VARIABLE ACCOUNT I OF AIG LIFE INS CO, N-4/A, 1996-03-01

VARIABLE ACCOUNT I OF AIG LIFE INS CO
N-4/A, 1996-03-01

Previous: IMC GLOBAL INC, S-8 POS, 1996-03-01

Next: WILLIAM BLAIR MUTUAL FUNDS INC, 485APOS, 1996-03-01

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 1, 1996
- ---------------------------------------------------------------------
File No. 33-39171
811-5301
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-4

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. [ ]
-------
Post - Effective Amendment No. 8 [ X ]
------

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 25 [ X ]
(Check appropriate box or boxes.)

VARIABLE ACCOUNT I
(Exact Name of Registrant)

AIG Life Insurance Company
(Name of Depositor)

One Alico Plaza, Wilmington, Delaware 19899
(Address of Depositor's Principal Executive Offices) (Zip Code)

Depositor's Telephone Number, including Area Code (302) 594-2000

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

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

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

It is proposed that this filing will become effective (check appropriate box)
/ / immediately upon filing pursuant to paragraph (b) of Rule 485
/ / on pursuant to paragraph (b) of Rule 485
/ / 60 days after filing pursuant to paragraph (a)(i) of Rule 485
/ / on pursuant to paragraph (a)(i) of Rule 485
/ / 75 days after filing pursuant to paragraph (a)(ii)
/x/ on May 1, 1996 pursuant to paragraph (a)(ii) of rule 485.

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

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

<PAGE>

CROSS REFERENCE SHEET
(required by Rule 495)

Item No. Location
- -------- --------

PART A

<S> <C> <C>
Item 1. Cover Page..................................... Cover Page

Item 2. Definitions.................................... Definitions

Item 3. Synopsis....................................... Highlights

Item 4. Condensed Financial Information................ Condensed Financial Information

Item 5. General Description of Registrant,
Depositor, and Portfolio Companies............. The Variable Account; The
Company; The Fund

Item 6. Deductions and Expenses........................ Charges and Deductions

Item 7. General Description of Variable Annuity
Contracts........................... The Contract; Parties to the Contract;
How to Purchase a Contract

Item 8. Annuity Period................................. Annuity Benefits

Item 9. Death Benefit.................................. Death Benefit

Item 10. Purchases and Contract Value................... How to Purchase a Contract; Premium
and Allocation of Your Investment Options

Item 11. Redemptions.................................... Distributions Under the Contract

Item 12. Taxes.......................................... Taxes

Item 13. Legal Proceedings.............................. Not Applicable

Item 14. Table of Contents of the Statement of
Additional Information......................... Table of Contents of the Statement
of Additional Information
</TABLE>

<PAGE>

Item No. Location
- -------- --------

PART B

<S> <C> <C>
Item 15. Cover Page.................................... Cover Page

Item 16. Table of Contents............................. Table of Contents

Item 17. General Information and History............... General Information

Item 18. Services...................................... Services

Item 19. Purchase of Securities Being Offered.......... Purchasing a Contract;
Charges and Deductions (Part A)

Item 20. Underwriters.................................. General Information/Distributor

Item 21. Calculation of Performance Data............... Calculation of Performance Related
Information

Item 22. Annuity Payments.............................. Annuity Provisions

Item 23. Financial Statements.......................... Financial Statements

</TABLE>

PART C

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

<PAGE>

PART A

<PAGE>

PROSPECTUS
for

INDIVIDUAL AND GROUP
SINGLE PREMIUM AND FLEXIBLE PREMIUM
DEFERRED
VARIABLE ANNUITY CONTRACTS

issued by

VARIABLE ACCOUNT I

and

AIG LIFE INSURANCE COMPANY
One Alico Plaza
600 King Street
Wilmington, Delaware 19801

This Prospectus sets forth the information a prospective investor ought
to know before investing.

The Individual Deferred Variable Annuity Contracts (the "Individual
Contracts") and Group Deferred Variable Annuity Contracts ("Group Contracts")
(collectively, the "Contracts") described in this Prospectus provide for
accumulation of Contract Values and payment of monthly annuity payments. The
Contracts may be used in retirement plans which do not qualify for federal tax
advantages ("Non-Qualified Contracts") or in connection with retirement plans
which may qualify as Individual Retirement Annuities ("IRA") under Section 408
of the Internal Revenue Code of 1986, as amended (the "Code") or Section 403(b)
of the Code ("403(b) Plans"). The Contracts will not be available in connection
with retirement plans designed by AIG Life Insurance Company (the "Company")
which qualify for the federal tax advantages available under Sections 401 and
457 of the Code. Purchasers intending to use the Contracts in connection with an
IRA or 403(b) Plan should seek competent tax advice.

Premiums allocated among the Subaccounts of Variable Account I (the
"Variable Account") will be invested in shares of Alliance Variable Products
Series Fund, Inc. (the "Fund"). The Fund has made available sixteen Portfolios:
Money Market Portfolio; Short-Term Multi-Market Portfolio; Growth Portfolio;
Growth and Income Portfolio; International Portfolio; U.S. Government/High Grade
Securities Portfolio; North American Government Income Portfolio; Global Dollar
Government Portfolio; Utility Income Portfolio; Global Bond Portfolio; Premier
Growth Portfolio; Total Return Portfolio; Conservative Investors Portfolio;
Growth Investors Portfolio; Worldwide Privatization Portfolio; and Technology
Portfolio. (See "Alliance Variable Products Series Fund, Inc. on Page __.)

Additional information about the Contracts and the Variable Account is
contained in the "Statement of Additional Information" which is available upon
request at no charge by calling or writing AIG Life Insurance Company;
Attention: Variable Products, One Alico Plaza, Wilmington, Delaware 19801,
1-800-340-2765 or call the service office at 1-800- 255-8402. The Statement of
Additional Information dated _________, 1996, has been filed with the Securities
and Exchange Commission and is hereby incorporated by reference. The Table of
Contents for the Statement of Additional Information can be found on page ___ of
this Prospectus.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<PAGE>

PLEASE READ THIS PROSPECTUS CAREFULLY AND RETAIN IT FOR YOUR FUTURE
REFERENCE.

THE CONTRACTS OFFERED BY THIS PROSPECTUS ARE NOT AVAILABLE IN ALL STATES.

Date of Prospectus: ____________, 1996

<PAGE>

TABLE CONTENTS

PAGE
Definitions.....................................................................
Highlights......................................................................
Summary of Expenses.............................................................
Condensed Financial Information.................................................
Calculation of Performance Data........................................
The Company.....................................................................
The Variable Account............................................................
Alliance Variable Products Series Fund, Inc.....................................

The Contract
Parties to the Contract................................................
How to Purchase a Contract.............................................
Discount Purchase Programs.............................................
Distributor............................................................
Administration of the Contracts........................................
Premium and Allocation to Your Investment Options......................
Right to Examine Contract Period.......................................
Unit Value and Contract Value..........................................
Transfers..............................................................
Dollar Cost Averaging..................................................

Charges and Deductions..........................................................

Annuity Benefits................................................................

Death Benefit...................................................................

Distributions Under the Contract................................................

Taxes...........................................................................

Appendix - General Account Option...............................................
Guaranteed Account.....................................................
Guarantee Periods......................................................
Market Value Adjustment................................................

Table of Contents of the Statement of Additional Information....................

<PAGE>

DEFINITIONS

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

Administrative Office - The Annuity Service Office of the Company: c/o Delaware
Valley Financial Services, Inc., 300 Berwyn Park, P.O. Box 3031, Berwyn, PA
19312-0031.

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

Annuity Date - The date on which annuity payments are to commence.

Annuity Option - An arrangement under which annuity payments are made under this
Contract.

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

Contract Anniversary - An anniversary of the Effective Date of the Contract.

Contract Value - The dollar value as of any Valuation Date of all amounts
accumulated under this Contract.

Contract Year - Each period of twelve (12) months commencing with the Effective
Date.

Effective Date - The date on which the first Contract Year begins.

Guaranteed Account - A part of our General Account, which earns a Guaranteed
Rate of interest.

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

Owner - The person named in the Contract Schedule, unless changed, and who has
all rights under the Contract.

Premium - Purchase payments for the Contract are referred to as Premium.

Premium Year - Any period of twelve (12) months commencing with the date a
Premium payment is made and ending on the same date in each succeeding twelve
(12) month period thereafter.

Surrender Charge - Contingent deferred sales charges are referred to as
Surrender Charges.

Valuation Date - Each day that We and the New York Stock Exchange are open for
trading.

Valuation Period - The period between the close of business on any Valuation
Date and the close of business for the next succeeding Valuation Date.

We, Our, Us - AIG Life Insurance Company.

You, Your - The Owner of this Contract.

<PAGE>

HIGHLIGHTS

This Prospectus describes the Individual Contracts or Group Contracts
(collectively, the "Contracts") and a segregated investment account of AIG Life
Insurance Company (the "Company") which account has been designated Variable
Account I (the "Variable Account"). The Contracts are designed to assist in
financial planning by providing for the accumulation of capital on a
tax-deferred basis for retirement and other long-term purposes, and providing
for the payment of monthly annuity income. Contracts may be purchased by
qualified retirement plans or with the intent to qualify for special Federal
income tax treatment ("Qualified Contracts"), or as an Individual Retirement
Annuity ("IRA"). The Contract may also be purchased for retirement plans,
deferred compensation plans and other purposes which do not qualify for such
special Federal income tax treatment ("Non-Qualified Contracts"). (See "Taxes"
on page ___.)

A Contract is purchased with a minimum initial premium of $5,000 for
Non-qualified Contracts and $2,000 for a Qualified Contract. If you choose a
flexible premium Contract, additional premium is permitted at any time, subject
to certain limitations. (See "Premium and Allocation to Your Investment Options"
on page ___.) You, as the Owner of the Contract, may allocate your premium so
that it accumulates on a variable basis, a fixed basis or a combination of both.

Premium allocated among the Subaccounts of the Variable Account will be invested
in shares of one or more of the underlying portfolios of the Alliance Variable
Products Series Fund, Inc. (the "Fund"), and will accumulate on a variable
basis. There are currently 16 Subaccounts, each of which invests exclusively in
one of the following Portfolios: Money Market; Short-Term Multi-Market; Growth;
Growth and Income; International; U.S. Government/High Grade Securities; North
American Government Income; Global Dollar Government; Utility Income; Global
Bond; Premier Growth; Total Return; Conservative Investors; Growth Investors;
Worldwide Privatization; and Technology. (See "Alliance Variable Products Series
Fund, Inc. on Page ___.) Your value in any one of these Subaccounts will vary
according to the investment performance of the underlying portfolio chosen by
you. You bear the entire investment risk for all premium allocated to the
Separate Account.

The Company does not deduct Sales Charges from any premium received. However,
the Contracts provide for a Surrender Charge (contingent deferred sales charge)
that may be assessed in the event that an Owner surrenders all or a portion of
the Contract Value within six contract years following payment of any premium.
The maximum Surrender Charge is 6% of premium to which the charge is applicable
for flexible premium contracts and 6% of the Contract Value for single premium
contracts. (See "Summary of Expenses" on page ____, and "Charges and Deductions
- - Deduction for Surrender Charge" on page .) Withdrawals and Surrenders from
the Guaranteed Account may be subject to a Market Value Adjustment (See "Market
Value Adjustment," Appendix , page ___.)

A penalty free withdrawal is available. Generally, there is no Surrender Charge
imposed on the greater of the Contract Value less premiums paid or the portion
of the withdrawal that does not exceed 10% of premium otherwise subject to the
Surrender Charge. (See "Withdrawals" on page ___.)

Surrenders and Withdrawals may be taxable and subject to a penalty tax. (See
"Taxes" beginning on page ___.)

The Company deducts daily a Mortality and Expense Risk Charge which is equal on
an annual basis to 1.25% of the average daily net asset value of the Variable
Account. There are no Mortality and Expense Risk Charges deducted for amounts in
the Guaranteed Account. (See "Charges and Deductions - Deduction for Mortality
and Expense Risk Charge" on page .)

<PAGE>

Charges are designed to reimburse the Company for administrative expenses
relating to maintenance of the Contract and the Variable Account. (See "Charges
and Deductions - Deduction for Administrative Charge and Contract Maintenance
Fee" on page .)

There are deductions and expenses paid out of the assets of the Fund which are
described in the accompanying Prospectus for the Fund.

The Owner may return the Contract within ten (10) days (the "Right to Examine
Contract Period") after it is received by returning it to the Company's
Administrative Office. The return of the Contract by mail will be effective when
the postmark is affixed to a properly addressed and postage prepaid envelope.
The Company will refund the Contract Value. In the case of Contracts issued in
connection with an IRA the Company will refund the greater of the Premium less
any withdrawals, or the Contract Value. However, if the laws of a state require
that the Company refund, during the Right to Examine Contract Period, an amount
equal to the premium paid less any withdrawals, the Company will refund such an
amount.

FEE TABLE

Contract Owner Transaction Expenses All Subaccounts
---------------

Sales Load Imposed on Purchases..........................................None
Surrender Charge (as a percentage of amount surrendered):

Single Premium Contracts Flexible Premium Contracts
------------------------ --------------------------

Contract Year 1 Premium Year 1 6%
Contract Year 2 Premium Year 2 5%
Contract Year 3 Premium Year 3 4%
Contract Year 4 Premium Year 4 3%
Contract Year 5 Premium Year 5 2%
Contract Year 6 Premium Year 6 1%
Contract Year 7 and thereafter Premium Year 7 and thereafter None

Exchange Fee:
First 12 Per Contract Year............................................None
Thereafter............................................................$ 10

Annual Contract Fee........................................................$ 30

Separate Account Expenses
(as a percentage of average account value)
Mortality and Expense Risk Fees........................................1.25%
Account Fees and Expenses..............................................0.15%
Total Separate Account Annual Expenses.....................................1.40%

<PAGE>

SUMMARY OF EXPENSES

SHORT
ALLIANCE PREMIER GROWTH & TERM ALL
GROWTH INCOME MULTI-MK OTHERS

Fund Annual Exp
After Exp. Reimb
Management Fees 0.55 0.62 0.50 0.00
Other Expenses 0.40 0.28 0.44 0.95
---- ---- ---- ----
Total 0.95 0.90 0.94 0.95

Expenses on a hypothetical $1,000 policy, assuming 5% growth:

If you Surrender:
1 Year 80 79 80 80
3 Year 114 113 114 114
5 Year 150 147 149 150
10 Years 276 271 275 276

If you Annuitize or you do not Surrender:

1 Year 25 24 24 25
3 Year 75 74 75 75
5 Year 129 127 129 129
10 Years 276 271 275 276

The purpose of the table set forth above is to assist the Purchaser in
understanding the various costs and expenses that an Owner will bear directly or
indirectly. The table reflects expenses of the Variable Account as well as the
Fund. (See "Charges and Deductions" on page of this Prospectus and
"Management of the Fund" in the Fund Prospectus.)

No deduction will be made for any premium or other taxes levied by any
State unless imposed by the State where you reside. Premium taxes currently
imposed on the Contracts by various states range from 0% to 3.5% of premiums
paid. (See "Charges and Deductions - Deduction for Premium and Other State
Taxes" on page .)

"Other Expenses" are based upon the expenses outlined under the section
entitled "Management of the Fund" in the Fund Prospectus.

*Fund operating expenses for each Portfolio before reimbursement by the
Fund's investment adviser were estimated to be 4.46% for the Money Market; .99%
for the Short-Term Multi-Market; .91% for the Growth and Income; 4.19% for the
Growth; 7.26% for the International; 3.73% for the U.S. Government/High Grade
Securities; 2.05% for the Global Bond; 4.43% for the North American Government
Income; 15.00% for the Global Dollar Government; 15.98% for the Utility Income;
1.40% for the Premier Growth; 19.49% for the Total Return; 20.35% for the
Conservative Investors; 41.62% for the Growth Investors; 18.47% for the
Worldwide Privatization; and 2.55% for Technology, of the average daily net
assets.

<PAGE>

The Example should not be considered a representation of past or future
expenses and actual expenses may be greater or less than those shown.

CONDENSED FINANCIAL INFORMATION
ACCUMULATION UNIT VALUES*

1995 1994 1993 1992
---- ---- ---- ----
<S> <C> <C> <C>
MONEY MARKET
Accumulation Unit Value
Beginning of Period 10.08 10.00 N/A
End of Period 10.26 10.08 N/A
Accum Units o/s @ end of period 431,319.86 8,487.20 N/A

GROWTH
Accumulation Unit Value
Beginning of Period 10.00 N/A N/A
End of Period 10.48 N/A N/A
Accum Units o/s @ end of period 467,688.06 N/A N/A

GROWTH & INCOME
Accumulation Unit Value
Beginning of Period 11.88 10.78 10.00
End of Period 11.67 11.88 10.78
Accum Units o/s @ end of period 438,680.32 28,041.82 800.00

INTERNATIONAL
Accumulation Unit Value
Beginning of Period 10.17 10.00 N/A
End of Period 10.71 10.17 N/A
Accum Units o/s @ end of period 447,407.41 21,717.14 N/A

SHORT-TERM MULTI-MARKET
Accumulation Unit Value
Beginning of Period 10.29 9.79 10.00
End of Period 9.49 10.29 9.79
Accum Units o/s @ end of period 95,717.60 14,511.57 5,161.58

GLOBAL BOND
Accumulation Unit Value
Beginning of Period 11.00 9.96 10.00
End of Period 10.28 11.00 9.96
Accum Units o/s @ end of period 85,875.16 18,846.45 5,444.00

</TABLE>

<PAGE>

1995 1994 1993 1992
---- ---- ---- ----
<S> <C> <C> <C>
US GOVERNMENT HIGH GRADE
Accumulation Unit Value
Beginning of Period 9.95 10.00 N/A
End of Period 9.42 9.95 N/A
Accum Units o/s @ end of period 320,574.64 41,210.45 N/A

NORTH AMERICAN GOVERNMENT INCOME
Accumulation Unit Value
Beginning of Period 10.00 N/A N/A
End of Period 8.70 N/A N/A
Accum Units o/s @ end of period 340,817.36 N/A N/A

UTILITY INCOME
Accumulation Unit Value
Beginning of Period 10.00 N/A N/A
End of Period 9.87 N/A N/A
Accum Units o/s @ end of period 111,604.02 N/A N/A

GLOBAL DOLLAR GOVERNMENT
Accumulation Unit Value
Beginning of Period 10.00 N/A N/A
End of Period 9.74 N/A N/A
Accum Units o/s @ end of period 69,320.82 N/A N/A

PREMIER GROWTH
Accumulation Unit Value
Beginning of Period 11.13 10.00 10.00
End of Period 10.15 11.13 10.00
Accum Units o/s @ end of period 223,550.22 35,271.53 2081.43

TOTAL RETURN
Accumulation Unit Value
Beginning of Period 10.00 N/A N/A
End of Period 9.65 N/A N/A
Accum Units o/s @ end of period 34,684.53 N/A N/A

CONSERVATIVE INVESTORS
Accumulation Unit Value
Beginning of Period 10.00 N/A N/A
End of Period 10.02 N/A N/A
Accum Units o/s @ end of period 62,868.02 N/A N/A

GROWTH INVESTORS
Accumulation Unit Value
Beginning of Period 10.00 N/A N/A
End of Period 9.81 N/A N/A
Accum Units o/s @ end of period 29,492.78 N/A N/A
</TABLE>

<PAGE>

1995 1994 1993 1992
---- ---- ---- ----
<S> <C> <C> <C>
WORLDWIDE PRIVATIZATION
Accumulation Unit Value
Beginning of Period 10.00 N/A N/A
End of Period 10.05 N/A N/A
Accum Units o/s @ end of period 105,674.08 N/A N/A

TECHNOLOGY
Accumulation Unit Value
Beginning of Period N/A N/A
End of Period N/A N/A
Accum Units o/s @ end of period N/A N/A

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

Short-Term Multi-Market Portfolio June 22, 1992
Growth & Income Portfolio July 8, 1992
Global Bond Portfolio July 8, 1992
Premier Growth Portfolio February 3, 1993
Money Market Portfolio February 3, 1993
U.S. Government/High Yield Securities Portfolio August 20, 1993
International Portfolio October 1, 1993
North American Government Income Portfolio April 11, 1994
Global Dollar Government Portfolio April 20, 1994
Utility Income Portfolio April 20, 1994
Conservative Investors Portfolio August 24, 1994
Growth Investors Portfolio August 16, 1994
Growth Portfolio August 16, 1994
Total Return Portfolio August 26, 1994
Worldwide Privatization Portfolio August 16, 1994
Technology Portfolio January 2, 1995
</TABLE>

Calculation of Performance Data

The Company may, from time to time, advertise certain performance
related information concerning one or more of the Subaccounts, including
information as to total return and yield. Performance information about a
Subaccount is based on the Subaccount's past performance only and is not
intended as an indication of future performance.

When the Company advertises the average annual total return of a
Subaccount, it will usually be calculated for one, five, and ten year periods
or, where a Subaccount has been in existence for a period less than one, five or
ten years, for such lesser period. Average annual total return is measured by
comparing the value of the investment in a Subaccount at the beginning of the
relevant period to the value of the investment at the end of the period
(assuming the deduction of any Surrender Charge which would be payable if the
account were redeemed at the end of the period) and calculating the average
annual compounded rate of return necessary to produce the value of the
investment at the end of the period. The Company may simultaneously present
returns that do not assume a surrender and, therefore, do not deduct the
Surrender Charge.

<PAGE>

When the Company advertises the yield of a Subaccount it will be
calculated based upon a given 30-day period. The yield is determined by dividing
the net investment income earned per Accumulation Unit during the period by the
value of an Accumulation Unit on the last day of the period.

When the Company advertises the performance of the Money Market
Subaccount it may advertise in addition to the total return either the yield or
the effective yield. The yield of the Money Market Subaccount refers to the
income generated by an investment in that Subaccount over a seven-day period.
The income is then annualized (i.e., the amount of income generated by the
investment during that week is assumed to be generated each week over a 52-week
period and is shown as a percentage of the investment). The effective yield is
calculated similarly but when annualized the income earned by an investment in
the Money Market Subaccount is assumed to be reinvested. The effective yield
will be slightly higher than the yield because of the compounding effect of this
assumed reinvestment during a 52-week period.

Total return at the Variable Account level is reduced by all contract
charges: sales charges, mortality and expense risk charges, and the
administrative charges, and is therefore lower than the total return at a Fund
level, which has no comparable charges. Likewise, yield and effective yield at
the Variable Account level take into account all recurring charges (except sales
charges), and are therefore lower than the yield and effective yield at a Fund
level, which has no comparable charges. Performance information for a Subaccount
may be compared to: (i) the Standard & Poor's 500 Stock Index, Dow Jones
Industrial Average, Donoghue Money Market Institutional Averages, indices
measuring corporate bond and government security prices as prepared by Lehman
Brothers, Inc. and Salomon Brothers or other indices measuring performance of a
pertinent group of securities so that investors may compare a Subaccount's
results with those of a group of securities widely regarded by investors as
representative of the securities markets in general; (ii) other variable annuity
separate accounts or other investment products tracked by Lipper Analytical
Services, a widely used independent research firm which ranks mutual funds and
other investment companies by overall performance, investment objectives, and
assets, or tracked by other ratings services, companies, publications, or
persons who rank separate accounts or other investment products on overall
performance or other criteria; (iii) the Consumer Price Index (measure for
inflation) to assess the real rate of return from an investment in the Contract;
and (iv) indices or averages of alternative financial products available to
prospective investors, including the Bank Rate Monitor which monitors average
returns of various bank instruments.

Financial Data

Financial Statements of the Company and the Variable Account may be
found in the Statement of Additional Information.

THE COMPANY

The Company is a stock life insurance company domiciled in Delaware.
The Company provides a full range of life insurance and annuity plans. The
Company is a subsidiary of American International Group, Inc. ("AIG"), which
serves as the holding company for a number of companies engaged in the
international insurance business, both life and general, in over 130 countries
and jurisdictions around the world.

<PAGE>

THE VARIABLE ACCOUNT

The Company authorized the organization of the Variable Account in
1986. The Variable Account is maintained pursuant to Delaware insurance law. The
Company has caused the Variable Account to be registered with the Securities and
Exchange Commission as a unit investment trust pursuant to the provisions of the
Investment Company Act of 1940. The Variable Account meets the definition of a
"Separate Account" under Federal securities laws. The SEC does not supervise the
management or the investment practices of the Variable Account.

The Company owns the assets in the Variable Account and obligations
under the Contract are general corporate obligations. The Variable Account and
each Subaccount, however, are separate from the Company's other assets including
those of the General Account and from any other separate accounts. The assets of
the Variable Account, equal to the reserves and other contract liabilities with
respect to the Variable Account, are not chargeable with liabilities arising out
of any other business the Company may conduct. Investment income, as well as
both realized and unrealized gains and losses are, in accordance with the
Contracts, credited to or charged against the Variable Account without regard to
income, gains or losses arising out of any other business of the Company. As a
result, the investment performance of each Subaccount and the Variable Account
is entirely independent of the investment performance of the General Account and
of any other separate account maintained by the Company.

The Variable Account is divided into Subaccounts, with the assets of
each Subaccount invested in shares of one portfolio of the Fund. The Company
may, from time to time, add additional portfolios of the Fund, and, when
appropriate, additional mutual funds to act as the funding vehicles for the
Contracts. If deemed to be in the best interests of persons having voting rights
under the Contract, the Variable Account may be operated as a management company
under the Investment Company Act of 1940, may be deregistered under such Act in
the event such registration is no longer required, or may be combined with one
or more other separate accounts. The Company may offer other variable annuity
contracts which also invest in Variable Account I, and are described in other
prospectuses.

THE FUND

Alliance Variable Products Series Fund, Inc., (the "Fund") will act as
the funding vehicle for the Contracts offered hereby. The Fund is managed by
Alliance Capital Management L.P., (the "Investment Manager"). The Fund is an
open-end, diversified management investment company, which is intended to meet
differing investment objectives. The Fund has made available the following
Portfolios: Money Market; Short-Term Multi-Market; Growth; Growth and Income;
International; U.S. Government/High Grade Securities; Global Bond; North
American Government Income; Global Dollar Government; Utility Income; Premier
Growth, Conservative Investors; Growth Investors; Total Return; Worldwide
Privatization; and Technology. The Investment Manager has entered into a
sub-advisory agreement with AIG Global Investors, Inc. (the "Sub-Adviser"), a
subsidiary of American International Group, Inc. and an affiliate of the
Company, to provide investment advice for the Global Bond Portfolio. A summary
of investment objectives for each portfolio is contained in the description of
the Fund below. More detailed information including the investment advisory fee
of each portfolio and other charges assessed by the Fund, may be found in the
current Prospectus for the Fund which contains a discussion of the risks
involved in investing in the Fund. The Prospectus for the Fund is included with
this Prospectus. Please read both Prospectuses carefully before investing.

The investment objectives of the portfolios are as follows:

Money Market Portfolio

This portfolio seeks safety of principal, maintenance of liquidity and
maximum current income by investing in a broadly diversified portfolio of money
market securities.

<PAGE>

Short-Term Multi-Market Portfolio

This portfolio seeks the highest level of current income, consistent
with what the Investment Manager considers to be prudent investment risk that is
available from a portfolio of high-quality debt securities having remaining
maturities of not more than three years.

Growth Portfolio

This portfolio seeks growth of capital rather than current income. In
pursuing its investment objective, the Growth Portfolio will employ aggressive
investment policies. Since investments will be made based upon their potential
for capital appreciation, current income will be incidental to the objective of
capital growth. Because of the risks involved in any investment, the selection
of securities on the basis of their appreciation possibilities cannot ensure
against possible loss in value. Moreover, to the extent the portfolio seeks to
achieve its objective through such aggressive investment policies, the risk of
loss increases. The portfolio is therefore not intended for investors whose
principal objective is assured income or preservation of capital.

Growth and Income Portfolio

This portfolio seeks to balance the objectives of reasonable current
income and reasonable opportunities for appreciation through investments
primarily in dividend-paying common stocks of good quality.

International Portfolio

This portfolio seeks to obtain a total return on its assets from
long-term growth of capital and from income principally through a broad
portfolio of marketable securities of established non-United States companies
(or United States companies having their principal activities and interests
outside the United States), companies participating in foreign economies with
prospects for growth, and foreign government securities.

North American Government Income Portfolio

This portfolio seeks the highest level of current income, consistent
with what the adviser considers to be prudent investment risk, that is available
from a portfolio of debt securities issued or guaranteed by the governments of
the United States, Canada and Mexico, their political subdivisions (including
Canadian Provinces but excluding the States of the United States), agencies,
instrumentalities or authorities. The portfolio seeks high current yields by
investing in government securities denominated in local currency and U.S.
Dollars. Normally, the portfolio expects to maintain at least 25% of its assets
in securities denominated in the U.S. Dollar.

Global Dollar Government Portfolio

This portfolio seeks a high level of current income through investing
substantially all of its assets in U.S. and non-U.S. fixed income securities
denominated only in U.S. Dollars. As a secondary objective, the portfolio seeks
capital appreciation. Substantially all of the portfolio's assets will be
invested in high yield, high risk securities that are low-rated (i.e., below
investment grade), or of comparable quality and unrated, and that are considered
to be predominately speculative as regards the issuer's capacity to pay interest
and repay principal.

<PAGE>

Utility Income Portfolio

This portfolio seeks current income and capital appreciation by
investing primarily in the equity and fixed-income securities of companies in
the "utilities industry." The portfolio's investment objective and policies are
designed to take advantage of the characteristics and historical performance of
securities of utilities companies. The utilities industry consists of companies
engaged in the manufacture, production, generation, provision, transmission,
sale and distribution of gas, electric energy, and communications equipment and
services, and in the provision of other utility or utility-related goods and
services.

U.S. Government/High Grade Securities Portfolio

This portfolio seeks a high level of current income consistent with
preservation of capital by investing principally in a portfolio of U.S.
Government Securities, and other high grade debt securities.

Global Bond Portfolio

This portfolio seeks to provide the highest level of current income
consistent with what the Fund's Adviser and Sub-Adviser consider to be prudent
investment risk that is available from a multi-currency portfolio of high
quality debt securities of varying maturities.

Premier Growth Portfolio

This portfolio seeks growth of capital rather than current income. In
pursuing its investment objective, the Premier Growth Portfolio will employ
aggressive investment policies. Since investments will be made based on their
potential for capital appreciation, current income will be incidental to the
objective of capital growth. The portfolio is not intended for investors whose
principal objective is assured income or preservation of capital.

Total Return Portfolio

This portfolio seeks to achieve a high return through a combination of
current income and capital appreciation by investing in a diversified portfolio
of common and preferred stocks, senior corporate debt securities, and U.S.
Government and Agency obligations, bonds and senior debt securities.

Conservative Investors Portfolio

This portfolio seeks the highest total return without, in the view of
the Fund's Adviser, undue risk to principal by investing in a diversified mix of
publicly traded equity and fixed-income securities.

Growth Investors Portfolio

This portfolio seeks the highest total return consistent with what the
Fund's Adviser considers to be reasonable risk by investing in a diversified mix
of publicly traded equity and fixed-income securities.

Worldwide Privatization Portfolio

This portfolio seeks long-term capital appreciation by investing
principally in equity securities issued by enterprises that are undergoing, or
have undergone, privatization. The balance of the investment portfolio will
include equity securities of companies that are believed by the Fund's Adviser
to be beneficiaries of the privatization process.

<PAGE>

Technology Portfolio

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

THERE IS NO ASSURANCE THAT ANY OF THESE PORTFOLIOS WILL ACHIEVE THEIR
STATED OBJECTIVES.

Voting Rights

As previously stated, all of the assets held in the Subaccounts of the
Variable Account will be invested in shares of a corresponding portfolio of the
Fund. Based on the Company's view of present applicable law, we will vote the
portfolio shares held in the Variable Account at meetings of shareholders in
accordance with instructions received from Owners having a voting interest in
the portfolio. However, if the 1940 Act or its regulations are amended, or if
our interpretation of present law changes to permit us to vote the portfolio
shares in our own right, we may elect to do so.

Prior to the Annuity Date, the Owner holds a voting interest in each
portfolio in which there is value in the corresponding Subaccount. The number of
portfolio shares which are attributable to the Owner is determined by dividing
the corresponding value in a particular Subaccount by the net asset value of one
portfolio share. The number of votes which an Owner will have a right to cast
will be determined as of the record date established by each portfolio.

We will solicit voting instructions by mail prior to the shareholder
meetings. An Owner having a voting interest in a Subaccount will be sent proxy
material, reports and other materials as provided by the Fund, relating to the
appropriate portfolios. The Company will vote shares in accordance with
instructions received from the Owner having a voting interest. At the meeting,
the Company will vote shares for which it has received no instructions and any
shares not attributable to Owners in the same proportion as it votes shares for
which it has received instructions from Owners.

The voting rights relate only to amounts invested in the Variable
Account. There are no voting rights with respect to funds allocated to the
Guaranteed Account.

Shares of the Fund may be sold only to separate accounts of life
insurance companies. The shares of the Fund will be sold to separate accounts of
the Company and its affiliate, American International Life Assurance Company of
New York, as well as to separate accounts of other affiliated or unaffiliated
life insurance companies to fund variable annuity contracts and variable life
insurance policies. It is conceivable that, in the future, it may be
disadvantageous for variable life insurance separate accounts and variable
annuity separate accounts to invest in the Fund simultaneously. Although neither
the Company nor the Fund currently foresees any such disadvantages, either to
variable life insurance policyowners or to variable annuity Owners, the Fund's
Board of Directors will monitor events in order to identify any material
irreconcilable conflicts which may possibly arise and to determine what action,
if any, should be taken in response thereto. If a material irreconcilable
conflict were to occur, the Fund will take whatever steps it deems necessary, at
its expense, to remedy or eliminate the irreconcilable material conflict. If
such a conflict were to occur, one or more insurance company separate accounts
might withdraw its investments in the Fund. This might force the Fund to sell
securities at disadvantageous prices.

Substitution Of Shares

If the shares of the Fund (or any portfolio within the Fund) should no
longer be available for investment by the Variable Account or if, in the
judgment of the Company, further investment in such shares should become
inappropriate in view of the purpose of the Contracts, the Company may
substitute shares of another mutual fund (or portfolio within

<PAGE>

the fund) for Fund shares already purchased or to be purchased in the future
under the Contracts. No substitution of securities may take place without any
required prior approval of the Securities and Exchange Commission and under such
requirements as it may impose.

THE CONTRACT

The Contract described in this Prospectus is a deferred variable
annuity. Single premium Contracts do not permit the payment of additional
premiums after the Contract Date. Flexible premium Contracts permit the payment
of additional Premiums at any time.

Parties to the Contract

Owner

As the purchaser of the Contract, You may exercise all rights
and privileges provided in the Contract, subject to any rights that
You, as Owner, may convey to an irrevocable beneficiary. As Owner, You
will also be the Annuitant, unless You name in writing some other
person as Annuitant.

Annuitant

The Annuitant is the person who receives annuity payments and
upon the continuance of whose life these payments are based. You may
designate someone other than yourself as Annuitant. If the Annuitant is
a person other than the Owner, and the Annuitant dies before the
Annuity Date, You will become the Annuitant unless you designate
someone else as the new Annuitant.

Beneficiary

The Beneficiary You designate will receive the death proceeds
if You die prior to the Annuity Date. If no Beneficiary is living at
that time, the death proceeds are payable to Your estate. If the
Annuitant dies after the Annuity Date, the Beneficiary will receive any
remaining guaranteed payments under an Annuity Option. If no
Beneficiary is living at that time, the remaining guaranteed payments
are payable to Your estate.

Change of Annuitant and Beneficiary

Prior to the Annuity Date, You may change the Annuitant and
Beneficiary by making a written request to Our Administrative Office.
After the Annuity Date only a change of Beneficiary may be made. Once
We have accepted Your written request, any change will become effective
on the date You signed it. However, any change will be subject to any
payment or other action taken by Us before We record the change. If the
Owner is not a natural person, under current Federal tax law, the
Contract may be subject to unintended and adverse tax consequences. For
possible tax considerations of these changes, see FEDERAL TAX MATTERS,
page .

How to Purchase a Contract

At the time of application, the Purchaser must pay at least the minimum
Premium required and provide instructions regarding the allocation of the
Premium among the Subaccounts. Acceptance of the Premium and form of application
is subject to Our requirements and We reserve the right to reject any Premium.
If the application and Premium are accepted in the form received, the Premium
will be credited and allocated to the Subaccounts within two business days of
its receipt. The date the Premium is credited to the Contract is the Effective
Date.

<PAGE>

If within five days of the receipt of the initial Premium We have not
received sufficient information to issue a Contract, You will be contacted. The
reason for the delay will be explained to You. If You consent We will retain the
Premium until the necessary requirements are fulfilled. Otherwise, the Premium
will be immediately refunded to You.

Discount Purchase Programs

Purchases made by officers, directors and employees of either the
Company, an affiliate of the Company or any individual, firm or company that has
executed the necessary agreements to sell the Contracts and members of each of
their immediate families will not be subject to the Surrender Charge. Such
purchases include retirement accounts and must be for accounts in the name of
the individual or qualifying family member.

Distributor

AIG Equity Sales Corp. ("AESC"), 80 Pine Street, New York, New York,
acts as the distributor of the Contracts. AESC is a wholly-owned subsidiary of
AIG, and an affiliate of the Company. Commissions not to exceed 6% of Premiums
will be paid to entities which sell the Contract. Additional payments may be
made for other services not directly related to the sale of the Contract,
including the recruitment and training of personnel, production of promotional
literature and similar services.

Under the Glass-Steagall Act and other laws, certain banking
institutions may be prohibited from distributing variable annuity contracts. If
a bank were to be prohibited from performing certain agency or administrative
services and receiving fees from AESC, Owners who purchased Contracts through
the bank would be permitted to retain their Contracts and alternate means for
servicing those Owners would be sought. It is not expected, however, that Owners
would suffer any loss of services or adverse financial consequences as a result
of any of these occurrences.

Administration of the Contracts

While the Company has primary responsibility for all administration of
the Contracts and the Variable Account, it has retained the services of Delaware
Valley Financial Services, Inc. ("DVFS") pursuant to an administrative
agreement. Such administrative services include issuance of the Contracts and
maintenance of Owner's records. DVFS serves as the administrator to various
insurance companies offering variable contracts.

Premium and Allocation to Your Investment Options

The initial Premium must be at least $5,000 for Non-Qualified Contracts
and $2,000 for a Contract purchased in connection with an IRA or 403(b) Plan. If
you chose a Flexible Premium Contract, You may make additional payments of
Premium prior to the Annuity Date, in amounts of at least $1000. There is no
maximum limit on the additional Premiums You may pay or on the numbers of
payments; however, the Company reserves the right to reject any Premium on any
Contract. You specify at the time of issue or subsequently how the remaining
amount, known as Additional Premium will be allocated.

Except for any Contract issued as an IRA, the initial Premium is
allocated among the Subaccounts and Guaranteed Account on the Effective Date.
For IRAs the initial Premium will be allocated to the Money Market Subaccount
until the end of the Right to Examine Contract Period, after which Your value in
the Money Market Subaccount will then be reallocated among the Subaccounts and
Guaranteed Account in accordance with Your allocation instructions. (See "Right
to Examine Contract Period" on Page , and "Individual Retirement Annuities" on
page .)

<PAGE>

than 10%. Allocations for additional Premium will be made on the same basis as
the initial Premium unless We receive a written notice with new instructions.
Additional Premium will be credited to the Contract Value and allocated at the
close of the first Valuation Date on or after which the Additional Premium is
received at Our Administrative Office.

ALL PREMIUM TO QUALIFIED CONTRACTS MUST COMPLY WITH THE APPLICABLE
PROVISIONS IN THE CODE AND THE APPLICABLE PROVISIONS OF YOUR RETIREMENT PLAN.
ADDITIONAL PREMIUM COMMINGLED IN AN IRA WITH A ROLLOVER CONTRIBUTION FROM OTHER
RETIREMENT PLANS MAY RESULT IN UNFAVORABLE TAX CONSEQUENCES. YOU SHOULD SEEK
LEGAL COUNSEL AND TAX ADVICE REGARDING THE SUITABILITY OF THE CONTRACT FOR YOUR
SITUATION. (SEE "FEDERAL TAX MATTERS" ON PAGE .)

Right to Examine Contract Period

The Contract provides a 10 day Right to Examine Contract Period giving
You the opportunity to cancel the Contract. You must return the Contract with
written notice to Us. If We receive the Contract and Your written notice within
10 days after it is received by You, the Contract will be voided. With the
exception of Contracts issued in connection with an IRA, in those states whose
laws do not require that We assume the risk of market loss during the Right to
Examine Contract Period, should You decide to cancel Your Contract, the amount
to be returned to You will be the Contract Value (on the day We receive the
Contract) plus any charges deducted for State Taxes, without imposition of the
Surrender Charge. The amount returned to you may be more or less than the
initial Premium. (See "Charges and Deductions" on page .) For Contracts
issued in those states that require we return the premium, we will do so. In the
case of Contracts issued in connection with an IRA, the Company will refund the
greater of the Premium, less any withdrawals, or the Contract Value.

State laws governing the duration of the Right to Examine Contract
Period may vary from state to state. We will comply with the laws of the state
in which the Owner resides at the time the Contract is applied for. Federal laws
governing IRAs require a minimum seven day right of revocation. We provide 10
days from the date the Contract is received by you. (See "Individual Retirement
Annuities" on page .)

Unit Value and Contract Value

After the deduction of certain changes and expenses, amounts which You
allocate to a Subaccount of the Variable Account are used to purchase
Accumulation Units in that Subaccount, not shares of the Portfolio in which that
Subaccount invest: The number of Accumulation Units you purchase will be
determined by dividing the amount allocated to each Subaccount by the Unit Value
of the Subaccount for the Valuation Period during which the amount was
allocated.

The Unit Value for each Subaccount will vary from one Valuation Period
to the next, based on the investment experience of the Portfolio in which the
Subaccount invests and the deduction of certain charges and expenses. The
Statement of Additional Information contains a detailed explanation of how
Accumulation Units are valued.

Your value in any given Subaccount is determined by multiplying the
Unit Value for the Subaccount by the number of Units You own. Your value within
the Variable Account is the sum of your values in all the Subaccounts. The total
value of your Contract, known as the Contract Value, equals your Value in the
Variable Account plus Your value in the Guaranteed Account.

Transfers

Prior to the Annuity Date, You may make Transfers among the Subaccounts
and into and out of the Guaranteed Account subject to certain rules.

<PAGE>

At the present time there is no limit on the number of transfers which
can be made among the Subaccounts and the Guaranteed Account in any one Contract
Year. We reserve the right to limit the number of transfers to 12 per Contract
Year. There are no fees for the first 12 transfers in any one Contract Year. For
each transfer in excess of 12 within one Contract Year, We impose a transfer fee
of $10. A transfer fee, if any, is deducted from the amount transferred.
Transfers of Contract Value in the Guaranteed Account may be subject to a Market
Value Adjustment. (See Appendix , "Guaranteed Account Transfers," page___.)

Transfers may be made by written request or by telephone as described
in the Contract or specifically authorized in writing. The Company will
undertake reasonable procedures to confirm that instructions communicated by
telephone are genuine. All calls will be recorded. All transfers will be
confirmed in writing to the Owner. The Company is not liable for any loss, cost,
or expense for action on telephone instructions which are believed to be genuine
in accordance with these procedures.

After the Annuity Date, the Owner may transfer the Contract Value
allocated to the Variable Account among the Subaccounts. However, the Company
reserves the right to refuse any more than one transfer per month. The transfer
fee is the same as before the Annuity Date. This transfer fee, if any, will be
deducted from the next annuity payment after the transfer. If following the
transfer, the Annuity Units remaining in the Subaccount would generate a monthly
annuity payment of less than $100, the Company will transfer the entire amount
in the Subaccount.

Once the transfer is effected, the Company will recompute the number of
Annuity Units for each Subaccount. The number of Annuity Units for each
Subaccount will remain the same for the remainder of the payment period unless
the Owner requests another change.

The minimum amount which may be transferred at any one time is the
lesser of $1,000 or the value of the Subaccount or Guarantee Period from which
the transfer is made. However, the minimum amount for transfers under our Dollar
Cost Averaging program is $100 per Subaccount. (See "Dollar Cost Averaging") For
additional limitations regarding transfers out of the Guaranteed Account, see
"The Guaranteed Account" in the Appendix, page ____.)

Dollar Cost Averaging

The Company currently offers an option under which Owners may dollar
cost average their allocations in the Subaccounts under the contract by
authorizing the Company to make periodic allocations of Contract Value from any
one Subaccount to one or more of the other Subaccounts. Dollar cost averaging is
a systematic method of investing in which securities are purchased at regular
intervals in fixed dollar amounts so that the cost of the securities gets
averaged over time and possibly over various market cycles. The option will
result in the allocation of Contract Value to one or more Subaccounts, and these
amounts will be credited at the Accumulation Unit value as of the end of the
Valuation Dates on which the exchanges are effected. Amounts periodically
transferred under this option are not included in the 12 transfers per Contract
Year discussed under "Transfers" on page ___. Since the value of Accumulation
Units will vary, the amounts allocated to a Subaccount will result in the
crediting of a greater number of units when the Accumulation Unit value is low
and a lesser number of units when the Accumulation Unit value is high.
Similarly, the amounts exchanged from a Subaccount will result in a debiting of
a greater number of units when the Subaccount's Accumulation Unit value is low
and a lesser number of units when the Accumulation Unit value is high. Dollar
cost averaging does not guarantee profits, nor does it assure that an Owner will
not have losses.

A Dollar Cost Averaging Request form is available from the
Administrative Office upon request. On the form, the Owner must designate
whether Contract Value is to be exchanged on the basis of a specific dollar
amount, a fixed period or earnings only, the Subaccount or Subaccounts to and
from which the transfers will be made, the desired frequency of the transfers,
which may be on a monthly, quarterly, semiannual, or annual basis, and the
length of time during which the transfers shall continue or the total amount to
be exchanged over time. The Owner may specify that such transfers be made on any
day of any month with the exception of the 29th, 30th or 31st of a month.

<PAGE>

To elect the Dollar Cost Averaging Option, the Owner's Contract Value
must be at least $12,000 ($2,000 for a Contract funding a Qualified Plan), and a
Dollar Cost Averaging Request in proper form must be received by the Company.
The Dollar Cost Averaging Request form will not be considered complete until the
Contract Value is at least the required amount. An Owner may not have in effect
at the same time Dollar Cost Averaging and Asset Rebalancing Options.

The Dollar Cost Averaging Option may be canceled at any time by written
request or if the Accumulation Unit value is less than $5,000, or such lower
amount as the Company may determine.

Asset Rebalancing Option

The Company currently offers an option under which Owners may authorize
the Company to automatically exchange Contract Value each quarter to maintain a
particular percentage allocation among the Subaccounts as selected by the Owner.
The Contract Value allocated to each Subaccount will grow or decline in value at
different rates during the quarter, and Asset Rebalancing automatically
reallocates the Contract Value in the Subaccounts each quarter to the allocation
selected by the Owner. Asset Rebalancing is intended to exchange Contract Value
from those Subaccounts that have increased in value to those Subaccounts that
have declined in value. Over time, this method of investing may help an Owner
buy low and sell high,although there can be no assurance of this. This
investment method does not guarantee profits, nor does it assure that an Owner
will not have losses.

To elect the Asset Rebalancing Option, the Contract Value in the
Contract must be at least $12,000 ($2,000 for a Contract funding a Qualified
Plan) and an Asset Rebalancing Request in proper form must be received by the
Company. An Owner may not have in effect at the same time Dollar Cost Averaging
and Asset Rebalancing Options. An Asset Rebalancing Request form is available
upon request. On the form, the Owner must indicate the applicable Subaccounts
and the percentage of Contract Value which should be allocated to each of the
applicable Subaccounts each quarter under the Asset Rebalancing Option. If the
Asset Rebalancing Option is elected, all Contract Value allocated to the
Subaccounts must be included in the Asset Rebalancing Option.

This option will result in the transfer of Contract Value to one or
more of the Subaccounts on the date specified by the Owner or, if no date is
specified, on the date of the Company's receipt of the Asset Rebalancing Request
in proper form and on each quarterly anniversary of the applicable date
thereafter. The amounts transferred will be credited to the Accumulation Unit
Value as of the end of the Valuation Dates on which the transfers are effected.
Amounts periodically transferred under this option are not included in the 12
transfers per Contract Year discussed under "Transfers" on page _____.

An Owner may instruct the Company at any time to terminate this option
by written request. Once terminated, this Option may not be reselected during
the same Contract Year.

CHARGES AND DEDUCTIONS

Various charges and deductions are made from Premium, the Contract
Value and the Variable Account. These charges and deductions are as follows:

Deduction for Premium and Other State Taxes

We do not deduct premium taxes unless assessed by the state of
residence of the Owner. Any premium or other taxes levied by any governmental
entity with respect to the Contracts will be charged at Our discretion against
either Premium or Contract Value. Premium taxes currently imposed by certain
states on the Contracts range typically from 0% to 3.5% of premiums paid. Some
states assess premium taxes at the time Premium is received; others assess

<PAGE>

premium taxes at the time of annuitization. Premium taxes are subject to being
changed or amended by state legislatures, administrative interpretations or
judicial acts.

The Company will also deduct from any amount payable under the
Contracts any income taxes a governmental authority requires the Company to
withhold with respect to that amount.

Deduction for Mortality and Expense Risk Charge

The Company deducts for each Valuation Period a Mortality and Expense
Risk Charge which is equal on an annual basis to 1.25% of the average daily net
asset value of the Variable Account. The mortality risks assumed by the Company
arise from its contractual obligation to make annuity payments after the Annuity
Date for the life of the Annuitant, to waive the Surrender Charge in the event
of the death of the Owner prior to the Annuity Date and to provide the death
benefit. The expense risk assumed by the Company is that the costs of
administering the Contracts and the Variable Account will exceed the amount
received from Administrative and Contract Maintenance Charges.

If the Mortality and Expense Risk Charge is insufficient to cover the
actual costs, the loss will be borne by the Company. Conversely, if the amount
deducted proves more than sufficient, the excess will be profit to the Company.
The Mortality and Expense Risk Charge is guaranteed by the Company and cannot be
increased. The Mortality and Expense Risk Charge is deducted during the
Accumulation Period and after the Annuity Date.

The Company currently offers annuity payment options that are based on
a life contingency. (See "Annuity Period - Annuity Options" on page .) The
Company in its discretion may offer additional payment options which are not
based on a life contingency. If this should occur and if a Owner should elect a
payment option not based on a life contingency, the Mortality and Expense Risk
Charge is still deducted but the Owner receives no benefit from that portion of
the charge attributable to mortality risk.

Deduction for Accidental Death Benefit

If the Owner has elected the Accidental Death Benefit, the Company
deducts for each Valuation Period, an Accidental Death Benefit Charge equal on
an annual basis to 0.10% of the average daily net asset value in the Variable
Account.

Deduction for Surrender (Deferred Sales) Charges

In the event that an Owner makes a withdrawal from or surrenders
Contract Value in excess of the Free Withdrawal Amount, a Surrender Charge may
be imposed. The Free Withdrawal Amount for a single premium Contract is equal to
10% of the Contract Value at the time of the withdrawal. The Free Withdrawal
Amount for a flexible premium Contract is equal to the greater of the Contract
Value less premiums paid or the portion of the withdrawal that does not exceed
10% of the total Premium otherwise subject to the Surrender Charge paid to the
time of withdrawal, less any prior withdrawals; however, the Surrender Charge
applies only to Premium received by the Company within six (6) years of the date
of the withdrawal.

The Surrender Charge will vary in amount depending upon the time which
has elapsed since the date Premium was received. In calculating the Surrender
Charge, Premium is allocated to the amount surrendered on a first-in, first out
basis. The amount of any withdrawal which exceeds the Free Withdrawal Amount for
a flexible premium Contract will be subject to the following charges:
<TABLE>
<CAPTION>

Applicable Surrender
Single Premium Contracts Flexible Premium Contracts Charge Percentage
------------------------ -------------------------- -----------------

<S> <C> <C>
Contract Year 1 Premium Year 1 6%
Contract Year 2 Premium Year 2 5%
Contract Year 3 Premium Year 3 4%
Contract Year 4 Premium Year 4 3%
Contract Year 5 Premium Year 5 2%
Contract Year 6 Premium Year 6 1%
Contract Year 7 and thereafter Premium Year 7 and thereafter None

</TABLE>

<PAGE>

No Surrender Charge is imposed against: (1) Transfers of Contract Value
under Dollar Cost Averaging, Asset Rebalancing, or Systematic Withdrawal
options; (2) Contract Value upon Annuitization; (3) a Death Benefit.

The Surrender Charge is intended to reimburse the Company for expenses
incurred which are related to Contract sales. The Company does not expect the
proceeds from the Surrender Charge to cover all distribution costs. To the
extent such charge is insufficient to cover all distribution costs, the Company
may use any of its corporate assets, including potential profit which may arise
from the Mortality and Expense Risk Charge, to make up any difference.

Certain restrictions on surrenders are imposed on Contracts issued in
connection with retirement plans which qualify under Code Section 403(b) (a
"403(b) Plan"). (See "Taxes - 403(b) Plans" on page .)

Deduction for Administrative Charges

The Company deducts for each Valuation Period a daily Administrative
Charge which is equal on an annual basis to .15% of the average daily net asset
value of the Variable Account. This charge is intended to reimburse Us for
administrative expenses, both during the accumulation period and following the
Annuity Date. We do not expect to recover an amount in excess of our accumulated
expenses through the deduction of the Administrative Charge.

Deduction for Contract Maintenance Charge

The Company also deducts an annual Contract Maintenance Charge of $30
per year, from the Contract Value on each Contract Anniversary. The Contract
Maintenance Fee is waived if the Contract Value is greater than $50,000 on the
date of deduction of the charge. These charges are designed to reimburse the
Company for the costs it incurs relating to maintenance of the Contract, the
Variable Account, and the Guaranteed Account. If the Contract is surrendered, we
will deduct the Contract Maintenance Charge at the time of surrender, pro-rata,
for the current Contract Year. The deduction will be made proportionally based
on your value in each Subaccount and the Guaranteed Account. After the Annuity
Date, the Contract Maintenance Charge is deducted on a pro-rata basis from each
annuity income payment and is guaranteed to remain at the same amount as at the
Annuity Date. This charge is not expected to result in a profit to the Company.

Deduction for Income Taxes

The Company deducts from the Contract Value and/or the Variable Account
any Federal income taxes resulting from the operation of the Variable Account.
The Company does not currently anticipate incurring any Federal income taxes.

Other Expenses

There are deductions from and expenses paid out of the assets of the
Fund which are described in the accompanying Prospectus for the Fund.

Group and Group Sponsored Arrangements

In certain instances, we may reduce the Surrender Charge and the
Administrative Charge or change the minimum premium requirements for the sale of
Contracts to certain groups, including those in which a trustee or an employer,
for example, purchases Contracts covering a group of individuals on a group
basis.

<PAGE>

existence. Group or group sponsored arrangements that have been set up solely to
buy Contracts or that have been in existence less than six months will not
qualify for reduced charges.

We will make any reductions according to our rules in effect when an
application or enrollment form for a Contract is approved. We may change these
rules from time to time. Any variation in the Surrender Charge or Administrative
Charge will reflect differences in costs or services and will not be unfairly
discriminatory.

ANNUITY BENEFITS

Annuitization

Annuitization is an election you make to apply the Contract Value to an
Annuity Option in order to provide a series of annuity payments. The date the
Annuity Option becomes effective is the Annuity Date.

Annuity Date

The latest Annuity Date is: (a) the first day of the calendar month
following the later of the Annuitant's 90th birthday; or (b) such earlier date
as may be set by applicable law.

The Owner may designate an earlier date or may change the Annuity Date
by making a written request at least thirty (30) days prior to the Annuity Date
being changed. However, any Annuity Date must be no later than the date defined
above; and, the first day of a calendar month.

Without the approval of the Company, the new Annuity Date cannot be
earlier thanone year after the Effective Date. In addition, for Qualified
Contracts, certain provisions of your retirement plan or the Code may further
restrict your choice of an Annuity Date. (See "Federal Tax Matters," page ____).

Annuity Options

The Owner may choose annuity payments which are fixed, or which are
based on the Variable Account, or a combination of the two. The Owner may, upon
at least 30 days prior written notice to us, at any time prior to the Annuity
Date, select or change an Annuity Option. If the Owner elects annuity payments
which are based on the Variable Account, the amount of the payments will be
variable. The amount of the annuity payment based on the value of a Subaccount
is determined through a calculation described in the Statement of Additional
Information, under the caption "Annuity Provisions". The Owner may not transfer
Contract Values between the Guaranteed Account and the Variable Account after
the Annuity Date, but may, subject to certain conditions, transfer Contract
Values from one Subaccount to another Subaccount. (See " Transfer of Contract
Values" on page .)

If the Owner has not made any annuity payment option selection at the
Annuity Date, the Contract Value will be applied to purchase Option 2 fixed
basis annuity payments and Option 2 variable basis annuity payments, in
proportion to the amount of Contract Value in the Guaranteed Account and the
Variable Account, respectively.

The annuity payment options are:

Option 1: Life Income. The Company will make annuity payments
during the lifetime of the Annuitant.

Option 2: Life Income with 10 Years of Payments Guaranteed. The
Company will make monthly annuity payments during the
lifetime of the Annuitant. If, at the death of the
Annuitant, payments have been made for less than 10
years, payments will be continued during the remainder
of the period to the Beneficiary.

<PAGE>

Option 3: Joint and Last Survivor Income. The Company will make
annuity payments for as long as either the Annuitant or
a Contingent Annuitant is alive. In the event that the
Contract is issued in connection with an IRA, the
payments in this Option will be made only to the Owner
as Annuitant and the Owner's spouse.

The annuity payment options are more fully explained in the Statement
of Additional Information. The Company may also offer additional options at its
own discretion.

Annuity Payments

If the Contract Value applied to annuity payment options is less than
$2,000, the Company reserves the right to pay the amount in a lump sum in lieu
of annuity payments. The Company makes all other annuity payments monthly.
However, if the total monthly annuity payment would be less than $100 the
Company reserves the right to make payments semi-annually or annually.

If fixed annuity payments are selected, the amount of each fixed
payment is determined by multiplying the Contract Value allocated to purchase
fixed annuity payments by the factor shown in the annuity table specified in the
Contract for the option selected, divided by 1,000.

If variable annuity payments are selected, the Annuitant receives the
value of a fixed number of Annuity Units each month. The actual dollar amount of
variable annuity payments is dependent upon: (i) the Contract Value at the time
of annuitization; (ii) the annuity table specified in the Contract; (iii) the
Annuity Option selected; (iv) the investment performance of the Subaccount
selected; and (v) the pro-rata portion of the Contract Maintenance charge.

The annuity tables contained in the Contract are based on a 5% assumed
investment rate. If the actual net investment rate exceeds 5%, payments will
increase. Conversely, if the actual rate is less than 5%, variable annuity
payments will decrease.

DEATH BENEFIT
Prior to the Annuity Date

In the event of Your death prior to the Annuity Date, a death benefit
is payable to the Beneficiary. The value of the death benefit will be determined
as of the date We receive proof of death in a form acceptable to Us. If there
has been a change of Owner, the death benefit will equal the Contract Value.
Otherwise, We will pay the death benefit equal to the greatest of: (a) the total
of all Premium, less withdrawals and surrenders; (b) the Contract Value; (c) the
greatest of the Contract Value at the sixth Contract Anniversary or at the
Contract Anniversary every six years thereafter, plus any Premium paid and less
any surrenders subsequent to that Contract Anniversary.

The Beneficiary may elect the death benefit to be paid as follows: (a)
payment of the entire death benefit within 5 years of the date of the Owner's
death; or (b) payment over the lifetime of the designated Beneficiary with
distribution beginning within 1 year of the date of death of the Owner; or (c)
if the designated Beneficiary is Your spouse, he/she can continue the contract
in his/her own name.

If no payment option is elected, a single sum settlement will be made
at the end of the sixty (60) day period following receipt of proof of death.

After the Annuity Date

<PAGE>

If the Owner is a person other than the Annuitant, and if the Owner's
death occurs on or after the Annuity Date, no death benefit will be payable
under this contract, except that any guaranteed payments remaining unpaid will
continue to be paid to the Annuitant pursuant to the Annuity Option in force at
the date of the Owner's death.

Accidental Death Benefit

If an Accidental Death Benefit has been elected, the cost of this benefit
will be equal on an annual basis to 0.10% of the average daily net assets in
the Variable Account.

<PAGE>

The Accidental Death Benefit, if any, is equal to the lesser of the
Contract Value as of the date the death benefit is determined or $250,000. The
Accidental Death Benefit is payable if the death of the primary Owner occurs
prior to the Contract Anniversary next following his 75th birthday as a result
of an Injury. The death must also occur before the Annuity Date and within 365
days of the date of the accident which caused the Injury. The Accidental Death
Benefit is paid to the Beneficiary.

The Accidental Death Benefit will not be paid for any death caused by
or resulting (in whole or in part) from the following:

(a) suicide or attempted suicide while sane or insane;
intentionally self-inflicted injuries;

(b) sickness, disease or bacterial infection of any kind, except
pyogenic infections which occur as a result of an injury or
bacterial infections which result from the accidental
ingestion of contaminated substances;

(d) injury sustained as a consequence of riding in, including
boarding or alighting from, any vehicle or device used for
aerial navigation except if the Owner is a passenger on any
aircraft licensed for the transportation of passengers;

(e) declared or undeclared war or any act thereof; or

(f) service in the military, naval or air service of any country.

Death of the Annuitant

If the Annuitant is a person other than the Owner, and if the Annuitant
dies before the Annuity Date, a new Annuitant may be named by the Owner. If no
new Annuitant is named within sixty (60) days of Our receipt of proof of the
Annuitant's death, the Owner will be deemed the new Annuitant. If an Annuitant
dies after the Annuity Date, the remaining payments, if any, will be as
specified in the Annuity Option elected. We will require proof of the
Annuitant's death. Death benefits, if any, will be paid to the designated
Beneficiary at least as rapidly as under the method of distribution in effect at
the Annuitant's death.

DISTRIBUTIONS UNDER THE CONTRACT

Withdrawals

The Owner may withdraw Contract Values prior to the Annuity Date. Any
withdrawal is subject to the following conditions:

(a) the Company must receive a written request;

(b) the amount requested must be at least $500;

(d) the Contract Value will be reduced by the sum of the amount
requested plus the amount of any applicable Surrender Charge;

(e) the Company will deduct the amount requested plus any
Surrender Charge from each Subaccount of the Variable Account
and from the Guaranteed Account either as specified or in the
proportion that each Subaccount and the Guaranteed Account
bears to the Contract Value; and

<PAGE>

We reserve the right to consider any withdrawal request that would
reduce the Value of the Accumulation Account to less than $2,000 to be a request
for Surrender. In this event, the Surrender Value will be paid to You and the
Contract will terminate.

Each withdrawal is subject to Federal income taxes on the taxable
portion. Unless otherwise directed by You, We must withhold federal income taxes
from each withdrawal. In addition, a 10% penalty tax may be assessed on
withdrawals if You are under age 59 1/2. This includes withdrawals under the
Systematic Withdrawal program (described below) and withdrawals You may make to
pay fees to Your investment advisor, if any.

Systematic Withdrawal

The systematic withdrawal program involves making regularly scheduled
withdrawals from Your value in the Contract. In order to initiate the program,
your total Contract Value must be at least $24,000. The program allows You to
prearrange the withdrawal of a specified dollar amount of at least $200 per
withdrawal, on a monthly or quarterly payment basis. A maximum of 10% of the
Contract Value may be withdrawn in a Contract Year. Surrender Charges are not
imposed on withdrawals under this program. If you elect this program Surrender
Charges will be imposed on any withdrawal, other than withdrawals made under
Your systematic withdrawal program, when the withdrawal is from Premium paid in
the last six years. You may not elect this program if you have taken a prior
withdrawal during the same Contract Year. (See "Withdrawals" on page , and
"Surrender Charges" on page .

Systematic withdrawals will begin on the first scheduled withdrawal
date selected by You following the date We process Your request. If the day You
designate is not a Valuation Date, the withdrawal will be made on the following
Valuation Date. In the event that Your value in a specified Subaccount or the
Guaranteed Account is not sufficient to deduct a withdrawal or if Your request
for systematic withdrawal does not specify the Guaranteed Account or from which
Subaccounts withdrawals are to be deducted, withdrawals will be deducted
proportionally based on Your value in each Subaccount and the Guaranteed
Account.

All parties to the Contract are cautioned that the rights of any person
to implement the systematic withdrawal program under Qualified Contracts may be
subject to the terms and conditions of the retirement plan, regardless of the
terms and conditions of the Qualified Contract issued in connection with such a
retirement plan. (See "Federal Tax Matters" on page .)

The systematic withdrawal program may be canceled at any time by
written request or automatically by Us should the Contract Value fall below
$1,000. In the event the systematic withdrawal program is canceled, the Owner
may not elect to participate in such program until the next Contract
Anniversary.

An Owner may change once per Contract Year the amount or frequency of
withdrawals on a systematic basis.

The Free Withdrawal Amount (see "Charges and Deductions - Deduction for
Surrender Charge" on page ) is not available while an Owner is receiving
systematic withdrawals. An Owner will be entitled to the free withdrawal amount
on and after the Contract Anniversary next following the termination of the
systematic withdrawal program.

Implementation of the systematic withdrawal program may subject an
Owner to adverse tax consequences, including a 10% tax penalty. (See "Taxes -
Taxation of Annuities in General" on page for a discussion of the tax
consequences of withdrawals.)

THE COMPANY RESERVES THE RIGHT TO DISCONTINUE THIS PROGRAM AT ANY TIME.

Surrender

<PAGE>

will be based on the Contract Value at the end of the Valuation Period during
which the Surrender request is received as described below. The Contract may not
be surrendered after the Annuity Date.

Surrender Value

The Surrender Value of the Contract varies each day depending on the
investment results of the Subaccounts selected by the Owner. Contract Value in
the Guaranteed Account may be subject to a Market Value Adjustment. (See "Market
Value Adjustment", Appendix .) The Surrender Value will be the Contract
Value, subject to any applicable Market Value Adjustment, as of the date the
Company receives Your surrender request, reduced by the following: (1) any
applicable taxes not previously deducted; (2) any applicable portion of the
Contract Maintenance Charge; and (3) any applicable Surrender Charge.

Payment of Withdrawals and Surrender Values

Payments of Withdrawals and Surrender Values will ordinarily be sent to the
Owner within seven (7) days of receipt of the written request, but see the
Deferment of Payment discussion below. (Also see Statement of Additional
Information - "Delay of Payments.")

The Company reserves the right to ensure that an Owner's check or other
form of Premium has been cleared for payment prior to processing any withdrawal
or redemption request occurring shortly after a Premium payment.

If, at the time You make a request for a Withdrawal or a Surrender, You
have not provided Us with a written election not to have Federal income taxes
withheld, We must by law withhold such taxes from the taxable portion of Your
payment and remit that amount to the IRS. Mandatory withholding rules apply to
distributions from qualified plans and Code section 403(b) annuities.
Additionally, the Code provides that a 10% penalty tax may be imposed on certain
early Withdrawals and Surrenders. (See "Federal Tax Matters" on page , and
"Qualified Contracts" on page .)

Deferral of Payment

Payment of any Withdrawal, Surrender, or lump sum death proceeds from
the Variable Account will usually occur within seven days. We may be permitted
to defer such payment if: (1) the New York Stock Exchange is closed for other
than usual weekends or holidays, or trading on the Exchange is otherwise
restricted; (2) an emergency exists as defined by the SEC or the SEC requires
that trading be restricted; (3) the SEC permits a delay for protection of
Owners; or (4) the check used to pay any Premium has not cleared through the
banking system (this may take up to 15 days).

We may defer payment of any Withdrawal or Surrender from the Guaranteed
Account for up to six months from the date we receive Your written request.

TAXES

Introduction

The Contracts are designed to accumulate Contract Values for retirement
plans which, except for IRAs and 403(b) Plans, are generally not tax-qualified
plans ("Qualified Plans"). The ultimate effect of Federal income taxes on the
amounts held under a Contract, on annuity payments, and on the economic benefits
to the Owner, Annuitant or Beneficiary depend on the Company's tax status and
upon the tax status of the individual concerned. Accordingly, each potential
Owner should consult a competent tax adviser regarding the tax consequences of
purchasing a Contract.

The following discussion is general in nature and is not intended as
tax advice. No attempt is made to consider any applicable state or other tax
laws. Moreover, the discussion is based upon the Company's understanding of the
Federal income tax laws as they are currently interpreted. No representation is
made regarding the likelihood of continuation of the Federal income tax laws,
the Treasury Regulations, or the current interpretations by the Internal

<PAGE>

Revenue Service (the "Service"). For a discussion of Federal income taxes as
they relate to the Fund, please see the accompanying Prospectus for the Fund.

Company Tax Status

The Company is taxed as a life insurance company under the Internal
Revenue Code of 1986, as amended (the "Code"). Since the Variable Account is not
a separate entity from the Company and its operations form a part of the
Company, it will not be taxed separately as a "regulated investment company"
under Subchapter M of the Code. Investment income and realized capital gains on
the assets of the Variable Account are reinvested and taken into account in
determining the Contract Value. Under existing Federal income tax law, the
Variable Account's investment income, including realized net capital gains, is
not taxed to the Company. The Company reserves the right to make a deduction for
taxes from the assets of the Variable Account should they be imposed with
respect to such items in the future.

Taxation of Annuities in General - Non-Qualified Plans

Code Section 72 governs the taxation of annuities. In general, an Owner
is not taxed on increases in value under a Contract until some form of
withdrawal or distribution is made under the Contract. However, under certain
circumstances, the increase in value may be subject to tax currently. (See
"Contracts Owned by Non-Natural Persons," and " Diversification Standards" on
page____.)

Withdrawals prior to the Annuity Date

Code Section 72 provides that a total or partial withdrawal
from a Contract prior to the Annuity Date will be treated as taxable
income to the extent the amounts held under the Contract on the date of
the withdrawal exceed the "investment in the contract," as that term is
defined under the Code. The "investment in the contract" can generally
be described as the cost of the Contract. It generally constitutes the
sum of all purchase payments made for the contract less any amounts
received under the Contract that are excluded from gross income. The
taxable portion is taxed as ordinary income. For purposes of this rule,
a pledge or assignment of a Contract is treated as a payment received
on account of a partial withdrawal of a Contract.

Withdrawals on or after the Annuity Date

Upon receipt of a lump sum payment or an annuity payment under
the Contract, the recipient is taxed on the portion of the payment that
exceeds the investment in the Contract. Ordinarily, the taxable portion
of payments under the Contract will be taxed as ordinary income.

For fixed annuity payments, the taxable portion of each
payment is generally determined by using a formula known as the
"exclusion ratio", which establishes the ratio that the investment in
the Contract bears to the total expected amount of annuity payments for
the term of the Contract. That ratio is then applied to each payment to
determine the nontaxable portion of the payment. The remaining portion
of each payment is taxed as ordinary income. For variable annuity
payments, the taxable portion is determined by a formula which
establishes a specific dollar amount of each payment that is not taxed.
The dollar amount is determined by dividing the investment in the
Contract by the total number of expected periodic payments. The
remaining portion of each payment is taxed as ordinary income.

The Company is obligated to withhold Federal income taxes from
certain payments unless the recipient elects otherwise. Prior to the
first payment, the Company will notify the payee of the right to elect
out of withholding and will furnish a form on which the election may be
made. The payee must properly notify the Company of that election in
advance of the payment in order to avoid withholding.

<PAGE>

Penalty Tax on Certain Withdrawals

With respect to amounts withdrawn or distributed before the
taxpayer reaches age 59 1/2, a 10% penalty tax is imposed upon the
portion of such amount which is includable in gross income. However,
the penalty tax will not apply to withdrawals: (i) made on or after the
death of the Owner (or where the Owner is not an individual, the death
of the "primary annuitant", who is defined as the individual, the
events in the life of whom are of primary importance in affecting the
timing or amount of the payout under the Contract); (ii) attributable
to the taxpayer's becoming totally disabled within the meaning of Code
Section 72(m)(7); (iii) which are part of a series of substantially
equal periodic payments (not less frequently than annually) made for
the life (or life expectancy) of the taxpayer, or the joint lives (or
joint life expectancies) of the taxpayer and his beneficiary; (iv)
allocable to investment in the Contract before August 14, 1982; (v)
under a qualified funding asset (as defined in Code Section 130(d));
(vi) under an immediate annuity contract; or (vii) that are purchased
by an employer on termination of certain types of qualified plans and
which are held by the employer until the employee separates from
service.

If the penalty tax does not apply to a withdrawal as a result
of the application of item (iii) above, and the series of payments are
subsequently modified (other than by reason of death or disability),
the tax for the first year in which the modification occurs will be
increased by an amount equal to the tax that would have been imposed
but for item (iii) above as determined under Treasury Regulations, plus
interest for the deferral period. The foregoing rule applies if the
modification takes place: (a) before the close of the period which is
five years from the date of the first payment and after the taxpayer
attains age 59 1/2; or (b) before the taxpayer reaches age 59 1/2.

Assignments

Any assignment or pledge of the Contract as collateral for a
loan may result in a taxable event and the excess of the Contract Value
over total Premium will be taxed to the assignor as ordinary income.
Please consult your tax adviser prior to making an assignment of the
Contract.

Distribution-at-Death Rules

In order to be treated as an annuity contract for Federal
income tax purposes, a Contract must generally provide for the
following two distribution rules: (i) if the Owner dies on or after the
Annuity Date, and before the entire interest in the Contract has been
distributed, the remaining portion of such interest will be distributed
at least as quickly as the method in effect on the Owner's death; and
(ii) if a Owner dies before the Annuity Date, the entire interest must
generally be distributed within five years after the date of death. To
the extent such interest is payable to a designated Beneficiary,
however, such interest may be annuitized over the life of that
Beneficiary or over a period not extending beyond the life expectancy
of that Beneficiary, so long as distributions commence within one year
after the date of death. If the Beneficiary is the spouse of the Owner,
the Contract may be continued unchanged in the name of the spouse as
Owner.

If the Owner is not an individual, the "primary annuitant" (as
defined under the Code) is considered the Owner. In addition, when the
Owner is not an individual, a change in the primary annuitant is
treated as the death of the Owner.

Gifts of Contracts

Any transfer of a Contract prior to the Annuity Date for less
than full and adequate consideration will generally trigger tax on the
gain in the Contract. The transferee will receive a step-up in basis
for the amount included in the transferor's income. This provision,
however, does not apply to those transfers between spouses or incident
to a divorce which are governed by Code Section 1041(a).

<PAGE>

Contracts Owned by Non-Natural Persons

If the Contract is held by a non-natural person (for example,
a corporation or trust) the Contract is generally not treated as an
annuity contract for Federal income tax purposes, and the income on the
Contract (generally the excess of the Contract Value over the purchase
payments) is includable in income each year. The rule does not apply
where the non-natural person is only the nominal owner such as a trust
or other entity acting as an agent for a natural person. The rule also
does not apply when the Contract is acquired by the estate of a
decedent, when the Contract is held under certain qualified plans, when
the Contract is a qualified funding asset for structured settlements,
when the Contract is purchased on behalf of an employee upon
termination of a qualified plan, and in the case of an immediate
annuity.

Section 1035 Exchanges

Code Section 1035 provides that no gain or loss shall be
recognized on the exchange of an annuity contract for another annuity
contract. A replacement contract obtained in a tax-free exchange of
contracts succeeds to the status of the surrendered contract. Special
rules and procedures apply to Code Section 1035 transactions.
Prospective owners wishing to take advantage of Code Section 1035
should consult their tax advisers.

Multiple Contracts

Annuity contracts that are issued by the Company (or
affiliate) to the same Owner during any calendar year will be treated
as one annuity contract in determining the amount includable in the
taxpayer's gross income. Thus, any amount received under any such
contract prior to the contract's annuity starting date will be taxable
(and possibly subject to the 10% penalty tax) to the extent of the
combined income in all such contracts. The Treasury has broad
regulatory authority to prevent avoidance of the purposes of this
aggregation rule. It is possible that, under this authority, Treasury
may apply this rule to amounts that are paid as annuities (on or after
the starting date) under annuity contracts issued by the same company
to the same Owner during any calendar year period. In this case,
annuity payments could be fully taxable (and possibly subject to the
10% penalty tax) to the extent of the combined income in all such
contracts and regardless of whether any amount would otherwise have
been excluded from income. Owners should consult a tax adviser before
purchasing more than one Contract or other annuity contracts.

Diversification Standards

To comply with the diversification regulations promulgated under Code
Section 817(h) (the "Diversification Regulations"), after a start-up period,
each Subaccount is required to diversify its investments. The Diversification
Regulations generally require that on the last day of each quarter of a calendar
year no more than 55% of the value of the assets of a Subaccount is represented
by any one investment, no more than 70% is represented by any two investments,
no more than 80% is represented by any three investments, and no more than 90%
is represented by any four investments. A "look-through" rule applies so that an
investment in the Fund is not treated as one investment but is treated as an
investment in a pro-rata portion of each underlying asset of the Fund. All
securities of the same issuer are treated as a single investment. In the case of
government securities, each Government agency or instrumentality is treated as a
separate issuer.

In connection with the issuance of the Diversification Regulations,
Treasury announced that such regulations do not provide guidance concerning the
extent to which Owners may direct their investments to particular divisions of a
separate account. It is possible that if and when additional regulations or IRS
pronouncements are issued, the Contract may need to be modified to comply with
such rules. For these reasons, the Company reserves the right to modify the
Contract, as necessary, to prevent the Owner from being considered the owner of
the assets of the Variable Account.

<PAGE>

The Company intends to comply with the Diversification Regulations to
assure that the Contracts continue to be treated as annuity contracts for
Federal income tax purposes.

Qualified Plans

The Contracts may be used to create an IRA. The Contracts are also
available for use in connection with a previously established 403(b) Plan. No
attempt is made herein to provide more than general information about the use of
the Contracts with IRAs or 403(b) Plans. The information herein is not intended
as tax advice. A prospective Owner considering use of the Contract to create an
IRA or in connection with a 403(b) Plan should first consult a competent tax
adviser with regard to the suitability of the Contract as an investment vehicle
for their qualified plan.

A Contract may be used as the investment medium for several types of
retirement plans. Under amendments to the Internal Revenue Code which became
effective in 1993, distributions from a qualified plan (other than non-taxable
distributions representing a return of capital, distributions meeting the
minimum distribution requirement, distributions for the life or life expectancy
of the recipient(s) or distributions that are made over a period of more than 10
years) are eligible for tax-free rollover within 60 days of the date of
distribution, but are also subject to federal income tax withholding at a 20%
rate unless paid directly to another qualified plan. If the recipient is unable
to take full advantage of the tax-free rollover provisions, there may be taxable
income, and the imposition of a 10% penalty if the recipient is under age 59
1/2. We make no attempt to provide more than general information about use of
Qualified Contracts with the various types of retirement plans. Owners and
participants under retirement plans as well as Annuitants and Beneficiaries are
cautioned that the rights of any person to any benefits under Qualified
Contracts may be subject to the terms and conditions of the retirement plan,
regardless of the terms and conditions of the Qualified Contract issued in
connection with such a retirement plan. Purchasers of Qualified Contracts for
use with any retirement plan should consult their legal counsel and tax adviser
regarding the suitability of a Qualified Contract for their retirement plan.

Individual Retirement Annuities

Section 408 of the Code permits eligible individuals to contribute to
an IRA. Contracts issued in connection with an IRA are subject to limitations on
eligibility, maximum contributions, and time of distribution. Distributions from
certain retirement plans qualifying for federal tax advantages may be rolled
over into an IRA. Sales of the Contracts for use with IRAs are subject to
special requirements imposed by the Service, including the requirement that
informational disclosure be given to each person desiring to establish an IRA.
The IRAs offered by this Prospectus are not available in all states.

403(b) Plans

Code Section 403(b)(11) imposes certain restrictions on an Owner's
ability to make partial withdrawals from Code Section 403(b) Contracts, if
attributable to Premium paid under a salary reduction agreement. Specifically,
Code Section 403(b)(11) allows an Owner to make a surrender or partial
withdrawal only (a) when the employee attains age 59 1/2, separates from
service, dies, or becomes disabled (as defined in the Code), or (b) in the case
of hardship. In the case of hardship, only an amount equal to the purchase
payments may be withdrawn. In addition, under Code Section 403(b) the employer
must comply with certain non-discrimination requirements. Owners should consult
their employers to determine whether the employer has complied with these rules.
The 403(b) Plan offered by this Prospectus is not available in all states.

<PAGE>

TABLE OF CONTENTS

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

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

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

<PAGE>

APPENDIX

GUARANTEED ACCOUNT OPTION

Under this Guaranteed Account option, Contract Values are held in the
Company's General Account. The General Account includes all of Our assets,
except those assets segregated in Our separate accounts. Because of exemptive
and exclusionary provisions, interests in the General Account have not been
registered under the Securities Act of 1933 nor is the General Account
registered as an investment company under the Investment Company Act of 1940.
The Company understands that the staff of the Securities and Exchange Commission
has not reviewed the disclosures in this Prospectus relating to the Guaranteed
Account portion of the Contract. Disclosures regarding the Guaranteed Account
may, however, be subject to certain generally applicable provisions of the
federal securities laws relating to the accuracy and completeness of statements
made in prospectuses.

During the Accumulation Period the Owner may allocate amounts to the
Guaranteed Account. The initial Premium will be invested in the Guaranteed
Account if selected by the Owner at the time of application. Additional Premium
will be allocated in accordance with the selection made in the application or
the most recent instruction received at the Company Office. If the Owner elects
to withdraw amounts from the Guaranteed Account, such withdrawal, except as
otherwise provided in this Appendix, will be subject to the same conditions as
imposed on withdrawals from the Variable Account. The Company reserves the right
to delay any payment from the Guaranteed Account for up to six (6) months from
the date it receives such request at its Office.

GUARANTEE PERIODS

The period(s) for which a guaranteed interest rate is credited is
called a Guarantee Period. Guarantee Periods may be offered or withdrawn at the
Company's discretion. The initial guarantee period(s) and the guaranteed
interest rate(s) applicable to the initial Premium are as shown in the Contract.
At least 15 days but no more than 75 days prior to the expiration of a Guarantee
Period, the Owner will be mailed a notice of the guaranteed interest rate
applicable to a renewal of the Guarantee Period. At the expiration of any
Guarantee Period applicable to any portion of the Contract Value, that portion
of the Contract Value will be automatically renewed for another Guarantee Period
for the same duration as the expired Guarantee Period and will receive the
guaranteed interest rate then in effect for that Guarantee Period, unless other
Guarantee Periods or one or more Subaccounts are requested in writing by the
Owner. All requests to change a Guarantee Period at the end of an existing
Guarantee Period must be received in writing at the Company's Office within 30
days prior to the end of that Guarantee Period.

ALLOCATIONS TO THE GUARANTEED ACCOUNT

The minimum amount that may be allocated to a Guarantee Period, either
from the initial or a subsequent Premium, is $3,000. Amounts invested in the
Guaranteed Account are credited with interest on a daily basis at the then
applicable effective guarantee rate. The effective guarantee rate is that rate
in effect when the Owner allocates or transfers amounts to the Guaranteed
Account. If the Owner has allocated or transferred amounts at different times to
the Guaranteed Account, each allocation or transfer may have a unique effective
guarantee rate and Guarantee Period associated with that amount. The effective
guarantee rate will not be changed more than once per year and the minimum rate
will not be less than 3%.

GUARANTEED ACCOUNT TRANSFERS

During the accumulation period the Owner may transfer, by written
request or telephone authorization, Contract Values to or from a subaccount of
the Variable Account to or from a Guarantee Period of the Guaranteed Account at
any time, subject to the conditions set out under Transfer of Contract Values
Section.

Prior to the end of a Guarantee Period the Owner may specify the
subaccount(s) of the Variable Account or the applicable Guarantee Period of the
Guaranteed Account to which the Owner wants the amounts from the Guaranteed
Account transferred at the end of the Guarantee Period. If the Owner does not
notify us prior to the end of the Guarantee Period, we will reapply that amount
to a new Guarantee Period of the same duration, provided it is available. If a
new Guarantee Period of the same duration is not available, that portion of Your
Contract Value shall be transferred to the

<PAGE>

Guarantee Period next shortest in duration. The amount so applied is then
subject to the same conditions as the original Guarantee Period, including the
condition that the amount may not be transferred until the end of that Guarantee
Period. In the event of a non-specified renewal, there is a grace period of 30
days within which the Owner can have transferred amounts reapplied. The
effective guarantee rate applicable to the new Guarantee Period may be different
from the effective guaranteed rate applicable to the original Guarantee Period.
These transfers will be handled at no charge to the Owner.

MARKET VALUE ADJUSTMENT

Unless accomplished on the expiration date of a Guarantee Period or
during the grace period, a transfer, withdrawal, surrender or annuitization of
amounts allocated to the Guaranteed Account may be subject to a Market Value
Adjustment. The adjusted value is determined by multiplying the amount to be
transferred, withdrawn, surrendered or annuitized from a Guarantee Period by the
following formula:

.75 x (A-B) x [N/12], where:

A= The guaranteed interest rate applicable to a Guarantee Period
for that portion of proceeds being transferred, withdrawn,
surrendered or annuitized.

B= The guaranteed interest rate currently available for the same
length of Guarantee Period as that remaining in the period
applicable to that portion of proceeds being transferred,
withdrawn, surrendered or annuitized. If no such Guarantee
Period is then offered, the guaranteed interest rate will be
calculated by straight line interpolation of the guaranteed
interest rates of available Guarantee Periods.

N= The number of complete and partial months remaining to the end
of the Guarantee Period applicable to that portion of proceeds
being transferred, withdrawn, surrendered or annuitized.

The Market Value Adjustment is not applicable on the date a Guarantee
Period expires; however, a Withdrawal or Surrender on such date may remain
subject to Surrender Charges. Applicable Surrender Charges will be applied after
any Market Value Adjustment to Guaranteed Account values.

MINIMUM SURRENDER VALUE

The minimum Surrender Value for amounts allocated to the Guaranteed
Account equals the amounts so allocated less withdrawals, with interest
compounded annually at the rate of 3%, reduced by any applicable Surrender
Charge.

A - 2

<PAGE>

PART B

<PAGE>

PART B
STATEMENT OF ADDITIONAL INFORMATION

DEFERRED VARIABLE ANNUITY CONTRACTS

issued by

VARIABLE ACCOUNT I

and

AIG LIFE INSURANCE COMPANY

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

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

DATE OF STATEMENT OF ADDITIONAL INFORMATION: ___________, 1996

<PAGE>

TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION

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

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

Annuity Provisions........................................................

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

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

B - 2

<PAGE>

GENERAL INFORMATION

The Company

A description of AIG Life Insurance Company (the "Company"), and its
ownership is contained in the Prospectus. The Company will provide for the
safekeeping of the assets of Variable Account I (the "Variable Account").

Independent Accountants

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

Legal Counsel

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

Distributor

AIG Equity Sales Corp. ("AESC"), a wholly owned subsidiary of American
International Group, Inc. and an affiliate of the Company, acts as the
distributor. The offering is on a continuous basis. Commissions in the amount of
$________ were paid during 1995, none of which were retained by the Distributor.

Calculation Of Performance Related Information

A. Yield and Effective Yield Quotations for the Money Market
Subaccount

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

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

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

B - 3

<PAGE>

previously made during that Contract Year. (See "Charges and Deductions -
Deduction for Surrender Charge" on page of the Prospectus) No deductions or
sales loads are assessed upon annuitization under the Contracts. Realized gains
and losses from the sale of securities and unrealized appreciation and
depreciation of the Money Market Subaccount and the Fund are excluded from the
calculation of yield.

B. Total Return Quotations

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

P(1+T)^n = ERV

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

T = average annual total return

n = number of years

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

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

B - 4

<PAGE>

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

One Year Inception to Date

Money Market
Premier Growth
Growth & Income
International
Short Term Multi
Global Bond
US Gov't Securities
Global Dollar Gov't
North American Gov't
Utility Income
Conservative Investor
Growth Investors
Growth
Total Return
World Wide Privatization
Technology Portfolio

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

Premier Growth Portfolio December 7, 1992
Growth & Income Portfolio April 17, 1992
Short-Term Multi-Market Portfolio June 25, 1992
Global Bond Portfolio May 10, 1993
Money Market Portfolio May 13, 1993
International Portfolio June 1, 1993
US Government/High Yield Securities Portfolio June 14, 1993
North American Government Income Portfolio April 8, 1994
Global Dollar Government Portfolio May 26, 1994
Utility Income Portfolio June 15, 1994
Conservative Investors Portfolio September 8, 1994
Growth Investors Portfolio October 12, 1994
Growth Portfolio August 12, 1994
Total Return Portfolio September 12, 1994
Worldwide Privatization Portfolio October 17, 1994
Technology Portfolio January 2, 1996

C. Yield Quotations for the Short-Term Multi-Market, U.S. Government/High Grade
Securities and Global Bond Subaccounts

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

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

B - 5

<PAGE>

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

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

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

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

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

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

D. Non - Standardized Performance Data

1. Total Return Quotations

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

P(1+T)^n = ERV

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

T = average annual total return

n = number of years

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

For the purposes of the total return quotations, the calculations take into
effect all fees that are charged to all Owner accounts. For any fees that vary
with the size of the account, the account size is assumed to be the respective
Subaccount's mean account size. The calculations do not, however, assume a total
withdrawal as of the end of the particular period and, therefore, no Surrender
Charge is reflected.

B - 6

<PAGE>

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

One Year Inception to Date

Money Market
Premier Growth
Growth & Income
International
Short Term Multi Market
Global Bond
US Gov't Securities
Global Dollar Gov't
North American Gov't
Utility Income
Conservative Investor
Growth Investors
Growth
Total Return
Worldwide Privatization
Technology Portfolio N/A

2. The Power of Tax-Deferred Growth

All current taxes on any income or capital gains are deferred until money
is taken out of your account. That way all of your earnings contribute to the
growth of your account. And, since all your earnings are automatically
reinvested to build your investment base, your account is given yet another
opportunity to grow. It's called the Power of Compounding and the following
charts illustrate just how powerful it can be.

The Power of Tax-Deferral $10,000 At 8% Compounded Annually*

[Chart to be inserted]

33% TAX APPLIED
AFTER 33% TAX APPLIED UPON SURRENDER TAX DEFERRED

10 years $ 16,856 $ 15,782 $ 18,630
20 years $ 28,413 $ 26,789 $ 36,059
30 years $ 47,893 $ 47,744 $ 66,336
40 years $ 80,729 $ 87,637 $125,877
50 years $136,078 $163,584 $239,230

* These illustrations are not intended to reflect the return of investments made
in your variable annuity contract. The figures are calculated on a fixed
interest rate and assume no fluctuation in the value of principal or the impact
of any fees or sales charges. Taxes are due on tax-deferred investments whenever
money is withdrawn from that investment.

B - 7

<PAGE>

Delay of Payments

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

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

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

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

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

METHOD OF DETERMINING CONTRACT VALUES

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

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

(a) is equal to:

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

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

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

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

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

B - 8

<PAGE>

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

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

ANNUITY PROVISIONS

Annuity Benefits

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

Variable Annuity Payment Values

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

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

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

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

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

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

Annuity Unit

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

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

(b) is the assumed investment factor for such Valuation Period. The
assumed investment factor adjusts for the interest assumed in
determining the first variable annuity payment. Such factor

B-9

<PAGE>

for any Valuation Period shall be the accumulated value, at the end
of such period, of $1.00 deposited at the beginning of such period at
the assumed investment rate of 5%.

Net Investment Factor

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

(a) is equal to:

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

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

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

(b) is equal to:

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

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

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

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

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

Additional Provisions

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

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

The Company will give the payee under an annuity payment option a

B - 10

<PAGE>

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

FINANCIAL STATEMENTS

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

B - 11

<PAGE>

PROSPECTUS
for

INDIVIDUAL AND GROUP
SINGLE PREMIUM AND FLEXIBLE PREMIUM
DEFERRED
VARIABLE ANNUITY CONTRACTS

issued by

VARIABLE ACCOUNT I

and

AIG LIFE INSURANCE COMPANY
One Alico Plaza
600 King Street
Wilmington, Delaware 19801

This Prospectus sets forth the information a prospective investor ought
to know before investing.

Premiums allocated among the Subaccounts of Variable Account I (the
"Variable Account") will be invested in shares of corresponding portfolios as
selected by the Owner from the following 17 choices: the Conservative Investors
Portfolio, Growth Investors Portfolio, Growth Portfolio, or Growth and Income
Portfolio of the ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.; the High Income
Portfolio, Growth Portfolio, Money Market Portfolio, Overseas Portfolio, Asset
Manager Portfolio, or Investment Grade Bond Portfolio of the FIDELITY
INVESTMENTS VARIABLE INSURANCE PRODUCTS FUNDS; the Zero Coupon Portfolio of the
DREYFUS VARIABLE INVESTMENT FUND; the Gold and Natural Resources Portfolio or
Worldwide Balanced Portfolio, of the VAN ECK WORLDWIDE INSURANCE TRUST; the
DREYFUS STOCK INDEX FUND; or the Short-Term Retirement

<PAGE>

Portfolio, Medium-Term Retirement Portfolio or the Long-Term
Retirement Portfolio of the TOMORROW FUNDS RETIREMENT TRUST.

Additional information about the Contracts and the Variable Account is
contained in the "Statement of Additional Information" which is available upon
request at no charge by calling or writing AIG Life Insurance Company; Attention
Variable Products, One Alico Plaza, Wilmington, Delaware 19801, 1-800-340-2765
or call the service office at 1-800-255-8402. The Statement of Additional
Information dated _________, 1996, has been filed with the Securities and
Exchange Commission and is hereby incorporated by reference. The Table of
Contents for the Statement of Additional Information can be found on page ___ of
this Prospectus.

PLEASE READ THIS PROSPECTUS CAREFULLY AND RETAIN IT FOR YOUR
FUTURE REFERENCE.

THE CONTRACTS OFFERED BY THIS PROSPECTUS ARE NOT AVAILABLE IN ALL STATES.
Date of Prospectus: ____________, 1996

<PAGE>

TABLE CONTENTS
PAGE

Definitions....................................................................
Highlights.....................................................................
Summary of Expenses............................................................
Condensed Financial Information................................................
Calculation of Performance Data.......................................
The Company....................................................................
The Variable Account...........................................................
The Funds......................................................................

The Contract
Parties to the Contract...............................................
How to Purchase a Contract............................................
Discount Purchase Programs............................................
Distributor...........................................................
Administration of the Contracts.......................................
Premium and Allocation to Your Investment Options.....................
Right to Examine Contract Period......................................
Unit Value and Contract Value.........................................
Transfers.............................................................
Dollar Cost Averaging.................................................

Charges and Deductions.........................................................

Annuity Benefits...............................................................

Death Benefit..................................................................

Distributions Under the Contract...............................................

Taxes..........................................................................

Appendix - General Account Option..............................................
Guaranteed Account....................................................
Guarantee Periods.....................................................
Market Value Adjustment...............................................

Table of Contents of the Statement of Additional Information...................

<PAGE>

DEFINITIONS

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

Administrative Office - The Annuity Service Office of the Company:
c/o Delaware Valley Financial Services, Inc., 300 Berwyn Park, P.O.
Box 3031, Berwyn, PA 19312-0031.