AIG Life Insurance Company
One Alico Plaza
P.O. Box 667
Wilmington, DE 19899-0667
302-594-2952
March 7, 1997
Securities and Exchange Commission
Division of Investment Management
Insurance Products-Branch #20
450 Fifth Street, N.W.
Washington, DC 20549
Attention: Filing Desk
Room 1004
Document Control
Re: AIG Life Insurance Company
Variable Account I
File No. 33-16708
Gentlemen:
Pursuant to Rule 30b2-1 of the Investment Company Act of 1940, we
submit electronically a copy of the letter that was sent to our
variable annuity contractholders for Variable Account I. (See Exhibit
1) The letter dated January 31, 1997 was mailed March 3, 1997
and enclosed the Annual Reports of the underlying funds.
In addition, this filing incorporates by reference the electronic filing
of the Annual Report of the Delaware Group Premium Fund, Inc., File No.
811-5162, made on March 7,1997.
Sincerely,
/s/ Kenneth D. Walma
Kenneth D. Walma
Associate Counsel
EXHIBIT 1
January 31, 1997
Dear Policy Holder:
The year of 1996 was marked by an ebullient U.S. stock market and the
largest inflow of personal savings into mutual funds ever. With the
exception of Japan, overseas stock markets were strong as well,
especially in Europe. Many foreign bond markets performed better
during the year than the U.S. bond market, which was dogged by a
persistent, largely unfounded fear of inflation.
1996 Total Return
Standard & Poor's 500 Index +22.95%
Russell 2000 Index +16.49%
Lehman Brothers Government Corporate Bond Index +2.91%
Morgan Stanley Europe Australia Far East Index +6.36%
Performance quoted above assumes reinvestment of dividends. It is
not intended to represent the performance of any Premium Fund Series.
Complete Performance information can be found following each
discussion section of this report.
Higher corporate earnings and improved productivity at many domestic
and multinational industrial companies drove the U.S. stock market
higher in 1996. The stocks of larger companies tended to outperform
midcap and smaller cap issues, as many investors decided "bigger was
better" amid an uncertain outlook for U.S. interest rates.
In recent months, domestic consumer spending has been weak and leading
U.S. economic indicators suggest subdued growth ahead. While it is
possible the U.S. stock market, especially smaller companies with above
average earnings prospect could turn in a strong year, we believe a
more likely scenario may be a return to historical patterns of share
price volatility and total return.
The U.S. bond market remains a question mark in 1997. The rate of
inflation, although a modest 3.3% this past year, was the highest in
five years. We generally believe income is likely to be the dominant
component of total return from U.S. bonds. In our opinion, high-yield
higher risk corporate securities are well positioned for the year
ahead because these bonds have historically been less sensitive to
modest increases in interest rates.
Beyond our shores, we have a somewhat more positive outlook for both stocks
and bonds. In Europe, several countries are taking positive steps to
reform fiscal policy in order to qualify for European Monetary Union.
In addition, we believe privatization across the Continent should encourage
greater long-term economic growth, although there are likely to be some
short-term political obstacles.
Summaries of the strategies and performance for each Delaware Group Premium
Fund* investment series are included in the pages that follow. Keep in mind
that your annuity is designed as a long-term investment and that any earnings
compound tax deferred until withdrawal. This can help increase your earnings
potential.
Sincerely,
/s/ Wayne A. Stork
Wayne A. Stork
Chairman, President and Chief Executive Officer
Delaware Group Premium Fund
*Investment Series of the Premium Fund underlie variable annuity products
issued by AIG Life Insurance Co. of America and American International
Life Assurance Company of New York.
