidiaries, Genelco's Spanish and
Mexican subsidiaries, and International Underwriting Services. As of December
31, 1995, the Company has provided a 100 percent valuation allowance against
the deferred tax asset related to International Underwriting Services' net
operating loss and to Genelco's Mexican and Spanish net operating losses.
International Underwriting Services' losses are not shown as deferred tax
benefits because this subsidiary has had no prior earnings history.
At December 31, 1996, the Company had capital loss carryforwards of $0.9
million. During 1996, 1995, and 1994 the Company paid income taxes totaling
approximately $20.7 million, $121.7 million, and $34.4 million, respectively.
At December 31, 1996, the Company's subsidiaries had recognized deferred tax
assets associated with net operating loss carryforwards of approximately
$61.4 million. The net operating loss and capital losses are expected to be
utilized during the period allowed for carryforwards.
(7) Deferred Policy Acquisition Costs
A summary of the policy acquisition costs deferred and amortized is as
follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Balance at beginning of year $ 526,939 664,452 587,546
Policy acquisition costs deferred 206,790 163,218 150,406
Policy acquisition costs amortized (182,038) (176,216) (138,813)
Interest credited 38,944 37,405 33,525
Deferred policy acquisition costs relating
to change in unrealized (gain) loss on
investments available for sale 61,616 (161,920) 31,788
-----------------------------------
Balance at end of year $ 652,251 526,939 664,452
===================================
</TABLE>
(8) Associate Benefit Plans and Postretirement Benefits
The Company has a defined benefit plan covering substantially all associates.
The benefits are based on years of service and each associate's compensation
level. The Company's funding policy is to contribute annually the maximum
amount deductible for federal income tax purposes. Contributions provide for
benefits attributed to service to date and for those expected to be earned in
the future.
The Company also has several non-qualified, defined benefit, and defined
contribution plans for directors and management associates. The plans are
unfunded and are deductible for federal income tax purposes when the benefits
are paid.
Net periodic defined benefit plan costs consist of the following
(in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Service cost $ 5,421 4,074 4,661
Interest 8,047 7,160 6,306
Return on plan assets (14,207) (27,984) 3,161
Amortization and deferral 4,646 19,841 (13,305)
Other 192 - -
----------------------------------
Pension costs $ 4,099 3,091 823
==================================
</TABLE>
<PAGE> 103
The following table presents the plans' funded status and amount recognized
in the Company's consolidated balance sheets at December 31, 1996 and 1995
based on the actuarial valuations as of December 31, 1996 and 1995 (in
thousands):
<TABLE>
<CAPTION>
1996 1995
Qualified Other Qualified Other
Plans Plans Plans Plans
<S> <C> <C> <C> <C>
Actuarial present value of
benefit obligations:
Accumulated benefit obligation,
including vested benefits of
$74,223 and $18,560 for 1996 and
$66,060 and $15,479 for 1995 $ 76,928 26,897 68,411 25,366
--------- -------- ------- --------
Projected benefit obligation for service
rendered to date 92,825 29,726 82,663 27,874
Plan assets at fair value, primarily
listed stocks and bonds 128,545 118,056
Plan assets in excess (less than)
projected benefit obligations 35,720 (29,726) 35,393 (27,874)
Unrecognized net transition
obligation at December 31 2,701 2,538
-------- --------
Pension cost funded in advance $ 35,720 35,393
========= =======
Accrued pension liability (27,025) (25,336)
======== ========
</TABLE>
Assumptions used for the December 31, 1996 and 1995 projected benefit
obligation included a 7.25 percent current discount rate, a 4.50 percent
increase rate for future compensation levels, and a 9.25 percent projected
return on plan assets.
The Board of Directors has adopted an associate incentive plan applicable to
full-time salaried associates with at least one year of service.
Contributions to the plan are determined annually by the Board of Directors
and are based upon salaries of eligible associates. Full vesting occurs
after five years of continuous service. The Company's contribution to the
plan was $8.8 million, $9.2 million, and $1.6 million for 1996, 1995, and
1994, respectively.
In addition to pension benefits, the Company provides certain health care and
life insurance benefits for retired employees. Substantially all employees
may become eligible for these benefits if they reach retirement age while
working for the Company. Alternatively, retirees may elect certain prepaid
health care benefit plans.
The Company uses the accrual method to account for the costs of its retiree
benefit plans and amortizes its transition obligation for retirees and fully
eligible or vested employees over 20 years. The unamortized transition
obligation was $17.8 million and $19.0 million at December 31, 1996 and 1995,
respectively. Net postretirement benefit costs for the years ended December
31, 1996, 1995, and 1994 were $5.8, million, $5.4 million, and $5.0 million,
respectively, and include the expected cost of such benefits for newly
eligible or vested employees, interest cost, gains and losses arising from
difference between actuarial assumptions and actual experience, and
amortization of the transition obligation.
Assumptions used were as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Discount rate in determining benefit obligations 7.25 % 8.25 %
Healthcare cost trend
First year:
Indemnity plan 9.0 10.0
HMO plan 8.0 9.0
Dental plan 9.0 10.0
Ultimate 5.25 6.00
</TABLE>
The health care cost trend rate assumption has a significant effect on the
amount reported. To illustrate, increasing the assumed health care cost
trend rates by one percentage point in each year would increase the
accumulated postretirement benefit obligation as of December 31, 1996 by $5.4
million or 12.9 percent. The aggregate of the service cost and interest cost
components of net periodic postretirement benefit cost for 1996 would
increase by $.7 million or 16 percent.
(9) Notes Payable
On January 14, 1994, the Company issued surplus notes with a face amount of
$107.0 million bearing a 7.625 percent interest rate due in 2024. The notes
pay interest on January 15 and July 15 of each year. The notes are not
subject to redemption prior to maturity. Payment of principal and interest
on the notes may be made only with the approval of the Missouri Director of
Insurance.
In December 1996 the Company obtained a note payable for $80.5 million with a
financial institution. The note is secured by bonds with a carrying value of
$91.6 million. This note bears a fixed interest rate at 5.55 percent and
matures on March 27, 1997.
On March 19, 1996, RGA issued 7.25 percent senior notes with a face value of
$100.0 million in accordance with Rule 144A of the Securities Act of 1933, as
amended. The net proceeds from the offering were approximately $98.9
million, and interest is payable semiannually on April 1 and October 1, with
the principal amount due April 1, 2006. The ability of RGA to make debt
principal and interest payments as well as make dividend payments to
shareholders is ultimately dependent on the earnings and surplus of its
subsidiaries and the investment earnings on the undeployed debt proceeds.
The transfer of funds from the insurance subsidiaries to Reinsurance Group of
America, Incorporated is subject to applicable insurance laws and
regulations.
On January 8, 1996, RGA Australian Holdings PTY, Limited, a wholly owned
subsidiary of RGA, established a $15.9 million unsecured, three month,
revolving line of credit. The debt is guaranteed by RGA and is utilized to
provide operating capital to RGA Australia. The current outstanding balance
is $7.6 million, representing drawdowns of $5.6 million in January 1996 and
$2.0 million in July 1996. Principal repayments are due in April 1997 and
are expected to be renewed under the terms of the line of credit. Interest
is paid every three months at a current rate between 7.03 percent and 7.08
percent.
Interest paid on debt during 1996, 1995, and 1994 amounted to $19.9 million,
$9.0 million, and $3.9 million, respectively.
<PAGE> 104
(10) Regulatory Matters
The Company is subject to financial statement filing requirements of the
State of Missouri Department of Insurance, in its state of domicile, as well
as the states in which it transacts business. Such financial statements,
generally referred to as statutory financial statements, are prepared on a
basis of accounting which varies in some respects from GAAP. Statutory
accounting practices include: (1) charging of policy acquisition costs to
income as incurred; (2) establishment of a liability for future policy
benefits computed using required valuation standards; (3) nonprovision of
deferred federal income taxes resulting from temporary differences between
financial reporting and tax bases of assets and liabilities; (4) recognition
of statutory liabilities for asset impairments and yield stabilization on
fixed maturity dispositions prior to maturity with asset valuation reserves
based on a statutorily determined formulas; and (5) valuation of investments
in bonds at amortized cost.
Combined net income and policyholders' surplus, for the years ended and at
December 31, 1996, 1995, and 1994, of the Company, as determined in
accordance with statutory accounting practices, are as follows (in
thousands):
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Net income (loss) $ 18,464 236,962 (13,875)
Policyholders' surplus $ 636,260 589,783 496,333
</TABLE>
Under the NAIC solvency monitoring program known as Risk-Based Capital (RBC),
General American and its insurance subsidiaries are required to measure its
solvency against certain parameters. As of December 31, 1996, General
American and its subsidiaries exceeded the established minimums in the RBC
program. In addition, General American and its subsidiaries exceeded the
minimum statutory capital and surplus requirements of their respective states
of domicile.
The Company's insurance subsidiaries are subject to limitations on the
payment of dividends to the Company. Generally, dividends during any year
may not be paid without prior regulatory approval, in excess of the lessor of
(and with respect to life and health subsidiaries in Missouri, in excess of
the greater of): (a) 10 percent of the insurance subsidiaries' statutory
surplus as of the preceding December 31 or (b) the insurance subsidiaries'
statutory gain from operations for the preceding year.
(11) Lease Commitments
The Company has entered into operating leases for office space and other
assets, principally office furniture and equipment. Future minimum lease
obligations under noncancelable leases are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
<S> <C>
Year ended December 31:
1997 $ 15,180
1998 13,348
1999 11,869
2000 8,489
2001 6,454
2002 2,622
</TABLE>
Operating lease expense totaled $17.0 million, $11.6 million, and $10.4
million in 1996, 1995, and 1994, respectively.
(12) Participating Policies and Dividends
to Policyholders
Over 33.9 percent and 33.2 percent of General American's business in force
relates to participating policies as of December 31, 1996 and 1995,
respectively. These participating policies allow the policyholders to
receive dividends based on actual interest, mortality, and expense experience
for the related policies. These dividends are distributed to the
policyholders through an annual dividend, using current dividend scales which
are approved by the Board of Directors.
(13) Contingent Liabilities
From time to time, the Company is subject to insurance-related litigation in
the normal course of business. Management does not believe that the Company
is party to any such pending litigation which would have a material adverse
effect on its financial statements or future operations.
(14) Subsequent Events
In January 1997, pursuant to Missouri's Mutual Holding Company Statute and
with the approval of its policyholders, General American initiated steps to
reorganize and form a mutual holding company structure by (i) forming a
mutual insurance holding company under the insurance laws of the State of
Missouri, to be named General American Mutual Holding Company (MHC), (ii)
forming an intermediate stock holding company under the general corporate
laws of the State of Missouri, to be named GenAmerica Corporation
(GenAmerica), and (iii) amending and restating the Charter and Articles of
Incorporation of General American to authorize the issuance of capital stock
and the continuance of its corporate existence as a stock life insurance
company under the same name.
All of the shares of the reorganized General American will be, as part of the
reorganization, issued to MHC and, shortly after the reorganization, MHC will
transfer all such shares to GenAmerica in exchange for all of the shares of
GenAmerica. As a result, reorganized General American will be a wholly owned
direct subsidiary of GenAmerica which, in turn, will be a wholly owned direct
subsidiary of MHC. MHC will at all times, in accordance with the plan of
reorganization and as required by the Missouri Mutual Holding Company
Statute, directly or indirectly control the reorganized General American
through the ownership of at least a majority of the voting shares of the
capital stock of reorganized General American or GenAmerica.
<PAGE> 105
APPENDIX A- Illustrations of Death Benefits and Cash Values
The following tables illustrate how the Cash Value, Cash Surrender
Value, and death benefit of a Policy change with the investment experience of
a Division of the Separate Account. The tables show how the Cash Value, Cash
Surrender Value, and death benefit of a Policy issued to an insured of a
given age and at a given premium would vary over time if the investment
return on the assets held in each Division of the Separate Account were a
uniform, gross, after-tax annual rate of 0%, 6%, or 12%. The tables on pages
A-2 through A-10 illustrate a Policy issued to a Male, age 45 in a preferred
nonsmoker rate class. If the insured falls into a smoker rate class, the
Cash Values, Cash Surrender Values, and death benefits would be lower than
those shown in the tables. In addition, the Cash Values, Cash Surrender
Values, and death benefits would be different from those shown if the gross
annual investment rates of return averaged 0%, 6%, and 12% over a period of
years, but fluctuated above and below those averages for individual Policy
Years.
The Cash Value column under the "Guaranteed" heading shows the
accumulated value of the Net Premiums paid at the stated interest rate,
reflecting deduction of the monthly administrative charges and monthly
charges for the cost of insurance based on the maximum values allowed under
the 1980 Commissioners Standard Ordinary Mortality Table. The Cash Surrender
Value column under the "Guaranteed" heading shows the projected Cash
Surrender Value of the Policy, which is calculated by taking the Cash Value
under the "Guaranteed" heading and deducting any appropriate Contingent
Deferred Sales Charge. The Cash value column under the "Current" heading
shows the accumulated value of the Net Premiums paid at the stated interest
rate, reflecting deduction of the monthly administrative charges and monthly
charges for the cost of insurance at their current level, which is less than
or equal to that allowed by the 1980 Commissioners Standard Ordinary
Mortality Table. The Cash Value column under the "Current" heading also
reflects payment of the projected dividends into the Cash Value. The Cash
Surrender Value column under the "Current" heading shows the projected Cash
Surrender Value of the Policy, which is calculated by taking the Cash Value
under the "Current" heading and deducting any appropriate Contingent Deferred
Sales Charge. The illustrations of death benefits reflect the above
assumptions. The death benefits also vary between tables depending upon
whether Death Benefit Options A or C (Level Type) or Death Benefit Option B
(Increasing Type) are illustrated.
The amounts shown for Cash Value, Cash Surrender Value, and death
benefit reflect the fact that the investment rate of return is lower than the
gross after-tax return on the assets held in a Division of the Separate
Account. The charges include a .70% charge for mortality and expense risk,
and an assumed .72% charge for the investment advisory fee and administrative
expenses combined. The actual investment advisory fee applicable to each
Division is shown in the respective Prospectuses of General American Capital
Company, Russell Insurance Funds, Variable Insurance Products Fund, Variable
Insurance Products Fund II, and Van Eck Worldwide Insurance Trust. After
deduction for these amounts, the illustrated gross annual investment rates of
return of 0%, 6%, and 12% correspond to approximate net annual rates of -1.42%,
4.58%, and 10.58%, respectively. The Prospectuses for General American Capital
Company, Russell Insurance Funds, Variable Insurance Products Fund, Variable
Insurance Products Fund II, and Van Eck Worldwide Insurance Trust should be
consulted for details about the nature and extent of their expenses.
The hypothetical values shown in the tables do not reflect any charges
for Federal income taxes against the Separate Account (as opposed to Premium
Tax Charges which are deducted from premium payments), since General American
is not currently making any such charges. However, such charges may be made
in the future and, in that event, the gross annual investment rate of return
of the Divisions of the Separate Account would have to exceed 0%, 6%, and 12%
by an amount sufficient to cover the tax charges in order to produce the
death benefit and Cash Value illustration. (See Federal Tax Matters.)
The tables illustrate the Policy values that would result based upon
the investment rates of return if premiums are paid as indicated, if all Net
Premiums are allocated to the Separate Account, if no Policy Loans have been
made, and dividends are paid into the Cash Value as projected. The tables
are also based on the assumptions that the Owner has not requested an
increase or decrease in the Face Amount, that no partial withdrawals have
been made, that no transfer charges were incurred, and that no optional
riders have been requested.
Upon request, General American will provide a comparable illustration
based upon the proposed Insured's age, sex, and rate class, the Face Amount
or premium requested, the proposed frequency of premium payments, and any
available riders requested.
1
<PAGE> 106
<TABLE>
GENERAL AMERICAN LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
POLICY FACE AMOUNT: $100,000 MALE PREFERRED NONSMOKER AGE 45
DEATH BENEFIT LEVEL (OPTION A) ANNUAL PREMIUM: $2,141
<CAPTION>
FOR SEPARATE ACCOUNT ELEVEN A HYPOTHETICAL
GROSS ANNUAL RATE OF RETURN @ 0.0% (NET RATE @ -1.42%)
======== CURRENT ========= ============= GUARANTEED ============
END AGE ANNUAL PREM SURR CASH DEATH SURR CASH DEATH
OF PAYMNT ACCUM @ VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR 5%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 2,141 2,248 1,691 1,777 100,000 1,691 1,777 100,000
2 47 2,141 4,609 3,313 3,484 100,000 3,015 3,186 100,000
3 48 2,141 7,087 4,858 5,115 100,000 4,289 4,545 100,000
4 49 2,141 9,689 6,350 6,693 100,000 5,511 5,853 100,000
5 50 2,141 12,422 7,803 8,231 100,000 6,679 7,107 100,000
6 51 2,141 15,291 9,330 9,741 100,000 7,894 8,305 100,000
7 52 2,141 18,304 10,854 11,214 100,000 9,082 9,441 100,000
8 53 2,141 21,467 12,385 12,659 100,000 10,237 10,512 100,000
9 54 2,141 24,788 13,915 14,069 100,000 11,355 11,510 100,000
10 55 2,141 28,276 21,852 21,852 100,000 18,089 18,089 100,000
11 56 2,141 31,938 24,667 24,667 100,000 20,085 20,085 100,000
12 57 2,141 35,782 27,622 27,622 100,000 22,116 22,116 100,000
13 58 2,141 39,820 19,652 19,652 100,000 14,676 14,676 100,000
14 59 2,141 44,059 20,978 20,978 100,000 15,244 15,244 100,000
15 60 2,141 48,510 22,268 22,268 100,000 15,714 15,714 100,000
16 61 2,141 53,183 23,498 23,498 100,000 16,075 16,075 100,000
17 62 2,141 58,090 24,669 24,669 100,000 16,317 16,317 100,000
18 63 2,141 63,243 25,774 25,774 100,000 16,424 16,424 100,000
19 64 2,141 68,653 26,807 26,807 100,000 16,378 16,378 100,000
20 65 2,141 74,334 27,770 27,770 100,000 16,159 16,159 100,000
25 70 2,141 107,293 31,323 31,323 100,000 11,828 11,828 100,000
30 75 2,141 149,358 31,945 31,945 100,000 0 0 100,000
</TABLE>
GUARANTEED VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF
INSURANCE RATES.
CURRENT VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES AND DIVIDENDS BASED ON THE CURRENT DIVIDEND SCALE FOR THE EXACT
COMBINATION OF PREMIUMS AND BENEFITS SHOWN. THESE VALUES ARE ALSO BASED ON A
POLICY ISSUE DATE OF JANUARY 1 FOR PURPOSES OF DETERMINING DIVIDEND AMOUNTS.
THE HYPOTHETICAL INVESTMENT RATE OF RETURN SHOWN ABOVE IS ILLUSTRATIVE ONLY,
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL
INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICY
OWNER AND THE INVESTMENT RESULTS FOR FUNDS OF GENERAL AMERICAN CAPITAL
COMPANY, RUSSELL INSURANCE FUNDS, VARIABLE INSURANCE PRODUCTS FUND, VARIABLE
INSURANCE PRODUCTS FUND II, AND VAN ECK WORLDWIDE INSURANCE TRUST. THE CASH
VALUE, CASH SURRENDER VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED THE RATE SHOWN ABOVE
OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY,
WALNUT STREET SECURITIES, GENERAL AMERICAN CAPITAL COMPANY, RUSSELL INSURANCE
FUNDS, VARIABLE INSURANCE PRODUCTS FUND, VARIABLE INSURANCE PRODUCTS FUND II,
VAN ECK WORLDWIDE INSURANCE TRUST, OR ANY REPRESENTATIVE THEREOF, THAT THIS
HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED
OVER ANY PERIOD OF TIME.
ILLUSTRATED VALUES SHOWN ABOVE ARE AS OF THE END OF THE POLICY YEARS
INDICATED AND ASSUME ANY ADDITIONAL PREMIUMS SHOWN ARE RECEIVED ON THE POLICY
ANNIVERSARIES. ILLUSTRATED VALUES ASSUME ALL PREMIUM TAXES ARE PAID BY THE
COMPANY.
2
<PAGE> 107
<TABLE>
GENERAL AMERICAN LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
POLICY FACE AMOUNT: $100,000 MALE PREFERRED NONSMOKER AGE 45
DEATH BENEFIT LEVEL (OPTION A) ANNUAL PREMIUM: $2,141
<CAPTION>
FOR SEPARATE ACCOUNT ELEVEN A HYPOTHETICAL
GROSS ANNUAL RATE OF RETURN @ 6.0% (NET RATE @ 4.58%)
======== CURRENT ========= ============= GUARANTEED ============
END AGE ANNUAL PREM SURR CASH DEATH SURR CASH DEATH
OF PAYMNT ACCUM @ VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR 5%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 2,141 2,248 1,804 1,890 100,000 1,804 1,890 100,000
2 47 2,141 4,609 3,650 3,822 100,000 3,343 3,514 100,000
3 48 2,141 7,087 5,531 5,788 100,000 4,926 5,183 100,000
4 49 2,141 9,689 7,472 7,815 100,000 6,555 6,898 100,000
5 50 2,141 12,422 9,490 9,918 100,000 8,229 8,657 100,000
6 51 2,141 15,291 11,703 12,114 100,000 10,052 10,463 100,000
7 52 2,141 18,304 14,037 14,397 100,000 11,951 12,311 100,000
8 53 2,141 21,467 16,508 16,782 100,000 13,926 14,200 100,000
9 54 2,141 24,788 19,111 19,265 100,000 15,973 16,127 100,000
10 55 2,141 28,276 21,852 21,852 100,000 18,089 18,089 100,000
11 56 2,141 31,938 24,667 24,667 100,000 20,085 20,085 100,000
12 57 2,141 35,782 27,622 27,622 100,000 22,116 22,116 100,000
13 58 2,141 39,820 30,704 30,704 100,000 24,184 24,184 100,000
14 59 2,141 44,059 33,929 33,929 100,000 26,291 26,291 100,000
15 60 2,141 48,510 37,308 37,308 100,000 28,437 28,437 100,000
16 61 2,141 53,183 40,830 40,830 100,000 30,622 30,622 100,000
17 62 2,141 58,090 44,509 44,509 100,000 32,843 32,843 100,000
18 63 2,141 63,243 48,353 48,353 100,000 35,096 35,096 100,000
19 64 2,141 68,653 52,370 52,370 100,000 37,377 37,377 100,000
20 65 2,141 74,334 56,581 56,581 100,000 39,684 39,684 100,000
25 70 2,141 107,293 81,175 81,175 100,000 51,704 51,704 100,000
30 75 2,141 149,358 113,442 113,442 121,383 64,952 64,952 100,000
</TABLE>
GUARANTEED VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF
INSURANCE RATES.
CURRENT VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES AND DIVIDENDS BASED ON THE CURRENT DIVIDEND SCALE FOR THE EXACT
COMBINATION OF PREMIUMS AND BENEFITS SHOWN. THESE VALUES ARE ALSO BASED ON A
POLICY ISSUE DATE OF JANUARY 1 FOR PURPOSES OF DETERMINING DIVIDEND AMOUNTS.
THE HYPOTHETICAL INVESTMENT RATE OF RETURN SHOWN ABOVE IS ILLUSTRATIVE ONLY,
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL
INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICY
OWNER AND THE INVESTMENT RESULTS FOR FUNDS OF GENERAL AMERICAN CAPITAL
COMPANY, RUSSELL INSURANCE FUNDS, VARIABLE INSURANCE PRODUCTS FUND, VARIABLE
INSURANCE PRODUCTS FUND II, AND VAN ECK WORLDWIDE INSURANCE TRUST. THE CASH
VALUE, CASH SURRENDER VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED THE RATE SHOWN ABOVE
OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY,
WALNUT STREET SECURITIES, GENERAL AMERICAN CAPITAL COMPANY, RUSSELL INSURANCE
FUNDS, VARIABLE INSURANCE PRODUCTS FUND, VARIABLE INSURANCE PRODUCTS FUND II,
VAN ECK WORLDWIDE INSURANCE TRUST, OR ANY REPRESENTATIVE THEREOF, THAT THIS
HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED
OVER ANY PERIOD OF TIME.
ILLUSTRATED VALUES SHOWN ABOVE ARE AS OF THE END OF THE POLICY YEARS
INDICATED AND ASSUME ANY ADDITIONAL PREMIUMS SHOWN ARE RECEIVED ON THE POLICY
ANNIVERSARIES. ILLUSTRATED VALUES ASSUME ALL PREMIUM TAXES ARE PAID BY THE
COMPANY.
3
<PAGE> 108
<TABLE>
GENERAL AMERICAN LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
POLICY FACE AMOUNT: $100,000 MALE PREFERRED NONSMOKER AGE 45
DEATH BENEFIT LEVEL (OPTION A) ANNUAL PREMIUM: $2,141
<CAPTION>
FOR SEPARATE ACCOUNT ELEVEN A HYPOTHETICAL
GROSS ANNUAL RATE OF RETURN @ 12.0% (NET RATE @ 10.58%)
======== CURRENT ========= ============= GUARANTEED ============
END AGE ANNUAL PREM SURR CASH DEATH SURR CASH DEATH
OF PAYMNT ACCUM @ VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR 5%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 2,141 2,248 1,917 2,003 100,000 1,917 2,003 100,000
2 47 2,141 4,609 4,001 4,172 100,000 3,685 3,857 100,000
3 48 2,141 7,087 6,259 6,516 100,000 5,620 5,876 100,000
4 49 2,141 9,689 8,737 9,080 100,000 7,739 8,081 100,000
5 50 2,141 12,422 11,472 11,900 100,000 10,061 10,489 100,000
6 51 2,141 15,291 14,606 15,017 100,000 12,711 13,122 100,000
7 52 2,141 18,304 18,094 18,454 100,000 15,640 16,000 100,000
8 53 2,141 21,467 21,983 22,258 100,000 18,875 19,149 100,000
9 54 2,141 24,788 26,305 26,459 100,000 22,444 22,598 100,000
10 55 2,141 28,276 31,104 31,104 100,000 26,378 26,378 100,000
11 56 2,141 31,938 36,391 36,391 100,000 30,529 30,529 100,000
12 57 2,141 35,782 42,285 42,285 100,000 35,099 35,099 100,000
13 58 2,141 39,820 48,827 48,827 100,000 40,144 40,144 100,000
14 59 2,141 44,059 56,105 56,105 100,000 45,727 45,727 100,000
15 60 2,141 48,510 64,208 64,208 100,000 51,922 51,922 100,000
16 61 2,141 53,183 73,227 73,227 100,000 58,814 58,814 100,000
17 62 2,141 58,090 83,269 83,269 106,585 66,501 66,501 100,000
18 63 2,141 63,243 94,388 94,388 118,929 75,103 75,103 100,000
19 64 2,141 68,653 106,690 106,690 132,296 84,737 84,737 105,074
20 65 2,141 74,334 120,305 120,305 146,773 95,363 95,363 116,343
25 70 2,141 107,293 213,371 213,371 247,510 166,505 166,505 193,146
30 75 2,141 149,358 368,025 368,025 393,787 281,591 281,591 301,302
</TABLE>
GUARANTEED VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF
INSURANCE RATES.
CURRENT VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES AND DIVIDENDS BASED ON THE CURRENT DIVIDEND SCALE FOR THE EXACT
COMBINATION OF PREMIUMS AND BENEFITS SHOWN. THESE VALUES ARE ALSO BASED ON A
POLICY ISSUE DATE OF JANUARY 1 FOR PURPOSES OF DETERMINING DIVIDEND AMOUNTS.
THE HYPOTHETICAL INVESTMENT RATE OF RETURN SHOWN ABOVE IS ILLUSTRATIVE ONLY,
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL
INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICY
OWNER AND THE INVESTMENT RESULTS FOR FUNDS OF GENERAL AMERICAN CAPITAL
COMPANY, RUSSELL INSURANCE FUNDS, VARIABLE INSURANCE PRODUCTS FUND, VARIABLE
INSURANCE PRODUCTS FUND II, AND VAN ECK WORLDWIDE INSURANCE TRUST. THE CASH
VALUE, CASH SURRENDER VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED THE RATE SHOWN ABOVE
OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY,
WALNUT STREET SECURITIES, GENERAL AMERICAN CAPITAL COMPANY, RUSSELL INSURANCE
FUNDS, VARIABLE INSURANCE PRODUCTS FUND, VARIABLE INSURANCE PRODUCTS FUND II,
VAN ECK WORLDWIDE INSURANCE TRUST, OR ANY REPRESENTATIVE THEREOF, THAT THIS
HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED
OVER ANY PERIOD OF TIME.
ILLUSTRATED VALUES SHOWN ABOVE ARE AS OF THE END OF THE POLICY YEARS
INDICATED AND ASSUME ANY ADDITIONAL PREMIUMS SHOWN ARE RECEIVED ON THE POLICY
ANNIVERSARIES. ILLUSTRATED VALUES ASSUME ALL PREMIUM TAXES ARE PAID BY THE
COMPANY.
4
<PAGE> 109
<TABLE>
GENERAL AMERICAN LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
POLICY FACE AMOUNT: $100,000 MALE PREFERRED NONSMOKER AGE 45
DEATH BENEFIT INCREASING (OPTION B) ANNUAL PREMIUM: $5,551
<CAPTION>
FOR SEPARATE ACCOUNT ELEVEN A HYPOTHETICAL
GROSS ANNUAL RATE OF RETURN @ 0.0% (NET RATE @ -1.42%)
======== CURRENT ========= ============= GUARANTEED ============
END AGE ANNUAL PREM SURR CASH DEATH SURR CASH DEATH
OF PAYMNT ACCUM @ VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR 5%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 5,551 5,829 4,662 4,884 104,884 4,662 4,884 104,884
2 47 5,551 11,949 9,206 9,650 109,650 8,898 9,342 109,342
3 48 5,551 18,375 13,624 14,290 114,290 13,031 13,698 113,698
4 49 5,551 25,122 17,940 18,829 118,829 17,062 17,950 117,950
5 50 5,551 32,206 22,169 23,279 123,279 20,985 22,095 122,095
6 51 5,551 39,645 26,588 27,654 127,654 25,067 26,133 126,133
7 52 5,551 47,456 31,011 31,944 131,944 29,122 30,054 130,054
8 53 5,551 55,657 35,450 36,160 136,160 33,145 33,855 133,855
9 54 5,551 64,269 39,894 40,294 140,294 37,129 37,528 137,528
10 55 5,551 73,311 44,344 44,344 144,344 41,065 41,065 141,065
11 56 5,551 82,805 48,576 48,576 148,576 44,462 44,462 144,462
12 57 5,551 92,774 52,764 52,764 152,764 47,714 47,714 147,714
13 58 5,551 103,241 56,860 56,860 156,860 50,817 50,817 150,817
14 59 5,551 114,232 60,876 60,876 160,876 53,768 53,768 153,768
15 60 5,551 125,772 64,813 64,813 164,813 56,560 56,560 156,560
16 61 5,551 137,889 68,636 68,636 168,636 59,184 59,184 159,184
17 62 5,551 150,612 72,347 72,347 172,347 61,627 61,627 161,627
18 63 5,551 163,971 75,935 75,935 175,935 63,872 63,872 163,872
19 64 5,551 177,998 79,389 79,389 179,389 65,901 65,901 165,901
20 65 5,551 192,727 82,711 82,711 182,711 67,695 67,695 167,695
25 70 5,551 278,180 97,006 97,006 197,006 72,675 72,675 172,675
30 75 5,551 387,242 106,252 106,252 206,252 68,824 68,824 168,824
</TABLE>
GUARANTEED VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF
INSURANCE RATES.
CURRENT VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES AND DIVIDENDS BASED ON THE CURRENT DIVIDEND SCALE FOR THE EXACT
COMBINATION OF PREMIUMS AND BENEFITS SHOWN. THESE VALUES ARE ALSO BASED ON A
POLICY ISSUE DATE OF JANUARY 1 FOR PURPOSES OF DETERMINING DIVIDEND AMOUNTS.
THE HYPOTHETICAL INVESTMENT RATE OF RETURN SHOWN ABOVE IS ILLUSTRATIVE ONLY,
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL
INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICY
OWNER AND THE INVESTMENT RESULTS FOR FUNDS OF GENERAL AMERICAN CAPITAL
COMPANY, RUSSELL INSURANCE FUNDS, VARIABLE INSURANCE PRODUCTS FUND, VARIABLE
INSURANCE PRODUCTS FUND II, AND VAN ECK WORLDWIDE INSURANCE TRUST. THE CASH
VALUE, CASH SURRENDER VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED THE RATE SHOWN ABOVE
OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY,
WALNUT STREET SECURITIES, GENERAL AMERICAN CAPITAL COMPANY, RUSSELL INSURANCE
FUNDS, VARIABLE INSURANCE PRODUCTS FUND, VARIABLE INSURANCE PRODUCTS FUND II,
VAN ECK WORLDWIDE INSURANCE TRUST, OR ANY REPRESENTATIVE THEREOF, THAT THIS
HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED
OVER ANY PERIOD OF TIME.
ILLUSTRATED VALUES SHOWN ABOVE ARE AS OF THE END OF THE POLICY YEARS
INDICATED AND ASSUME ANY ADDITIONAL PREMIUMS SHOWN ARE RECEIVED ON THE POLICY
ANNIVERSARIES. ILLUSTRATED VALUES ASSUME ALL PREMIUM TAXES ARE PAID BY THE
COMPANY.
5
<PAGE> 110
<TABLE>
GENERAL AMERICAN LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
POLICY FACE AMOUNT: $100,000 MALE PREFERRED NONSMOKER AGE 45
DEATH BENEFIT INCREASING (OPTION B) ANNUAL PREMIUM: $5,551
<CAPTION>
FOR SEPARATE ACCOUNT ELEVEN A HYPOTHETICAL
GROSS ANNUAL RATE OF RETURN @ 6.0% (NET RATE @ 4.58%)
======== CURRENT ========= ============= GUARANTEED ============
END AGE ANNUAL PREM SURR CASH DEATH SURR CASH DEATH
OF PAYMNT ACCUM @ VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR 5%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 5,551 5,829 4,964 5,186 105,186 4,964 5,186 105,186
2 47 5,551 11,949 10,116 10,560 110,560 9,798 10,242 110,242
3 48 5,551 18,375 15,454 16,120 116,120 14,822 15,488 115,488
4 49 5,551 25,122 21,009 21,897 121,897 20,045 20,933 120,933
5 50 5,551 32,206 26,804 27,914 127,914 25,468 26,578 126,578
6 51 5,551 39,645 33,129 34,195 134,195 31,366 32,432 132,432
7 52 5,551 47,456 39,807 40,739 140,739 37,561 38,493 138,493
8 53 5,551 55,657 46,860 47,571 147,571 44,054 44,765 144,765
9 54 5,551 64,269 54,291 54,691 154,691 50,848 51,248 151,248
10 55 5,551 73,311 62,113 62,113 162,113 57,941 57,941 157,941
11 56 5,551 82,805 70,167 70,167 170,167 64,848 64,848 164,848
12 57 5,551 92,774 78,639 78,639 178,639 71,971 71,971 171,971
13 58 5,551 103,241 87,480 87,480 187,480 79,316 79,316 179,316
14 59 5,551 114,232 96,721 96,721 196,721 86,885 86,885 186,885
15 60 5,551 125,772 106,380 106,380 206,380 94,681 94,681 194,681
16 61 5,551 137,889 116,442 116,442 216,442 102,701 102,701 202,701
17 62 5,551 150,612 126,927 126,927 226,927 110,941 110,941 210,941
18 63 5,551 163,971 137,843 137,843 237,843 119,390 119,390 219,390
19 64 5,551 177,998 149,199 149,199 249,199 128,037 128,037 228,037
20 65 5,551 192,727 161,018 161,018 261,018 136,869 136,869 236,869
25 70 5,551 278,180 227,467 227,467 327,467 183,465 183,465 283,465
30 75 5,551 387,242 307,077 307,077 407,077 232,074 232,074 332,074
</TABLE>
GUARANTEED VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF
INSURANCE RATES.
CURRENT VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES AND DIVIDENDS BASED ON THE CURRENT DIVIDEND SCALE FOR THE EXACT
COMBINATION OF PREMIUMS AND BENEFITS SHOWN. THESE VALUES ARE ALSO BASED ON A
POLICY ISSUE DATE OF JANUARY 1 FOR PURPOSES OF DETERMINING DIVIDEND AMOUNTS.
THE HYPOTHETICAL INVESTMENT RATE OF RETURN SHOWN ABOVE IS ILLUSTRATIVE ONLY,
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL
INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICY
OWNER AND THE INVESTMENT RESULTS FOR FUNDS OF GENERAL AMERICAN CAPITAL
COMPANY, RUSSELL INSURANCE FUNDS, VARIABLE INSURANCE PRODUCTS FUND, VARIABLE
INSURANCE PRODUCTS FUND II, AND VAN ECK WORLDWIDE INSURANCE TRUST. THE CASH
VALUE, CASH SURRENDER VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED THE RATE SHOWN ABOVE
OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY,
WALNUT STREET SECURITIES, GENERAL AMERICAN CAPITAL COMPANY, RUSSELL INSURANCE
FUNDS, VARIABLE INSURANCE PRODUCTS FUND, VARIABLE INSURANCE PRODUCTS FUND II,
VAN ECK WORLDWIDE INSURANCE TRUST, OR ANY REPRESENTATIVE THEREOF, THAT THIS
HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED
OVER ANY PERIOD OF TIME.
ILLUSTRATED VALUES SHOWN ABOVE ARE AS OF THE END OF THE POLICY YEARS
INDICATED AND ASSUME ANY ADDITIONAL PREMIUMS SHOWN ARE RECEIVED ON THE POLICY
ANNIVERSARIES. ILLUSTRATED VALUES ASSUME ALL PREMIUM TAXES ARE PAID BY THE
COMPANY.
6
<PAGE> 111
<TABLE>
GENERAL AMERICAN LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
POLICY FACE AMOUNT: $100,000 MALE PREFERRED NONSMOKER AGE 45
DEATH BENEFIT INCREASING (OPTION B) ANNUAL PREMIUM: $5,551
<CAPTION>
FOR SEPARATE ACCOUNT ELEVEN A HYPOTHETICAL
GROSS ANNUAL RATE OF RETURN @ 12.0% (NET RATE @ 10.58%)
======== CURRENT ========= ============= GUARANTEED ============
END AGE ANNUAL PREM SURR CASH DEATH SURR CASH DEATH
OF PAYMNT ACCUM @ VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR 5%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 5,551 5,829 5,266 5,488 105,488 5,266 5,488 105,488
2 47 5,551 11,949 11,063 11,507 111,507 10,734 11,178 111,178
3 48 5,551 18,375 17,433 18,099 118,099 16,762 17,428 117,428
4 49 5,551 25,122 24,462 25,350 125,350 23,407 24,296 124,296
5 50 5,551 32,206 32,234 33,344 133,344 30,730 31,840 131,840
6 51 5,551 39,645 41,105 42,171 142,171 39,064 40,130 140,130
7 52 5,551 47,456 50,974 51,907 151,907 48,303 49,236 149,236
8 53 5,551 55,657 61,949 62,660 162,660 58,525 59,236 159,236
9 54 5,551 64,269 74,126 74,526 174,526 69,815 70,215 170,215
10 55 5,551 73,311 87,622 87,622 187,622 82,267 82,267 182,267
11 56 5,551 82,805 102,472 102,472 202,472 95,499 95,499 195,499
12 57 5,551 92,774 118,996 118,996 218,996 110,027 110,027 210,027
13 58 5,551 103,241 137,277 137,277 237,277 125,985 125,985 225,985
14 59 5,551 114,232 157,519 157,519 257,519 143,517 143,517 243,517
15 60 5,551 125,772 179,939 179,939 279,939 162,781 162,781 262,781
16 61 5,551 137,889 204,735 204,735 304,735 183,947 183,947 283,947
17 62 5,551 150,612 232,168 232,168 332,168 207,201 207,201 307,201
18 63 5,551 163,971 262,514 262,514 362,514 232,744 232,744 332,744
19 64 5,551 177,998 296,080 296,080 396,080 260,796 260,796 360,796
20 65 5,551 192,727 333,217 333,217 433,217 291,601 291,601 391,601
25 70 5,551 278,180 587,314 587,314 687,314 497,580 497,580 597,580
30 75 5,551 387,242 1,008,776 1,008,776 1,108,776 827,340 827,340 927,340
</TABLE>
GUARANTEED VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF
INSURANCE RATES.
CURRENT VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES AND DIVIDENDS BASED ON THE CURRENT DIVIDEND SCALE FOR THE EXACT
COMBINATION OF PREMIUMS AND BENEFITS SHOWN. THESE VALUES ARE ALSO BASED ON A
POLICY ISSUE DATE OF JANUARY 1 FOR PURPOSES OF DETERMINING DIVIDEND AMOUNTS.
THE HYPOTHETICAL INVESTMENT RATE OF RETURN SHOWN ABOVE IS ILLUSTRATIVE ONLY,
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL
INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICY
OWNER AND THE INVESTMENT RESULTS FOR FUNDS OF GENERAL AMERICAN CAPITAL
COMPANY, RUSSELL INSURANCE FUNDS, VARIABLE INSURANCE PRODUCTS FUND, VARIABLE
INSURANCE PRODUCTS FUND II, AND VAN ECK WORLDWIDE INSURANCE TRUST. THE CASH
VALUE, CASH SURRENDER VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED THE RATE SHOWN ABOVE
OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY,
WALNUT STREET SECURITIES, GENERAL AMERICAN CAPITAL COMPANY, RUSSELL INSURANCE
FUNDS, VARIABLE INSURANCE PRODUCTS FUND, VARIABLE INSURANCE PRODUCTS FUND II,
VAN ECK WORLDWIDE INSURANCE TRUST, OR ANY REPRESENTATIVE THEREOF, THAT THIS
HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED
OVER ANY PERIOD OF TIME.
ILLUSTRATED VALUES SHOWN ABOVE ARE AS OF THE END OF THE POLICY YEARS
INDICATED AND ASSUME ANY ADDITIONAL PREMIUMS SHOWN ARE RECEIVED ON THE POLICY
ANNIVERSARIES. ILLUSTRATED VALUES ASSUME ALL PREMIUM TAXES ARE PAID BY THE
COMPANY.
7
<PAGE> 112
<TABLE>
GENERAL AMERICAN LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
POLICY FACE AMOUNT: $100,000 MALE PREFERRED NONSMOKER AGE 45
DEATH BENEFIT LEVEL (OPTION C) ANNUAL PREMIUM: $5,551
<CAPTION>
FOR SEPARATE ACCOUNT ELEVEN A HYPOTHETICAL
GROSS ANNUAL RATE OF RETURN @ 0.0% (NET RATE @ -1.42%)
======== CURRENT ========= ============= GUARANTEED ============
END AGE ANNUAL PREM SURR CASH DEATH SURR CASH DEATH
OF PAYMNT ACCUM @ VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR 5%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 5,551 5,829 4,668 4,890 100,000 4,668 4,890 100,000
2 47 5,551 11,949 9,230 9,674 100,000 8,952 9,396 100,000
3 48 5,551 18,375 13,682 14,349 100,000 13,159 13,825 100,000
4 49 5,551 25,122 18,050 18,939 100,000 17,293 18,181 100,000
5 50 5,551 32,206 22,348 23,458 100,000 21,354 22,464 100,000
6 51 5,551 39,645 26,852 27,918 100,000 25,611 26,677 100,000
7 52 5,551 47,456 31,380 32,312 100,000 29,884 30,817 100,000
8 53 5,551 55,657 35,941 36,651 100,000 34,176 34,886 100,000
9 54 5,551 64,269 40,530 40,930 100,000 38,485 38,885 100,000
10 55 5,551 73,311 45,145 45,145 100,361 42,814 42,814 100,000
11 56 5,551 82,805 49,541 49,541 107,107 46,652 46,652 100,861
12 57 5,551 92,774 53,904 53,904 113,391 50,366 50,366 105,948
13 58 5,551 103,241 58,184 58,184 119,141 53,958 53,958 110,487
14 59 5,551 114,232 62,390 62,390 124,411 57,429 57,429 114,518
15 60 5,551 125,772 66,525 66,525 129,236 60,781 60,781 118,077
16 61 5,551 137,889 70,567 70,567 133,609 64,011 64,011 121,196
17 62 5,551 150,612 74,521 74,521 137,571 67,119 67,119 123,906
18 63 5,551 163,971 78,382 78,382 141,147 70,102 70,102 126,237
19 64 5,551 177,998 82,145 82,145 144,369 72,955 72,955 128,217
20 65 5,551 192,727 85,817 85,817 147,278 75,677 75,677 129,877
25 70 5,551 278,180 102,734 102,734 157,917 87,393 87,393 134,335
30 75 0 355,036 92,352 92,352 128,928 72,949 72,949 101,841
</TABLE>
GUARANTEED VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF
INSURANCE RATES.
CURRENT VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES AND DIVIDENDS BASED ON THE CURRENT DIVIDEND SCALE FOR THE EXACT
COMBINATION OF PREMIUMS AND BENEFITS SHOWN. THESE VALUES ARE ALSO BASED ON A
POLICY ISSUE DATE OF JANUARY 1 FOR PURPOSES OF DETERMINING DIVIDEND AMOUNTS.
THE HYPOTHETICAL INVESTMENT RATE OF RETURN SHOWN ABOVE IS ILLUSTRATIVE ONLY,
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL
INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICY
OWNER AND THE INVESTMENT RESULTS FOR FUNDS OF GENERAL AMERICAN CAPITAL
COMPANY, RUSSELL INSURANCE FUNDS, VARIABLE INSURANCE PRODUCTS FUND, VARIABLE
INSURANCE PRODUCTS FUND II, AND VAN ECK WORLDWIDE INSURANCE TRUST. THE CASH
VALUE, CASH SURRENDER VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED THE RATE SHOWN ABOVE
OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY,
WALNUT STREET SECURITIES, GENERAL AMERICAN CAPITAL COMPANY, RUSSELL INSURANCE
FUNDS, VARIABLE INSURANCE PRODUCTS FUND, VARIABLE INSURANCE PRODUCTS FUND II,
VAN ECK WORLDWIDE INSURANCE TRUST, OR ANY REPRESENTATIVE THEREOF, THAT THIS
HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED
OVER ANY PERIOD OF TIME.
ILLUSTRATED VALUES SHOWN ABOVE ARE AS OF THE END OF THE POLICY YEARS
INDICATED AND ASSUME ANY ADDITIONAL PREMIUMS SHOWN ARE RECEIVED ON THE POLICY
ANNIVERSARIES. ILLUSTRATED VALUES ASSUME ALL PREMIUM TAXES ARE PAID BY THE
COMPANY.
8
<PAGE> 113
<TABLE>
GENERAL AMERICAN LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
POLICY FACE AMOUNT: $100,000 MALE PREFERRED NONSMOKER AGE 45
DEATH BENEFIT LEVEL (OPTION C) ANNUAL PREMIUM: $5,551
<CAPTION>
FOR SEPARATE ACCOUNT ELEVEN A HYPOTHETICAL
GROSS ANNUAL RATE OF RETURN @ 6.0% (NET RATE @ 4.58%)
======== CURRENT ========= ============= GUARANTEED ============
END AGE ANNUAL PREM SURR CASH DEATH SURR CASH DEATH
OF PAYMNT ACCUM @ VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR 5%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 5,551 5,829 4,971 5,193 100,000 4,971 5,193 100,000
2 47 5,551 11,949 10,143 10,587 100,000 9,857 10,301 100,000
3 48 5,551 18,375 15,520 16,186 100,000 14,968 15,635 100,000
4 49 5,551 25,122 21,139 22,028 100,000 20,320 21,208 100,000
5 50 5,551 32,206 20,025 28,136 100,000 25,926 27,036 100,000
6 51 5,551 39,645 33,469 34,534 100,000 32,068 33,133 100,000
7 52 5,551 47,456 40,300 41,233 100,000 38,584 39,516 100,000
8 53 5,551 55,657 47,505 48,215 113,481 45,439 46,149 108,619
9 54 5,551 64,269 55,079 55,479 126,878 52,590 52,989 121,184
10 55 5,551 73,311 63,036 63,036 140,135 60,034 60,034 133,461
11 56 5,551 82,805 71,217 71,217 153,971 67,285 67,285 145,471
12 57 5,551 92,774 79,808 79,808 167,881 74,742 74,742 157,224
13 58 5,551 103,241 88,755 88,755 181,740 82,406 82,406 168,739
14 59 5,551 114,232 98,086 98,086 195,589 90,280 90,280 180,025
15 60 5,551 125,772 107,816 107,816 209,452 98,365 98,365 191,090
16 61 5,551 137,889 117,930 117,930 223,282 106,657 106,657 201,939
17 62 5,551 150,612 128,441 128,441 237,111 115,152 115,152 212,577
18 63 5,551 163,971 139,357 139,357 250,949 123,841 123,841 223,010
19 64 5,551 177,998 150,680 150,680 264,818 132,714 132,714 233,243
20 65 5,551 192,727 162,431 162,431 278,762 141,761 141,761 243,289
25 70 5,551 278,180 227,876 227,876 350,279 189,450 189,450 291,212
30 75 0 355,036 275,516 275,516 384,634 212,874 212,874 297,183
</TABLE>
GUARANTEED VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF
INSURANCE RATES.
CURRENT VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES AND DIVIDENDS BASED ON THE CURRENT DIVIDEND SCALE FOR THE EXACT
COMBINATION OF PREMIUMS AND BENEFITS SHOWN. THESE VALUES ARE ALSO BASED ON A
POLICY ISSUE DATE OF JANUARY 1 FOR PURPOSES OF DETERMINING DIVIDEND AMOUNTS.
THE HYPOTHETICAL INVESTMENT RATE OF RETURN SHOWN ABOVE IS ILLUSTRATIVE ONLY,
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL
INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICY
OWNER AND THE INVESTMENT RESULTS FOR FUNDS OF GENERAL AMERICAN CAPITAL
COMPANY, RUSSELL INSURANCE FUNDS, VARIABLE INSURANCE PRODUCTS FUND, VARIABLE
INSURANCE PRODUCTS FUND II, AND VAN ECK WORLDWIDE INSURANCE TRUST. THE CASH
VALUE, CASH SURRENDER VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED THE RATE SHOWN ABOVE
OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY,
WALNUT STREET SECURITIES, GENERAL AMERICAN CAPITAL COMPANY, RUSSELL INSURANCE
FUNDS, VARIABLE INSURANCE PRODUCTS FUND, VARIABLE INSURANCE PRODUCTS FUND II,
VAN ECK WORLDWIDE INSURANCE TRUST, OR ANY REPRESENTATIVE THEREOF, THAT THIS
HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED
OVER ANY PERIOD OF TIME.
ILLUSTRATED VALUES SHOWN ABOVE ARE AS OF THE END OF THE POLICY YEARS
INDICATED AND ASSUME ANY ADDITIONAL PREMIUMS SHOWN ARE RECEIVED ON THE POLICY
ANNIVERSARIES. ILLUSTRATED VALUES ASSUME ALL PREMIUM TAXES ARE PAID BY THE
COMPANY.
9
<PAGE> 114
<TABLE>
GENERAL AMERICAN LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
POLICY FACE AMOUNT: $100,000 MALE PREFERRED NONSMOKER AGE 45
DEATH BENEFIT LEVEL (OPTION C) ANNUAL PREMIUM: $5,551
<CAPTION>
FOR SEPARATE ACCOUNT ELEVEN A HYPOTHETICAL
GROSS ANNUAL RATE OF RETURN @ 12.0% (NET RATE @ 10.582%)
======== CURRENT ========= ============= GUARANTEED ============
END AGE ANNUAL PREM SURR CASH DEATH SURR CASH DEATH
OF PAYMNT ACCUM @ VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR 5%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 5,551 5,829 5,274 5,496 100,000 5,274 5,496 100,000
2 47 5,551 11,949 11,092 11,536 100,000 10,799 11,243 100,000
3 48 5,551 18,375 17,508 18,175 100,000 16,928 17,594 100,000
4 49 5,551 25,122 24,617 25,505 100,000 23,733 24,622 100,000
5 50 5,551 32,206 32,506 33,616 100,000 31,292 32,403 100,000
6 51 5,551 39,645 41,533 42,599 106,310 39,961 41,027 102,388
7 52 5,551 47,456 51,550 52,483 127,175 49,538 50,470 122,299
8 53 5,551 55,657 62,654 63,365 149,138 60,072 60,782 143,059
9 54 5,551 64,269 74,937 75,337 172,291 71,632 72,032 164,734
10 55 5,551 73,311 88,507 88,507 196,758 84,294 84,294 187,393
11 56 5,551 82,805 103,391 103391 223,531 97,651 97,651 211,121
12 57 5,551 92,774 119,891 119,891 252,197 112,190 112,190 235,998
13 58 5,551 103,241 138,068 138,068 282,716 128,010 128,010 262,120
14 59 5,551 114,232 158,113 158,113 315,289 145,217 145,217 289,574
15 60 5,551 125,772 180,220 180,220 350,108 163,924 163,924 318,451
16 61 5,551 137,889 204,539 204,539 387,263 184,246 184,246 348,841
17 62 5,551 150,612 231,292 231,292 426,978 206,302 206,302 380,845
18 63 5,551 163,971 260,701 260,701 469,462 230,215 230,215 414,563
19 64 5,551 177,998 293,007 293,007 514,954 256,109 256,109 450,106
20 65 5,551 192,727 328,502 328,502 563,771 284,118 284,118 487,601
25 70 5,551 278,180 565,104 565,104 868,650 461,667 461,667 709,652
30 75 0 355,036 903,180 903,180 1,260,884 686,169 686,169 957,926
</TABLE>
GUARANTEED VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF
INSURANCE RATES.
CURRENT VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES AND DIVIDENDS BASED ON THE CURRENT DIVIDEND SCALE FOR THE EXACT
COMBINATION OF PREMIUMS AND BENEFITS SHOWN. THESE VALUES ARE ALSO BASED ON A
POLICY ISSUE DATE OF JANUARY 1 FOR PURPOSES OF DETERMINING DIVIDEND AMOUNTS.
THE HYPOTHETICAL INVESTMENT RATE OF RETURN SHOWN ABOVE IS ILLUSTRATIVE ONLY,
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL
INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICY
OWNER AND THE INVESTMENT RESULTS FOR FUNDS OF GENERAL AMERICAN CAPITAL
COMPANY, RUSSELL INSURANCE FUNDS, VARIABLE INSURANCE PRODUCTS FUND, VARIABLE
INSURANCE PRODUCTS FUND II, AND VAN ECK WORLDWIDE INSURANCE TRUST. THE CASH
VALUE, CASH SURRENDER VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED THE RATE SHOWN ABOVE
OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY,
WALNUT STREET SECURITIES, GENERAL AMERICAN CAPITAL COMPANY, RUSSELL INSURANCE
FUNDS, VARIABLE INSURANCE PRODUCTS FUND, VARIABLE INSURANCE PRODUCTS FUND II,
VAN ECK WORLDWIDE INSURANCE TRUST, OR ANY REPRESENTATIVE THEREOF, THAT THIS
HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED
OVER ANY PERIOD OF TIME.
ILLUSTRATED VALUES SHOWN ABOVE ARE AS OF THE END OF THE POLICY YEARS
INDICATED AND ASSUME ANY ADDITIONAL PREMIUMS SHOWN ARE RECEIVED ON THE POLICY
ANNIVERSARIES. ILLUSTRATED VALUES ASSUME ALL PREMIUM TAXES ARE PAID BY THE
COMPANY.
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FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
ISSUED BY
GENERAL AMERICAN LIFE INSURANCE COMPANY
700 Market Street
St. Louis, MO 63101
(314) 231-1700
This Prospectus describes an individual flexible premium variable life
insurance Policy ("the Policy") offered by General American Life Insurance
Company ("General American" or "the Company"). The Policy is designed to
provide lifetime insurance protection to age 100 and at the same time provide
maximum flexibility to vary premium payments and change the level of death
benefits payable under the Policy. This flexibility allows an Owner to
provide for changing insurance needs under a single insurance policy. An
Owner also has the opportunity to allocate Net Premiums among several
investment portfolios with different investment objectives.
The Policy provides for: (1) a Cash Surrender Value that can be
obtained by surrendering the Policy; (2) Policy Loans; and (3) a death
benefit payable at the Insured's death. As long as a Policy remains in force,
the death benefit will not be less than the current Face Amount of the
Policy. A Policy will remain in force so long as its Cash Surrender Value is
sufficient to pay certain monthly charges imposed in connection with the
Policy.
After the end of the "Right to Examine Policy" period, Net Premiums may
be allocated to one or more of the Divisions of General American Separate
Account Eleven ("the Separate Account") or in certain contracts to General
American's General Account. If Net Premiums are allocated to the Separate
Account, the amount of the Cash Value will vary to reflect the investment
performance of the investment Divisions selected by the Owner, the Policy may
lapse, and, depending on the death benefit option elected, the amount of the
death benefit above the minimum may also vary with that investment
performance. The Owner bears the entire investment risk for all amounts
allocated to the Separate Account; there is no minimum guaranteed Cash Value.
Divisions of the Separate Account invest in corresponding Funds from
the following open-end, diversified management investment companies:
Russell Insurance Funds, Inc. General American Capital Company
Multi-Style Equity Fund Money Market Fund
Aggressive Equity Fund
Non-U.S. Fund
Core Bond Fund
A full description of the Funds, including the investment policies,
restrictions, risks, and charges is contained in the prospectus of each Fund.
It may not be advantageous to purchase a Policy as a replacement for
another type of life insurance or as a means to obtain additional insurance
protection if the purchaser already owns another flexible premium variable
life insurance policy.
This Prospectus must be accompanied by current prospectuses for Russell
Insurance Funds, Inc. and General American Capital Company.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Please read this Prospectus carefully and retain it for future reference.
The date of this Prospectus is April 9, 1997.
The Policy is not available in all states.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN
WHICH SUCH OFFERING MAY NOT BE LAWFULLY MADE. NO DEALER, SALESMAN, OR OTHER
PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN
CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON.
<PAGE> 116
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
<S> <C>
DEFINITIONS 1
SUMMARY 2
THE COMPANY AND THE SEPARATE ACCOUNT 6
The Company 6
The Separate Account 6
Russell Insurance Funds, Inc. 6
General American Capital Company 7
POLICY BENEFITS 8
Death Benefit 8
Cash Value 10
POLICY RIGHTS 11
Loans 11
Surrender, Partial Withdrawals and Pro Rata Surrender 13
Transfers 15
Dollar Cost Averaging 15
Right to Examine Policy 16
Payment of Benefits at Maturity 16
PAYMENT AND ALLOCATION OF PREMIUMS 17
Issuance of a Policy 17
Premiums 17
Allocation of Net Premiums and Cash Value 18
Policy Lapse and Reinstatement 18
CHARGES AND DEDUCTIONS 19
Premium Expense Charges 19
Monthly Deduction 20
Contingent Deferred Sales Charge 21
Separate Account Charges 22
DIVIDENDS 22
THE GENERAL ACCOUNT 23
GENERAL MATTERS 25
DISTRIBUTION OF THE POLICIES 28
FEDERAL TAX MATTERS 28
UNISEX REQUIREMENTS UNDER MONTANA LAW 31
SAFEKEEPING OF THE SEPARATE ACCOUNT'S ASSETS 31
VOTING RIGHTS 31
STATE REGULATION OF THE COMPANY 32
MANAGEMENT OF THE COMPANY 33
LEGAL MATTERS 36
LEGAL PROCEEDINGS 36
EXPERTS 36
ADDITIONAL INFORMATION 36
FINANCIAL STATEMENTS 36
APPENDIX A A-1
APPENDIX B B-1
</TABLE>
<PAGE> 117
DEFINITIONS
Attained Age - The Issue Age of the Insured plus the number of
completed Policy Years.
Beneficiary - the person(s) named in the application or by later
designation to receive Policy proceeds in the event of the Insured's death. A
Beneficiary may be changed as set forth in the Policy and this Prospectus.
Cash Value - The total amount that a Policy provides for investment at
any time. It is equal to the total of the amounts credited to the Owner in
the Separate Account, the Loan Account, and in certain contracts, the General
Account.
Cash Surrender Value - The Cash Value of a Policy on the date of
surrender, less any Indebtedness, and less any surrender charges.
Division - A subaccount of the Separate Account which invests
exclusively in the shares of a corresponding Fund of Russell Insurance Funds,
Inc. ("Russell Insurance Funds") or General American Capital Company.
Effective Date - The date as of which insurance coverage begins under a
policy.
Face Amount - The minimum death benefit under the Policy so long as the
Policy remains in force.
Fund - A separate investment portfolio of Russell Insurance Funds or
General American Capital Company.
General Account -The assets of the Company other than those allocated
to the Separate Account or any other separate account. The Loan Account is
part of the General Account.
Home Office - The service office of General American Life Insurance
Company, the mailing address of which is P.O. Box 14490, St. Louis, Missouri
63178.
Indebtedness - The sum of all unpaid Policy Loans and accrued interest
on loans.
Insured - The person whose life is insured under the Policy.
Investment Start Date - The date the initial premium is applied to the
General Account and/or the Divisions of the Separate Account. This date is
the later of the Issue Date or the date the initial premium is received at
General American's Home Office.
Issue Age - The Insured's age at his or her nearest birthday as of the
date the Policy is issued.
Issue Date - The date from which Policy Anniversaries, Policy Years,
and Policy Months are measured.
Loan Account - The account of the Company to which amounts securing
Policy Loans are allocated. The Loan Account is part of General American's
General Account.
Loan Subaccount - A Loan Subaccount exists for the General Account and
for each Division of the Separate Account. Any Cash Value transferred to the
Loan Account will be allocated to the appropriate Loan Subaccount to reflect
the origin of the Cash Value. At any point in time, the Loan Account will
equal the sum of all the Loan Subaccounts.
Maturity Date - The Policy Anniversary on which the Insured reaches
Attained Age 100.
Monthly Anniversary - The same date in each succeeding month as the
Issue Date except that whenever the Monthly Anniversary falls on a date other
than a Valuation Date, the Monthly Anniversary will be deemed the next
Valuation Date. If any Monthly Anniversary would be the 29th, 30th, or 31st
day of a month that does not have that number of days, then the Monthly
Anniversary will be the last day of that month.
Net Premium - The premium less the premium expense charges (consisting
of the sales charge and the premium tax charge).
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<PAGE> 118
Owner - The Owner of a Policy, as designated in the application or as
subsequently changed.
Policy - The flexible premium variable life insurance Policy offered by
the Company and described in this Prospectus.
Policy Anniversary - The same date each year as the Issue Date.
Policy Month - A month beginning on the Monthly Anniversary.
Policy Year - A period beginning on a Policy Anniversary and ending on
the day immediately preceding the next Policy Anniversary.
SEC - The United States Securities and Exchange Commission.
Separate Account - General American Separate Account Eleven, a separate
investment account established by the Company to receive and invest the Net
Premiums paid under the Policy, and certain other variable life policies, and
allocated by the Owner to provide variable benefits.
Valuation Date - Each day that the New York Stock Exchange is open for
trading and the Company is open for business. The Company is not open for
business the day after Thanksgiving.
Valuation Period - The period between two successive Valuation Dates,
commencing at 4:00 p.m. (Eastern Standard Time) on a Valuation Date and
ending 4:00 p.m. on the next succeeding Valuation Date.
SUMMARY
The following summary of Prospectus information should be read in
conjunction with the detailed information appearing elsewhere in this
Prospectus. Unless otherwise indicated, the description of the Policies
contained in this Prospectus assumes that a Policy is in force and that there
is no outstanding Indebtedness.
The Policy. Under the flexible premium variable life insurance Policy
described in this Prospectus, the Owner may, subject to certain limitations,
make premium payments in any amount and at any frequency. The Policy is a
life insurance contract with death benefits, Cash Value, surrender rights,
Policy Loan privileges, and other features traditionally associated with life
insurance. It is a "flexible premium" Policy because, unlike traditional
insurance policies, there is no fixed schedule for premium payments.
Although the Owner may establish a schedule of premium payments ("planned
premium payments"), failure to make the planned premium payments will not
necessarily cause a Policy to lapse nor will making the planned premium
payments guarantee that a Policy will remain in force to maturity. Thus, an
Owner may, but is not required to, pay additional premiums. This flexibility
permits an Owner to provide for changing insurance needs within a single
insurance policy.
The Policy is a "variable" Policy because, unlike the fixed benefits
under an ordinary life insurance contract, to the extent that Net Premiums
are allocated to the Separate Account, the Cash Value and, under certain
circumstances, the death benefit under a Policy may increase or decrease
depending upon the investment performance of the Divisions of the Separate
Account to which the Owner has allocated Net Premium payments. However, so
long as a Policy's Cash Surrender Value continues to be sufficient to pay the
monthly deductions, an Owner is guaranteed a minimum death benefit equal to
the Face Amount of his or her Policy, less any outstanding Indebtedness.
A Policy will lapse (and terminate without value) when the Cash
Surrender Value is insufficient to pay the next monthly deduction and a grace
period of 62 days expires without an adequate payment being made by the
Owner. (See Payment and Allocation of Premiums - Policy Lapse and
Reinstatement on page 18.)
The Separate Account. After the end of the "Right to Examine Policy"
period, the Owner may allocate the Net Premiums to the Separate Account and,
if it is available, to the General Account. Amounts allocated to the
Separate Account are further allocated to one or more Divisions. Assets of
each Division are invested at net asset value in shares of a corresponding
Fund. (See The Company and the Separate Account on page 6.) An Owner may
change future allocations of Net Premiums at any time.
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<PAGE> 119
The option offered in connection with the Policies to allocate Net
Premiums or to transfer Cash Value to the General Account may not be made
available, at the Company's discretion, under all Policies. Further, the
option may be limited with respect to some Policies. The Company may, from
time to time, adjust the extent to which future premiums may be allocated to
the General Account in regard to any or all outstanding Policies. Such
adjustments may not be uniform as to all Policies.
Until the end of the "Right to Examine Policy" period (See Policy
Rights - Right to Examine Policy on page 16.), all Net Premiums automatically
will be allocated to the Division that invests in the Money Market Fund.
(See Payment and Allocation of Premiums - Allocation of Net Premiums and Cash
Value on page 18.)
To the extent Net Premiums are allocated to the Divisions of the
Separate Account, the Cash Value will, and the death benefit may, vary with
the investment performance of the chosen Division. To the extent Net
Premiums are allocated to the General Account, the Cash Value will accrue
interest at a guaranteed minimum rate. (See The General Account on page 23.)
Thus, depending upon the allocation of Net Premiums, investment risk over the
life of a Policy may be borne by the Owner, by the Company, or by both.
Subject to certain restrictions, an Owner may transfer Cash Values
among the Divisions of the Separate Account or, if available, between the
Separate Account and the General Account. Currently, no charge is assessed
for transfers. The Company reserves the right to revoke or modify the
transfer privilege. (See Policy Rights - Transfers on page 15.)
Charges and Deductions. A premium expense charge will be deducted from
each premium payment prior to allocation. The premium expense charge
consists of a sales charge and a charge to cover premium taxes. The sales
charge will never exceed 5.0% and is currently 5.0% in Policy years one
through ten and 2.25% in Policy years past Policy year ten. The charge to
cover premium taxes is 2.5%. (See Charges and Deductions - Premium Expense
Charges on page 19.)
A Contingent Deferred Sales Charge to compensate for sales expenses
will also be assessed against the Cash Value under a Policy upon a surrender,
a lapse, a partial withdrawal, or pro rata surrender. The Contingent
Deferred Sales Charge will never exceed 4% of premiums paid. (See Policy
Rights - Surrender, Partial Withdrawals, and Pro Rata Surrender on page 13;
Policy Benefits - Death Benefit on page 8; and Charges and Deductions -
Contingent Deferred Sales Charge on page 21.) Reductions in the Contingent
Deferred Sales Charge are available in some situations. (See Reduction of
Charges on page 22.)
On each Monthly Anniversary, the Cash Value will be reduced by a
monthly deduction. The monthly deduction includes an administrative charge of
$4 per month for each Policy Month. (See Charges and Deductions - Monthly
Deduction on page 20.) A monthly charge is also made for the cost of
insurance, and the cost of any additional benefits provided by rider. (See
Charges and Deductions - Monthly Deduction on page 20.)
A daily charge based on an effective annual charge of .70% of the net
assets of each Division of the Separate Account will be imposed for the
Company's assumption of certain mortality and expense risks incurred in
connection with the Policies. (See Charges and Deductions - Separate Account
Charges on page 22.)
The Company may make a charge for any taxes or economic burden
resulting from the application of the tax laws that it determines to be
properly attributable to the Separate Account or to the Policy. (See Federal
Tax Matters on page 28.)
The operating expenses of the Separate Account are paid by General
American. Investment management and advisory fees and other operating
expenses of the Funds are paid by the Funds and are reflected in the value of
the assets of the corresponding Division of the Separate Account. For a
description of these charges, see Charges and Deductions - Separate Account
Charges on page 22.
Currently, there are no transaction charges to cover the administrative
costs of processing partial withdrawals or transfers of Cash Value between
Divisions of the Separate Account. In contracts with the General Account
option, there are no transaction charges to cover the administrative costs of
processing transfers of Cash Value between the Separate and General Accounts.
However, the Company reserves the right to impose such charges in the future.
In addition, transfers and withdrawals are subject to restrictions relative
to amount and frequency. (See Payment and Allocation of Premiums - Allocation
of Net Premiums and Cash Value on page 18; Policy Rights - Surrender, Partial
Withdrawals, and Pro Rata Surrender on page 13; and The General Account on
page 23.)
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<PAGE> 120
Premiums. An Owner has considerable flexibility concerning the amount
and frequency of premium payments. A Policy will not become effective until
the Owner has paid an initial premium equal to one-twelfth (1/12) of the
"Minimum Premium" for the Policy. This amount will be different for each
Policy. Thereafter, an Owner may, subject to certain restrictions, make
premium payments in any amount and at any frequency. The Owner may also
determine a planned premium payment schedule. The schedule will provide for a
premium payment of a level amount at a fixed interval over a specified period
of time. An Owner need not, however, adhere to the planned premium payment
schedule. For policies issued as a result of a term conversion from certain
General American term policies, the Company requires the Owner to pay an
initial premium, which combined with conversion credits given, will equal one
full "Minimum Premium" for the Policy. (See Payment and Allocation of
Premiums on page 17.)
A Policy will lapse only when the Cash Surrender Value is insufficient
to pay the next monthly deduction (See Charges and Deductions - Monthly
Deduction on page 20.) and a grace period expires without a sufficient
payment by the Owner. (See Payment and Allocation of Premiums - Policy Lapse
and Reinstatement on page 18.)
Death Benefit. A death benefit is payable to the named Beneficiary when
the Insured under a Policy dies. Three death benefit options are available.
Under Death Benefit Option A, the death benefit is the Face Amount of the
Policy or, if greater, the applicable percentage of Cash Value. Under Death
Benefit Option B, the death benefit is the Face Amount of the Policy plus the
Cash Value or, if greater, the applicable percentage of Cash Value. Under
Death Benefit Option C, the death benefit is the Face Amount of the Policy
or, if greater, the Cash Value multiplied by the Attained Age factor. So long
as the Policy remains in force, the minimum death benefit under any death
benefit option will be at least the current Face Amount. The death benefit
will be increased by any unpaid dividends determined prior to the Insured's
death and by the amount of the cost of insurance for the portion of the month
from the date of death to the end of the month, and reduced by any
outstanding Indebtedness. The death benefit will be paid according to the
settlement options available at the time of death. (See Policy Benefits -
Death Benefit on page 8.)
The minimum Face Amount at issue is $50,000 under the Company's current
rules. Subject to certain restrictions, the Owner may change the Face Amount
and the death benefit option. In certain cases evidence of insurability may
be required. (See Change in Death Benefit Option on page 9, and Change In
Face Amount on page 9.)
Additional insurance benefits offered under the Policy include a waiver
of specified premium rider, a waiver of monthly deduction rider, and an
increasing benefit option. (See General Matters - Additional Insurance
Benefits on page 36.) The cost of these additional insurance benefits will be
deducted from the Cash Value as part of the monthly deduction. (See Charges
and Deductions - Monthly Deduction on page 20.)
Cash Value. The Policy provides for a Cash Value equal to the total of
the amounts credited to the Owner in the Separate Account, the Loan Account
(securing Policy Loans) and in certain contracts, the General Account. A
Policy's Cash Value will reflect the amount and frequency of Net Premium
payments, the investment performance of any selected Divisions of the
Separate Account, any Policy Loans, any partial withdrawals, and the charges
imposed in connection with the Policy. (See Policy Benefits - Cash Value on
page 10.) There is no minimum guaranteed Cash Value.
Policy Loans. After the first Policy Anniversary, an Owner may borrow
against the Cash Value of a Policy. The maximum amount that may be borrowed
under a Policy ("the Loan Value") is the Cash Value of the Policy on the date
the loan request is received, less loan interest to the next Policy
Anniversary, less any outstanding Indebtedness, less any surrender charges to
the next Policy Anniversary, and less monthly deductions to the next loan
interest due date. Loan interest is payable on each Policy Anniversary and
all outstanding Indebtedness will be deducted from proceeds payable at the
Insured's death, upon maturity, upon the exercise of a settlement option, or
upon surrender.
A Policy loan will be allocated among the General Account (if
available) and the various Divisions of the Separate Account. When a loan is
allocated to the Divisions of the Separate Account, a portion of the Policy's
Cash Value in the Divisions of the Separate Account sufficient to secure the
loan will be transferred to the Loan Account as security for the loan.
Therefore, a loan may have impact on the Policy's Cash Value even if it is
repaid. A Policy Loan may be repaid in whole or in part at any time while the
Policy is in force. (See Policy Rights - Loans on page 11.) Loans taken from,
or secured by, a Policy may have Federal income tax consequences. (See
Federal Tax Matters on page 28.)
Surrender, Partial Withdrawals, and Pro Rata Surrender. At any time
that a Policy is in force, an Owner may elect to surrender the Policy and
receive its Cash Surrender Value plus the value of any dividends determined
prior to the surrender. After the first year, an Owner may also request a
partial withdrawal of the Cash Surrender Value of the Policy. When the death
benefit is not based on an applicable percentage of the Cash Value, a partial
withdrawal reduces the death
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<PAGE> 121
benefit payable under the Policy by an amount equal to the reduction in the
Policy's Cash Value. An Owner may also request a pro rata surrender of the
Policy. (See Policy Rights - Surrender, Partial Withdrawals, and Pro Rata
Surrender. on page 13.) A surrender, partial withdrawal, or pro rata surrender
may have Federal income tax consequences. (See Federal Tax Matters on page 28.)
Right to Examine Policy. The Owner has a limited right to return a
Policy for cancellation within 20 days after receiving it (30 days if the
Owner is a resident of California and is age 60 or older), or within 45 days
after the application is signed, whichever is later. If a Policy is canceled
within this time period, a refund will be paid which will equal all premiums
paid under the Policy except in Kansas. The Owner also has a similar right to
cancel a requested increase in Face Amount. Upon cancellation of an increase,
the additional charges deducted in connection with the increase will be added
to the Cash Value. (See Policy Rights - Right to Examine Policy on page 16.)
Illustrations of Death Benefits and Cash Surrender Values.
Illustrations on pages A-2 to A-10 in Appendix A show how death benefits and
Cash Surrender Values may vary based on certain rate of return assumptions
and how these benefits compare with amounts which would accumulate if
premiums were invested to earn interest at 5% compounded annually. If a
Policy is surrendered in the early Policy Years the Cash Surrender Value
payable will be low as compared to premiums accumulated at interest, and
consequently the insurance protection provided prior to surrender will be
costly. You may make a written request for a projection of illustrated
future Cash Values and death benefits for a nominal fee not to exceed $25.00.
Tax Consequences of the Policy. If a Policy is issued on the basis of a
standard premium class or on a guaranteed or simplified issue basis, while
limited guidance exists, the Company believes that the Policy should qualify
as a life insurance contract for Federal income tax purposes. However, if a
Policy is issued on a substandard basis, it is unclear whether or not such a
Policy would qualify as a life insurance contract for Federal income tax
purposes. Assuming that the Policy qualifies as a life insurance contract for
Federal income tax purposes, the Company believes the Cash Value of the
Policy should be subject to the same Federal income tax treatment as the Cash
Value of a conventional fixed-benefit contract. If so, the Owner is not
considered to be in constructive receipt of the Cash Value under the Policy
until there is a distribution. A change of Owners, a surrender, a partial
withdrawal, a pro rata surrender, a lapse with outstanding Indebtedness, or
an exchange may have tax consequences, such as making the Policy a modified
endowment contract, depending on the particular circumstances. (See Federal
Tax Matters on page 28.)
A Policy may be treated as a "modified endowment contract" depending
upon the amount of premiums paid in relation to the death benefit. If the
Policy is a modified endowment contract, then all pre-death distributions,
including Policy Loans and due but unpaid loan interest, will be treated
first as a distribution of taxable income and then as a return of basis or
investment in the contract. In addition, prior to age 59 1/2 taxable income
from such distributions generally will be subject to a 10% additional tax. A
prospective Owner should contact a competent tax advisor before purchasing a
Policy to determine the circumstances under which the Policy would be a
modified endowment contract, and before paying any additional premiums or
making any other change to, including an exchange of, a Policy to determine
whether such premium or change would cause the Policy (or the new Policy in
the case of an exchange) to be treated as a modified endowment contract.
If the Policy is not a modified endowment contract, distributions
generally will be treated first as a return of basis or investment in the
contract and then as disbursing taxable income. Moreover, loans will not be
treated as distributions. Finally, neither distributions nor loans from a
Policy that is not a modified endowment contract are subject to the 10.0%
additional tax. (See Federal Tax Matters on page 28.)
Dividends. While a Policy is in force, it may share in the divisible
surplus of the Company. Each year the Company will determine the share of
divisible surplus accruing to a Policy and will distribute the surplus as
dividend. The Company is not obligated to pay dividends on the Policies. (See
Dividends on page 22.)
This Prospectus describes only those aspects of the Policy that relate
to the Separate Account, except where General Account matters are
specifically mentioned. For a brief summary of the aspects of the Policy
relating to the General Account, see The General Account on page 23.
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THE COMPANY AND THE SEPARATE ACCOUNT
The Company
General American Life Insurance Company ("General American" or "the
Company") is a mutual life insurance company originally incorporated as a
stock company under the laws of Missouri in 1933, and which began operations
as a mutual company in 1936. General American is principally engaged in
issuing individual and group life and health insurance policies and annuity
contracts. As of December 31,1996, it had assets of more than $19.2 billion.
It is admitted to do business in 49 states, the District of Columbia, Puerto
Rico, and in ten Canadian provinces. The principal offices of General
American are at 700 Market Street, St. Louis, Missouri 63101. The mailing
address of General American's service center ("the Home Office") is P.O. Box
14490, St. Louis, Missouri 63178.
The Separate Account
General American Life Insurance Company Separate Account Eleven ("the
Separate Account") was established by General American as a separate
investment account on January 24, 1985 under Missouri law. The Separate
Account will receive and invest the Net Premiums paid under this Policy and
allocated to it. In addition, the Separate Account currently receives and
invests Net Premiums for other classes of flexible premium variable life
insurance policies and might do so for additional classes in the future.
The Separate Account has been registered with the SEC as a unit
investment trust under the Investment Company Act of 1940 ("the 1940 Act")
and meets the definition of a "separate account" under Federal securities
laws. Registration with the SEC does not involve supervision of the
management or investment practices or policies of the Separate Account or
General American by the SEC.
The Separate Account currently is divided into eighteen divisions. The
Divisions which are available under the Policy are four Divisions which
invest in corresponding Funds from Russell Insurance Funds and one Division
which invests in a corresponding Fund from General American Capital Company.
Income and both realized and unrealized gains or losses from the assets of
each Division of the Separate Account are credited to or charged against that
Division without regard to income, gains, or losses from any other Division
of the Separate Account or arising out of any other business General American
may conduct.
Although the assets of the Separate Account are the property of General
American, the assets in the Separate Account equal to the reserves and other
liabilities of the Separate Account are not chargeable with liabilities
arising out of any other business which General American may conduct. The
assets of the Separate Account are available to cover the general liabilities
of General American only to the extent that the Separate Account's assets
exceed its liabilities arising under the Policies. From time to time, the
Company may transfer to its General Account any assets of the Separate
Account that exceed the reserves and the Policy liabilities of the Separate
Account (which will always be at least equal to the aggregate Policy value
allocated to the Separate Account under the Policies). Before making any such
transfers, General American will consider any possible adverse impact the
transfer may have on the Separate Account.
Russell Insurance Funds
Russell Insurance Funds ("the Investment Company") is an open-end,
diversified management investment company which was incorporated in Maryland
on October 8, 1987. The assets of each Fund of the Investment Company are
managed by one or more investment advisory organizations (each, a "Money
Manager') researched and recommended by Frank Russell Company ("FRC"),
consultant to the Investment Company. FRC's wholly owned subsidiary, Frank
Russell Investment Management Company ("the Management Company"), provides
general management of the Investment Company. The Management Company
continuously monitors and evaluates the Money Managers and recommends their
engagement, replacement, or termination to the board of the Investment
Company based upon the consultation and advice of FRC.
The investment objectives and policies of each Fund are summarized below:
Multi-Style Equity Fund: The investment objective of the
Fund is to provide income and capital growth by investing
principally in equity securities.
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<PAGE> 123
Aggressive Equity Fund: The investment objective of the
Fund is to maximize total return primarily through capital
appreciation and by assuming a higher level of volatility than is
ordinarily expected from the Multi-Style Equity Fund, while still
investing in equity securities.
Non-U.S. Fund: The investment objectives of the Fund are to
provide favorable total return and additional diversification for
United States investors by investing primarily in equity and
fixed-income securities of non-United States companies and
securities issued by non-United States governments.
Core Bond Fund: The investment objectives of the Fund are
to provide effective diversification against equities and a stable
level of cash flow by investing in fixed-income securities.
General American Capital Company
General American Capital Company ( the "Capital Company") is an
open-end, diversified management investment company which was incorporated in
Maryland on November 15, 1985, and commenced operations on October 1, 1987.
Only the Capital Company Fund described in this section of the Prospectus is
currently available as an investment choice for this Policy even though
additional Funds may be described in the prospectus for Capital Company.
Shares of Capital Company are currently offered to separate accounts
established by General American Life Insurance Company and affiliates. The
Capital Company's Investment Advisor is Conning Asset Management Company
("the Advisor"), an indirect subsidiary of General American Holding Company
which, in turn is wholly owned by General American. The Advisor selects
investments for the Fund
The investment objectives and policies of the Fund are summarized
below:
The Money Market Fund: The investment objective of the
Money Market Fund is to obtain the highest level of current
income which is consistent with the preservation of capital and
maintenance of liquidity. The Fund invests primarily in
high-quality, short-term money market instruments. An investment
in the Money Market Fund is neither insured nor guaranteed by the
U. S. Government.
There is no assurance that any of the Funds will achieve its stated
objective. A more detailed description of the Funds, their investment
policies, restrictions, risks, and charges is in the prospectuses for Russell
Insurance Funds and Capital Company, which must accompany or precede this
Prospectus and which should be read carefully.
Addition, Deletion, or Substitution of Investments
The Company reserves the right, subject to compliance with applicable
law, to make additions to, deletions from, or substitutions for the shares
that are held by the Separate Account or that the Separate Account may
purchase. The Company reserves the right to eliminate the shares of any of
the Funds and to substitute shares of another Fund of Russell Insurance
Funds, Capital Company, or of another registered open-end investment company
if the shares of a Fund are no longer available for investment or if in its
judgment further investment in any Fund becomes inappropriate in view of the
purposes of the Separate Account. The Company will not substitute any shares
attributable to an Owner's interest in a Division of the Separate Account
without notice to the Owner and prior approval of the SEC, to the extent
required by the 1940 Act or other applicable law. Nothing contained in this
Prospectus shall prevent the Separate Account from purchasing other
securities for other series or classes of policies, or from permitting a
conversion between series or classes of policies on the basis of requests
made by Owners.
The Company also reserves the right to establish additional Divisions
of the Separate Account, each of which would invest in a new Fund of Russell
Insurance Funds, Capital Company, or in shares of another investment company,
with a specified investment objective. New Divisions may be established when,
in the sole discretion of the Company, marketing needs or investment
conditions warrant. Any new Division will be made available to existing
Owners on a basis to be determined by the Company. To the extent approved by
the SEC, the Company may also eliminate or combine one or more Divisions,
substitute one Division for another Division, or transfer assets between
Divisions if, in its sole discretion, marketing, tax, or investment
conditions warrant.
In the event of a substitution or change, the Company may, if it
considers it necessary, make such changes in the Policy by appropriate
endorsement and offer conversion options required by law, if any. The Company
will notify all Owners of any such changes.
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<PAGE> 124
If deemed by the Company to be in the best interests of persons having
voting rights under the Policy, and to the extent any necessary SEC approvals
or Owner votes are obtained, the Separate Account may be: (a) operated as a
management company under the 1940 Act; (b) de-registered under that Act in
the event such registration is no longer required; or (c) combined with other
separate accounts of the Company. To the extent permitted by applicable law,
the Company may also transfer the assets of the Separate Account associated
with the Policy to another separate account.
POLICY BENEFITS
Death Benefit
As long as the Policy remains in force (See Payment and Allocation of
Premiums - Policy Lapse and Reinstatement on page 18), the Company will, upon
receipt of proof of the Insured's death at its Home Office, pay the death
benefit in a lump sum. The amount of the death benefit payable will be
determined at the end of the Valuation Period during which the Insured's
death occurred. The death benefit will be paid to the surviving Beneficiary
or Beneficiaries specified in the application or as subsequently changed.
The Policy provides three death benefit options: "Death Benefit Option
A," "Death Benefit Option B," and "Death Benefit Option C." The death
benefit under all options will never be less than the current Face Amount of
the Policy (less Indebtedness) as long as the Policy remains in force. (See
Payment and Allocation of Premiums - Policy Lapse and Reinstatement on page
18.) The minimum Face Amount currently is $50,000.
Death Benefit Option A. Under Death Benefit Option A, the death
benefit is the current Face Amount of the Policy or, if greater, the
applicable percentage of Cash Value on the date of death. The applicable
percentage is 250% for an Insured Attained Age 40 or below on the Policy
Anniversary prior to the date of death. For Insureds with an Attained Age
over 40 on that Policy Anniversary, the percentage is lower and declines with
age as shown in the Applicable Percentage of Cash Value Table shown below.
Accordingly, under Death Benefit Option A the death benefit will remain level
at the Face Amount unless the applicable percentage of Cash Value exceeds the
current Face Amount, in which case the amount of the death benefit will vary
as the Cash Value varies. (See Illustrations of Death Benefits and Cash
Values, Appendix A.)
Death Benefit Option B. Under Death Benefit Option B, the death benefit
is equal to the current Face Amount plus the Cash Value of the Policy on the
date of death or, if greater, the applicable percentage of the Cash Value on
the date of death. The applicable percentage is the same as under Death
Benefit Option A: 250% for an Insured Attained Age 40 or below on the Policy
Anniversary prior to the date of death, and for Insureds with an Attained Age
over 40 on that Policy Anniversary the percentage declines as shown in the
Applicable Percentage of Cash Value Table on the next page. Accordingly,
under Death Benefit Option B the amount of the death benefit will always vary
as the Cash Value varies (but will never be less than the Face Amount). (See
Illustrations of Death Benefits and Cash Values, Appendix A.)
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------
Applicable Percentage of Cash Value Table <F*>
<CAPTION>
Insured 40 or 45 50 55 60 65 70 78 to 95 or
Person's Age under 90 older
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Policy Account 250% 215% 185% 150% 130% 120% 115% 105% 100%
Percentage Multiple
- ------------------------------------------------------------------------------------------------------------------------
<FN>
<F*>For ages that are not shown on this table, the applicable percentage
multiples will decrease by a ratable portion for each full year.
</TABLE>
Death Benefit Option C. Under Death Benefit Option C, the death
benefit is equal to the current Face Amount of the Policy or, if greater, the
Cash Value on the date of death multiplied by the "Attained Age factor" (a
list of sample Attained Age factors is shown in the Sample Attained Age
Factor Table below). Accordingly, under Death Benefit Option C the death
benefit will remain level at the Face Amount unless the Cash Value multiplied
by the Attained Age factor exceeds the current Face Amount, in which case the
amount of the death benefit will vary as the Cash Value varies. (See
Illustrations of Death Benefits and Cash Values, Appendix A.)
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<PAGE> 125
<TABLE>
Death Benefit Option C Sample Attained Age Factor Table
<CAPTION>
-----------------------------------------------------------------------------------
Insured Male Female Insured Male Female
Attained Lives Lives Attained Lives Lives
Age Factor Factor Age Factor Factor
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
20 6.39373 7.62992 60 1.87392 2.15766
-----------------------------------------------------------------------------------
25 5.50505 6.48136 65 1.65835 1.87615
-----------------------------------------------------------------------------------
30 4.68733 5.49185 70 1.48797 1.64736
-----------------------------------------------------------------------------------
35 3.97255 4.64894 75 1.35451 1.46009
-----------------------------------------------------------------------------------
40 3.37168 3.94230 80 1.25595 1.31875
-----------------------------------------------------------------------------------
45 2.87784 3.36481 85 1.18113 1.21344
-----------------------------------------------------------------------------------
50 2.47279 2.88712 90 1.12767 1.13972
-----------------------------------------------------------------------------------
55 2.14116 2.49005 95 1.07472 1.07637
</TABLE>
Change In Death Benefit Option. After the first Policy Anniversary, if
the Policy was issued with either Death Benefit Option A or Death Benefit
Option B, the death benefit option may be changed. The option may be changed
once each Policy Year, and a request for change must be made to the Company
in writing. The effective date of such a change will be the Monthly
Anniversary on or following the date the Company receives the change request.
A change in death benefit option may have Federal income tax consequences.
(See Federal Tax Matters on page 28.)
A Death Benefit Option A Policy may change its death benefit option to
Death Benefit Option B. The Face Amount will be decreased to equal the death
benefit less the Cash Value on the effective date of change. A Death Benefit
Option B Policy may change its death benefit option to Death Benefit Option
A. The Face Amount will be increased to equal the death benefit on the
effective date of change. A Policy issued under Death Benefit Option C may
not change to either Death Benefit Option A or Death Benefit Option B for the
entire lifetime of the Contract. Similarly, a Policy issued under either
Death Benefit Option A or B may not change to Death Benefit Option C for the
lifetime of the Policy.
Satisfactory evidence of insurability must be submitted to the Company
in connection with a request for a change from Death Benefit Option A to
Death Benefit Option B. A change may not be made if it would result in a
Face Amount of less than the minimum Face Amount.
A change in death benefit option will not in itself result in an
immediate change in the amount of a Policy's death benefit or Cash Value. In
addition, if, prior to or accompanying a change in the death benefit option,
there has been an increase in the Face Amount, the cost of insurance charge
may be different for the increased amount. (See Monthly Deduction - Cost of
Insurance on page 20.)
Change in Face Amount. Subject to certain limitations set forth below,
an Owner may increase or decrease the Face Amount of a Policy once each
Policy Year and not before the first Policy Anniversary. A written request
is required for a change in the Face Amount. A change in Face Amount may
affect the cost of insurance rate and the net amount at risk, both of which
affect an Owner's cost of insurance charge. (See Monthly Deduction - Cost of
Insurance on page 20.) A change in the Face Amount of a Policy may have
Federal income tax consequences, including conversion of the Policy into a
modified endowment contract. (See Federal Tax Matters on page 28.)
For an increase in the Face Amount, the Company requires that
satisfactory evidence of insurability be submitted. An application for an
increase must be received by the Company. If approved, the increase will
become effective as of the Monthly Anniversary on or following receipt of the
application by the Company. In addition, the Insured must have an Attained
Age of not greater than 80 on the effective date of the increase. The
increase may not be less than $25,000. Although an application for an
increase need not be accompanied by an additional premium, the Cash Surrender
Value in effect immediately after the increase must be sufficient to cover
the next monthly deduction. To the extent the Cash Surrender Value is not
sufficient, an additional premium must be paid. (See Charges and Deductions
- - Monthly Deduction on page 20.) An increase in the Face Amount may result
in certain additional charges. (See Charges and Deductions - Monthly
Deduction on page 20.)
For the Owner's rights upon an increase in Face Amount, see Policy
Rights - Right to Examine Policy on page 16. Owners should consult their
sales representative before deciding whether to increase coverage by
increasing the Face Amount of a Policy.
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<PAGE> 126
Any decrease in the Face Amount will become effective on the Monthly
Anniversary on or following receipt of the written request by the Company.
The amount of the requested decrease must be at least $5,000 and the Face
Amount remaining in force after any requested decrease may not be less than
minimum Face Amount. If following a decrease in Face Amount, the Policy
would not comply with the maximum premium limitations required by Federal tax
law (See Payment and Allocation of Premiums on page 17), the decrease may be
limited or Cash Value may be returned to the Owner (at the Owner's election),
to the extent necessary to meet these requirements. Decreases will be
applied to prior increases in the Face Amount, if any, in the reverse order
in which such increases occurred, and then to the original Face Amount. This
order of reduction will be used to determine the amount of subsequent cost of
insurance charges (See Monthly Deduction - Cost of Insurance on page 20; and
Charges and Deductions - Contingent Deferred Sales Charge on page 21.)
Where one or more Policies are sold to a corporation or other entity or
group of individuals, special arrangements may be agreed upon to increase or
decrease the Face Amount, in accordance with criteria which the Company may
establish and modify from time to time in its discretion. Criteria that may
determine changes in Face Amount include, but shall not be limited to,
periodic adjustments to the Insured's level of compensation, the number of
Policies issued to a corporation or other entity, or the number of Policies
issued to any group of owners. Criteria established by the Company will not
unfairly discriminate against the interest of any Owner or Insured.
Payment of the Death Benefit. The death benefit under the Policy will
ordinarily be paid in a lump sum within seven days after the Company receives
all documentation required for such a payment. Payment may, however, be
postponed in certain circumstances. (See General Matters - Postponement of
Payment from the Separate Account on page 25.) The death benefit will be
increased by any unpaid dividends determined prior to the Insured's death,
and by the amount of the monthly cost of insurance for the portion of the
month from the date of death to the end of the month, and reduced by any
outstanding Indebtedness. (See General Matters - Additional Insurance
Benefits on page 27; Dividends on page 22; and Charges and Deductions on page
19.) The Company will pay interest on the death benefit from the date of the
Insured's death to the date of payment. Interest will be at an annual rate
determined by the Company, but will never be less than the guaranteed rate of
4%. Provisions for settlement of proceeds other than a lump sum payment may
only be made upon written agreement with the Company.
Cash Value
The Cash Value of the Policy is equal to the total of the amounts
credited to the Owner in the Separate Account, the Loan Account (securing
Policy Loans), and, in certain contracts, the General Account. The Policy's
Cash Value in the Separate Account will reflect the investment performance of
the chosen Divisions of the Separate Account as measured by each Division's
Net Investment Factor (defined on the next page), the frequency and amount of
Net Premiums paid, transfers, partial withdrawals, loans and the charges
assessed in connection with the Policy. An Owner may at any time surrender
the Policy and receive the Policy's Cash Surrender Value. (See Policy Rights
- - Surrender, Partial Withdrawals, and Pro Rata Surrender on page 13.) The
Policy's Cash Value in the Separate Account equals the sum of the Policy's
Cash Values in each Division. There is no guaranteed minimum Cash Value.
Determination of Cash Value. Cash Value is determined on each
Valuation Date. On the Investment Start Date, the Cash Value in a Division
will equal the portion of any Net Premium allocated to the Division, reduced
by the portion allocated to that Division of the monthly deduction(s) due
from the Issue Date through the Investment Start Date. (See Payment and
Allocation of Premiums on page 17.) Thereafter, on each Valuation Date, the
Cash Value in a Division of the Separate Account will equal:
(1) The Cash Value in the Division on the preceding
Valuation Date, multiplied by the Division's Net Investment
Factor (defined below) for the current Valuation Period; plus
(2) Any Net Premium payments received during the current
Valuation Period which are allocated to the Division; plus
(3) Any loan repayments allocated to the Division during
the current Valuation Period; plus
(4) Any amounts transferred to the Division from the
General Account or from another Division during the current
Valuation Period; plus
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<PAGE> 127
(5) That portion of the interest credited on outstanding
loans which is allocated to the Division during the current
Valuation Period; minus
(6) Any amounts transferred from the Division to the
General Account, Loan Account, or to another Division during the
current Valuation Period (including any transfer charges); minus
(7) Any partial withdrawals from the Division during the
current Valuation Period; minus
(8) Any withdrawal due to a pro rata surrender from the
Division during the current Valuation Period; minus
(9) Any withdrawal or surrender charges incurred during
the current Valuation Period attributed to the Division in
connection with a partial withdrawal or pro rata surrender;
minus
(10) If a Monthly Anniversary occurs during the current
Valuation Period, the portion of the monthly deduction allocated
to the Division during the current Valuation Period to cover the
Policy Month which starts during that Valuation Period. (See
Charges and Deductions on page 19.)
Net Investment Factor: The Net Investment Factor measures the
investment performance of a Division during a Valuation Period. The Net
Investment Factor for each Division for a Valuation period is calculated as
follows:
(1) The value of the assets at the end of the preceding
Valuation Period; plus
(2) The investment income and capital gains, realized or
unrealized, credited to the assets in the Valuation Period for
which the Net Investment Factor is being determined; minus
(3) The capital losses, realized or unrealized, charged
against those assets during the Valuation Period; minus
(4) Any amount charged against each Division for taxes,
including any tax or other economic burden resulting from the
application of the tax laws determined by the Company to be
properly attributable to the Divisions of the Separate Account,
or any amount set aside during the Valuation Period as a reserve
for taxes attributable to the operation or maintenance of each
Division; minus
(5) A charge equal to .0019111% of the average net assets
for each day in the Valuation Period. This is equivalent to an
effective annual rate of 0.70% per year for mortality and
expense risks; divided by
(6) The value of the assets at the end of the preceding
Valuation Period.
POLICY RIGHTS
Loans
Loan Privileges. After the first Policy Anniversary, the Owner may, by
written request to General American, borrow an amount up to the Loan Value of
the Policy, with the Policy serving as sole security for such loan. A loan
taken from, or secured by, a Policy may have Federal income tax consequences.
(See Federal Tax Matters on page 28.)
The Loan Value is the Cash Value of the Policy on the date the loan
request is received, less interest to the next loan interest due date, less
anticipated monthly deductions to the next loan interest due date, less any
existing loan, and less any surrender charge. Policy Loan interest is payable
on each Policy Anniversary.
The minimum amount that may be borrowed is $500. The loan may be
completely or partially repaid at any time while the Insured is living. Any
amount due to an Owner under a Policy Loan ordinarily will be paid within
seven days after General American receives the loan request at its Home
Office, although payments may be postponed under certain circumstances. (See
General Matters - Postponement of Payments from the Separate Account on page
25.)
11
<PAGE> 128
When a Policy Loan is made, Cash Value equal to the amount of the loan
plus interest due will be transferred to the Loan Account as security for the
loan. A Loan Subaccount exists within the Loan Account for the General
Account and each Division of the Separate Account. Amounts transferred to the
Loan Account to secure Indebtedness are allocated to the appropriate Loan
Subaccount to reflect its origin. Unless the Owner requests a different
allocation, amounts will be transferred from the Divisions of the Separate
Account and the General Account in the same proportion that the Policy's Cash
Value in each Division and the General Account, if any, bears to the Policy's
total Cash Value, less the Cash Value in the Loan Account, at the end of the
Valuation Period during which the request for a Policy Loan is received.
This will reduce the Policy's Cash Value in the General Account and Separate
Account. These transactions will not be considered transfers for purposes of
the limitations on transfers between Divisions or to or from the General
Account.
Cash Value in the Loan Account is expected to earn interest at a rate
("the earnings rate") which is lower than the rate charged on the Policy Loan
("the borrowing rate"). Cash Value in the Loan Account will accrue interest
daily at an earnings rate which is the greater of (a) an annual rate of 4%
("the guaranteed earnings rate" or (b) a current rate determined by us ("the
discretionary earnings rate"). The Company may change the discretionary
earnings rate on Policy Loans at any time in its sole discretion. Currently
in Policy Years one through ten, we accrue interest at a discretionary
earnings rate which is .50% less than the borrowing rate we charge for Policy
Loan interest. Beginning in Policy Year eleven we accrue interest at a
discretionary earnings rate which is .25% less than the borrowing rate we
charge for Policy Loan interest. The difference between the rate of interest
earned and the borrowing rate is the "Loan Spread." The Loan Spreads
mentioned above are currently in effect and are not guaranteed.
Interest credited on the Cash Value held in the Loan Account will be
allocated on Policy Anniversaries to the General Account and the Divisions of
the Separate Account in the same proportion that the Cash Value in each Loan
Subaccount bears to the Cash Value in the Loan Account. The interest credited
will also be transferred: (1) when a new loan is made; (2) when a loan is
partially or fully repaid; and (3) when an amount is needed to meet a monthly
deduction.
Interest Charged. The borrowing rate we charge for Policy Loan interest
will be based on an index. The indexed borrowing rate will never be more than
the maximum loan rate permitted by law. More information on the borrowing
rate charged is provided below.
General American will inform the Owner of the current borrowing rate
when a Policy Loan is made. General American will also mail the Owner an
advance notice if there is to be a change in the borrowing rate applicable to
any outstanding Indebtedness.
Policy Loan interest is due and payable annually on each Policy
Anniversary. If the Owner does not pay the interest when it is due, the
unpaid loan interest will be added to the outstanding Indebtedness as of the
due date and will be charged interest at the same rate as the rest of the
Indebtedness. (See Effect of Policy Loans on page 13.) The amount of Policy
Loan interest which is transferred to the Loan Account will be deducted from
the Divisions of the Separate Account and from the General Account in the
same proportion that the portion of the Cash Value in each Division and in
the General Account, respectively, bears to the total Cash Value of the
Policy minus the Cash Value in the Loan Account.
We determine the borrowing rate at the beginning of each Policy Year.
The same rate applies to any outstanding Indebtedness and to any new Policy
Loans made during the year. The borrowing rate determined by General
American for a Policy Year may not exceed a Maximum Limit which is the
greater of:
(a) The Published Monthly Average (defined below) for the
calendar month ending two months before the beginning of the
month in which the Policy Anniversary falls (example: for a
Policy with a June Policy Anniversary, the March Published
Average); or
(b) Five Percent (5%).
The Published Monthly Average means:
(1) Moody's Corporate Bond Yield Average - Monthly Average
Corporate, as published by Moody's Investors Service, Inc. or any
successor to that service; or
(2) If that average is no longer published, a
substantially similar average, established by regulation issued
by the insurance supervisory official of the state in which this
Policy is issued.
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<PAGE> 129
If the Maximum Limit for a Policy Year, as determined in this manner,
is at least 0.50% higher than the borrowing rate determined by General
American for the previous Policy Year, General American may increase the
borrowing rate to not more than the Maximum Limit. Therefore the borrowing
rate we charge for Policy Loan interest will only change if the Published
Monthly Average differs from the previous rate by at least 0.50%.
Effect of Policy Loans. Whether or not a Policy Loan is repaid, it
will permanently affect the Cash Value of a Policy, and may permanently
affect the amount of the death benefit. The collateral for the loan (the
amount held in the Loan Account) does not participate in the performance of
the Separate Account while the loan is outstanding. If the Loan Account
earnings rate is less than the investment performance of the selected
Division(s), the Cash Value of the Policy will be lower as a result of the
Policy Loan. Conversely, if the Loan Account earnings rate is higher than
the investment performance of the Division(s), the Cash Value may be higher.
In addition, if the Indebtedness (See Definitions on page 1) exceeds
the Cash Value minus the surrender charge on any Monthly Anniversary, the
Policy will lapse, subject to a grace period. (See Payment and Allocation of
Premiums - Policy Lapse and Reinstatement on page 18.) A sufficient payment
must be made within the later of the grace period of 62 days from the Monthly
Anniversary immediately before the date Indebtedness exceeds the Cash Value
less any surrender charges, or 31 days after notice that a Policy will
terminate unless a sufficient payment has been mailed, or the Policy will
lapse and terminate without value. A lapsed Policy, however, may later be
reinstated subject to certain limitations. (See Payment and Allocation of
Premiums - Policy Lapse and Reinstatement on page 18.)
Any outstanding Indebtedness will be deducted from the proceeds payable
upon the death of the Insured, surrender, or the maturity of the Policy.
Repayment of Indebtedness. A Policy Loan may be repaid in whole or in
part at any time prior to the death of the Insured and as long as a Policy is
in force. When a loan repayment is made, an amount securing the Indebtedness
in the Loan Account equal to the loan repayment will be transferred to the
Divisions of the Separate Account and the General Account in the same
proportion that the Cash Value in each Loan Subaccount bears to Cash Value in
the Loan Account. Amounts paid while a Policy Loan is outstanding will be
treated as premiums unless the Owner requests in writing that they be treated
as repayment of Indebtedness.
Surrender, Partial Withdrawals and Pro Rata Surrender
At any time during the lifetime of the Insured and while a Policy is in
force, the Owner may surrender the Policy by sending a written request to the
Company. After the first Policy Year, an Owner may make a partial withdrawal
by sending a written request to the Company. The amount available for
surrender is the Cash Surrender Value at the end of the Valuation Period
during which the surrender request is received at the Company's Home Office.
Amounts payable from the Separate Account upon surrender, partial withdrawal,
or a pro rata surrender will ordinarily be paid within seven days of receipt
of the written request. (See General Matters - Postponement of Payments from
the Separate Account on page 25.)
Surrenders. To effect a surrender, either the Policy itself must be
returned to the Company along with the request, or the request must be
accompanied by a completed affidavit of loss, which is available from the
Company. Upon surrender, the Company will pay the Cash Surrender Value plus
any unpaid dividends determined prior to surrender (See Dividends) to the
Owner in a single sum. The Cash Surrender Value equals the Cash Value on the
date of surrender, less any Indebtedness, and less any surrender charge.
(See Charges and Deductions - Contingent Deferred Sales Charge on page 21.)
The Company will determine the Cash Surrender Value as of the date that an
Owner's written request is received at the Company's Home Office. If the
request is received on a Monthly Anniversary, the monthly deduction otherwise
deductible will be included in the amount paid. Coverage under a Policy will
terminate as of the date of surrender. The Insured must be living at the time
of a surrender. A surrender may have Federal income tax consequences. (See
Federal Tax Matters on page 28.)
Partial Withdrawals. After the first Policy Year, an Owner may make up
to one partial withdrawal each Policy Month from the Separate Account, and up
to four partial withdrawals and transfers in any Policy Year from the General
Account. A partial withdrawal may have Federal income tax consequences. (See
Federal Tax Matters on page 28.)
The minimum amount of a partial withdrawal request, net of any
applicable surrender charges, is the lesser of a) $500 from a Division of
the Separate Account, or b) the Policy's Cash Value in a Division. (See
Charges and Deductions - Contingent Deferred Sales Charge on page 21.)
Partial withdrawals made during a Policy Year may not exceed the
13
<PAGE> 130
following limits. The maximum amount that may be withdrawn from a Division
of the Separate Account is the Policy's Cash Value net of any applicable
surrender charges in that Division. The total partial withdrawals and
transfers from the General Account over the Policy Year may not exceed a
maximum amount equal to the greatest of the following: (1) 25% of the Cash
Surrender Value in the General Account at the beginning of the Policy Year,
(2) $5,000, (3) the previous Policy Year's maximum amount.
The Owner may allocate the amount withdrawn plus any applicable
surrender charge, subject to the above conditions, among the Divisions of the
Separate Account and the General Account. If no allocation is specified, then
the partial withdrawal will be allocated among the Divisions of the Separate
Account and the General Account in the same proportion that the Policy's Cash
Value in each Division and the General Account bears to the total Cash Value
of the Policy, less the Cash Value in the Loan Account, on the date the
request for the partial withdrawal is received. If the limitations on
withdrawals from the General Account will not permit this proportionate
allocation, the Owner will be requested to provide an alternate allocation.
(See The General Account on page 23.)
No amount may be withdrawn that would result in there being
insufficient Cash Value to meet any surrender charge that would be payable
immediately following the withdrawal upon the surrender of the remaining Cash
Value.
The death benefit will be affected by a partial withdrawal. If Death
Benefit Option A or Death Benefit Option C is in effect and the death benefit
equals the Face Amount, then a partial withdrawal will decrease the Face
Amount by an amount equal to the partial withdrawal plus the applicable
surrender charge resulting from that partial withdrawal. If the death benefit
is based on a percentage of the Cash Value, then a partial withdrawal will
decrease the Face Amount by an amount by which the partial withdrawal plus
the applicable surrender charge exceeds the difference between the death
benefit and the Face Amount. If Death Benefit Option B is in effect, the Face
Amount will not change.
The Face Amount remaining in force after a partial withdrawal may not
be less than the minimum Face Amount. Any request for a partial withdrawal
that would reduce the Face Amount below this amount will not be implemented.
Partial withdrawals may affect the way in which the cost of insurance
charge is calculated and the amount of pure insurance protection afforded
under a Policy. (See Monthly Deduction - Cost of Insurance on page 20.)
Partial withdrawals will be applied first to reduce the initial Face Amount
and then to each increase in Face Amount in order, starting with the first
increase. The Company may change the minimum amount required for a partial
withdrawal or the number of times partial withdrawals may be made.
Pro Rata Surrender. After the first Policy Year, an Owner can make a
pro rata surrender of the Policy. The pro rata surrender will reduce the Face
Amount and the Cash Value by a percentage chosen by the Owner. This
percentage must be any whole number. A pro rata surrender may have Federal
income tax consequences. (See Federal Tax Matters on page 28.) The percentage
will be applied to the Face Amount and the Cash Value on the Monthly
Anniversary on or following our receipt of the request.
The Owner may allocate the amount of decrease in Cash Value plus any
applicable surrender charge among the Divisions of the Separate Account and
the General Account. (See Charges and Deductions - Contingent Deferred Sales
Charge on page 21.) If no allocation is specified, then the decrease in Cash
Value and any applicable surrender charge will be allocated among the
Divisions of the Separate Account and the General Account in the same
proportion that the Policy's Cash Value in each Division and the General
Account bears to the total Cash Value of the Policy, less the Cash Value in
the Loan Account, on the date the request for pro rata surrender is received.
A pro rata surrender can not be processed if it will reduce the Face
Amount below the minimum Face Amount of the Policy. No pro rata surrender
will be processed for more Cash Surrender Value than is available on the date
of the pro rata surrender. A cash payment will be made to the Owner for the
amount of Cash Value reduction less any applicable surrender charges.
Pro rata surrenders may affect the way in which the cost of insurance
charge is calculated and the amount of the pure insurance protection afforded
under the Policy. (See Monthly Deduction - Cost of Insurance on page 20.) Pro
rata surrenders will be applied to prior increases in the Face Amount, if
any, in the reverse order in which such increases occurred, and then to the
original Face Amount.
Charges on Surrender, Partial Withdrawals and Pro Rata Surrender. If a
Policy is surrendered within the first ten Policy Years, the Deferred
Contingent Sales Charge will apply. (See Contingent Deferred Sales Charge on
page 21.)
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<PAGE> 131
A partial withdrawal or pro rata surrender may also result in a charge.
The amount of the charge assessed is a portion of the Contingent Deferred
Sales Charge that would be deducted upon surrender or lapse. Charges are
described in more detail under Charges and Deductions - Contingent Deferred
Sales Charge on page 21.
While partial withdrawals and pro rata surrenders are each methods of
reducing a Policy's Cash Value, a pro rata surrender differs from a partial
withdrawal in that a partial withdrawal does not typically have a
proportionate effect on a Policy's death benefit by reducing the Policy's
Face Amount, while a pro rata surrender does. Assuming that a Policy's death
benefit is not a percentage of the Policy's Cash Value, a pro rata surrender
will reduce the Policy's death benefit in the same proportion that the
Policy's Cash Value is reduced, while a partial withdrawal will reduce the
death benefit by one dollar for each dollar of Cash Value withdrawn. Partial
Withdrawals and Pro Rata Surrenders will also result in there being different
cost of insurance charges subsequently deducted. (See Monthly Deduction -
Cost of Insurance on page 20; Surrender, Partial Withdrawals and Pro Rata
Surrender - Partial Withdrawals on page 13; and Surrenders, Partial
Withdrawals, and Pro Rata Surrenders - Pro Rata Surrender on page 14.)
Transfers
Under General American's current practices, a Policy's Cash Value,
except amounts credited to the Loan Account, may be transferred among the
Divisions of the Separate Account and for certain contracts, between the
General Account and the Divisions. Transfers to and from the General Account
are subject to restrictions. (See The General Account on page 23.) Requests
for transfers from or among Divisions of the Separate Account may be made in
writing or by telephone. Transfers from or among the Divisions of the
Separate Account may be made once each Policy Month and must be in amounts of
at least $500 or, if smaller, the Policy's Cash Value in a Division. General
American ordinarily will effectuate transfers and determine all values in
connection with transfers as of the end of the Valuation Period during which
the transfer request is received.
Requests may be made by telephone if the Owner has chosen to use
General American's telephone transfer program. To elect this program the
Owner must complete a form provided by General American. General American
reserves the right to cancel the telephone transfer program upon 30 days
written notice.
All requests received on the same Valuation Day will be considered a
single transfer request. Each transfer must meet the minimum requirement of
$500 or the entire Cash Value in a Division whichever is smaller. Where a
single transfer request calls for more than one transfer, and not all of the
transfers would meet the minimum requirements, General American will
effectuate those transfers that do meet the requirements. Transfers resulting
from Policy Loans will not be counted for purposes of the limitations on the
amount or frequency of transfers allowed in each Policy Month or Policy Year.
Although General American currently intends to continue to permit
transfers for the foreseeable future, the Policy provides that General
American may at any time revoke, modify, or limit the transfer privilege,
including the minimum amount transferable, the maximum General Account
allocation percent, and the frequency of such transfers. General American may
in the future impose a charge of no more than $25 per transfer request.
Dollar Cost Averaging
The Owner may direct the Company to transfer amounts on a monthly basis
from the Money Market Fund to any other Division of the Separate Account.
This service is intended to allow the Owner to utilize "dollar cost
averaging" ("DCA"), a long-term investment technique which provides for
regular, level investments over time. The Company makes no guarantee that DCA
will result in a profit or protect against loss.
The following rules and restrictions apply to DCA transfers:
(1) The minimum DCA transfer amount is $100.
(2) A written election of the DCA service, on a form provided by the
Company, must be completed by the Owner and on file with the Company in order
to begin DCA transfers.
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<PAGE> 132
(3) In the written election of the DCA service, the Owner indicates how
DCA transfers are to be allocated among the Divisions of the Separate
Account. For any Division chosen to receive DCA transfers, the minimum
percentage that may be allocated to a Division is 5% of the DCA transfer
amount, and fractional percentages may not be used.
(4) DCA transfers can only be made from the Money Market Fund, and DCA
transfers will not be allowed to the General Account.
(5) The DCA transfers will not count against the Policy's normal
transfer restrictions. (See Policy Rights Transfers on page 15.)
(6) The DCA transfer percentages may differ from the allocation
percentages the Owner specifies for the allocation of Net Premiums. (See
Payment and Allocation of Premiums - Allocation of Net Premiums and Cash
Values on page 18.)
(7) Once elected, DCA transfers from the Money Market Fund will be
processed monthly until either the value in the Money Market Fund is
completely depleted or the Owner instructs the Company in writing to cancel
the DCA service.
(8) Transfers as a result of a Policy Loan or repayment, or in exercise
of the conversion privilege, are not subject to the DCA rules and
restrictions. The DCA service terminates at the time the conversion
privilege is exercised, when any outstanding amount in any Division of the
Separate Account is immediately transferred to the General Account. (See
Policy Rights - Loans on page 11.)
(9) DCA transfers will not be made until the Right to Examine Policy
period has expired (See Policy Rights - Right to Examine Policy on page 16).
No fee is currently charged for DCA, but the Company reserves the right
to assess a processing fee for the DCA service. The Company reserves the
right to discontinue offering DCA upon 30 days' written notice to Owners.
However, any such discontinuation will not affect DCA services already
commenced. The Company reserves the right to impose a minimum total Cash
Value, less outstanding Indebtedness, in order to qualify for DCA service.
Also, the Company reserves the right to change the minimum necessary Cash
Value and the minimum required DCA transfer amount.
Right to Examine Policy
The Owner may cancel a Policy within 20 days after receiving it (30
days if the Owner is a resident of California and is age 60 or older) or
within 45 days after the application was signed, whichever is later. If a
Policy is canceled within this time period, a refund will be paid. Where
required by state law, the refund will equal all premiums paid under the
Policy. Where required by state law, General American will refund an amount
equal to the greater of premiums paid or (1) plus (2) where (1) is the
difference between the premiums paid, including any policy fees or other
charges, and the amounts allocated to the Separate Account under the Policy
and (2) is the value of the amounts allocated to the Separate Account under
the Policy on the date the returned Policy is received by General American or
its agent.
To cancel the Policy, the Owner should mail or deliver the Policy to
either General American or the agent who sold it. A refund of premiums paid
by check may be delayed until the Owner's check has cleared the bank upon
which it was drawn. (See General Matters - Postponement of Payments from the
Separate Account on page 25.)
A request for an increase in Face Amount (See Policy Benefits - Death
Benefit on page 8) may also be canceled. The request for cancellation must be
made within the later of 20 days from the date the Owner received the new
Policy specifications page for the increase, or 45 days after the application
for the increase was signed.
Payment of Benefits at Maturity
If the Insured is living and the Policy is in force, the Company will
pay in a lump sum the Cash Surrender Value of the Policy on the Maturity
Date, plus any unpaid dividends determined prior to maturity. Amounts payable
on the Maturity Date ordinarily will be paid in a lump sum within seven days
of that date, although payments may be postponed under certain circumstances.
(See General Matters - Postponements of Payments from the Separate Account on
page 25.) A Policy will mature if and when the Insured reaches Attained Age
100. Settlement options other than a lump sum payment may only be made upon
written agreement with the Company.
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<PAGE> 133
PAYMENT AND ALLOCATION OF PREMIUMS
Issuance of a Policy
Individuals wishing to purchase a Policy must complete an application
and submit it to an authorized registered agent of General American or to
General American's Home Office. A Policy will generally be issued to
Insureds of Issue Ages 0 through 80 for regularly underwritten contracts and
to Insureds of Issue Ages 0 through 70 for simplified issue and to Insureds
of Issue Ages 20 through 70 for guaranteed issue contracts. General American
may, in its sole discretion, issue Policies to individuals falling outside of
those Issue Ages. Acceptance of an application is subject to General
American's underwriting rules and General American reserves the right to
reject an application for any reason.
The Issue Date is determined by General American in accordance with its
standard underwriting procedures for variable life insurance policies. The
Issue Date is used to determine Policy Anniversaries, Policy Years, and
Policy Months. Insurance coverages under a Policy will not take effect until
the Policy has been delivered and the initial premium has been paid prior to
the Insured's death and prior to any change in health as shown in the
application.
Premiums
The initial premium is due on the Issue Date, and may be paid to an
authorized registered agent of General American or to General American at its
Home Office. General American currently requires that the initial premium for
a Policy be at least equal to one-twelfth (1/12) of the Minimum Premium for
the Policy. The Minimum Premium is the amount specified for each Policy based
on the requested initial Face Amount and the charges under the Policy which
vary according to the Issue Age, sex, underwriting risk class, and smoker
status of the Insured. (See Charges and Deductions on page 19.) For policies
issued as a result of a term conversion from certain General American term
policies, the Company requires the Owner to pay an initial premium, which
combined with conversion credits given, if any, will equal one full "Minimum
Premium" for the Policy.
Following the initial premium, subject to the limitations described
below, premiums may be paid in any amount and at any interval. Premiums after
the first premium payment must be paid to General American at its Home
Office. An Owner may establish a schedule of planned premiums which will be
billed by the Company at regular intervals. Failure to pay planned premiums,
however, will not itself cause the Policy to lapse. (See Policy Lapse and
Reinstatement on page 18.) Premium receipts will be furnished upon request.
An Owner may make unscheduled premium payments at any time in any
amount, or skip planned premium payments, subject to the minimum and maximum
premium limitations described below.
If a Policy is in the intended Owner's possession but the initial
premium has not been paid, the Policy is not in force. The intended Owner is
deemed to have the Policy for inspection only.
Premium Limitations. Every premium payment must be at least $10. In no
event may the total of all premiums paid in any Policy Year exceed the
current maximum premium limitations for that Policy Year. Maximum premium
limits for the Policy Year will be shown in an Owner's annual report.
In general, for policies issued with Death Benefit Option A or Death
Benefit Option B, the maximum premium limit for a Policy Year is the largest
amount of premium that can be paid in that Policy Year such that the sum of
the premiums paid under the Policy will not at any time exceed the guideline
premium limitations needed to comply with the tax definition of life
insurance. For policies issued with Death Benefit Option C, the company
reserves the right to impose other restrictions upon the amount of premium
that may be paid into the Policy. If at any time a premium is paid which
would result in total premiums exceeding the current maximum premium
limitations, the Company will only accept that portion of the premium which
will make total premiums equal the maximum. Any part of the premium in
excess of that amount will be returned or applied as otherwise agreed, and no
further premiums will be accepted until allowed under the current maximum
premium limitations.
In addition to the foregoing tax definitional limits on premiums, for
purposes of determining whether distributions (including loans) are a return
of income first, the Company monitors the Policy to detect whether the "seven
pay limit" has been exceeded. If the seven pay limit is exceeded, the Policy
becomes a "Modified Endowment". The Company has adopted administrative steps
designed to notify an Owner when it is believed that a premium payment will
cause a Policy to become a modified endowment contract. The Owner will be
given a limited amount of time to request that the premium
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<PAGE> 134
be reversed in order to avoid the Policy's being classified as a modified
endowment contract. (See Federal Tax Matters on page 28.)
If the Company receives a premium payment which would cause the death
benefit to increase by an amount that exceeds the Net Premium portion of the
payment, then the Company reserves the right to (1) refuse that premium
payment, or (2) require additional evidence of insurability before it accepts
the premium.
Allocation of Net Premiums and Cash Value
Allocation of Net Premiums. In the application for a Policy, the Owner
indicates how Net Premiums are to be allocated among the Divisions of the
Separate Account, to the General Account (if available), or both. For each
Division chosen, the minimum percentage that may be allocated to a Division
is 5% of the Net Premium, and fractional percentages may not be used. Certain
other restrictions apply to allocations made to the General Account (See
General Account on page 23). For policies issued with an allowable percentage
to the General Account of more than 5%, the minimum percentage is 5%, and
fractional percentages may not be used.
The allocation for future Net Premiums may be changed without charge at
any time by providing notice to the Company. Any change in allocation will
take effect immediately upon receipt by the Company of written notice. No
charge is imposed for changing the allocations of future premiums. The
initial allocation will be shown on the application which is attached to the
Policy. The Company may at any time modify the maximum percentage of future
Net Premiums that may be allocated to the General Account.
During the period from the Issue Date to the end of the Right to
Examine Policy Period (See Policy Rights - Right to Examine Policy on page
16.), Net Premiums will automatically be allocated to the Division that
invests in the Money Market Fund of Capital Company. When this period
expires, the Policy's Cash Value in that Division will be transferred to the
Divisions of the Separate Account and to the General Account (if available)
in accordance with the allocation requested in the application for the
Policy, or any allocation instructions received subsequent to receipt of the
application. Net Premiums received after the Right to Examine Policy Period
will be allocated according to the allocation instructions most recently
received by the Company unless otherwise instructed for that particular
premium receipt.
The Policy's Cash Value may also be transferred between Divisions of
the Separate Account, and, if the General Account is available under the
Policy, between those Divisions and the General Account. (See Policy Rights -
Transfers on page 15.)
The value of amounts allocated to Divisions of the Separate Account
will vary with the investment performance of the chosen Divisions and the
Owner bears the entire investment risk. This will affect the Policy's Cash
Value, and may affect the death benefit as well. Owners should periodically
review their allocations of Net Premiums and the Policy's Cash Value in light
of market conditions and their overall financial planning requirements.
Policy Lapse and Reinstatement
Lapse. Unlike conventional whole life insurance policies, the failure
to make a premium payment following the initial premium will not itself cause
a Policy to lapse. Lapse will occur when the Cash Surrender Value is
insufficient to cover the monthly deduction, and a grace period expires
without a sufficient payment being made.
The grace period, which is 62 days, begins on the Monthly Anniversary
on which the Cash Surrender Value becomes insufficient to meet the next
monthly deduction. The Company will notify the Owner at the beginning of the
grace period by mail addressed to the last known address on file with the
Company. The notice to the Owner will indicate the amount of additional
premium that must be paid. The amount of the premium required to keep the
Policy in force will be the amount to cover the outstanding monthly
deductions and premium expense charges. (See Charges and Deductions - Monthly
Deduction on page 20.) If the Company does not receive the required amount
within the grace period, the Policy will lapse and terminate without Cash
Value.
If the Insured dies during the grace period, any overdue monthly
deductions will be deducted from the death benefit otherwise payable.
Reinstatement. The Owner may reinstate a lapsed Policy by written
application any time within five years after the date of lapse and before the
Maturity Date. Reinstatement is subject to the following conditions:
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<PAGE> 135
1. Evidence of the insurability of the Insured
satisfactory to the Company (including evidence of insurability
of any person covered by a rider to reinstate the rider).
2. Payment of a premium that, after the deduction of
premium expense charges, is large enough to cover: (a) the
monthly deductions due at the time of lapse, and (b) two times
the monthly deduction due at the time of reinstatement.
3. Payment or reinstatement of any Indebtedness. Any
Indebtedness reinstated will cause Cash Value of an equal amount
also to be reinstated. Any loan interest due and unpaid on the
Policy Anniversary prior to reinstatement must be repaid at the
time of reinstatement. Any loan paid at the time of
reinstatement will cause an increase in Cash Value equal to the
amount to be reinstated.
The Policy cannot be reinstated if it has been surrendered.
The amount of Cash Value on the date of reinstatement will be equal to
the amount of any Policy Loan reinstated, increased by the Net Premiums paid
at reinstatement, any Policy Loan paid at the time of reinstatement, and the
amount of any surrender charge paid at the time of lapse. The Insured must be
alive on the date the Company approves the application for reinstatement. If
the Insured is not then alive, such approval is void and of no effect.
The effective date of reinstatement will be the date the Company
approves the application for reinstatement. There will be a full monthly
deduction for the Policy Month which includes that date. (See Charges and
Deductions-Monthly Deduction on page 20.)
The surrender charge in effect at the time of reinstatement will equal
the surrender charge in effect at the time of lapse.
CHARGES AND DEDUCTIONS
Charges will be deducted in connection with the Policy to compensate
the Company for providing the insurance benefits set forth in the Policy and
any additional benefits added by rider, administering the Policies, incurring
expenses in distributing the Policies, and assuming certain risks in
connection with the Policy.
Premium Expense Charges
Prior to allocation of Net Premiums, premium payments will be reduced
by premium expense charges consisting of a sales charge and a charge for
premium taxes. The premium payment less the premium expense charge equals the
Net Premium.
Sales Charge. A sales charge not to exceed 5% of each premium payment
will be deducted from each premium payment to partially compensate the
Company for expenses incurred in distributing the Policy and any additional
benefits provided by riders. The Company currently intends to deduct a sales
charge of 5% in Policy Years one through ten and 2.25% in Policy Years past
Policy Year ten. The expenses covered by the sales charge include agent sales
commissions, the cost of printing Prospectuses and sales literature, and any
advertising costs. Where Policies are issued to Insureds with higher
mortality risks or to Insureds who have selected additional insurance
benefits, a portion of the amount deducted for sales charge is used to pay
distribution expenses and other costs associated with these additional
coverages. No increase in this sales charge will occur that would result in
an increase in the sales charge percentage deducted in any previous Policy
year.
A Contingent Deferred Sales Charge is also imposed under certain
circumstances for expenses incurred in distributing the Policies. That charge
is discussed below.
To the extent that sales expenses are not recovered from the sales
charge and the surrender charge, those expenses may be recovered from other
sources, including the mortality and expense risk charge described below.
Premium Taxes. Various states and subdivisions impose a tax on premiums
received by insurance companies. Premium taxes vary from state to state and
range from 0.75% to 3.50%. A deduction of 2.5% of the premium is taken from
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<PAGE> 136
each premium payment for these taxes. The deduction represents an amount the
Company considers necessary to pay the premium taxes imposed by the states
and any subdivisions thereof.
Monthly Deduction
Charges will be deducted monthly from the Cash Value of each Policy
("the monthly deduction") to compensate the Company for (a) certain
administrative costs; (b) the cost of insurance; and (c) the cost of optional
benefits added by rider. The monthly deduction will be taken on the
Investment Start Date and on each Monthly Anniversary. It will be allocated
among the General Account and each Division of the Separate Account in the
same proportion that a Policy's Cash Value in the General Account and the
Policy's Cash Value in each Division bear to the total Cash Value of the
Policy, less the Cash Value in the Loan Account, on the date the deduction is
taken. Because portions of the monthly deduction, such as the cost of
insurance, can vary from month to month, the monthly deduction itself can
vary in amount from month to month.
Monthly Administrative Charge. The Company has responsibility for the
administration of the Policies and the Separate Account. Administrative
expenses include premium billing and collection, record keeping, processing
death benefit claims, cash surrenders, partial withdrawals, Policy changes,
and reporting and overhead costs, processing applications, and establishing
Policy records. As reimbursement for administrative expenses related to the
maintenance of each Policy and the Separate Account, the Company assesses a
monthly administration charge from each Policy. This charge is $4 per month
for all Policy Months. These charges are guaranteed not to increase while the
Policy is in force. The Company does not anticipate that it will make any
profit on the monthly administrative charge.
The Company may administer the Policy itself, or the Company may
purchase administrative services from such sources (including affiliates) as
may be available. Such services will be acquired on a basis which, in the
Company's sole discretion, affords the best services at the lowest cost. The
Company reserves the right to select a company to provide services which the
Company deems, in its sole discretion, is the best able to perform such
services in a satisfactory manner even though the costs for such services may
be higher than would prevail elsewhere.
Cost of Insurance. The cost of insurance is deducted on each Monthly
Anniversary for the following Policy Month. Because the cost of insurance
depends upon a number of variables, the cost will vary for each Policy Month.
The cost of insurance is determined separately for the initial Face Amount
and for any subsequent increases in Face Amount. The Company will determine
the cost of insurance charge by multiplying the applicable cost of insurance
rate or rates by the net amount at risk (defined below) for each Policy
Month.
The cost of insurance rates are determined at the beginning of each
Policy Year for the initial Face Amount and each increase in Face Amount. The
rates will be based on the Attained Age, duration, rate class, and sex
(except for Policies sold in Montana, (See Unisex Requirements Under Montana
Law on page 31.) of the Insured at issue or the date of an increase in Face
Amount. The cost of insurance rates generally increase as the Insured's
Attained Age increases. The rate class of an Insured also will affect the
cost of insurance rate. For the initial Face Amount, the Company will use the
rate class on the Issue Date. For each increase in Face Amount, other than
one caused by a change in the death benefit option, the Company will use the
rate class applicable to that increase. If the death benefit equals a
percentage of Cash Value, an increase in Cash Value will cause an automatic
increase in the death benefit. The rate class for such increase will be the
same as that used for the most recent increase that required proof of
insurability.
The Company currently places Insureds into a preferred rate class, a
standard rate class, or into rate classes involving a higher mortality risk.
The degree of underwriting imposed may vary from full underwriting, to
simplified issue underwriting, and to guaranteed issue underwriting.
Actual cost of insurance rates may change, and the actual monthly cost
of insurance rates will be determined by the Company based on its
expectations as to future mortality experience. However, the actual cost of
insurance rates will not be greater than the guaranteed cost of insurance
rates set forth in the Policy.
The Company issues Policies on three underwriting bases: a full
underwriting basis, a simplified underwriting basis, and a guaranteed
underwriting basis. Policies receiving a full underwriting basis are issued
in six rate classes: preferred non-smoker, preferred smoker, standard
non-smoker, standard smoker, substandard non-smoker and substandard smoker.
Policies underwritten on a simplified issue basis are issued in standard
smoker/non-smoker rate classes and substandard smoker/non-smoker rate
classes. Policies underwritten on a guaranteed issue basis are only issued
in guaranteed issue smoker and guaranteed issue non-smoker rate classes.
All other things being equal, Policies issued on a
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guaranteed issue basis will have higher cost of insurance rates than
Policies issued on a simplified issue or fully underwritten basis.
Generally, Policies underwritten on a simplified issue basis will have the
same cost of insurance rates as those subject to full underwriting (except
to the extent that a Policy underwritten on a simplified issue basis may
have received a preferred rate class had it been fully underwritten).
Similarly, for Policies issued on the same underwriting basis, all other
things being equal, standard rate classes pay a higher cost of insurance
rate than preferred rate classes and substandard rate classes pay a higher
cost of insurance rate than standard rate classes.
For Policies fully underwritten or underwritten on a simplified issue
basis that receive a standard rate class, the guaranteed cost of insurance
rates are equal to 100% of the rates set forth in the male/female 1980 CSO
Mortality Tables (1980 CSO Table A and 1980 CSO Table G), age nearest
birthday. For Policies issued on a guaranteed issue basis, the guaranteed
cost of insurance rates are equal to 125% of the rates set forth in the
smoker/non-smoker 1980 CSO Mortality Tables (1980 CSO Table SB and 1980 CSO
Table NB), age nearest birthday.
The net amount at risk for a Policy Month is (a) the death benefit at
the beginning of the Policy Month divided by 1.0032737 (which reduces the net
amount at risk, solely for purposes of computing the cost of insurance, by
taking into account assumed monthly earnings at an annual rate of 4%), less
(b) the Cash Value at the beginning of the Policy Month. If there is an
increase in the Face Amount, a net amount at risk will be calculated
separately for the initial Face Amount and for each increase in Face Amount.
If Death Benefit Option A or Death Option C is in effect, for purposes of
determining the net amounts at risk for the initial Face Amount and for each
increase in Face Amount, Cash Value will first be considered a part of the
initial Face Amount. If the Cash Value is greater than the initial Face
Amount, the excess Cash Value will then be considered a part of each increase
in order, starting with the first increase. If Death Benefit Option B is in
effect, the net amount at risk will be determined separately for the initial
Face Amount and for each increase in Face Amount. In calculating the cost of
insurance charges, the cost of insurance rate for a Face Amount is applied to
the net amount at risk for that Face Amount.
Additional Insurance Benefits. The monthly deduction will include
charges for any additional benefits provided by rider. (See General Matters -
Additional Insurance Benefits on page 27.)
Contingent Deferred Sales Charge (CDSC)
For a period of up to ten years after the Issue Date, the Company will
impose a CDSC upon surrender or lapse of the Policy, upon a partial
withdrawal, or upon a pro rata surrender. The amount of the charge assessed
will depend upon a number of factors, including the type of event (a full
surrender, lapse, or partial withdrawal), the amount of any premium payments
made under the Policy prior to the event, and the number of Policy Years
having elapsed since the Policy was issued.
The Contingent Deferred Sales Charge compensates the Company for
expenses relating to the distribution of the Policy, including agents'
commissions, advertising, and the printing of the Prospectus and sales
literature.
Calculation of Charge. If a Policy is surrendered, the charge will be
the Contingent Deferred Sales Charge Percentage multiplied by 4.0% of
premiums paid since issue.
The Contingent Deferred Sales Charge Percentage is shown in the
following table:
<TABLE>
Contingent Deferred Sales Charge Percentage Table
<CAPTION>
If surrender or lapse The following percentage
occurs in the last month of the 4% surrender charge
of Policy Year:<F*> will be payable:<F**>
<S> <C>
1 through 5 100%
6 80%
7 60%
8 40%
9 20%
10 and later 0%
--------------
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<FN>
<F*> In addition, the percentages reduce equally for each Policy Month
during the years shown. For example, during the seventh year, the
percentage reduces equally each month from 80% at the end of the
sixth Year to 60% at the end of the seventh Year.
<F**> For male issue ages 75 through 80 and female issue ages 77 through 80,
the Contingent Deferred Sales Charge Percentage grades to 0% in
less than ten years.
</TABLE>
Charge Assessed Upon Partial Withdrawals or Pro Rata Surrender. The
amount of the Contingent Deferred Sales Charge deducted upon a partial
withdrawal or pro rata surrender will equal a fraction of the charge that
would be deducted if the Policy were surrendered at that time. The fraction
will be determined by dividing the amount of the withdrawal of cash by the
Cash Value before the withdrawal and multiplying the result by the charge.
Immediately after a withdrawal, the Policy's remaining surrender charge will
equal the amount of the surrender charge immediately before the withdrawal
less the amount deducted in connection with the withdrawal.
Reduction of Charges. The Policy is available for purchase by
individuals, corporations, and other institutions. For certain individuals
and certain corporate or other group or sponsored arrangements purchasing one
or more Policies, General American may waive or reduce the amount of the
Sales Charge, Contingent Deferred Sales Charge, monthly administrative
charge, or other charges where the expenses associated with the sale of the
Policy or Policies or the underwriting or other administrative costs
associated with the Policy or Policies are reduced.
Sales, underwriting, or other administrative expenses may be reduced
for reasons such as expected economies resulting from a corporate purchase or
a group or sponsored arrangement; from the amount of the initial premium
payment or payments; or from the amount of projected premium payments.
General American will determine in its discretion if, and in what amount, a
reduction is appropriate. The Company may modify its criteria for
qualification for reduction of charges as experience is gained, subject to
the limitation that such reductions will not be unfairly discriminatory
against the interests of any Owner.
Separate Account Charges
Mortality and Expense Risk Charge. General American will deduct a daily
charge from the Separate Account at the rate of .0019111% of the average net
assets of each Division of the Separate Account which equals an effective
annual rate of .70% of those net assets. This deduction is guaranteed not to
increase while the Policy is in force. General American may realize a profit
from this charge.
The mortality risk assumed by General American is that Insureds may die
sooner than anticipated and that therefore General American will pay an
aggregate amount of death benefits greater than anticipated. The expense risk
assumed is that expenses incurred in issuing and administering the Policy
will exceed the amounts realized from the administrative charges assessed
against the Policy.
Fund Expenses. The value of the net assets of the Separate Account will
reflect the investment management and advisory fees and other expenses
incurred by the underlying investment companies. See the prospectuses for
the respective Funds for a description of investment management and advisory
fees and other expenses incurred by Russell Insurance Funds and the Capital
Company.
No charges are currently made to the Separate Account for Federal,
state, or local taxes that the Company incurs which may be attributable to
such Separate Account or to the Policy. The Company may make such a charge
for any such taxes or economic burden resulting from the application of the
tax laws that it determines to be properly attributable to the Separate
Account or to the Policy. (See Federal Tax Matters on page 28.)
DIVIDENDS
The Policy is a participating Policy which is entitled to a share, if
any, of the divisible surplus of the Company as determined each year and
apportioned to it. This surplus will be distributed as a dividend payable
annually on the January Monthly Anniversary. If the Insured dies after the
dividend has been determined, the Company will pay any unpaid dividend to the
Beneficiary. Because investment results are credited directly through
changes in the Policy's cash value, the Company expects little or no
divisible surplus to be credited to a Policy.
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Dividends under participating policies may be described as refunds of
premiums which adjust the cost of a Policy to the actual level of costs
emerging over time after the issue of the Policies. Both Federal and state
law recognize that dividends are generally considered to be a refund of a
portion of the premium paid and therefore are not treated as income for
Federal or state income tax purposes. However, depending on the dividend
payment option chosen (see below), dividends may have tax consequences to
Owners. Counsel or other competent tax advisors should be consulted for more
complete information.
Dividend illustrations published at the time of issue of a Policy
reflect the actual recent experience of the issuing insurance company with
respect to factors such as interest, mortality, and expenses. State law
generally prohibits a company from projecting or estimating future results.
State law also requires that dividends must be based on surplus, after
setting aside certain necessary amounts, and that such surplus must be
apportioned equitably among participating policies. In other words, in
principle and by statute, dividends must be based on actual experience and
cannot be guaranteed at issue of a Policy.
Each year the Company's actuary analyzes the current and recent past
experience and compares it to the assumptions used in determining the premium
rates at the time of issue. Some of the more important data studied includes
mortality and lapse rates, investment yield in the General Account, and
actual expenses incurred in administering the Policy. Such data is then
allocated to each dividend class, e.g., by year of issue, age and plan. The
actuary then determines what dividends can be equitably apportioned to each
Policy class and makes a recommendation to the Company's Board of Directors
("the Board"). The Board, which has the ultimate authority to declare
dividends, will vote the amount of surplus to be apportioned to each Policy
class, thereby, authorizing the distribution of the annual dividend.
An Owner may choose one of the following dividend options. Dividends
will be credited under the chosen option until the Owner changes it. If the
Owner does not choose an option, the Company will credit the dividend under
Dividend Option B until such time as the Owner requests in writing a
different option.
Dividend Option A: Cash. The amount of the dividend will be paid in
cash.
Dividend Option B: Increase Cash Value. The amount of the dividend will
be added to the Policy's Cash Value on the date of the dividend payment. The
Cash Value will be increased by the amount of the dividend. The dividend will
be allocated to the General Account (if available) and the Divisions of the
Separate Account according to the current allocation of the Net Premium.
THE GENERAL ACCOUNT
Because of exemptive and exclusionary provisions, interests in the
General Account have not been registered under the Securities Act of 1933 and
the General Account has not been registered as an investment company under
the 1940 Act. Accordingly, neither the General Account nor any interests
therein are subject to the provisions of these Acts and, as a result, the
staff of the SEC has not reviewed the disclosure in this Prospectus relating
to the General Account. The disclosure regarding the General Account may,
however, be subject to certain generally applicable provisions of the Federal
securities laws relating to the accuracy and completeness of statements made
in prospectuses.
General Description
The General Account consists of all assets owned by General American
other than those in the Separate Account and other separate accounts. Subject
to applicable law, General American has sole discretion over the investment
of the assets of the General Account.
At issue, General American will determine the maximum percentage of the
non-borrowed Cash Value that may be allocated, either initially or by
transfer, to the General Account. The ability to allocate Net Premiums or to
transfer Cash Value to the General Account may not be made available, in the
Company's discretion, under certain Policies. Further, the option may be
limited with respect to some Policies. The Company may, from time to time,
adjust the extent to which premiums or Cash Value may be allocated to the
General Account (the "maximum allocation percentage"). Such adjustments may
not be uniform as to all Policies. General American may at any time modify
the General Account maximum allocation percent. Subject to this maximum, an
Owner may elect to allocate Net Premiums to the General Account, the Separate
Account, or both. Subject to this maximum, the Owner may also transfer Cash
Value from the Divisions of the Separate Account to the General Account, or
from the General Account to the Divisions of the Separate Account. The
allocation of Net Premiums or the transfer of Cash Value to the General
Account does not entitle an Owner
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to share in the investment experience of the General Account. Instead,
General American guarantees that Cash Value allocated to the General Account
will accrue interest at a rate of at least 4%, compounded annually,
independent of the actual investment experience of the General Account.
The Loan Account is part of the General Account.
The Policy
This Prospectus describes a flexible premium variable life insurance
policy. This Prospectus is generally intended to serve as a disclosure
document only for the aspects of the Policy relating to the Separate Account.
For complete details regarding the General Account, see the Policy itself.
General Account Benefits
If the Owner allocates all Net Premiums only to the General Account and
makes no transfers, partial withdrawals, pro rata surrenders, or Policy
Loans, the entire investment risk will be borne by General American, and
General American guarantees that it will pay at least a minimum specified
death benefit. The Owner may select Death Benefit Option A, B or C under the
Policy and may change the Policy's Face Amount subject to satisfactory
evidence of insurability.
General Account Cash Value
Net Premiums allocated to the General Account are credited to the Cash
Value. General American bears the full investment risk for these amounts and
guarantees that interest will be credited to each Owner's Cash Value in the
General Account at a rate of no less than 4% per year, compounded annually.
General American may, AT ITS SOLE DISCRETION, credit a higher rate of
interest, although it is not obligated to credit interest in excess of 4% per
year, and might not do so. ANY INTEREST CREDITED ON THE POLICY'S CASH VALUE
IN THE GENERAL ACCOUNT IN EXCESS OF THE GUARANTEED MINIMUM RATE OF 4% PER
YEAR WILL BE DETERMINED IN THE SOLE DISCRETION OF GENERAL AMERICAN. THE
POLICY OWNER ASSUMES THE RISK THAT INTEREST CREDITED MAY NOT EXCEED THE
GUARANTEED MINIMUM RATE OF 4% PER YEAR. If excess interest is credited, a
different rate of interest may be applied to the Cash Value in the Loan
Account. The Cash Value in the General Account will be calculated on each
Monthly Anniversary of the Policy.
General American guarantees that, on each Valuation Date, the Cash
Value in the General Account will be the amount of the Net Premiums allocated
or Cash Value transferred to the General Account, plus interest at the rate
of 4% per year, plus any excess interest which General American credits and
any amounts transferred into the General Account, less the sum of all Policy
charges allocable to the General Account and any amounts deducted from the
General Account in connection with partial withdrawals, pro rata surrenders,
surrender charges or transfers to the Separate Account.
Transfers, Surrenders, Partial Withdrawals and Policy Loans
After the first Policy Year and prior to the Maturity Date, a portion
of Cash Value may be withdrawn from the General Account or transferred from
the General Account to the Separate Account. A maximum total of four partial
withdrawals and transfers from the General Account is permitted in a Policy
Year. A partial withdrawal, net of any applicable surrender charges, and any
transfer must be at least $500 or, the Policy's entire Cash Value in the
General Account if less than $500. No amount may be withdrawn from the
General Account that would result in there being insufficient Cash Value to
meet any surrender charges that would be payable immediately following the
withdrawal upon the surrender of the remaining Cash Value of the Policy. The
total amount of transfers and withdrawals in a Policy Year may not exceed a
Maximum Amount equal to the greater of (a) 25% of a Policy's Cash Surrender
Value in the General Account at the beginning of the Policy Year, (b) $5,000,
or (c) the previous Policy Year's Maximum Amount (not to exceed the total
Cash Surrender Value of the Policy).
Transfers to the General Account are limited by the maximum allocation
percentage (described below) in effect for a Policy at the time a transfer
request is made.
Policy Loans may also be made from the Policy's Cash Value in the
General Account.
Loans and withdrawals from the General Account may have Federal income
tax consequences. (See Federal Tax Matters on page 28.)
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No transfer charge currently is imposed on transfers to or from the
General Account. However, such a charge may be imposed in the future.
General American may revoke or modify the privilege of transferring amounts
to or from the General Account at any time. Partial withdrawals and pro rata
surrenders will result in the imposition of the applicable surrender charge.
Transfers, surrenders, partial withdrawals and pro rata surrenders
payable from the General Account and the payment of Policy Loans allocated to
the General Account may, subject to certain limitations, be delayed for up to
six months. However, if payment is deferred for 30 days or more, General
American will pay interest at the rate of 2.5% per year for the period of the
deferment. Amounts from the General Account used to pay premiums on policies
with General American will not be delayed.
GENERAL MATTERS
Postponement of Payments from the Separate Account
The Company usually pays amounts payable on partial withdrawal, pro
rata surrender, surrender, or Policy Loan allocated to the Separate Account
Divisions within seven days after written notice is received. Payment of any
amount payable from the Divisions of the Separate Account upon surrender,
partial withdrawals, pro rata surrender, death of Insured, or the Maturity
Date, as well as payments of a Policy Loan and transfers, may be postponed
whenever: (1) the New York Stock Exchange is closed other than customary
weekend and holiday closings, or trading on the New York Stock Exchange is
restricted as determined by the SEC; (2) the SEC by order permits
postponement for the protection of Owners; or (3) an emergency exists, as
determined by the SEC, as a result of which disposal of securities is not
reasonably practicable or it is not reasonably practicable to determine the
value of the Separate Account's net assets. The Company may defer payment of
the portion of any Policy Loan from the General Account for not more than six
months.
Payments under the Policy of any amounts derived from premiums paid by
check may be delayed until the Owner's check has cleared the bank upon which
it was drawn.
The Contract
The Policy, the attached application, any riders, endorsements, any
application for an increase in Face Amount, and any application for
reinstatement constitute the entire contract. All statements made by the
Insured in the application and any supplemental applications can be used to
contest a claim or the validity of the Policy. Any change to the Policy must
be in writing and approved by the President, a Vice President, or the
Secretary of the Company. No agent has the authority to alter or modify any
of the terms, conditions, or agreements of the Policy or to waive any of its
provisions.
Control of Policy
The Insured is the Owner of the Policy unless another person or entity
is shown as the Owner in the application. Ownership may be changed, however,
as described below. The Owner is entitled to all rights provided by the
Policy, prior to its Maturity Date. After the Maturity Date, the Owner cannot
change the payee nor the mode of payment, unless otherwise provided in the
Policy. Any person whose rights of ownership depend upon some future event
does not possess any present rights of ownership. If there is more than one
Owner at a given time, all Owners must exercise the rights of ownership by
joint action. If the Owner dies, and the Owner is not the Insured, the
Owner's interest in the Policy becomes the property of his or her estate
unless otherwise provided. Unless otherwise provided, the Policy is jointly
owned by all Owners named in the Policy or by the survivors of those joint
Owners. Unless otherwise stated in the Policy, the final Owner is the estate
of the last joint Owner to die. The Company may rely on the written request
of any trustee of a trust which is the Owner of the Policy, and the Company
is not responsible for the proper administration of any such trust.
Beneficiary
The Beneficiary(ies) is (are) the person(s) specified in the
application or by later designation. Unless otherwise stated in the Policy,
the Beneficiary has no rights in a Policy before the death of the Insured. If
there is more than one Beneficiary at the death of the Insured, each
Beneficiary will receive equal payments unless otherwise provided by the
Owner. If no Beneficiary is living at the death of the Insured, the proceeds
will be payable to the Owner or, if the Owner is not living, to the Owner's
estate.
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The Company permits the designation of various types of trusts as
Beneficiary(ies), including trusts for minor beneficiaries, trusts under a
will, and trusts under a separate written agreement. An Owner is also
permitted to designate several types of beneficiaries, including business
beneficiaries.
Change of Owner or Beneficiary
The Owner may change the ownership and/or Beneficiary designation by
written request in a form acceptable to the Company at any time during the
Insured's lifetime subject to any restrictions stated in the Policy and this
Prospectus. The Company may require that the Policy be returned for
endorsement of any change. If acceptable to us, the change will take effect
as of the date the request is signed, whether or not the Insured is living
when the request is received at the Company's Home Office. The Company is not
liable for any payment made or action taken before the Company received the
written request for change. If the Owner is also a Beneficiary of the Policy
at the time of the Insured's death, the Owner may, within sixty days of the
Insured's death, designate another person to receive the Policy proceeds. Any
change will be subject to any assignment of the Policy or any other legal
restrictions.
Policy Changes
The Company reserves the right to limit the number of changes to a
Policy to one per Policy Year and to restrict changes in the first Policy
Year. Currently, only one change is permitted during any Policy Year and no
change may be made during the first Policy Year. For this purpose, changes
include increases or decreases in Face Amount and changes in the death
benefit option. No change will be permitted that would result in a Policy not
satisfying the definition of life insurance under the Internal Revenue Code
of 1986 or any applicable successor provision thereto.
Conformity with Statutes
If any provision in a Policy is in conflict with the laws of the state
governing the Policy, the provision will be deemed to be amended to conform
to such laws. In addition, the Company reserves the right to change the
Policy if it determines that a change is necessary to cause this Policy to
comply with, or give the Owner the benefit of any Federal or state statute,
rule, or regulation, including, but not limited to, requirements of the
Internal Revenue Code, or its regulations or published rulings.
Claims of Creditors
To the extent permitted by law, neither the Policy nor any payment
under it will be subject to the claims of creditors or to any legal process.
Incontestability
The Policy is incontestable after it has been in force for two years
from the Issue Date during the lifetime of the Insured. An increase in Face
Amount or addition of a rider after the Issue Date is incontestable after
such increase or addition has been in force for two years from its effective
date during the lifetime of the Insured. Any reinstatement of a Policy is
incontestable only after it has been in force during the lifetime of the
Insured for two years after the effective date of the reinstatement.
Assignment
The Company will be bound by an assignment of a Policy only if: (a) the
assignment is in writing; (b) the original assignment instrument or a
certified copy thereof is filed with the Company at its Home Office; and (c)
the Company returns an acknowledged copy of the assignment instrument to the
Owner. The Company is not responsible for determining the validity of any
assignment. Payment of Policy proceeds is subject to the rights of any
assignee of record. If a claim is based on an assignment, the Company may
require proof of the interest of the claimant. A valid assignment will take
precedence over the claim of any Beneficiary.
Suicide
Suicide within two years of the Issue Date is not covered by the
Policy. If the Insured dies by suicide, while sane or insane, within two
years from the Issue Date (or within the maximum period permitted by the laws
of the state in which the Policy was delivered, if less than two years), the
amount payable will be limited to premiums paid, less any partial
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<PAGE> 143
withdrawals and outstanding Indebtedness subject to certain limitations, if
the Insured, while sane or insane, dies by suicide within two years after
the effective date of an increase in Face Amount, the death benefit for that
increase will be limited to the amount of the monthly deductions for the
increase.
If the Insured is a Missouri citizen when the Policy is issued, this
provision does not apply on the Issue Date of the Policy, or on the effective
date of any increase in Face Amount, unless the Insured intended suicide when
the Policy, or the increase in Face Amount, was applied for.
Misstatement of Age or Sex and Corrections
If the age or sex (except any Policies sold in Montana; see Unisex
Requirements Under Montana Law) of the Insured has been misstated in the
application, the amount of the death benefit will be that which the most
recent cost of insurance charge would have purchased for the correct age and
sex.
Any payment or Policy changes made by the Company in good faith,
relying on its records or evidence supplied with respect to such payment,
will fully discharge the Company's duty. The Company reserves the right to
correct any errors in the Policy.
Change in Rate Class
Sixty days prior to the Policy Anniversary on which the Insured attains
age 20, a letter will be sent to the Owner notifying the Owner of the
opportunity to apply for a change in the Insured's Rate Class from Smoker to
Non-Smoker. Upon receipt of the forms requested for a Non-Smoker risk
classification and proof satisfactory to the Company, the Rate Class will be
Non-Smoker. If the Owner does not apply for a Rate Class change, the Rate
Class will remain Smoker.
Additional Insurance Benefits
Subject to certain requirements, one or more of the following
additional insurance benefits may be added to a Policy by rider. The
descriptions below are intended to be general; the terms of the Policy riders
providing the additional benefits may vary from state to state, and the
Policy should be consulted. The cost of any additional insurance benefits
which require additional charges will be deducted as part of the monthly
deduction from the Policy's Cash Value. (See Charges and Deductions - Monthly
Deduction on page 20.) Certain restrictions may apply and are described in
the applicable rider. An insurance agent authorized to sell the Policy can
describe these extra benefits further. Samples of the provisions are
available from General American upon written request.
Waiver of Monthly Deduction Rider. Provides for the waiver of the
monthly deductions while the Insured is totally disabled, subject to certain
limitations described in the rider. The Insured must have become disabled
after age 5 and before age 65.
Waiver of Specified Premium Rider. Provides for crediting the Policy's
Cash Value with a specified monthly premium while the Insured is totally
disabled. The monthly premium selected at issue is not guaranteed to keep the
Policy in force. The Insured must have become disabled after age 5 and
before age 65.
Increasing Benefit Rider. Allows the Owner to increase the Face Amount
of the Policy without evidence of insurability. The increase is made on each
Policy Anniversary.
Records and Reports
The Company will maintain all records relating to the Separate Account
and will mail to the Owner once each Policy Year, at the last known address
of record, a report which shows the current Policy values, premiums paid,
deductions made since the last report, and any outstanding Policy Loans. The
Owner will also be sent a periodic report for Russell Insurance Funds and the
Capital Company and a list of the securities held in each Fund. Receipt of
premium payments, transfers, partial withdrawals, pro rata surrenders, Policy
Loans, loan repayments, changes in death benefit options, increases or
decreases in Face Amount, surrenders and reinstatements will be confirmed
promptly following each transaction.
An Owner may request in writing a projection of illustrated future Cash
Surrender Values and death benefits. This projection will be furnished by the
Company for a nominal fee which will not exceed $25.
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DISTRIBUTION OF THE POLICY
The Policy will be sold by individuals who, in addition to being
licensed as life insurance agents for the Company, are also registered
representatives of Walnut Street Securities, Inc. ("Walnut Street"), the
principal underwriter of the Policy, or of broker-dealers who have entered
into written sales agreements with Walnut Street. Walnut Street was
incorporated under the laws of Missouri in 1984 and is a wholly-owned
subsidiary of General American Holding Company, which is, in turn, a
wholly-owned subsidiary of the Company. Walnut Street is registered with the
SEC under the Securities Exchange Act of 1934 as a broker-dealer and is a
member of the National Association of Securities Dealers, Inc. No director
or officer of Walnut Street owns any units in the Separate Account.
Writing agents will receive commissions based on a commission schedule
and rules. The maximum agent first-year commissions equal 7.50% of target
premiums paid in Policy Year 1. In renewal years, the maximum agent
commissions equal 4.0% of premiums paid in years 2 through 10. A maximum
2.50% of premium service fee is paid after Policy year 10. For Policy years
after Policy Year 1, a maximum commission of .20% of the average monthly Cash
Value for each Policy Year is paid. These are maximum commissions, and
reductions may be possible under the circumstances outlined in the section
entitled Reduction of Charges. General Agents receive compensation which may
be in part based on the level of agent commissions in their agencies. The
general agent commission schedules and rules differ for different types of
agency contracts. Walnut Street receives no administrative fees, management
fees, or other fees from sales of the Policy.
FEDERAL TAX MATTERS
Introduction
The following summary provides a general description of the Federal
income tax considerations associated with the Policy and does not purport to
be complete or to cover all situations. This discussion is not intended as
tax advice. Counsel or other competent tax advisors should be consulted for
more complete information. This discussion is based upon General American's
understanding of the present Federal income tax laws as they are currently
interpreted by the Internal Revenue Service. No representation is made as to
the likelihood of continuation of the present Federal income tax laws or of
the current interpretations by the Internal Revenue Service.
Tax Status of the Policy
Section 7702 of the Internal Revenue Code of 1986, as amended (the
"Code") includes a definition of a life insurance contract for Federal tax
purposes. The Secretary of the Treasury (the "Treasury") issued proposed
regulations which specify what will be considered reasonable mortality
charges under Section 7702. Guidance as to how Section 7702 is to be applied
is, however, limited. If a Policy were determined not to be a life insurance
contract for purposes of Section 7702, such Policy would not provide most of
the tax advantages normally provided by a life insurance policy.
With respect to a Policy issued on a basis of a standard premium class
or on a guaranteed or simplified issue basis, while there is some uncertainty
due to the limited guidance under Section 7702, the Company believes that
such a Policy should meet the Section 7702 definition of a life insurance
contract. However, with respect to a Policy issued on a substandard basis
(i.e., a premium class involving higher than standard mortality risk), it is
not clear whether such a Policy would satisfy Section 7702, particularly if
the Owner pays the full amount of premiums permitted under the Policy.
If it is subsequently determined that a Policy does not satisfy Section
7702, the Company will take whatever steps are appropriate and necessary to
attempt to cause such a Policy to comply with Section 7702, including
possibly refunding any premiums paid that exceed the limitations allowable
under Section 7702 (together with interest or other earnings on any such
premiums refunded as required by law). For these reasons, the Company
reserves the right to modify the Policy as necessary to attempt to qualify it
as a life insurance contract under Section 7702.
Section 817(h) of the Code authorizes the Treasury to set standards by
regulation or otherwise for the investments of the Separate Account to be
"adequately diversified" in order for the Policy to be treated as a life
insurance contract for Federal tax purposes. The Separate Account intends to
comply with the diversification requirements prescribed by the Treasury in
Regulation Section 1.817-5, which affect how assets may be invested. Although
General American does not control Russell Insurance Funds or the Capital
Company it has entered into agreements, which require these investment
companies to be operated in compliance with the requirements prescribed by
the Treasury.
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The IRS has stated in published rulings that a variable contract owner
will be considered the owner of separate account assets, for federal income
tax purposes, if the contract owner possesses incidents of ownership in those
assets, such as the ability to exercise investment control over the assets.
If that were to be determined to be the case, income and gains from the
separate account assets would be includible in the variable contract owner's
gross income. The Treasury Department has also announced, in connection with
the issuance of regulations concerning diversification, that those
regulations "do not provide guidance concerning the circumstances in which
investor control of the investments of a segregated asset account may cause
the investor (i.e., the Owner), rather than the insurance company, to be
treated as the owner of the assets in the account." This announcement also
stated that guidance would be issued by way of regulations or rulings on the
"extent to which policyholders may direct their investments to particular
subaccounts without being treated as owners of the underlying assets."
The ownership rights under the Policy are different in certain respects
from those described by the IRS in rulings in which it was determined that
policy owners were not owners of separate account assets. For example, the
Owner has additional flexibility in allocating Premium payments and Policy
Values. These differences could result in an Owner being treated as the
owner of a pro rata portion of the assets of the Separate Account. In
addition, the Company does not know what standards will be set forth, if any,
in the regulations or rulings which the Treasury Department has stated it
expects to issue. The Company therefore reserves the right to modify the
Policy as necessary to attempt to prevent an Owner from being considered the
owner of a pro rata share of the assets of the Separate Account.
The following discussion assumes that the Policy will qualify as a life
insurance contract for Federal income tax purposes.
l. Tax Treatment of Policy Benefits. In general, the Company believes
that the proceeds and Cash Value increases of a Policy should be treated in a
manner consistent with a fixed-benefit life insurance policy for Federal
income tax purposes. Thus, the death benefit under the Policy should be
excludable from the gross income of the Beneficiary under Section 101(a)(1)
of the Code, unless a transfer for value (generally a sale of the policy) has
occurred.
Many changes or transactions involving a Policy may have tax
consequences, depending on the circumstances. Such changes include, but are
not limited to, the exchange of the Policy, a change of the Policy's Face
Amount, a Policy Loan, an additional premium payment, a Policy lapse with an
outstanding Policy Loan, a partial withdrawal, or a surrender of the Policy.
In addition, Federal estate and state and local estate, inheritance, and
other tax consequences of ownership or receipt of Policy proceeds depend upon
the circumstances of each Owner or Beneficiary. A competent tax advisor
should be consulted for further information.
A Policy may also be used in various arrangements, including
non-qualified deferred compensation or salary continuation plans, split
dollar insurance plans, executive bonus plans, retiree medical benefit plans
and others. The tax consequences of such plans may vary depending on the
particular facts and circumstances of each individual arrangement.
Therefore, if you are contemplating the use of a Policy in any arrangement
the value of which depends in part on its tax consequences, you should be
sure to consult a qualified tax advisor regarding the tax attributes of the
particular arrangement.
Generally, the Owner will not be deemed to be in constructive receipt
of the Policy's Cash Value, including increments thereof, under the Policy
until there is a distribution. The tax consequences of distributions from,
and Policy Loans taken from or secured by, a Policy depend upon whether the
Policy is classified as a "modified endowment contract." However, upon a
complete surrender or lapse of any Policy, or when benefits are paid at such
a Policy's maturity date, if the amount received plus the amount of
outstanding Indebtedness exceeds the total investment in the Policy, the
excess will generally be treated as ordinary income subject to tax.
2. Modified Endowment Contracts. A policy may be treated as a modified
endowment contract depending upon the amount of premiums paid in relation to
the death benefit provided under such Policy. The premium limitation rules
for determining whether a Policy is a modified endowment contract are
extremely complex. In general, however, 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.
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In addition, if a Policy is "materially changed" it may cause such
Policy to be treated as a modified endowment contract. The material change
rules for determining whether a Policy is a modified endowment contract are
also extremely complex. In general, however, the determination of whether a
Policy will be a modified endowment contract after a material change
generally depends upon the relationship among the death benefit at the time
of such change, the Cash Value at the time of the change and the additional
premiums paid in the seven Policy Years starting with the date on which the
material change occurs.
Moreover, a life insurance contract received in exchange for a life
insurance contract classified as a modified endowment contract will also be
treated as a modified endowment contract. A reduction in a Policy's benefits
may also cause such Policy to become a modified endowment contract.
Due to the Policy's flexibility, classification of a Policy as a
modified endowment contract will depend upon the circumstances of each
Policy. The Company has, however, adopted administrative steps designed to
protect an Owner against the possibility that the Policy might become a
modified endowment contract. The Company believes the safeguards are adequate
for most situations, but it cannot provide complete assurance that a Policy
will not be classified as a modified endowment contract. At the time a
premium is credited which would cause the Policy to become a modified
endowment contract, the Company will notify the Owner that unless a refund of
the excess premium is requested by the Owner, the Policy will become a
modified endowment contract. The Owner will have 30 days after receiving such
notification to request the refund. The excess premium paid will be returned
to the Owner upon receipt by the Company of the refund request. The amount to
be refunded will be deducted from the Policy Cash Value in the Divisions of
the Separate Account and in the General Account in the same proportion as the
premium payment was allocated to such Divisions.
Accordingly, a prospective Owner should contact a competent tax advisor
before purchasing a Policy to determine the circumstances under which the
Policy would be a modified endowment contract. In addition, an Owner should
contact a competent tax advisor before paying any additional premiums or
making any other change to, including an exchange of, a Policy to determine
whether such premium or change would cause the Policy (or the new Policy in
the case of an exchange) to be treated as a modified endowment contract.
3. Distributions from Policies Classified as Modified Endowment
Contract. Policies classified as modified endowment contracts will be subject
to the following tax rules: First, all distributions, including distributions
upon surrender and benefits paid at maturity, from such a Policy are treated
as ordinary income subject to tax up to the amount equal to the excess (if
any) of the Cash Value immediately before the distribution over the
investment in the Policy (described below) at such time. Second, Policy Loans
taken from, or secured by, such a Policy, as well as due but unpaid interest
thereon, are treated as distributions from such a Policy and taxed
accordingly. Third, a 10 percent additional income tax is imposed on the
portion of any distribution from, or Policy Loan taken from or secured by,
such a Policy that (a) is included in income, except where the distribution
or Policy Loan is made on or after the Owner attains age 59 1/2, (b) is
attributable to the Owner's becoming disabled, or (c) is part of a series of
substantially equal periodic payments 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.
4. Distributions From Policies Not Classified as Modified Endowment
Contract. Distributions from Policies not classified as modified endowment
contracts are generally treated as first recovering the investment in the
Policy (described below) and then, only after the return of all such
investment in the Policy, as distributing taxable income. An exception to
this general rule occurs in the case of a decrease in the Policy's death
benefit (possibly including a partial withdrawal) or any other change that
reduces benefits under the Policy in the first 15 years after the Policy is
issued and that results in cash distribution to the Owner in order for the
Policy to continue complying with the Section 7702 definitional limits. 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.
Policy Loans from, or secured by, a Policy that is not a modified
endowment contract are not treated as distributions. Instead, such loans are
treated as indebtedness of the Owner.
Upon a complete surrender or lapse of a Policy that is not a modified
endowment contract, or when benefits are paid at such a Policy's maturity
date, if the amount received plus the amount of indebtedness exceeds the
total investment in the Policy, the excess will generally be treated as
ordinary income subject to tax.
Neither distributions (including distributions upon surrender or lapse)
nor Policy Loans from, or secured by, a Policy that is not a modified
endowment contract are subject to the 10 percent additional income tax.
30
<PAGE> 147
If a Policy which is not a modified endowment contract subsequently
becomes a modified endowment contract, then any distribution made from the
Policy within two years prior to the date of such change in status may become
taxable.
5. Policy Loan Interest. Generally, interest paid on any loan under a
life insurance Policy owned by an individual is not deductible. In addition,
interest on any loan under a life insurance Policy owned by a business
taxpayer on the life of any individual who is an officer of or is financially
interested in the business carried on by that taxpayer is deductible only
under certain very limited circumstances. An Owner should consult a
competent tax advisor before deducting any loan interest.
6. Investment in the Policy. 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 Policy 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 Policy 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.
7. Multiple Policies. All modified endowment contracts that are issued
by the Company (or its affiliates) to the same Owner during any calendar year
are treated as one modified endowment contract for purposes of determining
the amount includible in gross income under Section 72(e) of the Code.
8. Possible Charge for Taxes. At the present time, the Company makes
no charge to the Separate Account for any Federal, state, or local taxes (as
opposed to Premium Tax Charges which are deducted from premium payments) that
it incurs which may be attributable to such Separate Account 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.
UNISEX REQUIREMENTS UNDER MONTANA LAW
The State of Montana generally prohibits the use of actuarial tables
that distinguish between men and women in determining premiums and Policy
benefits for policies issued on the lives of their residents. Therefore, all
Policies offered by this Prospectus to insure residents of Montana will have
premiums and benefits which are based on actuarial tables that do not
differentiate on the basis of sex.
SAFEKEEPING OF THE SEPARATE ACCOUNT'S ASSETS
General American holds the assets of the Separate Account in a
custodial account in its name at the Bank of New York. The Company maintains
records of all purchases and redemptions of applicable Fund shares by each of
the Divisions. Additional protection for the assets of the Separate Account
is afforded by a blanket fidelity bond issued by Lloyd's Underwriters in the
amount of five million dollars, covering all officers and employees of the
Company who have access to the assets of the Separate Account.
VOTING RIGHTS
Based on its understanding of current applicable legal requirements,
the Company will vote the shares of the Funds held in the Separate Account at
regular and special shareholder meetings of the mutual funds in accordance
with the instructions received from persons having voting interests in the
corresponding Divisions of the Separate Account. If, however, the 1940 Act or
any regulation thereunder should be amended or if the present interpretation
thereof should change, and as a result the Company determines that it is
permitted to vote shares of the Fund in its own right, it may elect to do so.
No voting privileges apply to the Policies with respect to Cash Value removed
from the Separate Account as a result of a Policy Loan.
The number of votes which an Owner has the right to instruct will be
calculated separately for each Division. Voting rights reflect the dollar
value of the total number of units of each Division of the Separate Account
credited to the Owner at the record date, rather than the number of units
alone. Fractional shares will be counted. The number of votes of the Fund
which the Owner has the right to instruct will be determined as of the date
coincident with the date established by that Fund for determining
shareholders eligible. Voting instructions will be solicited by written
communications prior to such meeting in accordance with procedures
established by the mutual funds.
31
<PAGE> 148
The company will vote shares of a Fund for which no timely instructions
are received in proportion to the voting instructions which are received with
respect to that Fund. The Company will also vote any shares of the Funds
which are not attributable to Policies in the same proportion.
Each person having a voting interest in a Division will receive any
proxy material, reports, and other materials relating to the appropriate
Fund.
Disregard of Voting Instructions. The Company may, when required by
state insurance regulatory authorities, disregard voting instructions if the
instructions require that the shares be voted so as to cause a change in the
subclassification or investment objective of the Fund or to approve or
disapprove an investment advisory contract for a Fund. In addition, the
Company itself may disregard voting instructions in favor of changes
initiated by an Owner in the investment policy or the investment advisor or
sub-advisor of a Fund if the Company reasonably disapproves of such changes.
A proposed change would be disapproved only if the proposed change is
contrary to state law or prohibited by state regulatory authorities, or the
Company determined that the change would have an adverse effect on its
General Account in that the proposed investment policy for a Fund may result
in overly speculative or unsound investments. If the Company disregards
voting instructions, a summary of that action and the reasons for such action
will be included in the next annual report to Owners.
STATE REGULATION OF THE COMPANY
The Company, a mutual life insurance company organized under the laws
of Missouri, and the Separate Account are subject to regulation by the
Missouri Department of Insurance. An annual statement is filed with the
Director of Insurance on or before March 1st of each year covering the
operations and reporting on the financial condition of the Company as of
December 31 of the preceding year. Periodically, the Director of Insurance
examines the liabilities and reserves of the Company and the Separate Account
and certifies their adequacy, and a full examination of the Company's
operations is conducted by the National Association of Insurance
Commissioners at least once every three years.
In addition, the Company is subject to the insurance laws and
regulations of other states within which it is licensed or may become
licensed to operate. Generally, the insurance departments of other states
apply the laws of the state of domicile in determining permissible
investments.
32
<PAGE> 149
<TABLE>
MANAGEMENT OF THE COMPANY
<CAPTION>
Principal Occupation(s)
Name During Past Five Years<F*>
---- --------------------------
Principal Officers <F**>
- ------------------------
<C> <S>
Richard A. Liddy Chairman, President and CEO, 1/95-present;
Chairman of the Executive Committee,
5/92-present. Formerly President and CEO,
5/92-1/95; President and Chief Operating
Officer, 5/88-5/92.
Robert J. Banstetter, Sr. Vice President, General Counsel and Secretary,
2/91-present. Formerly Vice President and
General Counsel, 1/83-2/91.
John W. Barber Vice President and Controller, 12/84-present.
O'Neil P. Boudreaux Vice President-Sales and Marketing, 10/96-
present. Formerly Vice President-Group Field
Accounts, 4/87-10/96.
E. Thomas Hughes Corporate Actuary and Treasurer, 10/94-present.
Formerly Executive Vice President-Group
Pensions, 3/90-10/94
Michael P. Ingrassia Vice President-Group Executive Accounts, 3/92-
present. Formerly Vice President-Group
Operations, 5/84-2/92.
George T. Lacy Vice President-Group Field Sales, 6/83-present.
Barbara L. Snyder Vice President-Product Division, 4/95-present.
Formerly Vice President and Chief Actuary,
American Bankers Insurance Company, Miami, FL.
Warren J. Winer Executive Vice President-Group Life and Health,
8/95-present. Formerly Managing Director,
William M. Mercer, Inc., 7/93-8/95; President
and Chief Operating Officer, W. F. Corroon,
1986-7/93.
Bernard H. Wolzenski Executive Vice President-Individual Insurance,
10/91-present. Formerly Vice President-Life
Product Management, 5/86-10/91.
A. Greig Woodring President and Chief Executive Officer,
Reinsurance Group of America, 12/92-present.
Executive Vice President-Reinsurance,
3/90-present.
<FN>
<F*> All positions listed are with General American unless otherwise
indicated.
<F**> The principal business address of Messrs. Banstetter, Hughes, and Liddy
is General American Life Insurance Company, 700 Market Street, St.
Louis, Missouri 63101. The principal business address for Messrs.
Barber, Boudreaux, Ingrassia, Lacy, Winer and Wolzenski and for
Ms. Snyder is 13045 Tesson Ferry Road, St. Louis, Missouri 63128.
The principal business address for Mr. Woodring is 660 Mason Ridge
Center Drive, Suite 300, St. Louis, Missouri 63141.
</TABLE>
33
<PAGE> 150
<TABLE>
<CAPTION>
Name Principal Occupation(s)
---- During Past Five Years<F*>
--------------------------
Directors
- ---------
<C> <S>
August A. Busch III Chairman of the Board and President,
Anheuser-Busch Companies, Inc. Anheuser-Busch Companies, Inc., (beer
One Busch Place business).
St. Louis, Missouri 63118
William E. Cornelius Retired Chairman and Chief Executive
Union Electric Company Officer, Union Electric Company (electric
P.O. Box 149 utility business). Prior to 1993,
St. Louis, Missouri 63166 Chairman and Chief Executive Officer.
John C. Danforth Partner. Formerly, U. S. Senator, State
Bryan Cave of Missouri.
One Metropolitan Square, Suite 3600
St. Louis, Missouri 63102
Bernard A. Edison Past President, Edison Brothers Stores,
Edison Brothers Stores, Inc. Inc. (retail specialty stores).
P.O. Box 14020
St. Louis, Missouri 63178
Richard A. Liddy Chairman, President and CEO, General
General American Life Insurance Co. American
700 Market Street
St. Louis, MO 63101
William E. Maritz Chairman and Chief Executive Officer,
Maritz, Inc. Maritz, Inc. (motivation, travel,
1375 North Highway Drive communications, training and marketing
Fenton, Missouri 63099 research business).
Craig D. Schnuck Chairman and Chief Executive Officer,
Schnuck Markets, Inc. Schnuck Markets, Inc. (retail supermarket
11420 Lackland Road chain). Prior to 1991, President and
P.O. Box 46928 Chief Executive Officer
St. Louis, Missouri 63146
William P. Stiritz Chairman, Chief Executive Officer and
Ralston Purina Company President, Ralston Purina Company (pet
Checkerboard Square food, batteries, and bread business);
St. Louis, Missouri 63164 Chairman, Ralcorp Holdings, Inc.
(ready-to-eat cereal, baby food, ski
resorts).
Andrew C. Taylor Chief Executive Officer and President,
Enterprise Rent-A-Car Enterprise Rent-A-Car (car rental). Prior
600 Corporate Park Drive to May, 1991, President.
St. Louis, Missouri 63105
34
<PAGE> 151
<CAPTION>
Name Principal Occupation(s)
---- During Past Five Years<F*>
--------------------------
Directors (continued)
- ---------------------
<C> <S>
H. Edwin Trusheim Retired Chairman and Chief Executive
General American Life Insurance Co. Officer
P.O. Box 396
St. Louis, MO 63166
Robert L. Virgil Principal, Edward Jones (investments).
Edward Jones Prior to 1993, Dean, the John M. Olin
12555 Manchester School of Business, Washington
St. Louis, Missouri 63131-3729 University (business education)
Virginia V. Weldon, M.D. Senior Vice President, Public Policy,
Monsanto Company Monsanto Company (chemicals diversified
800 North Lindbergh industry, pharmaceuticals, life science
St. Louis, Missouri 63167 products, and food ingredients
business). Prior to 1993, Vice
President, Public Policy.
Ted C. Wetterau President, Wetterau Associates, L.L.C.
Wetterau Associates, L.L.C. Retired Chairman and Chief Executive
7700 Bonhomme, Suite 750 Officer, Wetterau Incorporated (retail
St. Louis, Missouri 63105 and wholesale grocery, manufacturing
business).
<FN>
<F*> All positions listed are with General American unless otherwise indicated.
</TABLE>
35
<PAGE> 152
LEGAL MATTERS
All matters of Missouri law pertaining to the Policy, including the
validity of the Policy and General American's right to issue the Policy under
Missouri insurance law, have been passed upon by Robert J. Banstetter, Vice
President, General Counsel, and Secretary of General American.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Separate Account is a party
or to which the assets of the Separate Account are subject. General American
is not involved in any litigation that is of material importance in relation
to its total assets or that relates to the Separate Account.
EXPERTS
The audited financial statements of General American and the Separate
Account have been included in this Prospectus in reliance on the reports of
KPMG Peat Marwick LLP, independent certified public accountants, and on the
authority of said firm as experts in accounting and auditing.
The report of KPMG Peat Marwick LLP covering the December 31, 1996,
financial statements of General American, refers to the adoption of Statement
of Financial Accounting Standards No. 120, Accounting and Reporting by Mutual
Life Insurance Enterprises and by Insurance Enterprises for Certain Long-
Duration Participating Contracts.
Actuarial matters included in this Prospectus have been examined by
Shashikant Bhave, FSA, MAAA, Executive Director and Associate Actuary, as
stated in the opinion filed as an exhibit to the registration statement.
ADDITIONAL INFORMATION
A registration statement has been filed with the Securities and
Exchange Commission, under the Securities Act of 1933, as amended, with
respect to the Policy offered hereby. This Prospectus does not contain all
the information set forth in the registration statement and the amendments
and exhibits to the registration statement, to all of which reference is made
for further information concerning the Separate Account, General American and
the Policy offered hereby. Statements contained in this Prospectus as to the
contents of the Policy and other legal instruments are summaries. For a
complete statement of the terms thereof reference is made to such instruments
as filed.
FINANCIAL STATEMENTS
The financial statements of General American which are included in this
Prospectus should be distinguished from the financial statements of the
Separate Account, and should be considered only as bearing on the ability of
General American to meet its obligations under the Policy. They should not be
considered as bearing on the investment performance of the assets held in the
Separate Account. Financial information is not provided for four of the five
Divisions of the Separate Account because those Divisions have only recently
been established, and therefore no operating history exists for those
Divisions.
36
<PAGE> 153
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Contractholders
General American Life Insurance Company:
We have audited the statements of assets and liabilities, including the
schedule of investments, of the S & P 500 Index, Money Market, Bond Index,
Managed Equity, Asset Allocation, International Equity, Special Equity,
Equity-Income, Growth, Overseas, Asset Manager, High Income, and Gold and
Natural Resources Fund Divisions of General American Separate Account Eleven
as of December 31, 1996, and the related statements of operations and changes
in net assets for each of the periods presented. These financial statements
are the responsibility of the Separate Account's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
The investments owned as of December 31, 1996 were verified by audit of the
statements of assets and liabilities of the underlying portfolios of General
American Capital Company and confirmation by correspondence with respect to
the Variable Insurance Products Fund and the Variable Insurance Products Fund
II sponsored by Fidelity Investments, and the Van Eck World Wide Insurance
Trust sponsored by Van Eck Associates Corporation. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the S & P 500 Index, Money
Market, Bond Index, Managed Equity, Asset Allocation, International Equity,
Special Equity, Equity-Income, Growth, Overseas, Asset Manager, High Income,
and Gold and Natural Resources Fund Divisions of General American Separate
Account Eleven as of December 31, 1996, and the results of their operations
and changes in their net assets for the periods presented, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
St. Louis, Missouri
February 14, 1997
<PAGE> 154
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<CAPTION>
S & P 500 MONEY BOND MANAGED ASSET
INDEX MARKET INDEX EQUITY ALLOCATION
FUND DIVISION<F*> FUND DIVISION FUND DIVISION FUND DIVISION FUND DIVISION
----------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Assets:
Investments in General American
Capital Company, at market value
(see Schedule of Investments): $14,490,435 $ 8,200,563 $ 6,766,875 $ 2,790,019 $ 8,056,468
----------- ----------- ----------- ----------- -----------
Total assets 14,490,435 8,200,563 6,766,875 2,790,019 8,056,468
----------- ----------- ----------- ----------- -----------
Liabilities:
Payable to General American Life
Insurance Company 7,303 38,137 3,293 20,163 21,792
----------- ----------- ----------- ----------- -----------
Total net assets $14,483,132 $ 8,162,426 $ 6,763,582 $ 2,769,856 $ 8,034,676
=========== =========== =========== =========== ===========
Total net assets represented by:
Individual Variable Universal Life cash
value invested in Separate Account $ 5,316,476 $ 940,245 $ 1,397,307 $ 2,130,543 $ 6,811,743
Individual Variable General Select Plus
cash value invested in Separate Account 7,147,078 5,740,881 5,061,218 413,080 901,156
Individual Variable Universal Life-100
cash value invested in Separate Account 2,019,578 1,481,300 305,057 226,233 321,777
----------- ----------- ----------- ----------- -----------
Total net assets $14,483,132 $ 8,162,426 $ 6,763,582 $ 2,769,856 $ 8,034,676
=========== =========== =========== =========== ===========
Total units held - VUL-95 195,587 58,805 71,443 91,667 274,368
Total units held - VGSP 407,634 494,355 422,341 25,596 61,197
Total units held - VUL-100 122,221 134,892 25,326 14,277 21,970
VUL-95 Net unit value $ 27.18 $ 15.99 $ 19.56 $ 23.24 $ 24.83
VGSP Net unit value $ 17.53 $ 11.61 $ 11.98 $ 16.14 $ 14.73
VUL-100 Net unit value $ 16.52 $ 10.98 $ 12.05 $ 15.85 $ 14.65
Cost of investments $12,508,220 $ 8,457,415 $ 7,001,534 $ 2,673,250 $ 7,398,734
<FN>
<F*> This fund was formerly known as the Equity Index Fund.
See accompanying notes to the financial statements.
(continued)
</TABLE>
<PAGE> 155
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<CAPTION>
INTERNATIONAL SPECIAL
EQUITY EQUITY EQUITY-INCOME GROWTH OVERSEAS
FUND DIVISION FUND DIVISION FUND DIVISION FUND DIVISION FUND DIVISION
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Assets:
Investments in General American
Capital Company, at market value
(see Schedule of Investments): $ 6,792,249 $ 4,089,552 $ 0 $ 0 $ 0
Investments in Variable Insurance
Products Fund, at market value
(see Schedule of Investments): 0 0 10,317,272 13,347,649 5,440,850
Receivable from General American
Life Insurance Company 0 0 35,536 22,963 5,080
----------- ----------- ----------- ----------- -----------
Total assets 6,792,249 4,089,552 10,352,808 13,370,612 5,445,930
----------- ----------- ----------- ----------- -----------
Liabilities:
Payable to General American Life
Insurance Company 2,851 4,375 0 0 0
----------- ----------- ----------- ----------- -----------
Total net assets $ 6,789,398 $ 4,085,177 $10,352,808 $13,370,612 $ 5,445,930
=========== =========== =========== =========== ===========
Total net assets represented by:
Individual Variable Universal Life cash
value invested in Separate Account $ 2,554,237 $ 2,878,175 $ 5,046,288 $ 6,456,539 $ 3,171,627
Individual Variable General Select Plus
cash value invested in Separate Account 604,901 748,827 2,820,807 3,877,999 1,603,303
Individual Variable Universal Life-100
cash value invested in Separate Account 488,644 458,175 2,485,713 3,036,074 671,000
General American Life Insurance
Company seed money 3,141,616 0 0 0 0
----------- ----------- ----------- ----------- -----------
Total net assets $ 6,789,398 $ 4,085,177 $10,352,808 $13,370,612 $ 5,445,930
=========== =========== =========== =========== ===========
Total units held - VUL-95 164,557 185,140 287,907 367,037 202,771
Total units held - VGSP 45,125 48,209 160,791 233,747 114,696
Total units held - VUL-100 42,748 32,239 163,860 198,998 55,007
Total units held - Seed Money 200,000 0 0 0 0
VUL-95 Net unit value $ 15.52 $ 15.55 $ 17.53 $ 17.59 $ 15.64
VGSP Net unit value $ 13.41 $ 15.53 $ 17.54 $ 16.59 $ 13.98
VUL-100 Net unit value $ 11.43 $ 14.21 $ 15.17 $ 15.26 $ 12.20
Cost of investments $ 6,523,918 $ 4,065,431 $ 8,788,329 $11,308,224 $ 4,801,413
See accompanying notes to the financial statements. (continued)
</TABLE>
<PAGE> 156
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<CAPTION>
ASSET HIGH GOLD & NATURAL
MANAGER INCOME RESOURCES FUND
FUND DIVISION FUND DIVISION DIVISION
------------- ------------- --------------
<S> <C> <C> <C>
Assets:
Investments in Variable Insurance
Products Fund, at market value
(see Schedule of Investments): $ 0 $ 1,190,177 $ 0
Investments in Variable Insurance
Products Fund II, at market value
(see Schedule of Investments): 276,901 0 0
Investments in Van Eck Worldwide
Insurance Trust at market value
(see Schedule of Investments): 0 0 186,275
Receivable from General American
Life Insurance Company 0 854 44
--------- ----------- ---------
Total assets 276,901 1,191,031 186,319
--------- ----------- ---------
Liabilities:
Payable to General American Life
Insurance Company 437 0 0
--------- ----------- ---------
Total net assets $ 276,464 $ 1,191,031 $ 186,319
========= =========== =========
Total net assets represented by:
Individual Variable Universal Life
cash value invested in Separate Account $ 17,461 $ 260,284 $ 68,992
Individual Variable General Select Plus
cash value invested in Separate Account 51,077 448,378 48,169
Individual Variable Universal Life-100
cash value invested in Separate Account 207,926 482,369 69,158
--------- ----------- ---------
Total net assets $ 276,464 $ 1,191,031 $ 186,319
========= =========== =========
Total units held - VUL-95 1,443 21,331 5,927
Total units held - VGSP 4,211 36,657 4,130
Total units held - VUL-100 17,193 39,563 5,945
VUL-95 Net unit value $ 12.10 $ 12.09 $ 11.64
VGSP Net unit value $ 12.13 $ 12.23 $ 11.66
VUL-100 Net unit value $ 12.09 $ 12.19 $ 11.63
Cost of investments $ 257,108 $ 1,133,115 $ 182,929
See accompanying notes to the financial statements.
</TABLE>
<PAGE> 157
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<CAPTION>
S & P 500 INDEX MONEY MARKET
FUND DIVISION<F*> FUND DIVISION
---------------------------------- ----------------------------------
1996 1995 1994 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income<F**> $ -- $ -- $ -- $ -- $ -- $ --
Expenses:
Mortality and expense charges - VUL-95 $ (38,288) (31,973) (25,046) (8,690) (13,058) (14,631)
Mortality and expense charges - VGSP (16,887) (3,459) (1,323) (21,323) (8,747) (2,628)
Mortality and expense charges - VUL-100 (9,712) (233) 0 (10,113) (1,350) 0
---------- ---------- ---------- ---------- ---------- ----------
Total expenses (64,887) (35,665) (26,369) (40,126) (23,155) (17,259)
---------- ---------- ---------- ---------- ---------- ----------
Net investment expense (64,887) (35,665) (26,369) (40,126) (23,155) (17,259)
---------- ---------- ---------- ---------- ---------- ----------
Net realized gain on investments:
Realized gain from distributions 435,253 128,459 113,854 363,544 231,929 64,413
Realized gain on sales 244,401 339,252 62,974 14,173 65,400 14,509
---------- ---------- ---------- ---------- ---------- ----------
Net realized gain on investments 679,654 467,711 176,828 377,717 297,329 78,922
---------- ---------- ---------- ---------- ---------- ----------
Net unrealized gain (loss) on investments:
Unrealized gain (loss) on investments,
beginning of period 851,246 (10,068) 133,360 (158,740) (31,189) (40,988)
Unrealized gain (loss) on investments,
end of period 1,982,215 851,246 (10,068) (256,852) (158,740) (31,189)
---------- ---------- ---------- ---------- ---------- ----------
Net unrealized gain (loss) on investments 1,130,969 861,314 (143,428) (98,112) (127,551) 9,799
---------- ---------- ---------- ---------- ---------- ----------
Net gain on investments 1,810,623 1,329,025 33,400 279,605 169,778 88,721
---------- ---------- ---------- ---------- ---------- ----------
Net increase in net assets resulting
from operations $1,745,736 $1,293,360 $ 7,031 $ 239,479 $ 146,623 $ 71,462
========== ========== ========== ========== ========== ==========
<FN>
<F*>This fund was formerly known as the Equity Index Fund.
<F**>See Note 2C.
See accompanying notes to the financial statements.
(continued)
</TABLE>
<PAGE> 158
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<CAPTION>
BOND INDEX MANAGED EQUITY
FUND DIVISION FUND DIVISION
---------------------------------- ----------------------------------
1996 1995 1994 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income<F**> $ -- $ -- $ -- $ -- $ -- $ --
Expenses:
Mortality and expense charges - VUL-95 (11,376) (18,478) (19,171) (16,463) (16,717) (16,186)
Mortality and expense charges - VGSP (10,234) (153) (19) (1,751) (208) (43)
Mortality and expense charges - VUL-100 (1,802) (24) 0 (1,080) (40) 0
---------- ---------- ---------- ---------- ---------- ----------
Total expenses (23,412) (18,655) (19,190) (19,294) (16,965) (16,229)
---------- ---------- ---------- ---------- ---------- ----------
Net investment expense (23,412) (18,655) (19,190) (19,294) (16,965) (16,229)
---------- ---------- ---------- ---------- ---------- ----------
Net realized gain on investments:
Realized gain from distributions 496,106 70,070 253,405 292,621 193,544 309,279
Realized gain (loss) on sales (15,797) (31,850) 756 11,431 (1,087) 10,562
---------- ---------- ---------- ---------- ---------- ----------
Net realized gain on investments 480,309 38,220 254,161 304,052 192,457 319,841
---------- ---------- ---------- ---------- ---------- ----------
Net unrealized gain (loss) on investments:
Unrealized gain (loss) on investments,
beginning of period 19,005 (313,506) 32,498 (26,912) (408,116) (14,824)
Unrealized gain (loss) on investments,
end of period (234,659) 19,005 (313,506) 116,769 (26,912) (408,116)
---------- ---------- ---------- ---------- ---------- ----------
Net unrealized gain (loss) on investments (253,664) 332,511 (346,004) 143,681 381,204 (393,292)
---------- ---------- ---------- ---------- ---------- ----------
Net gain (loss) on investments 226,645 370,731 (91,843) 447,733 573,661 (73,451)
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) in net assets
resulting from operations $ 203,233 $ 352,076 $ (111,033) $ 428,439 $ 556,696 $ (89,680)
========== ========== ========== ========== ========== ==========
<FN>
<F**>See Note 2C.
See accompanying notes to the financial statements.
(continued)
</TABLE>
<PAGE> 159
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<CAPTION>
ASSET ALLOCATION INTERNATIONAL EQUITY
FUND DIVISION FUND DIVISION
---------------------------------- ----------------------------------
1996 1995 1994 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income<F**> $ -- $ -- $ -- $ -- $ -- $ --
Expenses:
Mortality and expense charges - VUL-95 (52,462) (46,892) (34,698) (19,773) (13,991) (8,440)
Mortality and expense charges - VGSP (5,214) (5,214) (6,461) (3,014) (2,260) (1,125)
Mortality and expense charges - VUL-100 (1,078) (10) 0 (2,475) (66) 0
Administrative expense charges - Seed Money 0 0 0 (25,684) (23,784) (23,655)
---------- ---------- ---------- ---------- ---------- ----------
Total expenses (58,754) (52,116) (41,159) (50,946) (40,101) (33,220)
---------- ---------- ---------- ---------- ---------- ----------
Net investment expense (58,754) (52,116) (41,159) (50,946) (40,101) (33,220)
---------- ---------- ---------- ---------- ---------- ----------
Net realized gain (loss) on investments:
Realized gain from distributions 554,498 474,238 436,647 164,186 514,927 329,985
Realized gain (loss) on sales 36,291 131,272 (20,756) 43,830 41,508 71,523
---------- ---------- ---------- ---------- ---------- ----------
Net realized gain on investments: 590,789 605,510 415,891 208,016 556,435 401,508
---------- ---------- ---------- ---------- ---------- ----------
Net unrealized gain (loss) on investments:
Unrealized gain (loss) on investments,
beginning of period 197,823 (765,423) (146,386) 40,286 198,307 400,379
Unrealized gain (loss) on investments,
end of period 657,734 197,823 (765,423) 268,331 40,286 198,307
---------- ---------- ---------- ---------- ---------- ----------
Net unrealized gain (loss) on investments 459,911 963,246 (619,037) 228,045 (158,021) (202,072)
---------- ---------- ---------- ---------- ---------- ----------
Net gain (loss) on investments 1,050,700 1,568,756 (203,146) 436,061 398,414 199,436
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) in net
assets resulting from operations $ 991,946 $1,516,640 $ (244,305) $ 385,115 $ 358,313 $ 166,216
========== ========== ========== ========== ========== ==========
<FN>
<F**>See Note 2C.
See accompanying notes to the financial statements.
(continued)
</TABLE>
<PAGE> 160
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<CAPTION>
SPECIAL EQUITY EQUITY-INCOME
FUND DIVISION FUND DIVISION
---------------------------------- ----------------------------------
1996 1995 1994 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividend income<F**> $ -- $ -- $ -- $ 9,260 $ 94,314 $ 36,567
Expenses:
Mortality and expense charges - VUL-95 (21,527) (16,741) (9,881) (38,120) (24,157) (9,487)
Mortality and expense charges - VGSP (4,349) (3,645) (1,556) (13,918) (6,731) (1,631)
Mortality and expense charges - VUL-100 (2,084) (72) 0 (10,210) (378) 0
Administrative expense charges - Seed Money (5,213) (11,191) (9,556) 0 0 0
---------- ---------- ---------- ---------- ---------- ----------
Total expenses (33,173) (31,649) (20,993) (62,248) (31,266) (11,118)
---------- ---------- ---------- ---------- ---------- ----------
Net investment income (loss) (33,173) (31,649) (20,993) (52,988) 63,048 25,449
---------- ---------- ---------- ---------- ---------- ----------
Net realized gain on investments:
Realized gain from distributions 805,221 210,225 62,272 265,454 125,686 31,411
Realized gain on sales 417,832 121,217 16,038 130,118 67,467 8,414
---------- ---------- ---------- ---------- ---------- ----------
Net realized gain on investments: 1,223,053 331,442 78,310 395,572 193,153 39,825
---------- ---------- ---------- ---------- ---------- ----------
Net unrealized gain (loss) on investments:
Unrealized gain on investments,
beginning of period 464,281 75,550 165,807 868,207 17,485 12,226
Unrealized gain on investments,
end of period 24,121 464,281 75,550 1,528,943 868,207 17,485
---------- ---------- ---------- ---------- ---------- ----------
Net unrealized gain (loss) on investments (440,160) 388,731 (90,257) 660,736 850,722 5,259
---------- ---------- ---------- ---------- ---------- ----------
Net gain (loss) on investments 782,893 720,173 (11,947) 1,056,308 918,189 13,673
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) in net assets resulting
from operations $ 749,720 $ 688,524 $ (32,940) $1,003,320 $1,106,923 $ 70,533
========== ========== ========== ========== ========== ==========
<FN>
<F**>See Note 2C.
See accompanying notes to the financial statements.
(continued)
</TABLE>
<PAGE> 161
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<CAPTION>
GROWTH OVERSEAS
FUND DIVISION FUND DIVISION
---------------------------------- ----------------------------------
1996 1995 1994 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividend income $ 21,639 $ 21,771 $ 6,373 $ 41,332 $ 8,707 $ 3,448
Expenses:
Mortality and expense charges - VUL-95 (51,026) (34,577) (13,498) (24,616) (17,340) (8,858)
Mortality and expense charges - VGSP (19,582) (11,893) (4,366) (8,371) (5,232) (1,870)
Mortality and expense charges - VUL-100 (14,179) (439) 0 (3,542) (152) 0
---------- ---------- ---------- ---------- ---------- ----------
Total expenses (84,787) (46,909) (17,864) (36,529) (22,724) (10,728)
---------- ---------- ---------- ---------- ---------- ----------
Net investment income (loss) (63,148) (25,138) (11,491) 4,803 (14,017) (7,280)
---------- ---------- ---------- ---------- ---------- ----------
Net realized gain (loss) on investments:
Realized gain from distributions 546,396 0 67,449 45,464 8,707 0
Realized gain (loss) on sales 254,460 176,048 (6,807) 42,658 19,162 28,436
---------- ---------- ---------- ---------- ---------- ----------
Net realized gain on investments: 800,856 176,048 60,642 88,122 27,869 28,436
---------- ---------- ---------- ---------- ---------- ----------
Net unrealized gain (loss) on investments:
Unrealized gain (loss) on investments,
beginning of period 1,501,642 51,539 40,113 210,998 (36,045) 23,986
Unrealized gain (loss) on investments,
end of period 2,039,425 1,501,642 51,539 639,437 210,998 (36,045)
---------- ---------- ---------- ---------- ---------- ----------
Net unrealized gain (loss) on investments 537,783 1,450,103 11,426 428,439 247,043 (60,031)
---------- ---------- ---------- ---------- ---------- ----------
Net gain (loss) on investments 1,338,639 1,626,151 4,619 516,561 266,205 (31,595)
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) in
net assets resulting from operations $1,275,491 $1,601,013 $ 60,577 $ 521,364 $ 260,895 $ (38,875)
========== ========== ========== ========== ========== ==========
See accompanying notes to the financial statements.
(continued)
</TABLE>
<PAGE> 162
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF OPERATIONS
PERIOD ENDED DECEMBER 31, 1996, and 1995
<CAPTION>
ASSET MANAGER HIGH INCOME GOLD & NATURAL RESOURCES
FUND DIVISION FUND DIVISION FUND DIVISION
1996 1995<F*> 1996 1995<F*> 1996 1995<F*>
---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividend income $ 2,632 $ 0 $ 28,732 $ 0 $ 1,298 $ 32
Expenses:
Mortality and expense charges - VUL-95 (126) (3) (1,639) (122) (389) (3)
Mortality and expense charges - VGSP (193) (20) (1,456) (55) (214) 0
Mortality and expense charges - VUL-100 (1,031) (29) (2,645) (76) (410) (11)
---------- ---------- ---------- ---------- ---------- -----------
Total expenses (1,350) (52) (5,740) (253) (1,013) (14)
---------- ---------- ---------- ---------- ---------- -----------
Net investment income (loss) 1,282 (52) 22,992 (253) 285 18
---------- ---------- ---------- ---------- ---------- -----------
Net realized gain (loss) on investments:
Realized gain from distributions 2,171 0 5,621 0 1,273 0
Realized gain (loss) on sales 1,016 13 (202) 1,132 1,682 (5)
---------- ---------- ---------- ---------- ---------- -----------
Net realized gain (loss) on investments: 3,187 13 5,419 1,132 2,955 (5)
---------- ---------- ---------- ---------- ---------- -----------
Net unrealized gain on investments:
Unrealized gain on investments,
beginning of period 1,779 0 2,337 0 370 0
Unrealized gain on investments,
end of period 19,793 1,779 57,062 2,337 3,346 370
---------- ---------- ---------- ---------- ---------- -----------
Net unrealized gain on investments 18,014 1,779 54,725 2,337 2,976 370
---------- ---------- ---------- ---------- ---------- -----------
Net gain on investments 21,201 1,792 60,144 3,469 5,931 365
---------- ---------- ---------- ---------- ---------- -----------
Net increase in net assets resulting
from operations $ 22,483 $ 1,740 $ 83,136 $ 3,216 $ 6,216 $ 383
========== ========== ========== ========== ========== ===========
<FN>
<F*> The Asset Manager Fund, High Income Fund, and Gold & Natural Resources Fund began operations on July 19, May 24, and
August 9, 1995, respectively.
See accompanying notes to the financial statements.
</TABLE>
<PAGE> 163
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<CAPTION>
S & P 500 INDEX MONEY MARKET
FUND DIVISION<F*> FUND DIVISION
----------------------------------- ----------------------------------
1996 1995 1994 1996 1995 1994
----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment expense $ (64,887) $ (35,665) $ (26,369) $ (40,126) $ (23,155) $ (17,259)
Net realized gain on investments 679,654 467,711 176,828 377,717 297,329 78,922
Net unrealized gain (loss) on investments 1,130,969 861,314 (143,428) (98,112) (127,551) 9,799
----------- ---------- ---------- ---------- ---------- ----------
Net increase in net assets
resulting from operations 1,745,736 1,293,360 7,031 239,479 146,623 71,462
Net deposits into (withdrawals from)
Separate Account 8,067,322 (145,477) 571,671 3,557,381 2,340,021 177,261
----------- ---------- ---------- ---------- ---------- ----------
Increase in net assets 9,813,058 1,147,883 578,702 3,796,860 2,486,644 248,723
Net assets, beginning of period 4,670,074 3,522,191 2,943,489 4,365,566 1,878,922 1,630,199
----------- ---------- ---------- ---------- ---------- ----------
Net assets, end of period $14,483,132 $4,670,074 $3,522,191 $8,162,426 $4,365,566 $1,878,922
=========== ========== ========== ========== ========== ==========
<FN>
<F*>This fund was formerly known as the Equity Index Fund.
See accompanying notes to the financial statements.
(continued)
</TABLE>
<PAGE> 164
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<CAPTION>
BOND INDEX MANAGED EQUITY
FUND DIVISION FUND DIVISION
----------------------------------- ----------------------------------
1996 1995 1994 1996 1995 1994
---------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment expense $ (23,412) $ (18,655) $ (19,190) $ (19,294) $ (16,965) $ (16,229)
Net realized gain on investments 480,309 38,220 254,161 304,052 192,457 319,841
Net unrealized gain (loss) on investments (253,664) 332,511 (346,004) 143,681 381,204 (393,292)
---------- ----------- ---------- ---------- ---------- ----------
Net increase (decrease) in net assets
resulting from operations 203,233 352,076 (111,033) 428,439 556,696 (89,680)
Net deposits into (withdrawals from)
Separate Account 5,128,242 (1,271,114) 143,229 436,005 (487,360) (55,715)
---------- ----------- ---------- ---------- ---------- ----------
Increase (decrease) in net assets 5,331,475 (919,038) 32,196 864,444 69,336 (145,395)
Net assets, beginning of period 1,432,107 2,351,145 2,318,949 1,905,412 1,836,076 1,981,471
---------- ----------- ---------- ---------- ---------- ----------
Net assets, end of period $6,763,582 $ 1,432,107 $2,351,145 $2,769,856 $1,905,412 $1,836,076
========== =========== ========== ========== ========== ==========
See accompanying notes to the financial statements.
(continued)
</TABLE>
<PAGE> 165
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<CAPTION>
ASSET ALLOCATION INTERNATIONAL EQUITY
FUND DIVISION FUND DIVISION
---------------------------------- ----------------------------------
1996 1995 1994 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment expense $ (58,754) $ (52,116) $ (41,159) $ (50,946) $ (40,101) $ (33,220)
Net realized gain on investments 590,789 605,510 415,891 208,016 556,435 401,508
Net unrealized gain (loss) on investments 459,911 963,246 (619,037) 228,045 (158,021) (202,072)
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) in net assets
resulting from operations 991,946 1,516,640 (244,305) 385,115 358,313 166,216
Net deposits into (withdrawals from)
Separate Account 1,086,684 (709,124) 649,032 1,016,960 789,597 775,500
---------- ---------- ---------- ---------- ---------- ----------
Increase in net assets 2,078,630 807,516 404,727 1,402,075 1,147,910 941,716
Net assets, beginning of period 5,956,046 5,148,530 4,743,803 5,387,323 4,239,413 3,297,697
---------- ---------- ---------- ---------- ---------- ----------
Net assets, end of period $8,034,676 $5,956,046 $5,148,530 $6,789,398 $5,387,323 $4,239,413
========== ========== ========== ========== ========== ==========
See accompanying notes to the financial statements.
(continued)
</TABLE>
<PAGE> 166
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<CAPTION>
SPECIAL EQUITY EQUITY-INCOME
FUND DIVISION FUND DIVISION
---------------------------------- -----------------------------------
1996 1995 1994 1996 1995 1994
---------- ---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment income (loss) $ (33,173) $ (31,649) $ (20,993) $ (52,988) $ 63,048 $ 25,449
Net realized gain on investments 1,223,053 331,442 78,310 395,572 193,153 39,825
Net unrealized gain (loss) on investments (440,160) 388,731 (90,257) 660,736 850,722 5,259
---------- ---------- ---------- ----------- ---------- ----------
Net increase (decrease) in net assets
resulting from operations 749,720 688,524 (32,940) 1,003,320 1,106,923 70,533
Net deposits into (withdrawals from)
Separate Account (860,933) 229,832 1,309,438 3,869,404 2,068,778 1,686,138
---------- ---------- ---------- ----------- ---------- ----------
Increase (decrease) in net assets (111,213) 918,356 1,276,498 4,872,724 3,175,701 1,756,671
Net assets, beginning of period 4,196,390 3,278,034 2,001,536 5,480,084 2,304,383 547,712
---------- ---------- ---------- ----------- ---------- ----------
Net assets, end of period $4,085,177 $4,196,390 $3,278,034 $10,352,808 $5,480,084 $2,304,383
========== ========== ========== =========== ========== ==========
See accompanying notes to the financial statements.
(continued)
</TABLE>
<PAGE> 167
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<CAPTION>
GROWTH OVERSEAS
FUND DIVISION FUND DIVISION
---------------------------------------- -----------------------------------------
1996 1995 1994 1996 1995 1994
------------ ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment income (loss) $ (63,148) $ (25,138) $ (11,491) $ 4,803 $ (14,017) $ (7,280)
Net realized gain on investments 800,856 176,048 60,642 88,122 27,869 28,436
Net unrealized gain (loss) on investments 537,783 1,450,103 11,426 428,439 247,043 (60,031)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations 1,275,491 1,601,013 60,577 521,364 260,895 (38,875)
Net deposits into Separate Account 4,760,220 1,991,002 2,588,073 1,491,289 1,053,659 1,672,381
------------ ------------ ------------ ------------ ------------ ------------
Increase in net assets 6,035,711 3,592,015 2,648,650 2,012,653 1,314,554 1,633,506
Net assets, beginning of period 7,334,901 3,742,886 1,094,236 3,433,277 2,118,723 485,217
------------ ------------ ------------ ------------ ------------ ------------
Net assets, end of period $ 13,370,612 $ 7,334,901 $ 3,742,886 $ 5,445,930 $ 3,433,277 $ 2,118,723
============ ============ ============ ============ ============ ============
See accompanying notes to the financial statements. (continued)
<PAGE> 168
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF CHANGES IN NET ASSETS
PERIOD ENDED DECEMBER 31, 1996 AND 1995
<CAPTION>
ASSET MANAGER HIGH INCOME GOLD & NATURAL RESOURCES
FUND DIVISION FUND DIVISION FUND DIVISION
---------------------- ------------------------ -----------------------
1996 1995<F*> 1996 1995<F*> 1996 1995<F*>
--------- --------- ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment income (loss) $ 1,282 $ (52) $ 22,992 $ (253) $ 285 $ 18
Net realized gain (loss) on investments 3,187 13 5,419 1,132 2,955 (5)
Net unrealized gain on investments 18,014 1,779 54,725 2,337 2,976 370
--------- -------- ----------- --------- --------- --------
Net increase in net assets
resulting from operations 22,483 1,740 83,136 3,216 6,216 383
Net deposits into Separate Account 202,863 49,378 904,946 199,733 170,306 9,414
--------- -------- ----------- --------- --------- --------
Increase in net assets 225,346 51,118 988,082 202,949 176,522 9,797
Net assets, beginning of period 51,118 0 202,949 0 9,797 0
--------- -------- ----------- --------- --------- --------
Net assets, end of period $ 276,464 $ 51,118 $ 1,191,031 $ 202,949 $ 186,319 $ 9,797
========= ======== =========== ========= ========= ========
<FN>
<F*> The Asset Manager Fund, High Income Fund, and Gold & Natural Resources Fund
began operations on July 19, May 24, and August 9, 1995, respectively.
See accompanying notes to the financial statements.
</TABLE>
<PAGE> 169
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996
<CAPTION>
No. of Shares Market Value
----------------- ----------------
<S> <C> <C>
S & P 500 Index Fund <F**>
General American Capital Company<F*> 488,464 $14,490,435
Money Market Fund
General American Capital Company<F*> 475,589 8,200,563
Bond Index Fund
General American Capital Company<F*> 318,998 6,766,875
Managed Equity Fund
General American Capital Company<F*> 110,250 2,790,019
Asset Allocation Fund
General American Capital Company<F*> 300,232 8,056,468
International Equity Fund
General American Capital Company<F*> 418,579 6,792,249
Special Equity Fund
General American Capital Company<F*> 249,107 4,089,552
Equity-Income Fund
Variable Insurance Products Fund 490,598 10,317,272
Growth Fund
Variable Insurance Products Fund 428,634 13,347,649
Overseas Fund
Variable Insurance Products Fund 288,792 5,440,850
Asset Manager Fund
Variable Insurance Products Fund II 16,356 276,901
High Income Fund
Variable Insurance Products Fund 95,062 1,190,177
Gold & Natural Resources Fund
Van Eck Worldwide Insurance Trust 11,141 186,275
<FN>
<F*>These funds use consent dividending. See Note 2C.
<F**>This fund was formerly known as the Equity Index Fund.
See accompanying notes to the financial statements.
</TABLE>
<PAGE> 170
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 1 - ORGANIZATION
General American Separate Account Eleven (the Separate Account) commenced
operations on September 15, 1987 and is registered under the Investment
Company Act of 1940 (1940 Act) as a unit investment trust. The Separate
Account offers three products: Variable Universal Life (VUL-95), Variable
General Select Plus (VGSP), and Variable Universal Life (VUL-100) that
receive and invest net premiums for flexible premium variable life insurance
policies that are issued by General American Life Insurance Company (General
American). The Separate Account is divided into thirteen Divisions. Each
Division invests exclusively in shares of a single Fund of either General
American Capital Company, Variable Insurance Products Fund, Variable
Insurance Products Fund II, or Van Eck Worldwide Insurance Trust which are
open-end, diversified management companies. The Funds of the General
American Capital Company, sponsored by General American, are the S & P 500
Index (formerly Equity Index), Money Market, Bond Index, Managed Equity,
Asset Allocation, International Equity, and the Special Equity Fund
Divisions. The funds of the Variable Insurance Products Fund, managed by
Fidelity Management & Research Company, are the Equity-Income, Growth,
Overseas, and the High Income Fund Divisions. The fund of the Variable
Insurance Products Fund II, managed by Fidelity Management and Research
Company is the Asset Manager Fund. The fund of the Van Eck Worldwide
Insurance Trust, managed by Van Eck Associates Corporation, is the Gold and
Natural Resources Fund. Policyholders have the option of directing their
premium payments into one or all of the Funds as well as into the general
account of General American, which is not generally subject to regulation
under the Securities Act of 1933 or the 1940 Act.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Separate Account in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
A. Investments
The Separate Accounts' investments in the thirteen Funds are valued
daily based on the net asset values of the respective Fund shares held
as reported to General American by General American Capital Company,
Variable Insurance Products Fund, Variable Insurance Products Fund II,
and Van Eck Worldwide Insurance Trust. The specific identification
method is used in determining the cost of shares sold on withdrawals
by the Separate Account. Share transactions are recorded on the trade
date, which is the same as the settlement date.
B. Federal Income Taxes
Under current federal income tax law, capital gains from sales of
investments of the Separate Account are not taxable. Therefore, no
federal income tax expense has been provided.
C. Distribution of Income and Realized Capital Gains
General American Capital Company follows the federal income tax
practice known as consent dividending, whereby substantially all of
its net investment income and realized gains are deemed to be passed
through to the Separate Account. As a result, General American
Capital Company does not pay any dividends or capital gain
distributions. During December of each year, accumulated investment
income and capital gains of the underlying Capital Company Fund are
allocated to the Separate Account by increasing the cost basis and
recognizing a capital gain in the Separate Account. This adjustment
has no impact on the net assets of the separate account.
<PAGE> 171
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
The Variable Insurance Products Fund, Variable Insurance Products Fund
II, and Van Eck Worldwide Insurance Trust intend to pay out all of its
net investment income and net realized capital gains each year.
Dividends from the funds are distributed at least annually on a per
share basis and are recorded on the ex dividend date. Normally, net
realized capital gains, if any, are distributed each year for each
fund. Such income and capital gain distributions are automatically
reinvested in additional shares of the funds.
D. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of increase
and decrease in net assets from operations during the period. Actual
results could differ from those estimates.
NOTE 3 - POLICY CHARGES
Charges are deducted from premiums and paid to General American for providing
the insurance benefits set forth in the contracts and any additional benefits
added by rider, administering the policies, reimbursement of expenses
incurred in distributing the policies, and assuming certain risks in
connection with the policies.
Prior to the allocation of net premiums among General American's general
account and the Fund Divisions of the Separate Account, premium payments are
reduced by premium expense charges, which consist of a sales charge and a
charge for premium taxes. The premium payment, less the premium expense
charge, equals the net premium.
Sales Charge: A sales charge equal to 6% is deducted from each
-------------
VUL-95 premium paid. A sales charge of 5% in years one through ten and
2.25% thereafter is deducted from each VGSP premium paid. This charge
is deducted to partially reimburse General American for expenses
incurred in distributing the policy and any additional benefits
provided by rider. No sales charge is deducted from VUL-100 premiums.
Premium Taxes: Various state and political subdivisions impose a tax
--------------
on premiums received by insurance companies. Premium taxes vary from
state to state. A deduction of 2% of each VUL-95 premium, 2.5% of each
VGSP premium, and 2.10% of each VUL-100 premium is made from each
premium payment for these taxes. In addition, a 1.25% deduction is
taken from VUL-100 premiums to cover the company's Federal income tax
costs attributable to the amount of premium received.
Charges are deducted monthly from the cash value of each policy to compensate
General American for (a) certain administrative costs; (b) insurance
underwriting and acquisition expenses in connection with issuing a policy;
(c) the cost of insurance, and (d) the cost of optional benefits added by
rider.
Administrative Charge: General American has responsibility for the
----------------------
administration of the policies and the Separate Account. As
reimbursement for administrative expenses related to the maintenance
of each policy and the Separate Account, General American assesses a
monthly administrative charge against each policy. This charge is
$10 per month for a standard policy and $12 per month for a pension
policy during the first 12 policy months and $4 (standard) and $6
(pension) per month for all policy months beyond the 12th for VUL-95
contracts. The charge is $4 per month for VGSP contracts. The
charge is $13 per month during the first 12 policy months and $6 per
month thereafter for VUL-100 contracts.
Insurance Underwriting and Acquisition Expense Charge: An
------------------------------------------------------
additional administrative charge is deducted from policy cash value
for VUL-95 as part of the monthly deduction during the first 12
policy months and for the first 12 policy months following an
increase in the face amount. The charge is $0.08 per month
multiplied by the face amount divided by 1,000. For VUL-100, the
charge during the first 12 policy months is $0.16 per month
multiplied by the face amount divided by 1,000, and in all policy
years thereafter, the charge is $0.01 per month multiplied by the
face amount divided by 1,000.
<PAGE> 172
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
Cost of Insurance: The cost of insurance is deducted on each
------------------
monthly anniversary date for the following policy month. Because the
cost of insurance depends upon a number of variables, the cost varies
for each policy month. The cost of insurance is determined
separately for the initial face amount and for any subsequent
increases in face amount. General American determines the monthly
cost of insurance charge by multiplying the applicable cost of
insurance rate or rates by the net amount at risk for each policy
month.
Optional Rider Benefits Charge: This monthly deduction includes
-------------------------------
charges for any additional benefits provided by rider.
Contingent Deferred Sales Charge: During the first ten policy
---------------------------------
years for VUL-95 and VGSP, and the first fifteen years for VUL-100,
General American also assesses a charge upon surrender or lapse of a
Policy, a requested decrease in face amount, or a partial withdrawal
that causes the face amount to decrease. The amount of the charge
assessed depends on a number of factors, including whether the event
is a full surrender or lapse or only a decrease in face amount, the
amount of premiums received to date by General American, and the
policy year in which the surrender or other event takes place.
Mortality and Expense Charge: In addition to the above charges, a
-----------------------------
daily charge is made for the mortality and expense risks assumed by
General American. General American deducts a daily charge from the
Separate Account at the rate of .002319% for VUL-95, .0019111% for
VGSP, and .002455% for VUL-100 of the net assets of each division of
the Separate Account, which equals an annual rate of .85%, .70%, and
.90% for VUL-95, VGSP, and VUL-100 respectively. VUL-95, VGSP, and
VUL-100 mortality and expense charges for 1996 were $315,392,
$106,506, and $60,361, respectively. The mortality risk assumed by
General American is the risk that those insured may die sooner than
anticipated and therefore, that General American will pay an
aggregate amount of death benefits greater than anticipated. The
expense risk assumed is that expenses incurred in issuing and
administering the policy will exceed the amounts realized from the
administrative charges assessed against the policy.
NOTE 4 - INVESTMENT OBJECTIVES AND MANAGER CHANGES
Effective January 1, 1997, the names, investment objectives and portfolio
managers of the underlying General American Capital Company International
Equity Fund and the Special Equity Fund changed. In addition, the portfolio
manager of the underlying General American Capital Company Managed Equity
Fund changed effective March 1, 1997.
The International Equity Fund became the International Index Fund. The
investment objective of the International Index Fund is to obtain investment
results that parallel the price and yield performance of publicly-traded
common stocks in the Morgan Stanley Capital International Europe, Australia,
and Far East Index ("EAFE Index"). The portfolio manager of the
International Index Fund is Conning Asset Management Company and the
management fee for the fund is .50% on the first $10 million in assets, .40%
on the balance over $10 million and less than $20 million and .30% on any
balance in excess of $20 million.
The Special Equity Fund became the Mid-Cap Equity Fund. The investment
objective of the Mid-Cap Equity Fund is to seek sustained growth of capital
by investing primarily in common stocks of United States-based publicly
traded companies with "medium market capitalizations". "Medium market
capitalization companies" are those whose market capitalization falls within
the range of the S&P MidCap 400 at the time of the Fund's investment. The
portfolio manager of the Mid-Cap Equity Fund is Conning Asset Management
Company and the total management fee rate remains unchanged from that of the
Special Equity Fund.
On March 1, 1997, the Managed Equity Fund will be managed by Conning Asset
Management Company. The management fee will be reduced to .40% on the first
$10 million in assets, .30% on the balance over $10 million and less than $30
million, and .25% on the balance in excess of $30 million.
<PAGE> 173
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 5 - PURCHASES AND SALES OF SHARES
During the year ended December 31, 1996, purchases including net realized
gain and income from distribution and proceeds from sales of General American
Capital Company shares were as follows:
<TABLE>
<CAPTION>
S & P 500 MONEY BOND MANAGED ASSET INTERNATIONAL SPECIAL
INDEX MARKET INDEX EQUITY ALLOCATION EQUITY EQUITY
FUND FUND FUND FUND FUND FUND FUND
---------- ----------- ---------- -------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Purchases $9,312,469 $20,770,171 $6,181,356 $969,926 $2,265,163 $ 1,461,465 $1,931,306
========== =========== ========== ======== ========== ============= ==========
Sales $ 857,995 $16,799,059 $ 546,453 $241,099 $ 681,085 $ 334,947 $2,027,557
========== =========== ========== ======== ========== ============= ==========
</TABLE>
During the year ended December 31, 1996, purchases (including dividend
reinvestment) and proceeds from sales of Variable Insurance Products Fund
Shares were as follows:
<TABLE>
<CAPTION>
EQUITY-INCOME GROWTH OVERSEAS HIGH INCOME
FUND FUND FUND FUND
------------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Purchases $4,596,809 $6,161,366 $2,021,322 $1,088,473
========== ========== ========== ==========
Sales $ 538,346 $ 926,936 $ 486,089 $ 153,055
========== ========== ========== ==========
</TABLE>
During the year ended December 31, 1996, purchases (including dividend
reinvestment) and proceeds from sales of Variable Insurance Products Fund II
shares were as follows:
<TABLE>
<CAPTION>
ASSET MANAGER
FUND
-------------
<S> <C>
Purchases $ 247,326
=========
Sales $ 39,382
=========
</TABLE>
During the year ended December 31, 1996, purchases (including dividend
reinvestment) and proceeds from sales of Van Eck Worldwide Insurance Trust
shares were as follows:
<TABLE>
<CAPTION>
GOLD AND NATURAL
RESOURCES FUND
----------------
<S> <C>
Purchases $ 191,637
=========
Sales $ 19,821
=========
</TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 6 - ACCUMULATION UNIT ACTIVITY
The following is a summary of the accumulation unit activity for the years
ended December 31, 1996, 1995, and 1994:
<TABLE>
<CAPTION>
S & P 500 INDEX MONEY MARKET
FUND DIVISION<F*> FUND DIVISION
------------------------------- ----------------------------------
1996 1995 1994 1996 1995 1994
------- -------- ------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Variable Universal Life-95:
Deposits 56,960 78,391 78,329 52,946 206,798 326,065
Withdrawals (32,408) (101,054) (61,101) (79,319) (215,226) (343,656)
Outstanding units, beginning of period 171,035 193,698 176,470 85,178 93,606 111,197
------- -------- ------- ---------- -------- --------
Outstanding units, end of period 195,587 171,035 193,698 58,805 85,178 93,606
======= ======== ======= ========== ======== ========
Variable General Select Plus:
Deposits 376,931 30,100 27,980 1,489,642 344,162 226,931
Withdrawals (16,019) (15,451) (843) (1,173,354) (215,211) (184,184)
Outstanding units, beginning of period 46,722 32,073 4,936 178,067 49,116 6,369
------- -------- ------- ---------- -------- --------
Outstanding units, end of period 407,634 46,722 32,073 494,355 178,067 49,116
======= ======== ======= ========== ======== ========
Variable Univeral Life-100:<F**>
Deposits 151,173 14,240 729,350 214,797
Withdrawals (42,505) (687) (698,266) (110,989)
Outstanding units, beginning of period 13,553 0 103,808 0
------- -------- ---------- --------
Outstanding units, end of period 122,221 13,553 134,892 103,808
======= ======== ========== ========
<FN>
<F*> This fund was formerly known as the Equity Index Fund
<F**>The Variable Universal Life 100 product was introduced in 1995, and the
first deposit was received on June 7, 1995.
</TABLE>
(continued)
<PAGE> 174
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 6 - ACCUMULATION UNIT ACTIVITY (CONTINUED)
The following is a summary of the accumulation unit activity for the years
ended December 31, 1996, 1995, and 1994:
<TABLE>
<CAPTION>
BOND INDEX MANAGED EQUITY
FUND DIVISION FUND DIVISION
------------------------------- -------------------------------
1996 1995 1994 1996 1995 1994
------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Variable Universal Life-95:
Deposits 20,690 28,341 34,979 22,639 37,042 38,637
Withdrawals (19,502) (102,229) (26,804) (23,620) (68,803) (43,454)
Outstanding units, beginning of period 70,255 144,143 135,968 92,948 124,409 129,226
------- -------- ------- ------- ------- -------
Outstanding units, end of period 71,443 70,255 144,143 91,667 92,648 124,409
======= ======== ======= ======= ======= =======
Variable General Select Plus:
Deposits 422,790 5,765 1,257 20,875 5,835 1,260
Withdrawals (6,268) (1,249) (35) (1,816) (595) (43)
Outstanding units, beginning of period 5,819 1,303 81 6,537 1,297 80
------- -------- ------- ------- ------- -------
Outstanding units, end of period 422,341 5,819 1,303 25,596 6,537 1,297
======= ======== ======= ======= ======= =======
Variable Univeral Life-100:<F**>
Deposits 31,945 1,670 15,297 1,823
Withdrawals (8,214) (75) (2,675) (168)
Outstanding units, beginning of period 1,595 0 1,655 0
------- -------- ------- -------
Outstanding units, end of period 25,326 1,595 14,277 1,655
======= ======== ======= =======
<FN>
<F**>The Variable Universal Life 100 product was introduced in 1995, and the
first deposit was received on June 7, 1995.
</TABLE>
(continued)
<PAGE> 175
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 6 - ACCUMULATION UNIT ACTIVITY, (CONTINUED)
The following is a summary of the accumulation unit activity for the years
ended December 31, 1996, 1995, and 1994:
<TABLE>
<CAPTION>
ASSET ALLOCATION INTERNATIONAL EQUITY
FUND DIVISION FUND DIVISION
------------------------------- -------------------------------
1996 1995 1994 1996 1995 1994
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Variable Universal Life-95:
Deposits 67,461 80,183 101,360 60,637 74,018 71,731
Withdrawals (33,247) (98,461) (49,338) (32,650) (28,390) (31,331)
Outstanding units, beginning of period 240,154 258,432 206,410 136,570 90,942 50,542
------- ------- ------- ------- ------- -------
Outstanding units, end of period 274,368 240,154 258,432 164,557 136,570 90,942
======= ======= ======= ======= ======= =======
Variable General Select Plus:
Deposits 21,668 12,925 18,605 24,970 16,837 18,803
Withdrawals (18,560) (31,947) (43,756) (12,229) (6,722) (730)
Outstanding units, beginning of period 58,089 77,111 102,262 32,384 22,269 4,196
------- ------- ------- ------- ------- -------
Outstanding units, end of period 61,197 58,089 77,111 45,125 32,384 22,269
======= ======= ======= ======= ======= =======
Variable Univeral Life-100:<F**>
Deposits 23,767 1,072 46,973 4,468
Withdrawals (2,830) (39) (7,916) (777)
Outstanding units, beginning of period 1,033 0 3,691 0
------- ------- ------- -------
Outstanding units, end of period 21,970 1,033 42,748 3,691
======= ======= ======= =======
General American Life Insurance Company
seed money:
Deposits 0 0 0 0 0 200,000
Withdrawals 0 0 0 0 0 0
Outstanding units, beginning of period 0 0 0 200,000 200,000 0
------- ------- ------- ------- ------- -------
Outstanding units, end of period 0 0 0 200,000 200,000 200,000
======= ======= ======= ======= ======= =======
<FN>
<F**>The Variable Universal Life 100 product was introduced in 1995, and the
first deposit was received on June 7, 1995.
</TABLE>
(continued)
<PAGE> 176
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 6 - ACCUMULATION UNIT ACTIVITY, (CONTINUED)
The following is a summary of the accumulation unit activity for the years
ended December 31, 1996, 1995, and 1994:
<TABLE>
<CAPTION>
SPECIAL EQUITY EQUITY-INCOME
FUND DIVISION FUND DIVISION
------------------------------- -------------------------------
1996 1995 1994 1996 1995 1994
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Variable Universal Life-95:
Deposits 67,217 94,909 119,434 100,383 143,543 139,841
Withdrawals (50,100) (88,190) (31,453) (61,252) (48,670) (28,685)
Outstanding units, beginning of period 168,023 161,304 73,323 248,776 153,903 42,747
------- ------- ------- ------- ------- -------
Outstanding units, end of period 185,140 168,023 161,304 287,907 248,776 153,903
======= ======= ======= ======= ======= =======
Variable General Select Plus:
Deposits 17,983 22,352 33,038 95,653 78,040 51,432
Withdrawals (16,026) (12,685) (1,030) (24,220) (34,513) (13,273)
Outstanding units, beginning of period 46,252 36,585 4,577 89,358 45,831 7,672
------- ------- ------- ------- ------- -------
Outstanding units, end of period 48,209 46,252 36,585 160,791 89,358 45,831
======= ======= ======= ======= ======= =======
Variable Univeral Life-100:<F**>
Deposits 35,395 4,498 167,806 20,481
Withdrawals (6,929) (725) (22,709) (1,718)
Outstanding units, beginning of period 3,773 0 18,763 0
------- ------- ------- -------
Outstanding units, end of period 32,239 3,773 163,860 18,763
======= ======= ======= =======
General American Life Insurance Company
seed money:
Deposits 0 0 100,000 0 0 0
Withdrawals 100,000 0 0 0 0 0
Outstanding units, beginning of period 100,000 100,000 0 0 0 0
------- ------- ------- ------- ------- -------
Outstanding units, end of period 0 100,000 100,000 0 0 0
======= ======= ======= ======= ======= =======
<FN>
<F**>The Variable Universal Life 100 product was introduced in 1995, and the
first deposit was received on June 7, 1995.
</TABLE>
(continued)
<PAGE> 177
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 6 - ACCUMULATION UNIT ACTIVITY, (CONTINUED)
The following is a summary of the accumulation unit activity for the years
ended December 31, 1996, 1995, and 1994:
<TABLE>
<CAPTION>
GROWTH OVERSEAS
FUND DIVISION FUND DIVISION
-------------------------------- -------------------------------
1996 1995 1994 1996 1995 1994
-------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Variable Universal Life-95:
Deposits 141,831 181,296 202,047 86,129 97,609 116,391
Withdrawals (101,041) (80,832) (42,320) (57,328) (42,775) (31,173)
Outstanding units, beginning of period 326,247 225,783 66,056 173,970 119,136 33,918
-------- ------- ------- ------- ------- -------
Outstanding units, end of period 367,037 326,247 225,783 202,771 173,970 119,136
======== ======= ======= ======= ======= =======
Variable General Select Plus:
Deposits 136,928 90,761 95,218 59,185 46,058 56,343
Withdrawals (38,737) (60,661) (19,705) (18,099) (24,367) (9,246)
Outstanding units, beginning of period 135,556 105,456 29,943 73,610 51,919 4,822
-------- ------- ------- ------- ------- -------
Outstanding units, end of period 233,747 135,556 105,456 114,696 73,610 51,919
======== ======= ======= ======= ======= =======
Variable Univeral Life-100:<F**>
Deposits 213,702 25,375 59,253 9,829
Withdrawals (38,214) (1,865) (12,929) (1,146)
Outstanding units, beginning of period 23,510 0 8,683 0
-------- ------- ------- -------
Outstanding units, end of period 198,998 23,510 55,007 8,683
======== ======= ======= =======
<FN>
<F**>The Variable Universal Life 100 product was introduced in 1995, and the
first deposit was received on June 7, 1995.
</TABLE>
(continued)
<PAGE> 178
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 6 - ACCUMULATION UNIT ACTIVITY, (CONTINUED)
The following is a summary of the accumulation unit activity for the year
ended December 31, 1996, and the period ended December 31, 1995:
<TABLE>
<CAPTION>
ASSET MANAGER HIGH INCOME GOLD AND NATURAL RESOURCES
FUND DIVISION FUND DIVISION FUND DIVISION
-------------------- -------------------- --------------------------
1996 1995<F*> 1996 1995<F*> 1996 1995<F*>
------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Variable Universal Life-95:
Deposits 1,196 331 18,576 6,217 6,777 135
Withdrawals (80) (4) (3,225) (237) (976) (9)
Outstanding units, beginning of period 327 0 5,980 0 126 0
------ ----- ------ ----- ------ ---
Outstanding units, end of period 1,443 327 21,331 5,980 5,927 126
====== ===== ====== ===== ====== ===
Variable General Select Plus:
Deposits 4,133 1,534 32,705 6,436 4,222 0
Withdrawals (1,450) (6) (2,369) (115) (92) 0
Outstanding units, beginning of period 1,528 0 6,321 0 0 0
------ ----- ------ ----- ------ ---
Outstanding units, end of period 4,211 1,528 36,657 6,321 4,130 0
====== ===== ====== ===== ====== ===
Variable Univeral Life-100:<F**>
Deposits 17,799 3,044 41,415 6,662 6,746 890
Withdrawals (3,550) (100) (8,355) (159) (1,660) (31)
Outstanding units, beginning of period 2,944 0 6,503 0 859 0
------ ----- ------ ----- ------ ---
Outstanding units, end of period 17,193 2,944 39,563 6,503 5,945 859
====== ===== ====== ===== ====== ===
<FN>
<F*> The Asset Manager Fund, High Income Fund, and Gold & Natural Resources Fund
began operations on July 19, May 24, and August 9, 1995, respectively.
<F**>The Variable Universal Life 100 product was introduced in 1995, and the
first deposit was received on June 7, 1995.
</TABLE>
<PAGE> 179
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT
Deposits into the Separate Account are used to purchase shares in the Capital
Company, Variable Insurance Products Funds, Variable Insurance Products Fund
II, or Van Eck Worldwide Insurance Trust. Net deposits represent the amounts
available for investment in such shares after deduction of sales charges,
premium taxes, administrative costs, insurance, underwriting and acquisition
expense, cost of insurance, and cost of optional benefits by rider. Realized
and unrealized capital gains (losses) have been excluded from net deposits
into the Separate Account because they have been included in increase
(decrease) in net assets resulting from operations in the Statements or
Changes in Net Assets.
Variable Universal Life-95:
- ---------------------------
<TABLE>
<CAPTION>
S & P 500 INDEX MONEY MARKET
FUND DIVISION<F*> FUND DIVISION
------------------------------------ -------------------------------------
1996 1995 1994 1996 1995 1994
---------- ----------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $1,063,999 $ 919,322 $ 712,059 $ 575,302 $ 2,001,421 $ 4,699,999
Transfers between fund divisions and
General American 139,650 472,868 (7,433) (728,445) (1,597,558) (3,475,334)
Surrenders and withdrawals (82,719) (1,380,995) (162,056) (107,442) (346,828) (274,623)
---------- ----------- --------- --------- ----------- -----------
Total gross deposits, transfers, and
surrenders between fund divisions 1,120,930 11,195 542,570 (260,585) 57,035 950,042
---------- ----------- --------- --------- ----------- -----------
Deductions:
Premium load charges 84,266 82,459 83,216 46,330 194,508 398,298
Cost of insurance and administrative expenses 430,221 435,147 418,871 105,165 329,711 819,312
---------- ----------- --------- --------- ----------- -----------
Total deductions 514,487 517,606 502,087 151,495 524,219 1,217,610
---------- ----------- --------- --------- ----------- -----------
Net deposits into (withdrawals from)
Separate Account $ 606,443 $ (506,411) $ 40,483 $(412,080) $ (467,184) $ (267,568)
========== =========== ========= ========= =========== ===========
<FN>
<F*>This fund was formerly known as the Equity Index Fund.
</TABLE>
(continued)
<PAGE> 180
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT,
(CONTINUED)
Variable Universal Life-95:
- ---------------------------
<TABLE>
<CAPTION>
BOND INDEX MANAGED EQUITY
FUND DIVISION FUND DIVISION
------------------------------------ ---------------------------------
1996 1995 1994 1996 1995 1994
---------- ----------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $ 321,458 $ 421,967 $ 496,821 $ 395,649 $ 465,063 $ 552,307
Transfers between fund divisions and
General American 20,627 62,346 (54,209) (120,443) (121,086) (157,877)
Surrenders and withdrawals (171,083) (1,586,477) (64,076) (83,215) (647,675) (144,799)
---------- ----------- --------- --------- --------- ---------
Total gross deposits, transfers, and
surrenders between fund divisions 171,002 (1,102,164) 378,536 191,991 (303,698) 249,631
---------- ----------- --------- --------- --------- ---------
Deductions:
Premium load charges 25,685 32,747 40,004 31,741 38,137 47,457
Cost of insurance and administrative expenses 119,034 206,477 207,751 187,326 234,100 270,685
---------- ----------- --------- --------- --------- ---------
Total deductions 144,719 239,224 247,755 219,067 272,237 318,142
---------- ----------- --------- --------- --------- ---------
Net deposits into (withdrawals from)
Separate Account $ 26,283 $(1,341,388) $ 130,781 $ (27,076) $(575,935) $ (68,511)
========== =========== ========= ========= ========= =========
</TABLE>
(continued)
<PAGE> 181
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT,
(CONTINUED)
Variable Universal Life-95:
- --------------------------
<TABLE>
<CAPTION>
ASSET ALLOCATION INTERNATIONAL EQUITY
FUND DIVISION FUND DIVISION
-------------------------------------- ---------------------------------
1996 1995 1994 1996 1995 1994
---------- ----------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $1,478,021 $ 1,361,239 $ 1,682,596 $ 657,882 $ 635,309 $ 608,033
Transfers between fund divisions and
General American (26,293) (10,959) 83,984 132,812 302,360 246,711
Surrenders and withdrawals (117,682) (1,175,619) (186,438) (102,036) (45,598) (44,700)
---------- ----------- ----------- --------- --------- ---------
Total gross deposits, transfers, and
surrenders between fund divisions 1,334,046 174,661 1,580,142 688,658 892,071 810,044
---------- ----------- ----------- --------- --------- ---------
Deductions:
Premium load charges 113,909 115,321 130,253 52,174 54,639 48,119
Cost of insurance and administrative expenses 467,810 559,425 604,611 215,112 211,351 197,926
---------- ----------- ----------- --------- --------- ---------
Total deductions 581,719 674,746 734,864 267,286 265,990 246,045
---------- ----------- ----------- --------- --------- ---------
Net deposits into (withdrawals from)
Separate Account $ 752,327 $ (500,085) $ 845,278 $ 421,372 $ 626,081 $ 563,999
========== =========== =========== ========= ========= =========
</TABLE>
(continued)
<PAGE> 182
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT,
(CONTINUED)
Variable Universal Life-95:
- --------------------------
<TABLE>
<CAPTION>
SPECIAL EQUITY EQUITY-INCOME
FUND DIVISION FUND DIVISION
-------------------------------------- --------------------------------------
1996 1995 1994 1996 1995 1994
----------- ---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $ 927,388 $ 713,819 $ 746,886 $ 1,399,658 $ 1,217,315 $ 783,048
Transfers between fund
divisions and General
American (325,567) (319,339) 562,587 10,733 565,593 832,642
Surrenders and withdrawals (74,752) (35,191) (53,731) (186,491) (37,075) (20,500)
Seed withdrawals <F*> (1,494,837) 0 0 0 0 0
----------- ---------- ----------- ----------- ----------- -----------
Total gross deposits, transfers,
and surrenders between fund divisions (967,768) 359,289 1,255,742 1,223,900 1,745,833 1,595,190
----------- ---------- ----------- ----------- ----------- -----------
Deductions:
Premium load charges 73,857 57,765 62,347 111,476 101,562 59,726
Cost of insurance and administrative
expenses 224,222 228,560 231,519 473,165 406,596 287,052
----------- ---------- ----------- ----------- ----------- -----------
Total deductions 298,079 286,325 293,866 584,641 508,158 346,778
----------- ---------- ----------- ----------- ----------- -----------
Net deposits into (withdrawals from)
Separate Account $(1,265,847) $ 72,964 $ 961,876 $ 639,259 $ 1,237,675 $ 1,248,412
=========== ========== =========== =========== =========== ===========
<FN>
<F*> Represents funds distributed to General American Life Insurance Company in repayment of seed money used to start
the Special Equity Fund in 1993.
</TABLE>
(continued)
<PAGE> 183
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT,
(CONTINUED)
Variable Universal Life-95:
- --------------------------
<TABLE>
<CAPTION>
GROWTH OVERSEAS
FUND DIVISION FUND DIVISION
-------------------------------------- ---------------------------------------
1996 1995 1994 1996 1995 1994
------------ ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $ 2,077,054 $ 1,771,614 $ 1,291,793 $ 1,128,054 $ 978,388 $ 795,752
Transfers between fund divisions and
General American (252,029) 348,401 1,055,928 (173,088) 156,839 677,421
Surrenders and withdrawals (286,745) (61,341) (16,988) (163,405) (33,911) (5,052)
----------- ----------- ----------- ----------- ----------- -----------
Total gross deposits, transfers, and
surrenders between fund divisions 1,438,280 2,058,674 2,330,733 791,561 1,101,316 1,468,121
----------- ----------- ----------- ----------- ----------- -----------
Deductions:
Premium load charges 165,735 145,300 104,397 89,820 79,076 65,305
Cost of insurance and administrative
expenses 610,838 588,684 439,902 289,700 317,551 278,619
----------- ----------- ----------- ----------- ----------- -----------
Total deductions 776,573 733,984 544,299 379,520 396,627 343,924
----------- ----------- ----------- ----------- ----------- -----------
Net deposits into Separate Account $ 661,707 $ 1,324,690 $ 1,786,434 $ 412,041 $ 704,689 $ 1,124,197
=========== =========== =========== =========== =========== ===========
</TABLE>
(continued)
<PAGE> 184
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT, (CONTINUED)
Variable Universal Life-95:
- --------------------------
<TABLE>
<CAPTION>
ASSET MANAGER HIGH INCOME GOLD & NATURAL RESOURCES
FUND DIVISION FUND DIVISION FUND DIVISION
-------------------- -------------------- ------------------------
1996 1995<F*> 1996 1995<F*> 1996 1995<F*>
------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $ 3,210 $ 24 $ 47,325 $ 6,373 $ 7,990 $ 1,007
Transfers between fund
divisions and General American 10,046 3,317 146,648 59,489 63,119 387
------- ------ -------- ------- ------- -------
Total gross deposits, transfers,
and surrenders between fund
divisions 13,256 3,341 193,973 65,862 71,109 1,394
------- ------ -------- ------- ------- -------
Deductions:
Premium load charges 248 3 3,747 499 595 81
Cost of insurance and administrative expenses 896 39 16,948 2,512 3,272 87
------- ------ -------- ------- ------- -------
Total deductions 1,144 42 20,695 3,011 3,867 168
------- ------ -------- ------- ------- -------
Net deposits into Separate Account $12,112 $3,299 $173,278 $62,851 $67,242 $ 1,226
======= ====== ======== ======= ======= =======
<FN>
<F*>The Asset Manager Fund, High Income Fund, and Gold & Natural Resources Fund
began operations on July 19, May 24, and August 9, 1995, respectively.
(continued)
</TABLE>
<PAGE> 185
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT, (CONTINUED)
Variable General Select Plus:
- -----------------------------
<TABLE>
<CAPTION>
S & P 500 INDEX MONEY MARKET
FUND DIVISION<F*> FUND DIVISION
---------------------------------- ----------------------------------------
1996 1995 1994 1996 1995 1994
---------- -------- -------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $ 475,955 $ 47,504 $453,179 $ 18,203,638 $ 3,333,097 $ 2,408,387
Transfers between fund divisions
and General American 5,512,487 182,278 116,566 (13,115,248) (1,350,435) (1,573,558)
Surrenders and withdrawals (28,210) (15,259) (1,470) (15,934) (10,440) 0
---------- -------- -------- ------------ ----------- -----------
Total gross deposits, transfers, and
surrenders between fund divisions 5,960,232 214,523 568,275 5,072,456 1,972,222 834,829
---------- -------- -------- ------------ ----------- -----------
Deductions:
Premium load charges 35,750 11,884 15,406 1,315,430 232,745 181,024
Cost of insurance and administrative
expenses 63,207 21,050 21,681 126,052 88,973 208,976
---------- -------- -------- ------------ ----------- -----------
Total deductions 98,957 32,934 37,087 1,441,482 321,718 390,000
---------- -------- -------- ------------ ----------- -----------
Net deposits into Separate Account $5,861,275 $181,589 $531,188 $ 3,630,974 $ 1,650,504 $ 444,829
========== ======== ======== ============ =========== ===========
<FN>
<F*> This fund was formerly known as the Equity Index Fund.
(continued)
</TABLE>
<PAGE> 186
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT, (CONTINUED)
Variable General Select Plus:
- -----------------------------
<TABLE>
<CAPTION>
BOND INDEX MANAGED EQUITY
FUND DIVISION FUND DIVISION
--------------------------------- ---------------------------------
1996 1995 1994 1996 1995 1994
---------- -------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $ 68,383 $ 9,129 $ 2,394 $131,764 $ 9,302 $ 3,900
Transfers between fund divisions
and General American 4,780,139 57,441 10,690 170,404 60,563 9,776
Surrenders and withdrawals (5,060) (12,416) 0 0 0 0
---------- -------- ------- -------- ------- -------
Total gross deposits, transfers, and
surrenders between fund divisions 4,843,462 54,154 13,084 302,168 69,865 13,676
---------- -------- ------- -------- ------- -------
Deductions:
Premium load charges 5,137 614 152 9,560 645 226
Cost of insurance and administrative
expenses 16,027 1,862 484 11,739 1,602 654
---------- -------- ------- -------- ------- -------
Total deductions 21,164 2,476 636 21,299 2,247 880
---------- -------- ------- -------- ------- -------
Net deposits into Separate Account $4,822,298 $ 51,678 $12,448 $280,869 $67,618 $12,796
========== ======== ======= ======== ======= =======
(continued)
</TABLE>
<PAGE> 187
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT, (CONTINUED)
Variable General Select Plus:
- -----------------------------
<TABLE>
<CAPTION>
ASSET ALLOCATION INTERNATIONAL EQUITY
FUND DIVISION FUND DIVISION
---------------------------------- ---------------------------------
1996 1995 1994 1996 1995 1994
-------- --------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $170,662 $ (34,323) $ 48,281 $181,044 $ 76,251 $ 92,237
Transfers between fund divisions
and General American (27,308) (131,408) (183,023) 32,353 76,707 141,207
Surrenders and withdrawals (26,276) (10,179) (22,704) (10,048) (4,465) (489)
-------- --------- --------- -------- -------- --------
Total gross deposits, transfers, and
surrenders between fund divisions 117,078 (175,910) (157,446) 203,349 148,493 232,955
-------- --------- --------- -------- -------- --------
Deductions:
Premium load charges 12,611 6,512 1,704 13,690 7,697 6,884
Cost of insurance and administrative
expenses 52,342 39,594 37,096 23,940 16,684 14,570
-------- --------- --------- -------- -------- --------
Total deductions 64,953 46,106 38,800 37,630 24,381 21,454
-------- --------- --------- -------- -------- --------
Net deposits into (withdrawals from)
Separate Account $ 52,125 $(222,016) $(196,246) $165,719 $124,112 $211,501
======== ========= ========= ======== ======== ========
(continued)
</TABLE>
<PAGE> 188
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT, (CONTINUED)
Variable General Select Plus:
- -----------------------------
<TABLE>
<CAPTION>
SPECIAL EQUITY EQUITY-INCOME
FUND DIVISION FUND DIVISION
-------------------------------- ----------------------------------
1996 1995 1994 1996 1995 1994
-------- -------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $191,049 $ 81,787 $206,659 $ 673,157 $285,714 $170,100
Transfers between fund divisions
and General American (58,467) 76,580 181,915 638,476 446,973 312,672
Surrenders and withdrawals (52,717) (11,584) (1,182) (10,403) (62,763) 0
-------- -------- -------- ---------- -------- --------
Total gross deposits, transfers, and
surrenders between fund divisions 79,865 146,783 387,392 1,301,230 669,924 482,772
-------- -------- -------- ---------- -------- --------
Deductions:
Premium load charges 13,676 12,214 15,456 53,024 20,534 12,452
Cost of insurance and administrative
expenses 26,565 21,651 24,374 112,967 58,881 32,594
-------- -------- -------- ---------- -------- --------
Total deductions 40,241 33,865 39,830 165,991 79,415 45,046
-------- -------- -------- ---------- -------- --------
Net deposits into Separate Account $ 39,624 $112,918 $347,562 $1,135,239 $590,509 $437,726
======== ======== ======== ========== ======== ========
(continued)
</TABLE>
<PAGE> 189
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT, (CONTINUED)
Variable General Select Plus:
- -----------------------------
<TABLE>
<CAPTION>
GROWTH OVERSEAS
FUND DIVISION FUND DIVISION
---------------------------------- --------------------------------
1996 1995 1994 1996 1995 1994
---------- --------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $ 899,999 $ 392,035 $372,501 $385,284 $154,142 $191,494
Transfers between fund divisions
and General American 888,367 225,243 514,277 271,694 200,230 399,196
Surrenders and withdrawals (48,837) (161,933) (1,272) (45,712) (55,346) (583)
---------- --------- -------- -------- -------- --------
Total gross deposits, transfers, and
surrenders between fund divisions 1,739,529 455,345 885,506 611,266 299,026 590,107
---------- --------- -------- -------- -------- --------
Deductions:
Premium load charges 69,694 34,454 27,464 29,621 13,147 14,571
Cost of insurance and administrative
expenses 136,072 82,849 56,403 46,151 31,516 27,352
---------- --------- -------- -------- -------- --------
Total deductions 205,766 117,303 83,867 75,772 44,663 41,923
---------- --------- -------- -------- -------- --------
Net deposits into Separate Account $1,533,763 $ 338,042 $801,639 $535,494 $254,363 $548,184
========== ========= ======== ======== ======== ========
(continued)
</TABLE>
<PAGE> 190
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
<TABLE>
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT, (CONTINUED)
Variable General Select Plus:
- -----------------------------
<CAPTION>
ASSET MANAGER HIGH INCOME GOLD AND NATURAL RESOURCES
FUND DIVISION FUND DIVISION FUND DIVISION
-------------------- -------------------- --------------------------
1996 1995<F*> 1996 1995<F*> 1996 1995<F*>
-------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $ 8,754 $ 255 $ 91,307 $ 603 $ 1,869 $ 0
Transfers between fund divisions
and General American 26,425 15,583 278,491 68,178 45,785 0
Surrenders and withdrawals (2,067) 0 0 0 0 0
-------- --------- -------- --------- -------- ---------
Total gross deposits, transfers, and
surrenders between fund divisions 33,112 15,838 369,798 68,781 47,654 0
-------- --------- -------- --------- -------- ---------
Deductions:
Premium load charges 670 10 7,156 37 175 0
Cost of insurance and administrative expenses 1,631 56 12,823 1,198 1,041 0
-------- --------- -------- --------- -------- ---------
Total deductions 2,301 66 19,979 1,235 1,216 0
-------- --------- -------- --------- -------- ---------
Net deposits into Separate Account $ 30,811 $ 15,772 $349,819 $ 67,546 $ 46,438 $ 0
======== ========= ======== ========= ======== =========
<FN>
<F*>The Asset Manager Fund, High Income Fund, and Gold & Natural Resources Fund
began operations on July 19, May 24, and August 9, 1995, respectively.
(continued)
</TABLE>
<PAGE> 191
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
<TABLE>
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT, (CONTINUED)
Variable Universal Life-100:<F*>
- --------------------------------
<CAPTION>
S & P 500 INDEX MONEY MARKET BOND INDEX
FUND DIVISION FUND DIVISION FUND DIVISION
----------------------- ------------------------ ------------------------
1996 1995 1996 1995 1996 1995
----------- ---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $ 606,419 $ 16,519 $ 7,989,872 $ 2,385,983 $ 58,468 $ 2,634
Transfers between fund divisions
and General American 1,285,071 172,340 (6,898,282) (1,031,031) 257,285 16,903
Surrenders and withdrawals (12,850) 0 (242) 0 (2,419) 0
----------- ---------- ----------- ----------- ----------- -----------
Total gross deposits, transfers, and
surrenders between fund divisions 1,878,640 188,859 1,091,348 1,354,952 313,334 19,537
----------- ---------- ----------- ----------- ----------- -----------
Deductions:
Premium load charges 20,294 458 250,193 73,630 1,906 79
Cost of insurance and administrative expenses 258,742 9,056 502,668 124,621 31,767 862
----------- ---------- ----------- ----------- ----------- -----------
Total deductions 279,036 9,514 752,861 198,251 33,673 941
----------- ---------- ----------- ----------- ----------- -----------
Net deposits into Separate Account $ 1,599,604 $ 179,345 $ 338,487 $ 1,156,701 $ 279,661 $ 18,596
=========== ========== =========== =========== =========== ===========
<FN>
<F*>The Variable Universal Life 100 product was introduced in 1995, and the
first deposit was received on June 7, 1995.
(continued)
</TABLE>
<PAGE> 192
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
<TABLE>
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT, (CONTINUED)
Variable Universal Life-100:<F*>
- --------------------------------
<CAPTION>
MANAGED EQUITY ASSET ALLOCATION INTERNATIONAL EQUITY
FUND DIVISION FUND DIVISION FUND DIVISION
----------------------- ------------------------ ------------------------
1996 1995 1996 1995 1996 1995
----------- ---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $ 102,809 $ 1,658 $ 91,429 $ 926 $ 202,195 $ 20,494
Transfers between fund divisions
and General American 120,203 21,497 233,391 12,569 315,663 27,674
Surrenders and withdrawals (413) 0 (906) 0 (2,005) 0
----------- ---------- ----------- ----------- ----------- -----------
Total gross deposits, transfers, and
surrenders between fund divisions 222,599 23,155 323,914 13,495 515,853 48,168
----------- ---------- ----------- ----------- ----------- -----------
Deductions:
Premium load charges 3,442 48 3,162 30 6,724 656
Cost of insurance and administrative expenses 36,945 2,150 38,520 488 79,260 8,108
----------- ---------- ----------- ----------- ----------- -----------
Total deductions 40,387 2,198 41,682 518 85,984 8,764
----------- ---------- ----------- ----------- ----------- -----------
Net deposits into Separate Account $ 182,212 $ 20,957 $ 282,232 $ 12,977 $ 429,869 $ 39,404
=========== ========== =========== =========== =========== ===========
<FN>
<F*>The Variable Universal Life 100 product was introduced in 1995, and the
first deposit was received on June 7, 1995.
(continued)
</TABLE>
<PAGE> 193
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
<TABLE>
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT, (CONTINUED)
Variable Universal Life-100:<F*>
- --------------------------------
<CAPTION>
SPECIAL EQUITY EQUITY-INCOME GROWTH OVERSEAS
FUND DIVISION FUND DIVISION FUND DIVISION FUND DIVISION
------------------- ---------------------- ---------------------- --------------------
1996 1995 1996 1995 1996 1995 1996 1995
--------- -------- ----------- --------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total gross deposits $ 232,270 $ 18,525 $ 914,095 $ 44,385 $ 1,361,304 $ 50,500 $ 373,593 $ 25,338
Transfers between fund divisions
and General American 228,709 34,407 1,521,792 219,488 1,759,062 304,735 307,488 82,196
Surrenders and withdrawals (5,591) 0 (7,812) 0 (38,619) 0 (13,206) 0
--------- -------- ----------- --------- ----------- --------- --------- ---------
Total gross deposits, transfers, and
surrenders between fund divisions 455,388 52,932 2,428,075 263,873 3,081,747 355,235 667,875 107,534
--------- -------- ----------- --------- ----------- --------- --------- ---------
Deductions:
Premium load charges 7,772 598 29,267 1,400 44,819 1,424 11,611 762
Cost of insurance and administrative
expenses 82,326 8,384 303,902 21,879 472,178 25,541 112,510 12,165
--------- -------- ----------- --------- ----------- --------- --------- ---------
Total deductions 90,098 8,982 333,169 23,279 516,997 26,965 124,121 12,927
--------- -------- ----------- --------- ----------- --------- --------- ---------
Net deposits into Separate Account $ 365,290 $ 43,950 $ 2,094,906 $ 240,594 $ 2,564,750 $ 328,270 $ 543,754 $ 94,607
========= ======== =========== ========= =========== ========= ========= =========
<FN>
<F*>The Variable Universal Life 100 product was introduced in 1995, and the
first deposit was received on June 7, 1995.
(continued)
</TABLE>
<PAGE> 194
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
<TABLE>
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT, (CONTINUED)
Variable Universal Life-100:<F**>
- ---------------------------------
<CAPTION>
ASSET MANAGER HIGH INCOME GOLD AND NATURAL RESOURCES
FUND DIVISION FUND DIVISION FUND DIVISION
-------------------- -------------------- --------------------------
1996 1995<F*> 1996 1995<F*> 1996 1995<F*>
--------- -------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $ 50,502 $ 964 $ 158,842 $ 5,221 $ 22,003 $ 193
Transfers between fund divisions
and General American 137,452 30,404 297,097 65,982 53,910 8,300
Surrenders and withdrawals (2,165) 0 (11,551) 0 (5,154) 0
--------- -------- --------- -------- -------- --------
Total gross deposits, transfers, and
surrenders between fund divisions 185,789 31,368 444,388 71,203 70,759 8,493
--------- -------- --------- -------- -------- --------
Deductions:
Premium load charges 1,674 28 4,982 174 712 8
Cost of insurance and administrative expenses 24,175 1,033 57,557 1,693 13,421 297
--------- -------- --------- -------- -------- --------
Total deductions 25,849 1,061 62,539 1,867 14,133 305
--------- -------- --------- -------- -------- --------
Net deposits into Separate Account $ 159,940 $ 30,307 $ 381,849 $ 69,336 $ 56,626 $ 8,188
========= ======== ========= ======== ======== ========
<FN>
<F*>The Asset Manager Fund, High Income Fund, and Gold & Natural Resources Fund
began operations on July 19, May 24, and August 9, 1995, respectively.
<F**>The Variable Universal Life 100 product was introduced in 1995, and the
first deposit was received on June 7, 1995.
</TABLE>
<PAGE> 195
LEGAL COUNSEL
Stephen E. Roth
Sutherland, Asbill & Brennan, Washington, D.C.
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
If distributed to prospective investors, this report must be preceded or
accompanied by a current prospectus.
The prospectus is incomplete without reference to the financial data
contained in the annual report.
<PAGE> 196
Independent Auditors' Report
The Board of Directors and Policyholders
General American Life Insurance Company:
We have audited the accompanying consolidated balance sheets of General
American Life Insurance Company and subsidiaries as of December 31, 1996 and
1995, and the related consolidated statements of operations, policyholders'
surplus, and cash flows for each of the years in the three-year period ended
December 31, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of General American Life Insurance Company and subsidiaries as of December
31, 1996 and 1995, and the results of their consolidated operations and their
consolidated cash flows for each of the years in the three-year period ended
December 31, 1996, in conformity with generally accepted accounting
principles.
As discussed in Note 1 to the consolidated financial statements, the
Company adopted Statement of Financial Accounting Standards No. 120,
Accounting and Reporting by Mutual Life Insurance Enterprises and by
Insurance Enterprises for Certain Long-Duration Participating Contracts in
1996.
/s/ KPMG Peat Marwick LLP
St. Louis, Missouri
March 5, 1997
[PHOTO]
[PHOTO]
<PAGE> 197
Consolidated Balance Sheets
(in thousands)
<TABLE>
<CAPTION>
As of December 31
Assets 1996 1995
- --------------------------------------------------
<S> <C> <C>
Fixed maturities:
Available-for-sale, at fair value $ 6,758,309 5,621,482
Mortgage loans, net 2,273,627 1,709,115
Real estate, net 203,767 210,170
Equity securities, at fair value 20,905 17,087
Policy loans 1,917,861 1,707,237
Short-term investments 55,594 36,141
Other invested assets 183,612 150,885
------------ ----------
Total investments 11,413,675 9,452,117
Cash and cash equivalents 142,724 144,897
Accrued investment income 148,419 132,144
Reinsurance recoverables 3,515,640 3,104,931
Deferred policy acquisition costs 652,251 526,939
Other assets 406,943 383,975
Separate account assets 2,833,258 2,182,101
------------ ----------
Total assets $ 19,112,910 15,927,104
============ ==========
Liabilities and Policyholders' Surplus
- -------------------------------------------------
Policy and contract liabilities:
Future policy benefits $ 4,238,033 3,907,522
Policyholder account balances:
Universal life 1,419,184 1,198,298
Annuities 4,300,070 4,314,642
Pension funds 3,306,351 1,798,514
Policy and contract claims 352,433 337,781
Dividends payable to policyholders 103,019 90,323
------------ ----------
Total policy and contract liabilities 13,719,090 11,647,080
Amounts payable to reinsurers 393,657 149,735
Notes payable 295,614 208,118
Other liabilities and accrued expenses 670,109 581,416
Deferred tax liability 43,277 50,391
Separate account liabilities 2,810,907 2,168,933
------------ ----------
Total liabilities 17,932,654 14,805,673
Minority interests 182,469 164,348
Policyholders' surplus:
Unassigned funds 983,222 893,887
Foreign currency translation adjustments (35,802) (34,259)
Unrealized gain on investments, net of taxes 50,367 97,455
------------ ----------
Total policyholders' surplus 997,787 957,083
------------ ----------
Total liabilities and policyholders' surplus $ 19,112,910 15,927,104
============ ==========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 198
Consolidated Statements of Operations
(in thousands)
<TABLE>
<CAPTION>
Years ended December 31
Revenues 1996 1995 1994
- -------------------------------------------------
<S> <C> <C> <C>
Insurance premiums and other considerations $ 1,623,228 1,498,013 1,597,814
Net investment income 790,897 669,443 551,471
Ceded commissions 27,538 14,908 31,208
Other income 274,277 176,662 150,305
Net realized investment gains (losses) 24,531 280,756 (50,066)
------------ --------- ---------
Total revenues 2,740,471 2,639,782 2,280,732
Benefits and Expenses
- -------------------------------------------------
Policy benefits 934,369 831,811 955,683
Interest credited to policyholder account balances 301,678 227,512 167,625
------------ --------- ---------
Total policyholder benefits 1,236,047 1,059,323 1,123,308
Dividends to policyholders 171,904 264,658 141,546
Policy acquisition costs 143,094 138,811 105,288
Other insurance and operating expenses 1,026,412 790,266 808,317
------------ --------- ---------
Total benefits and expenses 2,577,457 2,253,058 2,178,459
------------ --------- ---------
Income before provision for income taxes
and minority interest 163,014 386,724 102,273
------------ --------- ---------
Provision for income taxes:
Current 45,902 115,769 61,508
Deferred 13,992 29,411 (8,839)
------------ --------- ---------
Total provision for income taxes 59,894 145,180 52,669
------------ --------- ---------
Income before minority interest 103,120 241,544 49,604
Minority interest in earnings of consolidated
subsidiaries (19,888) (17,512) (21,732)
------------ --------- ---------
Net income $ 83,232 224,032 27,872
============ ========= =========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 199
Consolidated Statements of Policyholders' Surplus
(in thousands)
<TABLE>
<CAPTION>
Years ended December 31
Foreign Unrealized
currency gain (loss) on Total
Unassigned translation investments, policyholders'
funds adjustments net of taxes surplus
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1993 $ 641,315 (36,219) (356) 604,740
Implementation of SFAS No. 115 79,152 79,152
Net income 27,872 27,872
Foreign currency translation adjustments (3,948) (3,948)
Change in unrealized gain (loss) on
investments, net of tax (144,205) (144,205)
Other, net (2,468) (2,468)
----------------------------------------------------------------
Balance at December 31, 1994 666,719 (40,167) (65,409) 561,143
Net income 224,032 224,032
Foreign currency translation adjustments 5,908 5,908
Change in unrealized gain (loss) on
investments, net of tax 162,864 162,864
Other, net 3,136 3,136
---------------------------------------------------------------
Balance at December 31, 1995 893,887 (34,259) 97,455 957,083
Net income 83,232 83,232
Foreign currency translation adjustments (1,543) (1,543)
Change in unrealized gain (loss) on
investments, net on tax (47,088) (47,088)
Other, net 6,103 6,103
---------------------------------------------------------------
Balance at December 31, 1996 $ 983,222 (35,802) 50,367 997,787
===============================================================
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 200
Consolidated Statements of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
Years ended December 31
Cash flows from operating activities 1996 1995 1994
- -------------------------------------------------
<S> <C> <C> <C>
Net income $ 83,232 224,032 27,872
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Change in:
Accrued investment income (16,275) (22,202) (25,489)
Reinsurance recoverables (410,709) 262,054 (92,099)
Deferred policy acquisition costs (87,249) (23,141) (47,268)
Other assets (16,248) (67,650) 8,401
Future policy benefits 330,511 399,261 466,069
Policy and contract claims 14,652 74,173 54,108
Other liabilities and accrued expenses 315,667 184,756 (222,015)
Deferred income taxes 14,505 29,411 (8,839)
Policyholder considerations (144,748) (140,475) (113,557)
Interest credited to policyholder account balances 301,678 227,512 167,625
Amortization and depreciation 28,375 19,196 19,116
Net realized investment (gains) losses (24,531) (280,756) 50,066
Other, net (14,554) 2,488 12,527
----------- ----------- -----------
Net cash provided by operating activities 374,306 888,659 296,517
----------- ----------- -----------
Cash flows from investing activities
- -------------------------------------------------
Proceeds from investments sold or redeemed:
Fixed maturities available-for-sale 1,822,169 1,482,122 816,952
Mortgage loans 182,650 206,520 135,503
Equity securities 13,427 468,143 38,868
Short-term and other invested assets 84,748 414,102 59,429
Cost of investments purchased in:
Fixed maturities available-for-sale (3,428,943) (3,010,016) (1,245,700)
Fixed maturities held-to-maturity - (3,068) (45,263)
Equity securities (39,553) (89,062) (16,822)
Short-term and other invested assets (97,426) (16,471) (17,316)
Mortgage loan originations (593,438) (431,043) (309,433)
Maturity of fixed maturities held-to-maturity - 6,365 9,002
Maturity of fixed maturities available-for-sale 225,087 75,518 62,716
Increase in policy loans, net (210,624) (211,526) (168,547)
Investments in subsidiaries (4,807) (126,363) -
----------- ----------- -----------
Net cash used in investing activities (2,046,710) (1,234,779) (680,611)
----------- ----------- -----------
Cash flows from financing activities
- -------------------------------------------------
Net deposits 1,558,153 259,695 445,279
Issuance of debt 106,903 100,219 107,000
Repayment of debt (19,497) (4,800) (37,285)
Dividends (1,832) (4,376) (4,124)
Other, net 26,770 17,498 21,563
----------- ----------- -----------
Net cash provided by financing activities 1,670,497 368,236 532,433
----------- ----------- -----------
Effect of exchange rate changes (266) 5,908 (7,922)
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents (2,173) 28,024 140,417
Cash and cash equivalents at beginning of year 144,897 116,873 (23,544)
----------- ----------- -----------
Cash and cash equivalents at end of year $ 142,724 144,897 116,873
=========== =========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 201
Notes to Consolidated Financial Statements
(1) Basis of Presentation and Summary of Significant Accounting Policies
General American Life Insurance Company (General American or the Company) is
a mutual life insurance company originally incorporated as a stock life
insurance company under the laws of Missouri in 1933, which began operations
as a mutual company in 1936. The consolidated financial statements include
the assets, liabilities, and results of operations of General American and
its wholly owned subsidiaries, General American Holding Company, a
non-insurance holding company; Cova Corporation, an insurance holding
company; Paragon Life Insurance Company; Security Equity Life Insurance
Company; General Life Insurance Company of America; General Life Insurance
Company and its 63 percent owned subsidiary, Reinsurance Group of America,
Incorporated (RGA), an insurance holding company. All significant intercompany
balances and transactions have been eliminated.
The Company's principal lines of business, conducted through General American
or one of its subsidiaries, are: Individual Life Insurance, Annuities, Group
Life and Health Insurance, Asset Management, and Reinsurance. General
American distributes its products and services primarily through a nationwide
network of general agencies, independent brokers, and group sales and claims
offices. General American (including its subsidiaries) is licensed to do
business in all fifty states, twelve Canadian provinces, Puerto Rico, and the
District of Columbia. Through its subsidiaries, the Company has operations
in Europe, Pacific Rim countries, and Latin America.
In January 1996, General American and Security Mutual Life Insurance Company
(a New York mutual company) entered into a strategic alliance agreement to
market life insurance products more efficiently and to achieve long-term
growth objectives. The agreement includes sharing expertise such as
consulting services, technology sharing, and investment advisory services.
The accompanying consolidated financial statements are prepared on the basis
of generally accepted accounting principles (GAAP). The preparation of
financial statements requires the use of estimates by management which affect
the amounts reflected in the financial statements. Actual results could
differ from those estimates. Accounts that the Company deems to be sensitive
to changes in estimates include future policy benefits and policy and
contract claims, deferred acquisition costs, as well as certain investments.
In April 1993, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 40, Applicability of Generally Accepted Accounting
Principles to Mutual Life Insurance and Other Enterprises. This
interpretation requires mutual life insurance enterprises which have
traditionally issued statutory based financial statements that have been
reported to be in conformity with GAAP, to apply all authoritative accounting
pronouncements in preparing those statements, effective for periods beginning
after December 31, 1994. In January 1995, the FASB issued Statement of
Financial Accounting Standards No. 120 (SFAS 120), Accounting and Reporting
by Mutual Life Insurance Enterprises and by Insurance Enterprises for Certain
Long Duration Participating Contracts, and the American Institute of
Certified Public Accountants (AICPA) issued Statement of Position 95-1 (SOP
95-1), Accounting for Certain Insurance Activities of Mutual Life
Enterprises, which together define the GAAP model for mutual life insurance
enterprises. These pronouncements define the enterprises and method of
accounting for certain participating life insurance contracts of mutual and
stock life insurance companies that meet the criteria defined in SOP 95-1.
SFAS 120 also deferred implementation of Interpretation No. 40 to be
concurrent with implementation of SFAS 120. SFAS 120 and SOP 95-1 are
effective for financial statements issued for fiscal years beginning after
December 15, 1995. The effect of initially applying this new accounting
model has been reported retroactively through restatement of all periods
presented. The cumulative effect was recorded effective January 1, 1993.
The significant accounting policies of the Company are as follows:
Recognition of Policy Revenue and Related Expenses
For traditional life policies, including participating businesses, premiums
are recognized when due, less allowances for estimated uncollectible
balances. For limited payment contracts, net premiums are recorded as
revenue, and the difference between the gross premium and the net premium is
deferred and recognized in income in a constant relationship to insurance in
force over the estimated policy life.
For universal life and annuity products, contract charges for mortality,
surrender, and expense, other than front-end expense charges, are reported as
income when charged to policyholders' accounts. Expenses consist primarily
of benefit payments in excess of policyholder account values and interest
credited to policyholder accounts. Profits are recognized over the life of
the universal life type contracts through amortization of deferred policy
acquisition costs in relation to the present value of estimated gross profits
from mortality, interest, surrender, and expense charges.
Invested Assets
Fixed Maturity and Equity Securities: Investment securities are accounted for
in accordance with SFAS 115, Accounting for Certain Investments in Debt and
Equity Securities. SFAS 115 requires debt and equity securities to be
classified into categories of available-for-sale, trading securities, or
held-to-maturity depending on an entity's ability and positive intent to hold
a security to maturity. Fixed maturities held-to-maturity, including
mortgage-backed and asset-backed securities, are reported at amortized cost
and are classified as such based on the Company's ability and positive intent
to hold such securities to maturity. Fixed maturities available-for-sale are
reported at fair value and are so classified based on the possibility that
such securities could be sold prior to maturity if that action enables the
Company to execute its investment philosophy and appropriately match
investment results to operating and liquidity needs. Effective December 31,
1995, the Company reclassified the entire portfolio of fixed maturities
held-to-maturity to available-for-sale in accordance with the FASB's Guide to
Implementation of Statement 115 on Accounting for Certain Investments in Debt
and Equity Securities, which was issued during November 1995. This
reclassification gives the Company an added measure of flexibility in
managing credit quality in coordination with appropriate asset/liability
matching. Equity securities are carried at fair value.
Realized gains or losses on the sale of securities are determined on the
basis of specific identification and include the impact of any related
amortization of premiums or accretion of discounts which is generally
computed consistent with the interest method. Unrealized gains and losses
are recorded, net of related income tax effects, in a separate component of
policyholders' surplus.
<PAGE> 202
Mortgage Loans: Mortgage loans on real estate are stated at an unpaid
principal balance, net of unamortized discounts and valuation allowances.
The valuation allowances on mortgage loans are based on losses expected by
management to be realized on transfers of mortgage loans to real estate, on
the disposition or settlement of mortgage loans and on mortgage loans which
management believes will not be collectible in full. It is the Company's
policy to discontinue the accrual of interest on mortgage loans which are
more than 90 days delinquent. Interest received on nonaccrual mortgage loans
is generally reported as interest income.
Policy Loans, Real Estate and Other Invested Assets: Policy loans are carried
at an unpaid principal balance and are generally secured. Investment real
estate which the Company has the intent to hold for the production of income
is carried at depreciated cost plus capital additions, net of writedowns for
other than temporary declines in fair value and net of encumbrances.
Properties held for sale (primarily acquired through foreclosure) are carried
at the lower of depreciated cost (fair value at foreclosure plus capital
additions less accumulated depreciation and encumbrances) or fair value less
estimated selling costs. Adjustments to carrying value of properties held
for sale are recorded in a valuation reserve when the fair value less
estimated selling costs is below depreciated cost. The accumulated
depreciation and encumbrances on real estate amounted to $53.0 million and
$55.2 million at December 31, 1996 and 1995, respectively. Direct valuation
allowances amounted to $15.7 million and $25.4 million at December 31, 1996
and 1995, respectively. Other invested assets are recorded at amortized cost
less allowances for other than temporary declines in value.
Short-term Investments: Short-term investments, consisting primarily of money
market instruments and other debt issues purchased with a maturity of less
than a year, are carried at amortized cost, which approximates fair value.
Invested Asset Impairment and Valuation Allowances: Invested assets are
considered impaired when General American determines that collection of all
amounts due under the contractual terms is doubtful. General American
adjusts invested assets to their estimated net realizable value at the point
at which it determines an impairment is other than temporary. In addition,
General American has established valuation allowances for mortgage loans and
other invested assets. Valuation allowances for other than temporary
impairments in value are netted against the asset categories to which they
apply. Additions to valuation allowances are included in net investment
income.
Cash and Cash Equivalents: For purposes of reporting cash flows, cash and
cash equivalents represent cash, demand deposits and highly liquid short-term
investments, which include U.S. Treasury bills, commercial paper, and
repurchase agreements with original or remaining maturities of 90 days or
less when purchased.
Investment Income
Bond premium and discounts are amortized into income using the scientific
yield method over the term of the security. Amortization of the premium or
discount on mortgage-backed securities is recognized using a scientific yield
method which considers the estimated timing and amount of prepayments of
underlying mortgage loans. Actual prepayment experience is periodically
reviewed and effective yields are recalculated when differences arise between
the prepayments originally anticipated and the actual prepayments received
and currently anticipated. When such differences occur, the net investment
in the mortgage-backed security is adjusted to the amount that would have
existed had the new effective yield been applied since the acquisition of the
security with a corresponding charge or credit to interest income (the
"retrospective method").
Policy and Contract Liabilities
For traditional life insurance policies, future policy benefits and dividend
liabilities are computed using a net level premium method with actuarial
assumptions as to mortality, persistency, and interest established at policy
issue. Assumptions established at policy issue as to mortality and
persistency are based on industry standards and General American's historical
experience which, together with interest and expense assumptions, provide a
margin for adverse deviation. Interest rate assumptions generally range from
2.5 percent to 11.0 percent. When the liabilities for future policy benefits
plus the present value of expected future gross premiums are insufficient to
provide for expected policy benefits and expenses, unrecoverable deferred
policy acquisition costs are written off and thereafter a premium deficiency
reserve is established through a charge to earnings.
For participating policies, future policy benefits are computed using a net
level premium method based on the guaranteed cash value basis for mortality
and interest. Mortality rates are similar to those used for statutory
valuation purposes. Interest rates generally range from 2.5 percent to 6.0
percent. Dividend liabilities are established by taking the pro rata portion
of the following policy year dividend earned but unpaid. When the liabilities
less unamortized acquisition expenses are insufficient to provide for future
policy benefits and expenses under best estimate assumptions, the
unrecoverable deferred policy acquisition costs are written off and, if
necessary, an additional reserve established.
Policyholder account balances for universal life and annuity policies are
equal to the policyholder account value before deduction of any surrender
charges. The policyholder account value represents an accumulation of gross
premium payments plus credited interest less expense and mortality charges
and withdrawals. These expense charges are recognized in income as earned.
Weighted average interest crediting rates were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Universal life 6.00-7.56 % 6.00-7.87 % 6.00-7.36 %
Annuities 5.70-6.00 % 5.69-6.29 % 5.87 %
</TABLE>
Accident and health benefits for active lives are calculated using the net
level premium method and assumptions as to future morbidity, withdrawals, and
interest which provide a margin for adverse deviation. Benefit liabilities
for disabled lives are calculated using the present value of benefits method
and experience assumptions for claim termination, expense, and interest which
also provide a margin for adverse deviation.
Policy and Contract Claims
General American establishes a liability for unpaid claims based on estimates
of the ultimate cost of claims incurred, which is comprised of aggregate case
basis estimates, average claim costs for reported claims, and estimates of
unreported losses based on past experience. Policy and contract claims
include a provision for both life and accident and health claims. Management
believes the liabilities for unpaid claims are adequate to cover the ultimate
liability; however, due to the underlying risks and the high degree of
uncertainty associated with the determination of the liability for unpaid
claims, the amounts which will ultimately be paid to settle these liabilities
cannot be determined precisely and may vary from the estimated amount
included in the consolidated balance sheets.
<PAGE> 203
Deferred Policy Acquisition Costs
The costs of acquiring new business, which vary with and are primarily
related to the production of new business, have been deferred to the extent
that such costs are deemed recoverable from future estimated gross profits of
the underlying business. Such costs include commissions, premium taxes, as
well as certain other costs of policy issuance and underwriting.
For limited payment and other nonparticipating traditional life insurance
policies, the deferred policy acquisition costs are amortized in proportion
to the ratio of the expected annual premium revenue to the expected total
premium revenue. Expected future premium revenue is estimated with the same
assumptions used for computing liabilities for future policy benefits for
these policies.
For participating life insurance, universal life, and annuity type contracts,
the deferred policy acquisition costs are amortized over a period of not more
than thirty years in relation to the present value of estimated gross margins
arising from estimates of mortality, interest, expense, and surrender
experience.
The average rates of assumed interest used in estimated gross margins were as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Participating life 8.70 % 7.81 % 6.80 %
Universal life 6.00-8.20 % 6.00-7.56 % 7.45-7.75 %
Annuities 7.83 % 8.04 % 7.31 %
</TABLE>
The estimates of expected gross margins are evaluated regularly and are
revised if actual experience or other evidence indicates that revision is
appropriate. Upon revision, total amortization recorded to date is adjusted
by a charge or credit to current earnings. Under SFAS 115, deferred policy
acquisition costs are adjusted for the impact on estimated gross margins of
net unrealized gains and losses on securities.
Reinsurance
In the normal course of business, the Company seeks to limit its exposure to
loss on any single insured by ceding risks to other insurance enterprises or
reinsurers under various types of contracts including coinsurance and excess
coverage. The Company's retention level per individual life ranges between
$.1 million and $2.5 million depending on the entity writing the policy.
Reinsurance activities are accounted for consistent with terms of the risk
transfer reinsurance contracts. Premiums ceded to other companies have been
reported as a reduction of premiums. Amounts applicable to reinsurance ceded
for future policy benefits and claim liabilities have been reported as assets
for these items, and commissions and expense allowances received in
connection with reinsurance ceded have been accounted for in income as
earned. Reinsurance does not relieve the Company from its primary
responsibility to meet claim obligations. The Company evaluates the
financial conditions of its reinsurers annually.
Federal Income Taxes
General American and certain of its U.S. subsidiaries file a consolidated
federal income tax return. In order to consolidate, General American must
possess both 80 percent of the total voting power and 80 percent of the value
of the stock of the subsidiary. Further, even if it meets the 80 percent
test, any acquired life insurance company is not included in the consolidated
return until the acquired company has been a member of the group for five
years. Prior to satisfying the five-year requirement, the subsidiary files a
separate federal return. RGA Barbados also files a U.S. tax return. The
Company's Canadian, Argentine, Australian, Chilean, Mexican, and Spanish
subsidiaries are taxed under applicable local statutes.
The Company uses the asset and liability method to record deferred income
taxes. Accordingly, deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases, using enacted tax rates.
Separate Account Business
The assets and liabilities of the separate accounts represent segregated
funds administered and invested by the Company for purposes of funding
variable life insurance and annuity contracts for the exclusive benefit of
the contract holders. The Company charges the separate accounts for risks it
assumes in issuing a contract and retains varying amounts of withdrawal
charges to cover expenses in the event of early withdrawals by contract
holders. The assets and liabilities of the separate account are carried at
fair value. The Company's participation in the separate accounts (seed
money) is carried at its fair value in the separate account, and amounted to
$22.3 million and $13.2 million at December 31, 1996, and 1995, respectively.
Fair Value of Financial Instruments
Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. These
estimates do not reflect any premium or discount that could result from
offering for sale at one time the Company's entire holdings of a particular
financial instrument. Although fair value estimates are calculated using
assumptions that management believes are appropriate, changes in assumptions
could significantly affect the estimates and such estimates should be used
with care. The following assumptions were used to estimate the fair value of
each class of financial instrument for which it was practicable to estimate
fair value:
Investment securities: Fixed maturities are valued using quoted market
prices, if available. For securities not actively traded, fair values are
estimated using values obtained from independent pricing services or, in the
case of private placements, are estimated by discounting expected future cash
flows using a current market rate applicable to the yield, credit quality,
and maturity of investments. Prepayments are assumed to occur at the same
rate as in previous periods when interest rates were at levels similar to
current levels. The fair values of equity securities are based on quoted
market prices.
Mortgage loans: The fair values of mortgage loans are estimated using
discounted cash flow analyses and using interest rates currently being
offered for similar loans to borrowers with similar credit ratings. Loans
with similar characteristics are aggregated for purposes of the calculations.
Real estate: The fair value of real estate is based on market values for
comparable local real estate.
Policy loans: The fair value of policy loans approximates the carrying value.
The majority of these loans are indexed, with yield tied to a stated return.
Policyholder account balances on investment type contracts: Fair values for
the Company's liabilities under investment-type contracts are estimated using
discounted cash flow calculations based on interest rates currently being
offered for similar contracts with maturities consistent with those remaining
for the contracts being valued.
Separate account assets and liabilities: The separate account assets and
liabilities are carried at fair value as determined by the market value of
the underlying segregated investments.
Short-term investments and cash and cash equivalents: The carrying amount is
considered a reasonable estimate of fair value.
<PAGE> 204
Notes payable: The fair value of notes payable is estimated using discounted
cash flow calculations based on interest rates currently being offered for
similar instruments.
(2) Acquisitions and Divestitures
On June 1, 1995, the Company acquired Xerox Life Insurance Companies, now
known as Cova Corporation (Cova). At acquisition, Cova had total assets of
approximately $635.6 million. The purchase price of approximately $107.7
million was funded from the Company's operations.
Effective July 31, 1995, the Company entered into a merger arrangement with
Conning Corporation and Subsidiaries (Conning), an investment management
firm, whereby the Company acquired Conning and subsequently contributed
Conning and General American Investment Management Company, a wholly owned
subsidiary, to form Conning Asset Management Company (CAM). At acquisition,
Conning had total assets of approximately $16.0 million. The purchase price
consisted of approximately $13.0 million in cash (from the Company's
operations) and 3.2 million shares of CAM convertible redeemable preferred
stock, with fair value of approximately $17.0 million.
These transactions were accounted for using the purchase method of
accounting. The results of operations of the acquired entities are included
in the consolidated financial statements subsequent to the respective
acquisition dates. The excess of cost over fair value of net assets acquired
amounted to approximately $56.6 million and $23.1 million for Cova and
Conning, respectively, and is being amortized over approximately 20 years.
On January 3, 1995, the Company sold its 72 percent ownership in GenCare
Health Systems, Inc. to United HealthCare Corporation. Proceeds received net
of expenses were $365.0 million and the net realized gain on sale was $170.2
million.
(3) Investments
Fixed maturities and equity securities
The amortized cost and estimated fair value of fixed maturity and equity
securities at December 31, 1996 and 1995 are as follows (in thousands):
<TABLE>
<CAPTION>
1996
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
<S> <C> <C> <C> <C>
Available-for-sale:
U. S. Treasury securities $ 28,980 368 (151) 29,197
Government agency obligations 343,945 41,324 (970) 384,299
Corporate securities 4,071,775 158,361 (39,623) 4,190,513
Mortgage-backed securities 1,949,717 18,927 (14,386) 1,954,258
Asset-backed securities 198,934 1,599 (491) 200,042
-----------------------------------------------------------
Total fixed maturities
available-for-sale $ 6,593,351 220,579 (55,621) 6,758,309
===========================================================
Equity securities $ 21,460 1,137 (1,692) 20,905
===========================================================
<CAPTION>
1996
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
<S> <C> <C> <C> <C>
Available-for-sale:
U. S. Treasury securities $ 37,216 1,089 (12) 38,293
Government agency obligations 444,936 39,406 (1,151) 483,191
Corporate securities 3,500,376 252,109 (18,477) 3,734,008
Mortgage-backed securities 1,213,081 34,343 (2,071) 1,245,353
Asset-backed securities 118,004 2,660 (27) 120,637
-----------------------------------------------------------
Total fixed maturities
available-for-sale $ 5,313,613 329,607 (21,738) 5,621,482
===========================================================
Equity securities $ 14,239 5,190 (2,342) 17,087
===========================================================
</TABLE>
General American manages its credit risk associated with fixed maturities by
diversifying its portfolio. At December 31, 1996, General American held no
corporate debt securities or foreign government debt securities of a single
issuer which had a carrying value in excess of 10 percent of policyholders'
surplus.
The carrying value of the Company's investments in principal-only securities
and interest-only securities totaled approximately $7.4 million and $14.9
million or approximately .05 percent and .1 percent of total invested assets
at December 31, 1996 and 1995, respectively.
The amortized cost and estimated fair value of fixed maturities at December
31, 1996, by contractual maturity, are shown below (in thousands). Expected
maturities may differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
Estimated
Amortized fair
cost value
<S> <C> <C>
Due in one year or less $ 67,398 68,130
Due after one year through five years 937,312 953,122
Due after five years through ten years 1,664,499 1,683,183
Due after ten years through twenty years 1,974,425 2,099,616
Mortgage-backed securities 1,949,717 1,954,258
----------------------------
Total $ 6,593,351 6,758,309
============================
</TABLE>
The sources of net investment income follow (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Fixed maturities $ 471,038 373,564 299,096
Mortgage loans 171,781 143,047 139,392
Real estate 39,062 37,108 41,498
Equity securities 755 622 544
Policy loans 133,511 127,920 104,437
Short-term investments 13,979 26,920 10,059
Other 9,705 (369) 1,019
----------------------------------------
Investment revenue 839,831 708,812 596,045
Investment expenses (48,934) (39,369) (44,574)
----------------------------------------
Net investment income $ 790,897 669,443 551,471
========================================
</TABLE>
<PAGE> 205
Net realized gains (losses) from sales of investments consist of the
following (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
<S>
Fixed maturities: <C> <C> <C>
Realized gains $ 27,928 30,139 14,304
Realized losses (10,398) (9,000) (29,761)
Equity securities:
Realized gains 6,146 306,142 5,649
Realized losses (288) (5,259) (2,282)
Other investments, net 1,143 (41,266) (37,976)
-----------------------------------------
Net realized investment gains (losses) $ 24,531 280,756 (50,066)
=========================================
</TABLE>
A summary of the components of the net unrealized appreciation (depreciation)
on invested assets carried at fair value is as follows
(in thousands):
<TABLE>
<CAPTION>
1996 1995
<S>
Unrealized appreciation (depreciation): <C> <C>
Fixed maturities available-for-sale $ 164,957 308,203
Equity securities and short-term investments 605 (8)
Deferred policy acquisition costs (70,038) (130,091)
Effect on present value of future profits 1,986 (7,021)
Deferred income taxes (36,705) (61,414)
Minority interest, net of taxes (10,438) (12,214)
----------------------------
Net unrealized appreciation $ 50,367 97,455
============================
</TABLE>
The Company has securities on deposit with various state insurance
departments and regulatory authorities with an amortized cost of
approximately $278.6 million and $202.2 million at December 31, 1996, and
1995, respectively.
Mortgage loans
The Company originates mortgage loans on income-producing properties, such as
apartments, retail and office buildings, light warehouses, and light
industrial facilities. Loan to value ratios at the time of loan approval are
80 percent or less. The Company monitors creditworthiness of the borrowers
by using controls that include credit approvals, limits, and other monitoring
mechanisms. The Company minimizes risk through geographic and property type
diversification. The Company's mortgage loans were distributed as follows
(in thousands):
<TABLE>
<CAPTION>
1996 1995
Carrying Percent of Carrying Percent of
Value Total Value Total
<S> <C> <C> <C> <C>
Arizona $ 185,575 8.0 % $ 113,555 6.5 %
California 378,376 16.4 281,191 16.1
Colorado 226,531 9.8 212,295 12.1
Florida 193,570 8.4 189,967 10.8
Georgia 141,442 6.1 58,448 3.3
Illinois 183,883 8.0 162,072 9.3
Maryland 99,944 4.3 85,057 4.9
Missouri 102,111 4.4 85,669 4.9
Texas 225,697 9.8 156,528 8.9
Virginia 92,663 4.0 82,705 4.7
Other 481,546 20.8 323,448 18.5
------------------------------------------------------
Subtotal 2,311,338 100.0 % 1,750,935 100.0 %
Valuation reserve (37,711) (41,820)
------------------------------------------------------
Total $ 2,273,627 $ 1,709,115
======================================================
<CAPTION>
1996 1995
Carrying Percent of Carrying Percent of
Value Total Value Total
<S> <C> <C> <C> <C>
Property Type
Apartment $ 131,352 5.7 % $ 96,209 5.5 %
Retail 966,298 41.8 681,740 38.9
Office building 641,204 27.7 487,763 27.9
Industrial 479,755 20.8 416,354 23.8
Other commercial 92,729 4.0 68,869 3.9
------------------------------------------------------
Subtotal 2,311,338 100.0 % 1,750,935 100.0 %
Valuation reserve (37,711) (41,820)
------------------------------------------------------
Total $ 2,273,627 $ 1,709,115
======================================================
</TABLE>
SFAS 114, Accounting by Creditors for Impairment of a Loan, which was amended
by SFAS 118, Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosures, requires that an impaired loan be measured at
the present value of expected future cash flows or, alternatively, the
observable market price or the fair value of the collateral. General
American adopted these standards as of January 1, 1995, with no material
impact.
Mortgage loans which have been non-income producing for the preceding twelve
months were $5.1 million and $25.8 million at December 31, 1996 and 1995,
respectively. At December 31, 1996 and 1995, the recorded investment in
mortgage loans that were considered impaired under SFAS 114 was $86.5 million
and $129.3 million, respectively, with related allowances for credit losses
of $8.0 million and $16.9 million, respectively. The average recorded
investment in impaired loans during 1996 and 1995 was $107.9 million and
$174.9 million, respectively. For the years ended December 31, 1996 and
1995, the Company recognized $6.6 million and $11.9 million, respectively, of
interest income on those impaired loans, which included $6.7 million and
$12.0 million, respectively, of interest income recognized using the cash
basis method of income recognition.
The Company has outstanding mortgage loan commitments as of December 31, 1996
totalling $227.0 million. During 1995, the Company entered into an agreement
whereby approximately $109.8 million of mortgage loans were sold by the
Company for securitization and resale by a financial institution as mortgage
pass-through certificates. In conjunction with this transaction, the Company
entered into futures positions to hedge against interest rate risk. The sale
of these mortgage loans resulted in a net loss of approximately $.4 million.
In addition, the close-out of the futures positions related to this
transaction resulted in a net loss of approximately $6.4 million.
Derivatives
The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. The Company is
sensitive to interest rate changes, as its liabilities may reprice or mature
before interest-earning assets. The Company manages interest rate risk on
certain contracts, primarily through the utilization of interest rate swaps.
Under interest rate swaps, the Company agrees with counterparties to
exchange, at specified intervals, the payments between floating and
fixed-rate interest amounts calculated by reference to notional amounts. Net
interest payments are recognized within net investment income in the
consolidated statements of operations.
At December 31, 1996, the Company has eight outstanding interest rate swap
agreements which expire at various dates through 2026. Under four of the
agreements, the Company receives a fixed rate ranging from 5.8 percent to 6.9
percent on $15.4 million and pays a floating rate based on the London
Interbank Offered Rate (LIBOR).
<PAGE> 206
Under the remaining four agreements, the Company receives a floating rate
based on LIBOR on $25.0 million and pays a fixed rate ranging from 6.5 percent
to 8.3 percent. The estimated fair value of the agreements was a net loss of
approximately $2.0 million, which is not recognized in the accompanying
consolidated balance sheet. At December 31, 1995 the Company's exposure to
derivative financial instruments was not material.
The Company is exposed to credit related risk in the event of nonperformance
by counterparties to financial instruments but does not expect any
counterparties to fail to meet their obligations. Where appropriate, master
netting agreements are arranged and collateral is obtained in the form of
rights to securities to lower the Company's exposure to credit risk. It is
the Company's policy to deal only with highly rated companies.
(4) Fair Value of Financial Instruments
The following table presents the carrying amounts and estimated fair values
of the Company's financial instruments at December 31, 1996 and 1995. SFAS
107, Disclosures about the Fair Value of Financial Instruments, defines fair
value of a financial instrument as the amount at which the instrument could
be exchanged in a current transaction between willing parties (in thousands):
<TABLE>
<CAPTION>
1996 1995
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
<S>
Assets: <C> <C> <C> <C>
Fixed maturities $ 6,758,309 6,758,309 5,621,482 5,621,482
Mortgage loans 2,273,627 2,354,072 1,709,115 1,825,000
Real estate 203,767 254,387 210,170 259,664
Equity securities 20,905 20,905 17,087 17,087
Policy loans 1,917,861 1,917,861 1,707,237 1,707,237
Short-term investments 55,594 55,594 36,141 36,141
Other invested assets 183,612 183,628 150,885 150,885
Separate account assets 2,833,258 2,833,258 2,182,101 2,182,101
Liabilities:
Policyholder account
balances relating to
investment contracts 5,920,651 5,829,603 5,212,444 5,138,433
Notes payable 295,614 293,913 208,118 215,969
Separate account liabilities 2,810,907 2,810,907 2,168,933 2,168,933
</TABLE>
(5) Reinsurance
The Company is a major reinsurer to the life and health industry. The effect
of reinsurance on premiums and other considerations is as follows (in
thousands):
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Direct $ 1,097,340 1,069,248 1,245,112
Assumed 827,171 700,152 615,870
Ceded (301,283) (271,387) (263,168)
------------------------------------
Net insurance premiums and
other considerations $ 1,623,228 1,498,013 1,597,814
====================================
</TABLE>
Reinsurance assumed represents approximately $160.0 billion, $157.9 billion,
and $160.0 billion, of insurance in force at December 31, 1996, 1995, and
1994, respectively. The amount of ceded insurance in force, including
retrocession, was $53.2 billion, $48.7 billion, and $46.3 billion, for 1996,
1995, and 1994, respectively.
On July 1, 1995 RGA entered into reinsurance agreements with another company,
wherein RGA assumed virtually all of the life, health, and annuity financial
reinsurance inforce retained by the other company at that time. RGA
simultaneously entered into reinsurance agreements wherein RGA retroceded to
various retrocessionaires all of the financial reinsurance assumed under the
above clients, while retaining a net risk charge margin.
(6) Federal Income Taxes
Income tax expense (benefit) attributable to income from continuing
operations consists of the following (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Current income tax expense $ 45,902 115,769 61,508
Deferred income tax expense (benefit) 13,992 29,411 (8,839)
---------------------------------
Provision for income taxes $ 59,894 145,180 52,669
=================================
</TABLE>
Income tax expense attributable to income from operations differed from the
amounts computed by applying the U.S. federal income tax rate of 35 percent
to pre-tax income as a result of the following (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Computed "expected" tax expense $ 57,055 135,353 35,796
Increase (decrease) in income tax
resulting from:
Surplus tax on mutual life
insurance companies 4,777 - 15,674
Foreign tax rate in excess of
U.S. tax rate 941 763 683
Tax preferred investment income (7,318) (5,784) (2,660)
State tax net of federal benefit 971 292 296
GAAP/tax basis difference on GenCare - 15,710 -
Goodwill amortization 895 567 609
Difference in book vs. tax basis in
domestic subsidiaries 2,230 1,547 -
Other, net 343 (3,268) 2,271
---------------------------------
Provision for income taxes $ 59,894 145,180 52,669
=================================
</TABLE>
Total income taxes were allocated as follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Provision for income taxes from
continuing operations $ 59,894 145,180 52,669
Income tax from policyholders' surplus:
Unrealized holding gain or loss on debt
and equity securities recognized for
financial reporting purposes (24,612) 99,871 (38,420)
Other (1,023) - -
---------------------------------
Total income tax $ 34,259 245,051 14,249
=================================
</TABLE>
<PAGE> 207
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities at December 31, 1996 and 1995
are presented below (in thousands):
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Deferred tax assets:
Reserve for future policy benefits $ 138,848 130,043
Deferred acquisition costs capitalized for tax 95,332 88,099
Difference in basis of post retirement benefits 13,993 -
Net operating loss 22,789 11,578
Other, net 106,263 192,305
----------------------
Gross deferred tax assets 377,225 422,025
Less valuation allowance 1,299 778
----------------------
Total deferred tax asset after valuation allowance 375,926 421,247
======================
Deferred tax liabilities:
Unrealized gain on investments 63,204 109,720
Deferred acquisition costs capitalized
for financial reporting 246,858 187,709
Difference in the tax basis of cash
and invested assets 19,222 20,609
Other, net 89,919 153,600
----------------------
Total deferred tax liabilities 419,203 471,638
----------------------
Net deferred liability $ 43,277 50,391
======================
</TABLE>
The Company has not recognized a deferred tax liability for the undistributed
earnings of its wholly owned domestic and foreign subsidiaries because the
Company currently does not expect those unremitted earnings to become taxable
to the Company in the foreseeable future. This is because the unremitted
earnings will not be repatriated in the foreseeable future, or because those
unremitted earnings that may be repatriated will not be taxable through the
application of tax planning strategies that management would utilize.
As of December 31, 1996, the Company has provided for a 100 percent valuation
allowance against the deferred tax asset related to the net operating losses
of RGA's Australian, Argentine, and UK subsidiaries, Genelco's Spanish and
Mexican subsidiaries, and International Underwriting Services. As of December
31, 1995, the Company has provided a 100 percent valuation allowance against
the deferred tax asset related to International Underwriting Services' net
operating loss and to Genelco's Mexican and Spanish net operating losses.
International Underwriting Services' losses are not shown as deferred tax
benefits because this subsidiary has had no prior earnings history.
At December 31, 1996, the Company had capital loss carryforwards of $0.9
million. During 1996, 1995, and 1994 the Company paid income taxes totaling
approximately $20.7 million, $121.7 million, and $34.4 million, respectively.
At December 31, 1996, the Company's subsidiaries had recognized deferred tax
assets associated with net operating loss carryforwards of approximately
$61.4 million. The net operating loss and capital losses are expected to be
utilized during the period allowed for carryforwards.
(7) Deferred Policy Acquisition Costs
A summary of the policy acquisition costs deferred and amortized is as
follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Balance at beginning of year $ 526,939 664,452 587,546
Policy acquisition costs deferred 206,790 163,218 150,406
Policy acquisition costs amortized (182,038) (176,216) (138,813)
Interest credited 38,944 37,405 33,525
Deferred policy acquisition costs relating
to change in unrealized (gain) loss on
investments available for sale 61,616 (161,920) 31,788
-----------------------------------
Balance at end of year $ 652,251 526,939 664,452
===================================
</TABLE>
(8) Associate Benefit Plans and Postretirement Benefits
The Company has a defined benefit plan covering substantially all associates.
The benefits are based on years of service and each associate's compensation
level. The Company's funding policy is to contribute annually the maximum
amount deductible for federal income tax purposes. Contributions provide for
benefits attributed to service to date and for those expected to be earned in
the future.
The Company also has several non-qualified, defined benefit, and defined
contribution plans for directors and management associates. The plans are
unfunded and are deductible for federal income tax purposes when the benefits
are paid.
Net periodic defined benefit plan costs consist of the following
(in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Service cost $ 5,421 4,074 4,661
Interest 8,047 7,160 6,306
Return on plan assets (14,207) (27,984) 3,161
Amortization and deferral 4,646 19,841 (13,305)
Other 192 - -
----------------------------------
Pension costs $ 4,099 3,091 823
==================================
</TABLE>
<PAGE> 208
The following table presents the plans' funded status and amount recognized
in the Company's consolidated balance sheets at December 31, 1996 and 1995
based on the actuarial valuations as of December 31, 1996 and 1995 (in
thousands):
<TABLE>
<CAPTION>
1996 1995
Qualified Other Qualified Other
Plans Plans Plans Plans
<S> <C> <C> <C> <C>
Actuarial present value of
benefit obligations:
Accumulated benefit obligation,
including vested benefits of
$74,223 and $18,560 for 1996 and
$66,060 and $15,479 for 1995 $ 76,928 26,897 68,411 25,366
--------- -------- ------- --------
Projected benefit obligation for service
rendered to date 92,825 29,726 82,663 27,874
Plan assets at fair value, primarily
listed stocks and bonds 128,545 118,056
Plan assets in excess (less than)
projected benefit obligations 35,720 (29,726) 35,393 (27,874)
Unrecognized net transition
obligation at December 31 2,701 2,538
-------- --------
Pension cost funded in advance $ 35,720 35,393
========= =======
Accrued pension liability (27,025) (25,336)
======== ========
</TABLE>
Assumptions used for the December 31, 1996 and 1995 projected benefit
obligation included a 7.25 percent current discount rate, a 4.50 percent
increase rate for future compensation levels, and a 9.25 percent projected
return on plan assets.
The Board of Directors has adopted an associate incentive plan applicable to
full-time salaried associates with at least one year of service.
Contributions to the plan are determined annually by the Board of Directors
and are based upon salaries of eligible associates. Full vesting occurs
after five years of continuous service. The Company's contribution to the
plan was $8.8 million, $9.2 million, and $1.6 million for 1996, 1995, and
1994, respectively.
In addition to pension benefits, the Company provides certain health care and
life insurance benefits for retired employees. Substantially all employees
may become eligible for these benefits if they reach retirement age while
working for the Company. Alternatively, retirees may elect certain prepaid
health care benefit plans.
The Company uses the accrual method to account for the costs of its retiree
benefit plans and amortizes its transition obligation for retirees and fully
eligible or vested employees over 20 years. The unamortized transition
obligation was $17.8 million and $19.0 million at December 31, 1996 and 1995,
respectively. Net postretirement benefit costs for the years ended December
31, 1996, 1995, and 1994 were $5.8, million, $5.4 million, and $5.0 million,
respectively, and include the expected cost of such benefits for newly
eligible or vested employees, interest cost, gains and losses arising from
difference between actuarial assumptions and actual experience, and
amortization of the transition obligation.
Assumptions used were as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Discount rate in determining benefit obligations 7.25 % 8.25 %
Healthcare cost trend
First year:
Indemnity plan 9.0 10.0
HMO plan 8.0 9.0
Dental plan 9.0 10.0
Ultimate 5.25 6.00
</TABLE>
The health care cost trend rate assumption has a significant effect on the
amount reported. To illustrate, increasing the assumed health care cost
trend rates by one percentage point in each year would increase the
accumulated postretirement benefit obligation as of December 31, 1996 by $5.4
million or 12.9 percent. The aggregate of the service cost and interest cost
components of net periodic postretirement benefit cost for 1996 would
increase by $.7 million or 16 percent.
(9) Notes Payable
On January 14, 1994, the Company issued surplus notes with a face amount of
$107.0 million bearing a 7.625 percent interest rate due in 2024. The notes
pay interest on January 15 and July 15 of each year. The notes are not
subject to redemption prior to maturity. Payment of principal and interest
on the notes may be made only with the approval of the Missouri Director of
Insurance.
In December 1996 the Company obtained a note payable for $80.5 million with a
financial institution. The note is secured by bonds with a carrying value of
$91.6 million. This note bears a fixed interest rate at 5.55 percent and
matures on March 27, 1997.
On March 19, 1996, RGA issued 7.25 percent senior notes with a face value of
$100.0 million in accordance with Rule 144A of the Securities Act of 1933, as
amended. The net proceeds from the offering were approximately $98.9
million, and interest is payable semiannually on April 1 and October 1, with
the principal amount due April 1, 2006. The ability of RGA to make debt
principal and interest payments as well as make dividend payments to
shareholders is ultimately dependent on the earnings and surplus of its
subsidiaries and the investment earnings on the undeployed debt proceeds.
The transfer of funds from the insurance subsidiaries to Reinsurance Group of
America, Incorporated is subject to applicable insurance laws and
regulations.
On January 8, 1996, RGA Australian Holdings PTY, Limited, a wholly owned
subsidiary of RGA, established a $15.9 million unsecured, three month,
revolving line of credit. The debt is guaranteed by RGA and is utilized to
provide operating capital to RGA Australia. The current outstanding balance
is $7.6 million, representing drawdowns of $5.6 million in January 1996 and
$2.0 million in July 1996. Principal repayments are due in April 1997 and
are expected to be renewed under the terms of the line of credit. Interest
is paid every three months at a current rate between 7.03 percent and 7.08
percent.
Interest paid on debt during 1996, 1995, and 1994 amounted to $19.9 million,
$9.0 million, and $3.9 million, respectively.
<PAGE> 209
(10) Regulatory Matters
The Company is subject to financial statement filing requirements of the
State of Missouri Department of Insurance, in its state of domicile, as well
as the states in which it transacts business. Such financial statements,
generally referred to as statutory financial statements, are prepared on a
basis of accounting which varies in some respects from GAAP. Statutory
accounting practices include: (1) charging of policy acquisition costs to
income as incurred; (2) establishment of a liability for future policy
benefits computed using required valuation standards; (3) nonprovision of
deferred federal income taxes resulting from temporary differences between
financial reporting and tax bases of assets and liabilities; (4) recognition
of statutory liabilities for asset impairments and yield stabilization on
fixed maturity dispositions prior to maturity with asset valuation reserves
based on a statutorily determined formulas; and (5) valuation of investments
in bonds at amortized cost.
Combined net income and policyholders' surplus, for the years ended and at
December 31, 1996, 1995, and 1994, of the Company, as determined in
accordance with statutory accounting practices, are as follows (in
thousands):
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Net income (loss) $ 18,464 236,962 (13,875)
Policyholders' surplus $ 636,260 589,783 496,333
</TABLE>
Under the NAIC solvency monitoring program known as Risk-Based Capital (RBC),
General American and its insurance subsidiaries are required to measure its
solvency against certain parameters. As of December 31, 1996, General
American and its subsidiaries exceeded the established minimums in the RBC
program. In addition, General American and its subsidiaries exceeded the
minimum statutory capital and surplus requirements of their respective states
of domicile.
The Company's insurance subsidiaries are subject to limitations on the
payment of dividends to the Company. Generally, dividends during any year
may not be paid without prior regulatory approval, in excess of the lessor of
(and with respect to life and health subsidiaries in Missouri, in excess of
the greater of): (a) 10 percent of the insurance subsidiaries' statutory
surplus as of the preceding December 31 or (b) the insurance subsidiaries'
statutory gain from operations for the preceding year.
(11) Lease Commitments
The Company has entered into operating leases for office space and other
assets, principally office furniture and equipment. Future minimum lease
obligations under noncancelable leases are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
<S> <C>
Year ended December 31:
1997 $ 15,180
1998 13,348
1999 11,869
2000 8,489
2001 6,454
2002 2,622
</TABLE>
Operating lease expense totaled $17.0 million, $11.6 million, and $10.4
million in 1996, 1995, and 1994, respectively.
(12) Participating Policies and Dividends
to Policyholders
Over 33.9 percent and 33.2 percent of General American's business in force
relates to participating policies as of December 31, 1996 and 1995,
respectively. These participating policies allow the policyholders to
receive dividends based on actual interest, mortality, and expense experience
for the related policies. These dividends are distributed to the
policyholders through an annual dividend, using current dividend scales which
are approved by the Board of Directors.
(13) Contingent Liabilities
From time to time, the Company is subject to insurance-related litigation in
the normal course of business. Management does not believe that the Company
is party to any such pending litigation which would have a material adverse
effect on its financial statements or future operations.
(14) Subsequent Events
In January 1997, pursuant to Missouri's Mutual Holding Company Statute and
with the approval of its policyholders, General American initiated steps to
reorganize and form a mutual holding company structure by (i) forming a
mutual insurance holding company under the insurance laws of the State of
Missouri, to be named General American Mutual Holding Company (MHC), (ii)
forming an intermediate stock holding company under the general corporate
laws of the State of Missouri, to be named GenAmerica Corporation
(GenAmerica), and (iii) amending and restating the Charter and Articles of
Incorporation of General American to authorize the issuance of capital stock
and the continuance of its corporate existence as a stock life insurance
company under the same name.
All of the shares of the reorganized General American will be, as part of the
reorganization, issued to MHC and, shortly after the reorganization, MHC will
transfer all such shares to GenAmerica in exchange for all of the shares of
GenAmerica. As a result, reorganized General American will be a wholly owned
direct subsidiary of GenAmerica which, in turn, will be a wholly owned direct
subsidiary of MHC. MHC will at all times, in accordance with the plan of
reorganization and as required by the Missouri Mutual Holding Company
Statute, directly or indirectly control the reorganized General American
through the ownership of at least a majority of the voting shares of the
capital stock of reorganized General American or GenAmerica.
<PAGE> 210
APPENDIX A- Illustrations of Death Benefits and Cash Values
The following tables illustrate how the Cash Value, Cash Surrender
Value, and death benefit of a Policy change with the investment experience of
a Division of the Separate Account. The tables show how the Cash Value, Cash
Surrender Value, and death benefit of a Policy issued to an insured of a
given age and at a given premium would vary over time if the investment
return on the assets held in each Division of the Separate Account were a
uniform, gross, after-tax annual rate of 0%, 6%, or 12%. The tables on pages
A-2 through A-10 illustrate a Policy issued to a Male, age 45 in a preferred
nonsmoker rate class. The tables on pages A-11 through A-19 illustrate a
Policy issued to an insured, age 45 in a guaranteed issue nonsmoker rate
class. If the insured falls into a smoker rate class, the Cash Values, Cash
Surrender Values, and death benefits would be lower than those shown in the
tables. In addition, the Cash Values, Cash Surrender Values, and death
benefits would be different from those shown if the gross annual investment
rates of return averaged 0%, 6%, and 12% over a period of years, but
fluctuated above and below those averages for individual Policy Years.
The Cash Value column under the "Guaranteed" heading shows the
accumulated value of the Net Premiums paid at the stated interest rate,
reflecting deduction of the monthly administrative charges and monthly
charges for the cost of insurance based on the maximum values allowed under
the 1980 Commissioners Standard Ordinary Mortality Table. The Cash Surrender
Value column under the "Guaranteed" heading shows the projected Cash
Surrender Value of the Policy, which is calculated by taking the Cash Value
under the "Guaranteed" heading and deducting any appropriate Contingent
Deferred Sales Charge. The Cash value column under the "Current" heading
shows the accumulated value of the Net Premiums paid at the stated interest
rate, reflecting deduction of the monthly administrative charges and monthly
charges for the cost of insurance at their current level, which is less than
or equal to that allowed by the 1980 Commissioners Standard Ordinary
Mortality Table. The Cash Surrender Value column under the "Current" heading
shows the projected Cash Surrender Value of the Policy, which is calculated
by taking the Cash Value under the "Current" heading and deducting any
appropriate Contingent Deferred Sales Charge. The illustrations of death
benefits reflect the above assumptions. The death benefits also vary between
tables depending upon whether Death Benefit Options A or C (Level Type) or
Death Benefit Option B (Increasing Type) are illustrated.
The amounts shown for Cash Value, Cash Surrender Value, and death
benefit reflect the fact that the investment rate of return is lower than the
gross after-tax return on the assets held in a Division of the Separate
Account. The charges include a .70% charge for mortality and expense risk,
and an assumed .72% charge for the investment management and advisory fees
and administrative expenses combined. The actual investment management and
advisory fees applicable to each Division are shown in the respective
prospectuses of Russell Insurance Funds and General American Capital Company.
After deduction for these amounts, the illustrated gross annual investment
rates of return of 0%, 6%, and 12% correspond to approximate net annual rates
of -1.42%, 4.58%, and 10.58%, respectively. The prospectuses for Russell
Insurance Funds and General American Capital Company should be consulted for
details about the nature and extent of their expenses.
The hypothetical values shown in the tables do not reflect any charges
for Federal income taxes against the Separate Account (as opposed to Premium
Tax Charges which are deducted from premium payments), since General American
is not currently making any such charges. However, such charges may be made
in the future and, in that event, the gross annual investment rate of return
of the Divisions of the Separate Account would have to exceed 0%, 6%, and 12%
by an amount sufficient to cover the tax charges in order to produce the
death benefit and Cash Value illustration. (See Federal Tax Matters on page
28.)
The tables illustrate the Policy values that would result based upon
the investment rates of return if premiums are paid as indicated, if all Net
Premiums are allocated to the Separate Account and if no Policy Loans have
been made. The tables are also based on the assumptions that the Owner has
not requested an increase or decrease in the Face Amount, that no partial
withdrawals have been made, that no transfer charges were incurred, and that
no optional riders have been requested.
Upon request, General American will provide a comparable illustration
based upon the proposed Insured's age, sex, and rate class, the Face Amount
or premium requested, the proposed frequency of premium payments, and any
available riders requested.
<PAGE> 211
<TABLE>
GENERAL AMERICAN LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
POLICY FACE AMOUNT: $100,000 MALE PREFERRED NONSMOKER AGE 45
DEATH BENEFIT LEVEL (OPTION A) ANNUAL PREMIUM: $2,141
<CAPTION>
FOR SEPARATE ACCOUNT ELEVEN A HYPOTHETICAL
GROSS ANNUAL RATE OF RETURN @ 0.0% (NET RATE @ -1.42%)
========= CURRENT ========= ======== GUARANTEED ========
END AGE ANNUAL PREM SURR CASH DEATH SURR CASH DEATH
OF PAYMNT ACCUM @ VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR 5%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 2,141 2,248 1,782 1,782 100,000 1,692 1,777 100,000
2 47 2,141 4,609 3,497 3,497 100,000 3,017 3,188 100,000
3 48 2,141 7,087 5,134 5,134 100,000 4,292 4,548 100,000
4 49 2,141 9,690 6,719 6,719 100,000 5,515 5,858 100,000
5 50 2,141 12,423 8,264 8,264 100,000 6,685 7,114 100,000
6 51 2,141 15,292 9,782 9,782 100,000 7,903 8,314 100,000
7 52 2,141 18,305 11,262 11,262 100,000 9,093 9,453 100,000
8 53 2,141 21,468 12,717 12,717 100,000 10,252 10,526 100,000
9 54 2,141 24,790 14,135 14,135 100,000 11,373 11,527 100,000
10 55 2,141 28,278 15,519 15,519 100,000 12,450 12,450 100,000
11 56 2,141 31,940 16,955 16,955 100,000 13,290 13,290 100,000
12 57 2,141 35,785 18,337 18,337 100,000 14,044 14,044 100,000
13 58 2,141 39,822 19,669 19,669 100,000 14,709 14,709 100,000
14 59 2,141 44,062 20,961 20,961 100,000 15,281 15,281 100,000
15 60 2,141 48,513 22,214 22,214 100,000 15,755 15,755 100,000
16 61 2,141 53,187 23,403 23,403 100,000 16,122 16,122 100,000
17 62 2,141 58,094 24,530 24,530 100,000 16,368 16,368 100,000
18 63 2,141 63,247 25,587 25,587 100,000 16,480 16,480 100,000
19 64 2,141 68,658 26,569 26,569 100,000 16,439 16,439 100,000
20 65 2,141 74,339 27,478 27,478 100,000 16,226 16,226 100,000
25 70 2,141 107,300 30,714 30,714 100,000 11,923 11,923 100,000
30 75 2,141 149,368 30,950 30,950 100,000 0 0 0
</TABLE>
GUARANTEED VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF
INSURANCE RATES.
CURRENT VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES AND DIVIDENDS BASED ON THE CURRENT DIVIDEND SCALE FOR THE EXACT
COMBINATION OF PREMIUMS AND BENEFITS SHOWN. THESE VALUES ARE ALSO BASED ON A
POLICY ISSUE DATE OF JANUARY 1 FOR PURPOSES OF DETERMINING DIVIDEND AMOUNTS.
THE HYPOTHETICAL INVESTMENT RATE OF RETURN SHOWN ABOVE IS ILLUSTRATIVE ONLY,
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL
INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICY
OWNER AND THE INVESTMENT RESULTS FOR FUNDS OF GENERAL AMERICAN CAPITAL
COMPANY, RUSSELL INSURANCE FUNDS, VARIABLE INSURANCE PRODUCTS FUND, VARIABLE
INSURANCE PRODUCTS FUND II, AND VAN ECK INVESTMENT TRUST. THE CASH VALUE,
CASH SURRENDER VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED THE RATE SHOWN ABOVE OVER
A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY,
WALNUT STREET SECURITIES, GENERAL AMERICAN CAPITAL COMPANY, RUSSELL INSURANCE
FUNDS, VARIABLE INSURANCE PRODUCTS FUND, VARIABLE INSURANCE PRODUCTS FUND II,
VAN ECK INVESTMENT TRUST, OR ANY REPRESENTATIVE THEREOF, THAT THIS
HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED
OVER ANY PERIOD OF TIME.
ILLUSTRATED VALUES SHOWN ABOVE ARE AS OF THE END OF THE POLICY YEARS
INDICATED AND ASSUME ANY ADDITIONAL PREMIUMS SHOWN ARE RECEIVED ON THE POLICY
ANNIVERSARIES. ILLUSTRATED VALUES ASSUME ALL PREMIUM TAXES ARE PAID BY THE
COMPANY.
<PAGE> 212
<TABLE>
GENERAL AMERICAN LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
POLICY FACE AMOUNT: $100,000 MALE PREFERRED NONSMOKER AGE 45
DEATH BENEFIT LEVEL (OPTION A) ANNUAL PREMIUM: $2,141
<CAPTION>
FOR SEPARATE ACCOUNT ELEVEN A HYPOTHETICAL
GROSS ANNUAL RATE OF RETURN @ 6.0% (NET RATE @ 4.58%)
========= CURRENT ========= ======== GUARANTEED ========
END AGE ANNUAL PREM SURR CASH DEATH SURR CASH DEATH
OF PAYMNT ACCUM @ VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR 5%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 2,141 2,248 1,896 1,896 100,000 1,805 1,890 100,000
2 47 2,141 4,609 3,835 3,835 100,000 3,345 3,516 100,000
3 48 2,141 7,087 5,809 5,809 100,000 4,930 5,187 100,000
4 49 2,141 9,690 7,845 7,845 100,000 6,561 6,903 100,000
5 50 2,141 12,423 9,958 9,958 100,000 8,237 8,665 100,000
6 51 2,141 15,292 12,165 12,165 100,000 10,063 10,474 100,000
7 52 2,141 18,305 14,459 14,459 100,000 11,967 12,326 100,000
8 53 2,141 21,468 16,857 16,857 100,000 13,946 14,220 100,000
9 54 2,141 24,790 19,355 19,355 100,000 15,998 16,152 100,000
10 55 2,141 28,278 21,958 21,958 100,000 18,120 18,120 100,000
11 56 2,141 31,940 24,763 24,763 100,000 20,123 20,123 100,000
12 57 2,141 35,785 27,673 27,673 100,000 22,162 22,162 100,000
13 58 2,141 39,822 30,698 30,698 100,000 24,239 24,239 100,000
14 59 2,141 44,062 33,854 33,854 100,000 26,356 26,356 100,000
15 60 2,141 48,513 37,151 37,151 100,000 28,514 28,514 100,000
16 61 2,141 53,187 40,575 40,575 100,000 30,712 30,712 100,000
17 62 2,141 58,094 44,139 44,139 100,000 32,947 32,947 100,000
18 63 2,141 63,247 47,848 47,848 100,000 35,216 35,216 100,000
19 64 2,141 68,658 51,713 51,713 100,000 37,515 37,515 100,000
20 65 2,141 74,339 55,747 55,747 100,000 39,843 39,843 100,000
25 70 2,141 107,300 79,037 79,037 100,000 52,006 52,006 100,000
30 75 2,141 149,368 109,257 109,257 116,905 65,527 65,527 100,000
</TABLE>
GUARANTEED VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF
INSURANCE RATES.
CURRENT VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES AND DIVIDENDS BASED ON THE CURRENT DIVIDEND SCALE FOR THE EXACT
COMBINATION OF PREMIUMS AND BENEFITS SHOWN. THESE VALUES ARE ALSO BASED ON A
POLICY ISSUE DATE OF JANUARY 1 FOR PURPOSES OF DETERMINING DIVIDEND AMOUNTS.
THE HYPOTHETICAL INVESTMENT RATE OF RETURN SHOWN ABOVE IS ILLUSTRATIVE ONLY,
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL
INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICY
OWNER AND THE INVESTMENT RESULTS FOR FUNDS OF GENERAL AMERICAN CAPITAL
COMPANY, RUSSELL INSURANCE FUNDS, VARIABLE INSURANCE PRODUCTS FUND, VARIABLE
INSURANCE PRODUCTS FUND II, AND VAN ECK INVESTMENT TRUST. THE CASH VALUE,
CASH SURRENDER VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED THE RATE SHOWN ABOVE OVER
A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY,
WALNUT STREET SECURITIES, GENERAL AMERICAN CAPITAL COMPANY, RUSSELL INSURANCE
FUNDS, VARIABLE INSURANCE PRODUCTS FUND, VARIABLE INSURANCE PRODUCTS FUND II,
VAN ECK INVESTMENT TRUST, OR ANY REPRESENTATIVE THEREOF, THAT THIS
HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED
OVER ANY PERIOD OF TIME.
ILLUSTRATED VALUES SHOWN ABOVE ARE AS OF THE END OF THE POLICY YEARS
INDICATED AND ASSUME ANY ADDITIONAL PREMIUMS SHOWN ARE RECEIVED ON THE POLICY
ANNIVERSARIES. ILLUSTRATED VALUES ASSUME ALL PREMIUM TAXES ARE PAID BY THE
COMPANY.
<PAGE> 213
<TABLE>
GENERAL AMERICAN LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
POLICY FACE AMOUNT: $100,000 MALE PREFERRED NONSMOKER AGE 45
DEATH BENEFIT LEVEL (OPTION A) ANNUAL PREMIUM: $2,141
<CAPTION>
FOR SEPARATE ACCOUNT ELEVEN A HYPOTHETICAL
GROSS ANNUAL RATE OF RETURN @ 12.0% (NET RATE @ 10.58%)
========= CURRENT ========= ======== GUARANTEED ========
END AGE ANNUAL PREM SURR CASH DEATH SURR CASH DEATH
OF PAYMNT ACCUM @ VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR 5%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 2,141 2,248 2,010 2,010 100,000 1,918 2,004 100,000
2 47 2,141 4,609 4,187 4,187 100,000 3,687 3,858 100,000
3 48 2,141 7,087 6,540 6,540 100,000 5,623 5,880 100,000
4 49 2,141 9,690 9,114 9,114 100,000 7,745 8,087 100,000
5 50 2,141 12,423 11,947 11,947 100,000 10,070 10,498 100,000
6 51 2,141 15,292 15,079 15,079 100,000 12,724 13,135 100,000
7 52 2,141 18,305 18,533 18,533 100,000 15,660 16,019 100,000
8 53 2,141 21,468 22,357 22,357 100,000 18,902 19,176 100,000
9 54 2,141 24,790 26,581 26,581 100,000 22,479 22,633 100,000
10 55 2,141 28,278 31,254 31,254 100,000 26,423 26,423 100,000
11 56 2,141 31,940 36,521 36,521 100,000 30,587 30,587 100,000
12 57 2,141 35,785 42,341 42,341 100,000 35,173 35,173 100,000
13 58 2,141 39,822 48,782 48,782 100,000 40,236 40,236 100,000
14 59 2,141 44,062 55,924 55,924 100,000 45,841 45,841 100,000
15 60 2,141 48,513 63,853 63,853 100,000 52,063 52,063 100,000
16 61 2,141 53,187 72,651 72,651 100,000 58,986 58,986 100,000
17 62 2,141 58,094 82,421 82,421 105,499 66,712 66,712 100,000
18 63 2,141 63,247 93,208 93,208 117,442 75,358 75,358 100,000
19 64 2,141 68,658 105,108 105,108 130,334 85,042 85,042 105,451
20 65 2,141 74,339 118,238 118,238 144,251 95,721 95,721 116,780
25 70 2,141 107,300 207,133 207,133 240,275 167,272 167,272 194,036
30 75 2,141 149,368 352,671 352,671 377,358 283,155 283,155 302,976
</TABLE>
GUARANTEED VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF
INSURANCE RATES.
CURRENT VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES AND DIVIDENDS BASED ON THE CURRENT DIVIDEND SCALE FOR THE EXACT
COMBINATION OF PREMIUMS AND BENEFITS SHOWN. THESE VALUES ARE ALSO BASED ON A
POLICY ISSUE DATE OF JANUARY 1 FOR PURPOSES OF DETERMINING DIVIDEND AMOUNTS.
THE HYPOTHETICAL INVESTMENT RATE OF RETURN SHOWN ABOVE IS ILLUSTRATIVE ONLY,
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL
INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICY
OWNER AND THE INVESTMENT RESULTS FOR FUNDS OF GENERAL AMERICAN CAPITAL
COMPANY, RUSSELL INSURANCE FUNDS, VARIABLE INSURANCE PRODUCTS FUND, VARIABLE
INSURANCE PRODUCTS FUND II, AND VAN ECK INVESTMENT TRUST. THE CASH VALUE,
CASH SURRENDER VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED THE RATE SHOWN ABOVE OVER
A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY,
WALNUT STREET SECURITIES, GENERAL AMERICAN CAPITAL COMPANY, RUSSELL INSURANCE
FUNDS, VARIABLE INSURANCE PRODUCTS FUND, VARIABLE INSURANCE PRODUCTS FUND II,
VAN ECK INVESTMENT TRUST, OR ANY REPRESENTATIVE THEREOF, THAT THIS
HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED
OVER ANY PERIOD OF TIME.
ILLUSTRATED VALUES SHOWN ABOVE ARE AS OF THE END OF THE POLICY YEARS
INDICATED AND ASSUME ANY ADDITIONAL PREMIUMS SHOWN ARE RECEIVED ON THE POLICY
ANNIVERSARIES. ILLUSTRATED VALUES ASSUME ALL PREMIUM TAXES ARE PAID BY THE
COMPANY.
<PAGE> 214
<TABLE>
GENERAL AMERICAN LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
POLICY FACE AMOUNT: $100,000 MALE PREFERRED NONSMOKER AGE 45
DEATH BENEFIT INCREASING (OPTION B) ANNUAL PREMIUM: $5,551
<CAPTION>
FOR SEPARATE ACCOUNT ELEVEN A HYPOTHETICAL
GROSS ANNUAL RATE OF RETURN @ 0.0% (NET RATE @ -1.42%)
========= CURRENT ========= ======== GUARANTEED ========
END AGE ANNUAL PREM SURR CASH DEATH SURR CASH DEATH
OF PAYMNT ACCUM @ VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR 5%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 5,551 5,829 4,899 4,899 104,899 4,663 4,885 104,885
2 47 5,551 11,949 9,681 9,681 109,681 8,902 9,346 109,346
3 48 5,551 18,375 14,338 14,338 114,338 13,039 13,705 113,705
4 49 5,551 25,122 18,895 18,895 118,895 17,074 17,962 117,962
5 50 5,551 32,206 23,364 23,364 123,364 21,003 22,113 122,113
6 51 5,551 39,645 27,759 27,759 127,759 25,091 26,157 126,157
7 52 5,551 47,456 32,069 32,069 132,069 29,154 30,087 130,087
8 53 5,551 55,657 36,307 36,307 136,307 33,186 33,896 133,896
9 54 5,551 64,269 40,463 40,463 140,463 37,179 37,579 137,579
10 55 5,551 73,311 44,537 44,537 144,537 41,126 41,126 141,126
11 56 5,551 82,805 48,749 48,749 148,749 44,534 44,534 144,534
12 57 5,551 92,774 52,856 52,856 152,856 47,797 47,797 147,797
13 58 5,551 103,241 56,857 56,857 156,857 50,912 50,912 150,912
14 59 5,551 114,232 60,768 60,768 160,768 53,876 53,876 153,876
15 60 5,551 125,772 64,588 64,588 164,588 56,682 56,682 156,682
16 61 5,551 137,889 68,285 68,285 168,285 59,320 59,320 159,320
17 62 5,551 150,612 71,859 71,859 171,859 61,777 61,777 161,777
18 63 5,551 163,971 75,300 75,300 175,300 64,037 64,037 164,037
19 64 5,551 177,998 78,598 78,598 178,598 66,081 66,081 166,081
20 65 5,551 192,727 81,756 81,756 181,756 67,892 67,892 167,892
25 70 5,551 278,180 95,120 95,120 195,120 72,952 72,952 172,952
30 75 5,551 387,242 103,313 103,313 203,313 69,176 69,176 169,176
</TABLE>
GUARANTEED VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF
INSURANCE RATES.
CURRENT VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES AND DIVIDENDS BASED ON THE CURRENT DIVIDEND SCALE FOR THE EXACT
COMBINATION OF PREMIUMS AND BENEFITS SHOWN. THESE VALUES ARE ALSO BASED ON A
POLICY ISSUE DATE OF JANUARY 1 FOR PURPOSES OF DETERMINING DIVIDEND AMOUNTS.
THE HYPOTHETICAL INVESTMENT RATE OF RETURN SHOWN ABOVE IS ILLUSTRATIVE ONLY,
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL
INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICY
OWNER AND THE INVESTMENT RESULTS FOR FUNDS OF GENERAL AMERICAN CAPITAL
COMPANY, RUSSELL INSURANCE FUNDS, VARIABLE INSURANCE PRODUCTS FUND, VARIABLE
INSURANCE PRODUCTS FUND II, AND VAN ECK INVESTMENT TRUST. THE CASH VALUE,
CASH SURRENDER VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED THE RATE SHOWN ABOVE OVER
A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY,
WALNUT STREET SECURITIES, GENERAL AMERICAN CAPITAL COMPANY, RUSSELL INSURANCE
FUNDS, VARIABLE INSURANCE PRODUCTS FUND, VARIABLE INSURANCE PRODUCTS FUND II,
VAN ECK INVESTMENT TRUST, OR ANY REPRESENTATIVE THEREOF, THAT THIS
HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED
OVER ANY PERIOD OF TIME.
ILLUSTRATED VALUES SHOWN ABOVE ARE AS OF THE END OF THE POLICY YEARS
INDICATED AND ASSUME ANY ADDITIONAL PREMIUMS SHOWN ARE RECEIVED ON THE POLICY
ANNIVERSARIES. ILLUSTRATED VALUES ASSUME ALL PREMIUM TAXES ARE PAID BY THE
COMPANY.
<PAGE> 215
<TABLE>
GENERAL AMERICAN LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
POLICY FACE AMOUNT: $100,000 MALE PREFERRED NONSMOKER AGE 45
DEATH BENEFIT INCREASING (OPTION B) ANNUAL PREMIUM: $5,551
<CAPTION>
FOR SEPARATE ACCOUNT ELEVEN A HYPOTHETICAL
GROSS ANNUAL RATE OF RETURN @ 6.0% (NET RATE @ 4.58%)
========= CURRENT ========= ======== GUARANTEED ========
END AGE ANNUAL PREM SURR CASH DEATH SURR CASH DEATH
OF PAYMNT ACCUM @ VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR 5%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 5,551 5,829 5,202 5,202 105,202 4,965 5,187 105,187
2 47 5,551 11,949 10,594 10,594 110,594 9,802 10,246 110,246
3 48 5,551 18,375 16,173 16,173 116,173 14,830 15,497 115,497
4 49 5,551 25,122 21,973 21,973 121,973 20,058 20,946 120,946
5 50 5,551 32,206 28,016 28,016 128,016 25,489 26,599 126,599
6 51 5,551 39,645 34,324 34,324 134,324 31,396 32,462 132,462
7 52 5,551 47,456 40,899 40,899 140,899 37,602 38,534 138,534
8 53 5,551 55,657 47,764 47,764 147,764 44,109 44,819 144,819
9 54 5,551 64,269 54,921 54,921 154,921 50,918 51,317 151,317
10 55 5,551 73,311 62,384 62,384 162,384 58,028 58,028 158,028
11 56 5,551 82,805 70,398 70,398 170,398 64,956 64,956 164,956
12 57 5,551 92,774 78,733 78,733 178,733 72,102 72,102 172,102
13 58 5,551 103,241 87,402 87,402 187,402 79,473 79,473 179,473
14 59 5,551 114,232 96,435 96,435 196,435 87,071 87,071 187,071
15 60 5,551 125,772 105,846 105,846 205,846 94,899 94,899 194,899
16 61 5,551 137,889 115,619 115,619 215,619 102,955 102,955 202,955
17 62 5,551 150,612 125,768 125,768 225,768 111,234 111,234 211,234
18 63 5,551 163,971 136,300 136,300 236,300 119,727 119,727 219,727
19 64 5,551 177,998 147,220 147,220 247,220 128,421 128,421 228,421
20 65 5,551 192,727 158,545 158,545 258,545 137,305 137,305 237,305
25 70 5,551 278,180 221,527 221,527 321,527 184,237 184,237 284,237
30 75 5,551 387,242 295,538 295,538 395,538 233,333 233,333 333,333
</TABLE>
GUARANTEED VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF
INSURANCE RATES.
CURRENT VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES AND DIVIDENDS BASED ON THE CURRENT DIVIDEND SCALE FOR THE EXACT
COMBINATION OF PREMIUMS AND BENEFITS SHOWN. THESE VALUES ARE ALSO BASED ON A
POLICY ISSUE DATE OF JANUARY 1 FOR PURPOSES OF DETERMINING DIVIDEND AMOUNTS.
THE HYPOTHETICAL INVESTMENT RATE OF RETURN SHOWN ABOVE IS ILLUSTRATIVE ONLY,
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL
INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICY
OWNER AND THE INVESTMENT RESULTS FOR FUNDS OF GENERAL AMERICAN CAPITAL
COMPANY, RUSSELL INSURANCE FUNDS, VARIABLE INSURANCE PRODUCTS FUND, VARIABLE
INSURANCE PRODUCTS FUND II, AND VAN ECK INVESTMENT TRUST. THE CASH VALUE,
CASH SURRENDER VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED THE RATE SHOWN ABOVE OVER
A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY,
WALNUT STREET SECURITIES, GENERAL AMERICAN CAPITAL COMPANY, RUSSELL INSURANCE
FUNDS, VARIABLE INSURANCE PRODUCTS FUND, VARIABLE INSURANCE PRODUCTS FUND II,
VAN ECK INVESTMENT TRUST, OR ANY REPRESENTATIVE THEREOF, THAT THIS
HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED
OVER ANY PERIOD OF TIME.
ILLUSTRATED VALUES SHOWN ABOVE ARE AS OF THE END OF THE POLICY YEARS
INDICATED AND ASSUME ANY ADDITIONAL PREMIUMS SHOWN ARE RECEIVED ON THE POLICY
ANNIVERSARIES. ILLUSTRATED VALUES ASSUME ALL PREMIUM TAXES ARE PAID BY THE
COMPANY.
<PAGE> 216
<TABLE>
GENERAL AMERICAN LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
POLICY FACE AMOUNT: $100,000 MALE PREFERRED NONSMOKER AGE 45
DEATH BENEFIT INCREASING (OPTION B) ANNUAL PREMIUM: $5,551
<CAPTION>
FOR SEPARATE ACCOUNT ELEVEN A HYPOTHETICAL
GROSS ANNUAL RATE OF RETURN @ 12.0% (NET RATE @ 10.58%)
========= CURRENT ========= ======== GUARANTEED ========
END AGE ANNUAL PREM SURR CASH DEATH SURR CASH DEATH
OF PAYMNT ACCUM @ VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR 5%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 5,551 5,829 5,505 5,505 105,505 5,268 5,490 105,490
2 47 5,551 11,949 11,543 11,543 111,543 10,738 11,182 111,182
3 48 5,551 18,375 18,159 18,159 118,159 16,771 17,437 117,437
4 49 5,551 25,122 25,438 25,438 125,438 23,423 24,311 124,311
5 50 5,551 32,206 33,464 33,464 133,464 30,754 31,865 131,865
6 51 5,551 39,645 42,329 42,329 142,329 39,101 40,167 140,167
7 52 5,551 47,456 52,109 52,109 152,109 48,355 49,288 149,288
8 53 5,551 55,657 62,914 62,914 162,914 58,597 59,307 159,307
9 54 5,551 64,269 74,840 74,840 174,840 69,911 70,311 170,311
10 55 5,551 73,311 88,005 88,005 188,005 82,392 82,392 182,392
11 56 5,551 82,805 102,788 102,788 202,788 95,660 95,660 195,660
12 57 5,551 92,774 119,088 119,088 219,088 110,231 110,231 210,231
13 58 5,551 103,241 137,067 137,067 237,067 126,241 126,241 226,241
14 59 5,551 114,232 156,915 156,915 256,915 143,834 143,834 243,834
15 60 5,551 125,772 178,831 178,831 278,831 163,170 163,170 263,170
16 61 5,551 137,889 202,997 202,997 302,997 184,420 184,420 284,420
17 62 5,551 150,612 229,651 229,651 329,651 207,773 207,773 307,773
18 63 5,551 163,971 259,044 259,044 359,044 233,432 233,432 333,432
19 64 5,551 177,998 291,456 291,456 391,456 261,618 261,618 361,618
20 65 5,551 192,727 327,207 327,207 427,207 292,579 292,579 392,579
25 70 5,551 278,180 569,395 569,395 669,395 499,780 499,780 599,780
30 75 5,551 387,242 964,855 964,855 1,064,855 831,958 831,958 931,958
</TABLE>
GUARANTEED VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF
INSURANCE RATES.
CURRENT VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES AND DIVIDENDS BASED ON THE CURRENT DIVIDEND SCALE FOR THE EXACT
COMBINATION OF PREMIUMS AND BENEFITS SHOWN. THESE VALUES ARE ALSO BASED ON A
POLICY ISSUE DATE OF JANUARY 1 FOR PURPOSES OF DETERMINING DIVIDEND AMOUNTS.
THE HYPOTHETICAL INVESTMENT RATE OF RETURN SHOWN ABOVE IS ILLUSTRATIVE ONLY,
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL
INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICY
OWNER AND THE INVESTMENT RESULTS FOR FUNDS OF GENERAL AMERICAN CAPITAL
COMPANY, RUSSELL INSURANCE FUNDS, VARIABLE INSURANCE PRODUCTS FUND, VARIABLE
INSURANCE PRODUCTS FUND II, AND VAN ECK INVESTMENT TRUST. THE CASH VALUE,
CASH SURRENDER VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED THE RATE SHOWN ABOVE OVER
A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY,
WALNUT STREET SECURITIES, GENERAL AMERICAN CAPITAL COMPANY, RUSSELL INSURANCE
FUNDS, VARIABLE INSURANCE PRODUCTS FUND, VARIABLE INSURANCE PRODUCTS FUND II,
VAN ECK INVESTMENT TRUST, OR ANY REPRESENTATIVE THEREOF, THAT THIS
HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED
OVER ANY PERIOD OF TIME.
ILLUSTRATED VALUES SHOWN ABOVE ARE AS OF THE END OF THE POLICY YEARS
INDICATED AND ASSUME ANY ADDITIONAL PREMIUMS SHOWN ARE RECEIVED ON THE POLICY
ANNIVERSARIES. ILLUSTRATED VALUES ASSUME ALL PREMIUM TAXES ARE PAID BY THE
COMPANY.
<PAGE> 217
<TABLE>
GENERAL AMERICAN LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
POLICY FACE AMOUNT: $100,000 MALE PREFERRED NONSMOKER AGE 45
DEATH BENEFIT LEVEL (OPTION C) ANNUAL PREMIUM: $5,551
<CAPTION>
FOR SEPARATE ACCOUNT ELEVEN A HYPOTHETICAL
GROSS ANNUAL RATE OF RETURN @ 0.0% (NET RATE @ -1.42%)
========= CURRENT ========= ======== GUARANTEED ========
END AGE ANNUAL PREM SURR CASH DEATH SURR CASH DEATH
OF PAYMNT ACCUM @ VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR 5%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 5,551 5,829 4,905 4,905 100,000 4,669 4,891 100,000
2 47 5,551 11,949 9,706 9,706 100,000 8,956 9,400 100,000
3 48 5,551 18,375 14,397 14,397 100,000 13,167 13,833 100,000
4 49 5,551 25,122 19,005 19,005 100,000 17,305 18,194 100,000
5 50 5,551 32,206 23,544 23,544 100,000 21,372 22,482 100,000
6 51 5,551 39,645 28,024 28,024 100,000 25,636 26,702 100,000
7 52 5,551 47,456 32,439 32,439 100,000 29,918 30,850 100,000
8 53 5,551 55,657 36,801 36,801 100,000 34,218 34,929 100,000
9 54 5,551 64,269 41,102 41,102 100,000 38,538 38,937 100,000
10 55 5,551 73,311 45,339 45,339 100,793 42,877 42,877 100,000
11 56 5,551 82,805 49,714 49,714 107,481 46,726 46,726 101,022
12 57 5,551 92,774 53,991 53,991 113,572 50,451 50,451 106,128
13 58 5,551 103,241 58,173 58,173 119,117 54,055 54,055 110,687
14 59 5,551 114,232 62,269 62,269 124,169 57,539 57,539 114,737
15 60 5,551 125,772 66,283 66,283 128,766 60,904 60,904 118,316
16 61 5,551 137,889 70,195 70,195 132,903 64,148 64,148 121,454
17 62 5,551 150,612 74,007 74,007 136,622 67,269 67,269 124,183
18 63 5,551 163,971 77,718 77,718 139,952 70,266 70,266 126,533
19 64 5,551 177,998 81,323 81,323 142,923 73,134 73,134 128,531
20 65 5,551 192,727 84,827 84,827 145,579 75,871 75,871 130,208
25 70 5,551 278,180 100,806 100,806 154,954 87,660 87,660 134,746
30 75 0 355,036 89,186 89,186 124,507 73,269 73,269 102,288
</TABLE>
GUARANTEED VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF
INSURANCE RATES.
CURRENT VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES AND DIVIDENDS BASED ON THE CURRENT DIVIDEND SCALE FOR THE EXACT
COMBINATION OF PREMIUMS AND BENEFITS SHOWN. THESE VALUES ARE ALSO BASED ON A
POLICY ISSUE DATE OF JANUARY 1 FOR PURPOSES OF DETERMINING DIVIDEND AMOUNTS.
THE HYPOTHETICAL INVESTMENT RATE OF RETURN SHOWN ABOVE IS ILLUSTRATIVE ONLY,
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL
INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICY
OWNER AND THE INVESTMENT RESULTS FOR FUNDS OF GENERAL AMERICAN CAPITAL
COMPANY, RUSSELL INSURANCE FUNDS, VARIABLE INSURANCE PRODUCTS FUND, VARIABLE
INSURANCE PRODUCTS FUND II, AND VAN ECK INVESTMENT TRUST. THE CASH VALUE,
CASH SURRENDER VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED THE RATE SHOWN ABOVE OVER
A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY,
WALNUT STREET SECURITIES, GENERAL AMERICAN CAPITAL COMPANY, RUSSELL INSURANCE
FUNDS, VARIABLE INSURANCE PRODUCTS FUND, VARIABLE INSURANCE PRODUCTS FUND II,
VAN ECK INVESTMENT TRUST, OR ANY REPRESENTATIVE THEREOF, THAT THIS
HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED
OVER ANY PERIOD OF TIME.
ILLUSTRATED VALUES SHOWN ABOVE ARE AS OF THE END OF THE POLICY YEARS
INDICATED AND ASSUME ANY ADDITIONAL PREMIUMS SHOWN ARE RECEIVED ON THE POLICY
ANNIVERSARIES. ILLUSTRATED VALUES ASSUME ALL PREMIUM TAXES ARE PAID BY THE
COMPANY.
<PAGE> 218
<TABLE>
GENERAL AMERICAN LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
POLICY FACE AMOUNT: $100,000 MALE PREFERRED NONSMOKER AGE 45
DEATH BENEFIT LEVEL (OPTION C) ANNUAL PREMIUM: $5,551
<CAPTION>
FOR SEPARATE ACCOUNT ELEVEN A HYPOTHETICAL
GROSS ANNUAL RATE OF RETURN @ 6.0% (NET RATE @ 4.58%)
========= CURRENT ========= ======== GUARANTEED ========
END AGE ANNUAL PREM SURR CASH DEATH SURR CASH DEATH
OF PAYMNT ACCUM @ VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR 5%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 5,551 5,829 5,209 5,209 100,000 4,972 5,194 100,000
2 47 5,551 11,949 10,621 10,621 100,000 9,861 10,305 100,000
3 48 5,551 18,375 16,240 16,240 100,000 14,977 15,643 100,000
4 49 5,551 25,122 22,104 22,104 100,000 20,334 21,222 100,000
5 50 5,551 32,206 28,238 28,238 100,000 25,947 27,057 100,000
6 51 5,551 39,645 34,665 34,665 100,000 32,099 33,164 100,000
7 52 5,551 47,456 41,394 41,394 100,306 38,626 39,559 100,000
8 53 5,551 55,657 48,410 48,410 113,939 45,494 46,205 108,750
9 54 5,551 64,269 55,710 55,710 127,406 52,660 53,060 121,345
10 55 5,551 73,311 63,307 63,307 140,737 60,122 60,122 133,657
11 56 5,551 82,805 71,444 71,444 154,462 67,393 67,393 145,704
12 57 5,551 92,774 79,892 79,892 168,058 74,871 74,871 157,497
13 58 5,551 103,241 88,663 88,663 181,551 82,561 82,561 169,055
14 59 5,551 114,232 97,781 97,781 194,982 90,462 90,462 180,388
15 60 5,551 125,772 107,261 107,261 208,373 98,577 98,577 191,503
16 61 5,551 137,889 117,082 117,082 221,678 106,902 106,902 202,403
17 62 5,551 150,612 127,259 127,259 234,927 115,433 115,433 213,097
18 63 5,551 163,971 137,792 137,792 248,132 124,162 124,162 223,587
19 64 5,551 177,998 148,684 148,684 261,309 133,078 133,078 233,881
20 65 5,551 192,727 159,951 159,951 274,506 142,170 142,170 243,991
25 70 5,551 278,180 222,082 222,082 341,374 190,140 190,140 292,273
30 75 0 355,036 264,396 264,396 369,110 213,916 213,916 298,638
</TABLE>
GUARANTEED VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF
INSURANCE RATES.
CURRENT VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES AND DIVIDENDS BASED ON THE CURRENT DIVIDEND SCALE FOR THE EXACT
COMBINATION OF PREMIUMS AND BENEFITS SHOWN. THESE VALUES ARE ALSO BASED ON A
POLICY ISSUE DATE OF JANUARY 1 FOR PURPOSES OF DETERMINING DIVIDEND AMOUNTS.
THE HYPOTHETICAL INVESTMENT RATE OF RETURN SHOWN ABOVE IS ILLUSTRATIVE ONLY,
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL
INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICY
OWNER AND THE INVESTMENT RESULTS FOR FUNDS OF GENERAL AMERICAN CAPITAL
COMPANY, RUSSELL INSURANCE FUNDS, VARIABLE INSURANCE PRODUCTS FUND, VARIABLE
INSURANCE PRODUCTS FUND II, AND VAN ECK INVESTMENT TRUST. THE CASH VALUE,
CASH SURRENDER VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED THE RATE SHOWN ABOVE OVER
A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY,
WALNUT STREET SECURITIES, GENERAL AMERICAN CAPITAL COMPANY, RUSSELL INSURANCE
FUNDS, VARIABLE INSURANCE PRODUCTS FUND, VARIABLE INSURANCE PRODUCTS FUND II,
VAN ECK INVESTMENT TRUST, OR ANY REPRESENTATIVE THEREOF, THAT THIS
HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED
OVER ANY PERIOD OF TIME.
ILLUSTRATED VALUES SHOWN ABOVE ARE AS OF THE END OF THE POLICY YEARS
INDICATED AND ASSUME ANY ADDITIONAL PREMIUMS SHOWN ARE RECEIVED ON THE POLICY
ANNIVERSARIES. ILLUSTRATED VALUES ASSUME ALL PREMIUM TAXES ARE PAID BY THE
COMPANY.
<PAGE> 219
<TABLE>
GENERAL AMERICAN LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
POLICY FACE AMOUNT: $100,000 MALE PREFERRED NONSMOKER AGE 45
DEATH BENEFIT LEVEL (OPTION C) ANNUAL PREMIUM: $5,551
<CAPTION>
FOR SEPARATE ACCOUNT ELEVEN A HYPOTHETICAL
GROSS ANNUAL RATE OF RETURN @ 12.0% (NET RATE @ 10.582%)
========= CURRENT ========= ======== GUARANTEED ========
END AGE ANNUAL PREM SURR CASH DEATH SURR CASH DEATH
OF PAYMNT ACCUM @ VALUE VALUE BENEFIT VALUE VALUE BENEFIT
YEAR 5%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 5,551 5,829 5,512 5,512 100,000 5,275 5,497 100,000
2 47 5,551 11,949 11,572 11,572 100,000 10,803 11,247 100,000
3 48 5,551 18,375 18,235 18,235 100,000 16,937 17,603 100,000
4 49 5,551 25,122 25,593 25,593 100,000 23,749 24,637 100,000
5 50 5,551 32,206 33,737 33,737 100,000 31,318 32,428 100,000
6 51 5,551 39,645 42,758 42,758 106,708 39,999 41,065 102,482
7 52 5,551 47,456 52,685 52,685 127,666 49,591 50,523 122,427
8 53 5,551 55,657 63,618 63,618 149,735 60,144 60,854 143,229
9 54 5,551 64,269 75,648 75,648 173,004 71,728 72,128 164,953
10 55 5,551 73,311 88,886 88,886 197,602 84,419 84,419 187,670
11 56 5,551 82,805 103,699 103,699 224,197 97,810 97,810 211,465
12 57 5,551 92,774 119,969 119,969 252,362 112,390 112,390 236,419
13 58 5,551 103,241 137,840 137,840 282,247 128,259 128,259 262,629
14 59 5,551 114,232 157,487 157,487 314,040 145,523 145,523 290,182
15 60 5,551 125,772 179,090 179,090 347,914 164,296 164,296 319,172
16 61 5,551 137,889 202,783 202,783 383,939 184,694 184,694 349,690
17 62 5,551 150,612 228,768 228,768 422,319 206,838 206,838 381,836
18 63 5,551 163,971 257,246 257,246 463,241 230,853 230,853 415,713
19 64 5,551 177,998 288,434 288,434 506,917 256,864 256,864 451,433
20 65 5,551 192,727 322,595 322,595 553,634 285,006 285,006 489,125
25 70 5,551 278,180 548,095 548,095 842,504 463,537 463,537 712,526
30 75 0 355,036 862,947 862,947 1,204,718 689,758 689,758 962,936
</TABLE>
GUARANTEED VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF
INSURANCE RATES.
CURRENT VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES AND DIVIDENDS BASED ON THE CURRENT DIVIDEND SCALE FOR THE EXACT
COMBINATION OF PREMIUMS AND BENEFITS SHOWN. THESE VALUES ARE ALSO BASED ON A
POLICY ISSUE DATE OF JANUARY 1 FOR PURPOSES OF DETERMINING DIVIDEND AMOUNTS.
THE HYPOTHETICAL INVESTMENT RATE OF RETURN SHOWN ABOVE IS ILLUSTRATIVE ONLY,
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL
INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICY
OWNER AND THE INVESTMENT RESULTS FOR FUNDS OF GENERAL AMERICAN CAPITAL
COMPANY, RUSSELL INSURANCE FUNDS, VARIABLE INSURANCE PRODUCTS FUND, VARIABLE
INSURANCE PRODUCTS FUND II, AND VAN ECK INVESTMENT TRUST. THE CASH VALUE,
CASH SURRENDER VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED THE RATE SHOWN ABOVE OVER
A PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY,
WALNUT STREET SECURITIES, GENERAL AMERICAN CAPITAL COMPANY, RUSSELL INSURANCE
FUNDS, VARIABLE INSURANCE PRODUCTS FUND, VARIABLE INSURANCE PRODUCTS FUND II,
VAN ECK INVESTMENT TRUST, OR ANY REPRESENTATIVE THEREOF, THAT THIS
HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED
OVER ANY PERIOD OF TIME.
ILLUSTRATED VALUES SHOWN ABOVE ARE AS OF THE END OF THE POLICY YEARS
INDICATED AND ASSUME ANY ADDITIONAL PREMIUMS SHOWN ARE RECEIVED ON THE POLICY
ANNIVERSARIES. ILLUSTRATED VALUES ASSUME ALL PREMIUM TAXES ARE PAID BY THE
COMPANY.
<PAGE> 220
<TABLE>
APPENDIX B
TARGET ANNUAL PREMIUM PER $1,000
BASE COVERAGE -- UNDERWRITTEN
NON-SMOKER RATES
- --------------------------------------------------------------------------------------------------------
<CAPTION>
- - - - - - - - - Male Non-Smoker - - - - - - - - - - - - - - - - - Female Non-Smoker - - - - - - -
Pre- Stan- Pre- Stan- Pre- Stan- Pre- Stan-
ferred dard ferred dard ferred dard ferred dard
Issue Non- Non- Issue Non- Non- Issue Non- Non- Issue Non- Non-
Age Smoker Smoker Age Smoker Smoker Age Smoker Smoker Age Smoker Smoker
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0 -- -- 0 -- --
1 -- -- 41 48.84 48.86 1 -- -- 41 41.73 41.75
2 -- -- 42 50.44 50.45 2 -- -- 42 43.09 43.10
3 -- -- 43 52.09 52.11 3 -- -- 43 44.47 44.49
4 -- -- 44 53.77 53.79 4 -- -- 44 45.90 45.92
5 -- -- 45 55.51 55.53 5 -- -- 45 47.38 47.40
6 -- -- 46 57.27 57.31 6 -- -- 46 48.88 48.90
7 -- -- 47 59.10 59.14 7 -- -- 47 50.44 50.46
8 -- -- 48 60.98 61.00 8 -- -- 48 52.02 52.04
9 -- -- 49 62.90 62.92 9 -- -- 49 53.67 53.69
10 -- -- 50 64.87 64.90 10 -- -- 50 55.34 55.36
66.91
11 -- -- 51 66.89 11 -- -- 51 57.06 57.09
12 -- -- 52 68.95 68.99 12 -- -- 52 58.83 58.85
13 -- -- 53 71.07 71.11 13 -- -- 53 60.63 60.67
14 -- -- 54 73.23 73.27 14 -- -- 54 62.48 62.52
15 -- -- 55 75.44 75.49 15 -- -- 55 64.38 64.41
77.73
16 -- -- 56 77.68 16 -- -- 56 66.32 66.36
17 -- -- 57 79.98 80.04 17 -- -- 57 68.32 68.35
18 -- -- 58 82.31 82.38 18 -- -- 58 70.36 70.40
19 -- -- 59 84.71 84.78 19 -- -- 59 72.51 72.54
20 24.89 24.91 60 87.18 87.23 20 20.89 20.89 60 74.42 74.77
21 25.63 25.64 61 89.71 89.76 21 21.58 21.58 61 77.03 77.07
22 26.39 26.41 62 92.30 92.36 22 22.31 22.31 62 79.40 79.45
23 27.20 27.22 63 94.96 95.04 23 23.05 23.05 63 81.85 81.91
24 28.06 28.06 64 97.69 97.78 24 23.81 23.81 64 84.35 84.41
25 28.94 28.94 65 100.47 100.56 25 24.60 24.60 65 86.89 86.96
26 29.87 29.87 66 103.30 103.41 26 25.43 25.43 66 89.48 89.57
27 30.83 30.84 67 106.23 106.34 27 26.28 26.30 67 92.15 92.24
28 31.84 31.86 68 109.23 109.38 28 27.16 27.18 68 94.93 95.02
29 32.88 32.92 69 112.39 112.54 29 28.08 28.10 69 97.84 97.93
30 33.98 34.01 70 115.66 115.83 30 29.01 29.02 70 100.90 101.01
31 35.12 35.14 71 119.09 119.27 31 29.99 30.00 71 104.11 104.24
32 36.30 36.32 72 122.65 122.86 32 30.98 31.00 72 107.49 107.64
33 37.53 37.55 73 126.30 126.53 33 32.03 32.05 73 111.01 111.16
34 38.80 38.81 74 130.03 130.27 34 33.12 33.14 74 114.61 114.79
35 40.11 40.12 75 133.81 134.07 35 34.25 34.27 75 118.31 118.52
36 41.46 41.48 76 137.66 137.97 36 35.41 35.43 76 122.14 122.36
37 42.85 42.87 77 141.64 141.98 37 36.60 36.62 77 126.13 126.37
38 44.29 44.31 78 145.79 146.18 38 37.84 37.85 78 130.31 130.57
39 45.77 45.78 79 150.22 150.65 39 39.10 39.12 79 134.76 135.06
40 47.28 47.30 80 154.90 155.38 40 40.39 40.41 80 139.52 139.84
</TABLE>
1
<PAGE> 221
<TABLE>
APPENDIX B
TARGET ANNUAL PREMIUM PER $1,000
BASE COVERAGE -- UNDERWRITTEN
SMOKER RATES
- --------------------------------------------------------------------------------------------------------
<CAPTION>
- - - - - - - - - - Male Smoker - - - - - - - - - - - - - - - - - - - Female Smoker - - - - - - - -
Pre- Stan- Pre- Stan- Pre- Stan- Pre- Stan-
Issue ferred dard Issue ferred dard Issue ferred dard Issue ferred dard
Age Smoker Smoker Age Smoker Smoker Age Smoker Smoker Age Smoker Smoker
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0 13.49 13.49 0 11.20 11.20
1 13.77 13.77 41 48.95 49.16 1 11.44 11.44 41 41.79 41.99
2 14.16 14.16 42 50.56 50.80 2 11.76 11.76 42 43.16 43.36
3 14.58 14.58 43 52.22 52.49 3 12.11 12.11 43 44.56 44.78
4 15.00 15.00 44 53.91 54.20 4 12.48 12.48 44 46.01 46.24
5 15.47 15.47 45 55.67 55.96 5 12.84 12.84 45 47.79 47.74
6 15.96 15.96 46 57.47 57.72 6 13.25 13.25 46 49.02 49.26
7 16.48 16.48 47 59.32 59.53 7 13.67 13.67 47 50.58 50.82
8 17.03 17.03 48 61.21 61.39 8 14.11 14.11 48 52.20 52.42
9 17.61 17.61 49 63.15 63.30 9 14.58 14.58 49 53.85 54.05
10 18.21 18.21 50 65.15 65.26 10 15.06 15.06 50 55.56 55.74
11 18.84 18.84 51 67.18 67.29 11 15.56 15.56 51 57.29 57.45
12 19.48 19.48 52 69.26 69.36 12 16.08 16.08 52 59.07 59.23
13 20.14 20.14 53 71.40 71.52 13 16.64 16.64 53 60.88 61.04
14 20.83 20.83 54 73.59 73.70 14 17.19 17.19 54 62.73 32.91
15 21.50 21.50 55 75.81 75.92 15 17.77 17.77 55 64.65 64.81
16 22.17 22.17 56 78.07 78.19 16 18.36 18.36 56 66.61 66.77
17 22.85 22.85 57 80.39 80.54 17 18.95 18.95 57 68.60 68.76
18 23.52 23.52 58 82.74 82.88 18 19.59 19.59 58 70.67 70.81
19 24.20 24.20 59 85.14 85.30 19 20.23 20.23 59 72.81 72.94
20 24.91 24.98 60 87.61 87.75 20 20.89 20.89 60 75.02 75.15
21 25.64 25.72 61 90.14 90.30 21 21.58 21.58 61 77.33 77.44
22 26.41 26.49 62 92.77 92.93 22 22.31 22.31 62 79.72 79.82
23 27.22 27.29 63 95.45 95.61 23 23.05 23.05 63 82.19 82.30
24 28.06 28.13 64 98.20 98.40 24 23.81 23.81 64 84.71 84.83
25 28.96 29.00 65 101.01 101.23 25 24.60 24.60 65 87.28 87.43
26 29.89 29.93 66 103.90 104.12 26 25.43 25.43 66 89.89 90.05
27 30.86 30.90 67 106.86 107.12 27 26.30 26.30 67 92.60 92.76
28 31.88 31.91 68 109.92 110.20 28 27.18 27.18 68 95.40 95.59
29 32.93 32.97 69 113.10 113.42 29 28.10 28.10 69 98.34 98.54
30 34.03 34.07 70 116.44 116.77 30 29.02 29.06 70 101.42 101.63
31 35.17 35.21 71 119.90 120.27 31 30.00 30.04 71 104.69 104.92
32 36.36 36.41 72 123.51 123.90 32 31.02 31.07 72 108.09 108.34
33 37.58 37.64 73 127.20 127.61 33 32.07 32.13 73 111.61 111.88
34 38.85 38.92 74 130.95 131.41 34 33.16 33.23 74 115.25 115.54
35 40.16 40.25 75 134.80 135.29 35 34.28 34.36 75 118.99 119.32
36 41.51 41.62 76 138.72 139.26 36 35.45 35.54 76 122.86 123.19
37 42.91 43.03 77 142.78 143.36 37 36.66 36.75 77 126.87 127.26
38 44.36 44.51 78 146.99 147.63 38 37.89 38.02 78 131.11 131.53
39 45.84 46.02 79 151.48 152.17 39 39.15 39.30 79 135.59 136.06
40 47.37 47.57 80 156.21 156.98 40 40.46 40.63 80 140.38 140.90
</TABLE>
2
<PAGE> 222
<TABLE>
APPENDIX B
TARGET ANNUAL PREMIUM PER $1,000
BASE COVERAGE -- GUARANTEED ISSUE
- --------------------------------------------------------------------------------------------------------
<CAPTION>
- - - - - - - - Male Guaranteed Issue - - - - - - - - - - - - - - Female Guaranteed Issue - - - - -
Issue Non- Issue Non- Issue Non- Issue Non-
Age Smoker Smoker Age Smoker Smoker Age Smoker Smoker Age Smoker Smoker
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0 -- -- 0 -- --
1 -- -- 41 44.70 53.45 1 -- -- 41 44.70 53.45
2 -- -- 42 46.24 55.22 2 -- -- 42 46.24 55.22
3 -- -- 43 47.82 57.01 3 -- -- 43 47.82 57.01
4 -- -- 44 49.45 58.83 4 -- -- 44 49.45 58.83
5 -- -- 45 51.12 60.69 5 -- -- 45 51.12 60.69
6 -- -- 46 52.83 62.61 6 -- -- 46 52.83 62.61
7 -- -- 47 54.60 64.57 7 -- -- 47 54.60 64.57
8 -- -- 48 56.40 66.56 8 -- -- 48 56.40 66.56
9 -- -- 49 58.24 68.63 9 -- -- 49 58.24 68.63
10 -- -- 50 60.15 70.78 10 -- -- 50 60.15 70.78
11 -- -- 51 62.09 72.97 11 -- -- 51 62.09 72.97
12 -- -- 52 64.10 75.19 12 -- -- 52 64.10 75.19
13 -- -- 53 66.20 77.47 13 -- -- 53 66.20 77.47
14 -- -- 54 68.35 79.77 14 -- -- 54 68.35 79.77
15 -- -- 55 70.62 82.10 15 -- -- 55 70.62 82.10
16 -- -- 56 72.94 84.51 16 -- -- 56 72.94 84.51
17 -- -- 57 75.29 86.96 17 -- -- 57 75.29 86.96
18 -- -- 58 77.72 89.47 18 -- -- 58 77.72 89.47
19 -- -- 59 80.25 92.06 19 -- -- 59 80.25 92.06
20 22.39 27.34 60 82.85 94.72 20 22.39 27.34 60 82.85 94.72
21 23.07 28.15 61 85.52 97.47 21 23.07 28.15 61 85.52 97.47
22 23.78 28.99 62 88.26 100.35 22 23.78 28.99 62 88.26 100.35
23 24.52 29.87 63 91.03 103.30 23 24.52 29.87 63 91.03 103.30
24 25.31 30.79 64 93.83 106.30 24 25.31 30.79 64 93.83 106.30
25 26.15 31.76 65 96.69 109.36 25 26.15 31.76 65 96.69 109.36
26 27.00 32.77 66 99.70 112.47 26 27.00 32.77 66 99.70 112.47
27 27.89 33.83 67 102.83 115.66 27 27.89 33.83 67 102.83 115.66
28 28.81 34.94 68 106.12 119.02 28 28.81 34.94 68 106.12 119.02
29 29.78 36.09 69 109.54 122.54 29 29.78 36.09 69 109.54 122.54
30 30.79 37.28 70 113.12 126.28 30 30.79 37.28 70 113.12 126.28
31 31.83 38.54 71 -- -- 31 31.83 38.54 71 -- --
32 32.91 39.83 72 -- -- 32 32.91 39.83 72 -- --
33 34.04 41.18 73 -- -- 33 34.04 41.18 73 -- --
34 35.24 42.57 74 -- -- 34 35.24 42.57 74 -- --
35 36.45 43.99 75 -- -- 35 36.45 43.99 75 -- --
36 37.72 45.46 76 -- -- 36 37.72 45.46 76 -- --
37 39.02 46.96 77 -- -- 37 39.02 46.96 77 -- --
38 40.39 48.53 78 -- -- 38 40.39 48.53 78 -- --
39 41.78 50.14 79 -- -- 39 41.78 50.14 79 -- --
40 43.21 51.79 80 -- -- 40 43.21 51.79 80 -- --
</TABLE>
3
<PAGE> 223
PART II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities and
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 heretofore, or hereafter duly adopted pursuant
to authority conferred in that section.
RULE 484 UNDERTAKING
Section 351.355 of the Missouri General and Business Corporation Law, in
brief, allows a corporation to indemnify any person who is a party or is
threatened to be made a party to any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal, administrative, or
investigative by reason of the fact that he is or was a director, officer,
employee, or agent of the corporation, against expenses, including attorneys'
fees, judgments, fines, and amounts paid in settlement actually and
reasonably incurred by him in connection with such action if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation. When any person was or is a party or is
threatened to be made a party in an action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the Fact that he
is or was a director, officer, employee, or agent of the corporation,
indemnification may be paid unless such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
corporation. In the event of such a determination indemnification is allowed
if a court determines that the person is fairly and reasonably entitled to
indemnity. A corporation has the power to give any further indemnity to any
person who is or was a director, officer, employee, or agent, provided for in
the articles of incorporation or as authorized by any by-law which has been
adopted by vote of the shareholders, provided that no such indemnity shall
indemnify any person's conduct which was finally adjudged to have been
knowingly fraudulent, deliberately dishonest, or willful misconduct.
In accordance with Missouri law, General American's Board of Directors, at
its meeting on 19 November 1987, and the policyholders of General American at
the annual meeting held on 26 January 1988, adopted the following
resolutions:
"BE IT RESOLVED THAT
II-1
<PAGE> 224
1. The company shall indemnify any person who is, or was a
director, officer, or employee of the company, or is or was
serving at the request of the company as a director, officer,
employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against any and all
expenses (including attorneys' fees), judgments, fines, and
amounts paid in settlement, actually and reasonably incurred by
him or her in connection with any civil, criminal,
administrative, or investigative action, proceeding, or claim
(including an action by or in the right of the company), by
reason of the fact that he or she was serving in such capacity
if he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best
interests of the company; provided that such person's conduct
is not finally adjudged to have been knowingly fraudulent,
deliberately dishonest, or willful misconduct.
2. The indemnification provided herein shall not be deemed
exclusive of any other rights to which a director, officer, or
employee may be entitled under any agreement, vote of
policyholders or disinterested directors, or otherwise, both as
to action in his or her official capacity and as to action in
another capacity which holding such office, and shall continue
as to a person who has ceased to be a director, officer, or
employee and shall inure to the benefit of the heirs, executors
and administrators of such a person."
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
II-2
<PAGE> 225
Reasonableness of Fees and Charges
General American of which Registrant forms a part, hereby represents that the
fees and charges deducted under the terms of the Contract are, in the
aggregate, reasonable in relationship to the services rendered, the expenses
expected, and the risks assumed by General American.
II-3
<PAGE> 226
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following Papers and Documents:
The facing sheet.
VGSP Prospectus, consisting of 52 pages; FRC-VUL Prospectus,
consisting of 51 pages.
The undertaking to file reports required by Section 15 (d), 1934 Act.
The undertaking pursuant to Rule 484.
Representations pursuant to Rule 6e-3(T).
The signatures.
1. The following exhibits (which correspond in number to the numbers
under paragraph A of the instructions for exhibits to Form N-8B-2):
(1) Resolution of the Board of Directors of General
American authorizing establishment of the
Separate Account<F1>
(2) Not applicable
(3) (a) Principal Underwriting Agreement<F1>
(b) Proposed form of Selling Agreement<F1>
(c) Commission Schedule<F1>
(4) Not applicable
(5) (a) Revised form of VGSP Policy<F2>
(b) Form of VGSP Pension Policy and Policy Riders<F1>
(c) Waiver of monthly Deduction Rider<F1>
(d) Form of FRC-VUL Policy<F4>
(e) Form of FRC-VUL Waiver of Monthly Deduction Rider<F4>
(f) Form of FRC-VUL Waiver of Specified Premium Rider<F4>
(g) Form of FRC-VUL Increasing Benefit Rider<F4>
II-4
<PAGE> 227
(6) (a) Amended Charter and Articles of Incorporation of General
American<F2>
(b) Amended By-Laws of General American<F1>
(7) Not applicable
(8) (a) Form of Agreement to Purchase Shares of
General American Capital Company<F2>
(b) Form of Participation Agreement with Variable
Insurance Products Fund<F2>
(c) Form of Participation Agreement with Russell
Insurance Funds, Inc.<F4>
(9) Not applicable
(10) (a) Form of Application for Standard VGSP Policy<F2>
(b) Form of Application for Standard FRC-VUL Policy<F4>
(c) Form of Application for FRC-VUL Policy--Guaranteed
Issue<F4>
(d) Form of Master Application for FRC-VUL Policy<F4>
2. Revised Memorandum describing General American's issuance,
transfer, and redemption procedures for the Policies and
General American's procedure for conversion to a fixed benefit policy<F2>
3. The following exhibits are numbered to correspond to the numbers in the
instructions as to exhibits for Form S-6.
(1) See above
(2) See Exhibit 1(5)
(3) (a) Opinion of Robert J. Banstetter, General
Counsel of General American as to VGSP Policy<F1>
(b) Opinion of Matthew P. McCauley, Associate
General Counsel of General American as to FRC-VUL
Policy<F4>
<PAGE> 228
(4) No financial statements are omitted from the
Prospectuses pursuant to prospectus instructions 1(b) or
(c).
(5) Not applicable
4. The consent of KPMG Peat Marwick LLP, Independent
Certified Public Accountants.
[FN]
- ---------------
<F1> Incorporated by reference to the initial Registration Statement
and File No. 33-48550.
<F2> Incorporated by reference to Pre-Effective Amendment
No. 1 to the Registration Statement, File No. 33-48550.
<F3> Incorporated by reference to Post-Effective Amendment No. 3 to
the Registration Statement, File No. 33-48550.
<F4> Incorporated by reference to Post-Effective Amendment No. 5 to
the Registration Statement, File No. 33-48550.
II-6
<PAGE> 229
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, General American
Life Insurance Company and General American Separate Account Eleven certify
that they meet all of the requirements for effectiveness of this amended
Registration Statement pursuant to Rule 485(b) under the Securities Act of
1933 and have duly caused this amended Registration Statement to be signed on
their behalf by the undersigned thereunto duly authorized, and the seal of
General American Life Insurance Company to be hereunto affixed and attested,
all in the City of St. Louis, State of Missouri, on the 7th day of April,
1997.
GENERAL AMERICAN SEPARATE ACCOUNT
ELEVEN (Registrant)
(Seal) BY: GENERAL AMERICAN LIFE
INSURANCE COMPANY (for Registrant
and as Depositor)
Attest: By:
--------------------------- ----------------------------
Robert J. Banstetter, Sr. Richard A. Liddy
Secretary President
General American Life
Insurance Company
II-7
<PAGE> 230
Pursuant to the requirements of the Securities Act of 1933, this amended
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
Chairman, President 4/7/97
- ---------------------------- (Principal Executive
Richard A. Liddy Officer)
Vice President 4/7/97
- ---------------------------- -----
John W. Barber Controller
(Principal Accounting
Officer and Principal
Financial Officer)
Director
- ----------------------------
August A. Busch, III<F*>
Director
- ----------------------------
William E. Cornelius<F*>
Director
- ----------------------------
John C. Danforth<F*>
Director
- ----------------------------
Bernard A. Edison<F*>
Director 4/7/97
- ----------------------------
Richard A. Liddy
II-8
<PAGE> 231
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
Director
- ----------------------------
William E. Maritz<F*>
Director
- ----------------------------
Craig D. Schnuck<F*>
Director
- ----------------------------
William P. Stiritz<F*>
Director
- ----------------------------
Andrew C. Taylor<F*>
Director
- ----------------------------
H. Edwin Trusheim<F*>
Director
- ----------------------------
Robert L. Virgil, Jr.<F*>
Director
- ----------------------------
Virginia V. Weldon<F*>
Director
- ----------------------------
Ted C. Wetterau<F*>
By 4/7/97
------------------------------
Matthew P. McCauley
<FN>
<F*> Original powers of attorney authorizing Matthew P. McCauley to sign this
Registration Statement and Amendments thereto on behalf of the Board of
Directors of General American Life Insurance Company are on file with the
Securities and Exchange Commission.
</TABLE>
II-9
<PAGE> 232
<TABLE>
INDEX TO EXHIBITS
<CAPTION>
Source
Exhibit or Page
Number Description Number
- ------ ----------- ------
<C> <S>
1. Consent of KPMG Peat Marwick LLP,
Independent Certified Public Accountants
2. Revised General American Life
Insurance Company by-laws.
</TABLE>
II-10
<PAGE> 233
Exhibit 1.
Consent of KPMG Peat Marwick LLP, Independent Certified Public Accountants
II-11
<PAGE> 234
The Board of Directors
General American Life Insurance Company:
Re: "Select Plus"
"Russell Insurance Funds"
We consent to the use of our reports included herein and to the reference of
our firm under the heading "Experts" in the Registration Statement and
Prospectus for General American Separate Account Eleven. Our report on
the consolidated financial statements of General American Life Insurance
Company and subsidiaries refers to the adoption of Statement of Financial
Accounting Standards No. 120, Accounting and Reporting by Mutual Life
Insurance Enterprises and by Insurance Enterprises for Certain Long-
Duration Participating Contracts in 1996.
KPMG PEAT MARWICK LLP
St. Louis, Missouri
9 April, 1997
II-12
<PAGE> 235
Exhibit 2.
AMENDED AND RESTATED CHARTER and ARTICLES OF INCORPORATION of GENERAL
AMERICAN LIFE INSURANCE COMPANY
ARTICLE I
The name of the Company shall continue to be General American Life
Insurance Company.
ARTICLE II
The principal office of the Company shall continue to be located at 700
Market Street in the City of St. Louis, in the State of Missouri.
ARTICLE III
The Company is incorporated for the purpose of making insurance upon
the lives of individuals and every assurance pertaining thereto or connected
therewith, to grant, purchase and dispose of annuities and endowments of
every kind and description whatsoever, to provide an indemnity against death
and for weekly or other periodic indemnity for disability occasioned by
accident or sickness to the person of the assured and to have all the further
rights, powers and privileges granted or permitted life insurance companies
organized under the provisions of Chapter 376 R.S.Mo., and all Acts
amendatory thereof or additional thereto.
ARTICLE IV
The Company was originally organized as a domestic stock and mutual
life insurance Company in 1933 and, in a process initiated in 1936, converted
to a mutual Company with no capital stock. Pursuant to a Plan of
Reorganization (the "Plan") adopted by the Company as of 26 September 1996,
and in accordance with Senate Bill No. 759 as enacted by the 1996 Session of
the 88th General Assembly of the State of Missouri (Section 376.1300 et seq.
R.S.Mo.)(the "MHC Statute"), the Company converted to a stock form life
insurance Company, without members, and each member of the Company
immediately prior to the consummation of the reorganization described in the
Plan became, automatically by operation of law, a member of General American
Mutual Holding Company in accordance with the provisions of the Articles of
Incorporation and By-laws of General American Mutual Holding Company and the
MHC Statute.
II-13
<PAGE> 236
The aggregate number of shares of stock that the Company shall be
authorized to issue shall be thirty thousand (30,000) shares of common stock,
with par value of one dollar ($1.00) per share.
No holder of stock of the Company shall be entitled as a matter of
right to subscribe for or purchase any part of any new or additional issue of
stock, or securities convertible into stock, of any class whatsoever, whether
now or hereafter authorized, and all such additional shares of stock or other
securities convertible into stock may be issued and disposed of by the Board
of Directors to such person or persons and on such terms and for such
consideration (so far as may be permitted by law) as the Board of Directors,
in its absolute discretion, may deem advisable.
The Company shall be a continuation of the original corporation of the
same name whose first Certificate of Authority to transact a life insurance
business was granted by the Superintendent of the Insurance Department on the
5th day of September, 1933.
ARTICLE V
The corporate powers of the Company shall be vested in a Board of
Directors and shall be exercised by the Board and by such officers, agents,
employees and committees, including an Advisory Committee, as the Board may,
in its discretion, from time to time appoint and empower. The Board shall
have the power from time to time to make, amend or repeal such By-laws, rules
and regulations for the transaction of the business of the Company as the
Board may deem expedient and as are not inconsistent with this Amended and
Restated Charter and Articles of Incorporation or the constitution or other
laws of the State of Missouri. The Company shall have perpetual succession
for a term of nine hundred ninety-nine (999) years.
ARTICLE VI
The Board of Directors shall consist of not less than nine (9) and not
more than fifteen (15) persons elected as hereinafter provided. At least one
Director shall be a citizen and resident of the state of Missouri, and a
majority of the Directors shall be policyholders of the Company. Meetings of
the Board of Directors shall be held at such time and place and upon such
notice as shall be prescribed by the By-laws of the Company. Vacancies in
the Board of Directors may be filled by the shareholders at any regular
meeting or at any special meeting
II-14
<PAGE> 237
called for that purpose, or by vote of a majority of Directors present at any
regular or special meeting. Vacancies occasioned by death, resignation or
disqualification when filled shall be filled for the unexpired term for which
such Director was elected. Any Director elected by the Board to fill a
vacancy shall have the same qualifications required of the Director whose
place he or she takes. A majority of the members of the Board of Directors,
or such greater number thereof as may from time to time be provided for in
the By-laws of the Company, shall constitute a quorum for the transaction of
business, but a smaller number may meet and adjourn from time to time until a
quorum is present.
ARTICLE VII
The incumbent members of the Board of Directors shall continue to be
Directors of the Company until their respective terms have expired or until
their successors are duly elected and qualified. New Directors will be
elected by class so as to equalize as nearly as possible the number in each
class of Directors. There shall continue to be three classes of Directors,
each class serving for a three year term expiring one year after expiration
of the term of the immediately preceding class (effective at the annual
meeting of the Company for the year in which the term expires), so that the
term of one class will expire each year. Each Director shall serve during
the term for which he or she was elected or until a successor is duly elected
and qualified and nothing in this Amended and Restated Charter and Articles
of Incorporation shall be interpreted to prevent a Director whose term is
expiring from being eligible for re-election.
ARTICLE VIII
The annual meeting of the Company shall be held at the office of the
Company in the City of St. Louis, State of Missouri, on the fourth Thursday
in April in each year or at such other place as may be selected by the Board
of Directors and shall be held at such time as shall be selected by the Board
of Directors or as provided in the By-laws of the Company. Special meetings
of the Company shall be called at any time by the vote of a majority of the
entire number of the members of the Board of Directors, or upon the written
request of five percent of those shareholders of the Company eligible to vote
at such meeting, which request shall specify the matters proposed to be acted
upon. Notice of any annual or special meeting shall be given in the manner
provided in the By-laws.
II-15
<PAGE> 238
Each outstanding share of stock shall be entitled to one vote upon each
matter submitted to a vote at any annual or special meeting of the Company.
On all propositions which shall be submitted for decision at any annual or
special meeting of the Company, such matter shall be decided by the vote of
the majority of the shares voting at such meeting.
ARTICLE IX
The policyholders of the Company shall benefit in the earnings and
profits of the Company in such manner as shall be determined from time to
time by the Board of Directors under the laws of the State of Missouri, and
particularly Section 376.360 R.S.Mo. and all Acts amendatory thereof. Any
allocation of earnings and profits as made by the Board of Directors pursuant
to the provisions of this Article shall be binding and conclusive upon every
person who is entitled to share in its profits or earnings.
ARTICLE X
This Amended and Restated Charter and Articles of Incorporation may be
amended at any annual or special meeting of the Company by the majority vote
of the shareholders voting at such meeting; provided that if it is proposed
to amend the same at any special meeting a copy of the proposed amendment and
a copy of the notice of the meeting of the shareholders of the Company called
for that purpose shall be mailed at least ten (10) days before such meeting
to each shareholder as the shareholder's address appears upon the books of
the Company.
If it be proposed to amend Articles IV, V, IX and X of this Amended and
Restated Charter and Articles of Incorporation at any meeting, annual or
otherwise, then the notice and a copy of the proposed amendment, provided in
the preceding paragraph, shall be mailed at least thirty (30) days before
such meeting and a true and correct list of the shareholders of the Company,
together with the address of each as shown on the books and records of the
Company, shall be filed with the Director of the Department of Insurance of
the State of Missouri at least twenty (20) days before such meeting.
II-16
<PAGE> 239
ARTICLE XI
Whenever in this Amended and Restated Charter and Articles of
Incorporation notice is required or permitted to be given by mail, the
affidavit of the person who mailed such notice, filed with the Secretary of
the Company, shall constitute conclusive evidence that such notice has been
given and mailed.
ARTICLE XII: INDEMNIFICATION
The Company shall indemnify each of its directors, officers, employees,
and agents to the full extent specified by Section 351.355 R.S.Mo., as
amended from time to time (the "Indemnification Statute"), and, in
addition, shall indemnify each of them against all expenses (including,
without limitation, attorneys' fees, judgments, fines, taxes, and amounts
paid in settlement) actually and reasonably incurred by him or her in
connection with any claim (including, without limitation, any threatened,
pending, or completed action, suit, or proceeding whether civil, criminal,
administrative, or investigative and whether or not by or in the right of any
corporation) by reason of the fact that he or she is or was serving the
Company or at the request of the Company in any of the capacities referred to
in the Indemnification Statute or arising out of his or her status in any
such capacity, provided that the Company shall not indemnify any person from
or on account of such person's conduct which was finally adjudged to have
been knowingly fraudulent, deliberately dishonest or willful misconduct.
The Company is authorized to give or supplement any of the aforesaid
indemnifications by By-law, agreement, or otherwise and support them by
insurance to the extent it deems appropriate. Amounts to be paid under this
Article XII shall be disbursed at such times and upon such procedures as the
Company shall determine. All such indemnification shall continue as to any
person who has ceased to serve in any of the aforesaid capacities and shall
inure to the benefit of the heirs, devisees, and personal representatives of
such person. Indemnification given under this Article XII shall survive
elimination or modification of this Article XII with respect to any such
expenses incurred in connection with claims arising out of acts or omissions
occurring prior to such elimination or modification and persons to whom such
indemnification is given shall be entitled to rely on such indemnification as
a contract with the Company.
II-17
