VARIABLE ACCOUNT I OF AIG LIFE INS CO, 497, 1998-02-09

VARIABLE ACCOUNT I OF AIG LIFE INS CO
497, 1998-02-09

Previous: VARIABLE ACCOUNT I OF AIG LIFE INS CO, 497, 1998-02-09

Next: ONEITA INDUSTRIES INC, NT 10-Q, 1998-02-09

Rule 497(e)
File No. 33-39171

INDIVIDUAL AND GROUP 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 describes an individual flexible premium deferred
variable annuity contract (the "Individual Contract") and a group flexible
premium deferred variable annuity contract (the "Group Contract") (collectively,
the "Contracts") offered by AIG Life Insurance Company (the "Company"). The
Contracts provide for the accumulation of Contract Value and payment of monthly
annuity payments for individuals. Under the Group Contract, these individuals
are within groups under sponsored arrangements, which may include, for example,
those instances where an employer, a financial institution, an association, or
group otherwise permitted by state insurance law, allows the Company to sell
contracts to its employees, depositors, or members. An Owner may be issued a
certificate as evidence of individual participation under a group arrangement.
The description of the Contract in this Prospectus is fully applicable to any
certificate that may be issued under the Group Contract. As used herein the
words "Contract" and "Contracts" include any such certificate.

The Contracts described in this Prospectus 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 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 for the Contracts will be allocated to Variable Account I (the
"Variable Account"), a segregated investment account of the Company. Premiums
allocated among the subaccounts of the Variable Account (the "Subaccounts") will
be invested in shares of corresponding portfolios of Alliance Variable Products
Series Fund, Inc. (the "Fund"). The following portfolios are available: Money
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; Worldwide Privatization Portfolio; Technology Portfolio; Quasar
Portfolio; Real Estate Investment Portfolio; and the High Yield Portfolio. (See
"The Fund" on page ___ .)

<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 calling the service office at 1-800-255-8402. The Statement
of Additional Information dated May 1, 1997, as supplemented February 9, 1998,
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.

INVESTMENTS IN THESE CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, AND
ARE NOT GUARANTEED OR ENDORSED BY, THE ADVISOR OR ANY BANK OR BANK AFFILIATE.
INVESTMENTS ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. ANY
INVESTMENT IN THE CONTRACTS INVOLVES CERTAIN INVESTMENT RISK WHICH MAY INCLUDE
THE POSSIBLE LOSS OF PRINCIPAL.

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: May 1, 1997, as supplemented February 9, 1998

Distributor:
AIG Equity Sales Corp.
Attention: Variable Products
80 Pine Street
New York, New York 10270
1-800-888-7485

2
<PAGE>

TABLE OF CONTENTS
Page

Definitions.........................................................
Highlights..........................................................
Fee Table...........................................................
Summary of Expenses ................................................
Condensed Financial Information ....................................
The Company ........................................................
The Variable Account ...............................................
The Fund ...........................................................
The Contracts.......................................................
Charges and Deductions .............................................
Annuity Benefits ...................................................
Death Benefit ......................................................
Distributions under the Contracts ..................................
Taxes ..............................................................
Legal Proceedings...................................................
Legal Matters.......................................................
Table of Contents of the Statement of Additional Information........
Appendix ...........................................................

3
<PAGE>

DEFINITIONS

Accumulation Period -- The period prior to the Annuity Date.

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 the
Contracts.

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 Contracts.

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

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.

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

Premium -- A purchase payment for the Contracts is referred to as a 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 -- The sales charge that may be applied against amounts
withdrawn prior to the Annuity Date if withdrawal is within 7 years of purchase.

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 a Contract.

4
<PAGE>

HIGHLIGHTS

This Prospectus describes the Contracts and a segregated investment account
of the Company which account has been designated Variable Account I. 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. The
Contracts may be purchased in connection with a retirement plan which may
qualify as a 403 (b) Plan or as an IRA. The Contracts 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 ____.)

Contracts are purchased with a minimum initial Premium of $2,000.
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 a 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 Fund and
will accumulate on a variable basis. Each Subaccount invests exclusively in one
of the available portfolios. (See "The Fund" 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 Variable Account.

The Company does not deduct sales charges from any Premium received.
However, the Contracts provide for a Surrender Charge that may be assessed in
the event that an Owner surrenders all or a portion of the Contract Value within
seven Contract Years following payment of any Premium. The maximum Surrender
Charge is 6% of Premium to which the charge is applicable. (See "Summary of
Expenses" on page ___ and "Charges and Deductions -- Deduction for Surrender
Charge" on 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 (the "Free Withdrawal Amount"). (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 is no Mortality and Expense Risk Charge deducted for
amounts in the Guaranteed Account. (See "Charges and Deductions -- Deduction for
Mortality and Expense Risk Charge" on page ___.)

The Company deducts daily an Administrative Charge which is equal on an
annual basis to 0.15% of the average daily net asset value of the Variable
Account. The Administrative Charge is not assessed to the Guaranteed Account. In
addition, the Company deducts from the Contract Value an annual Contract
Maintenance Charge which is $30 per year. The Contract Maintenance Charge is
waived if the Contract Value is greater than $50,000 on the date of the charge.
(See "Charges and Deductions -- Deduction for Administrative Charge; Deduction
for Contract Maintenance Charge" 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.

5
<PAGE>

The Owner may return a Contract within ten (10) days (the "Right to Examine
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 Period, an amount equal to the
Premium paid less any withdrawals, the Company will refund such an amount.

FEE TABLE
Owner Transaction Expenses

Sales Load Imposed on Purchases None

Surrender Charge (as a percentage of amount surrendered):
Premium Year 1 6%
Premium Year 2 6%
Premium Year 3 5%
Premium Year 4 5%
Premium Year 5 4%
Premium Year 6 3%
Premium Year 7 2%
Premium Year 8 and thereafter None

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

Annual Contract Fee (waived for Owners with
Contract Values of $50,000 or greater) $30

Variable Account Expenses (as a percentage of average account value):
Mortality and Expense Risk Fees 1.25%
Account Fees and Expenses 0.15%

Total Variable Account Annual Expenses 1.40%

6
<PAGE>

SUMMARY OF EXPENSES

Annual Fund Expenses After Expense Reimbursements
Total
Management Other Operating
Portfolio Fee Expenses Expenses4
<S> <C> <C> <C>
Money Market.................................................. 0.50% 0.19% 0.69%
Growth ....................................................... 0.74 0.19 0.93
Growth and Income ............................................ 0.63 0.19 0.82
International................................................. 0.04 0.91 0.95
U.S. Government/High Grade Securities......................... 0.54 0.38 0.92
North American Government Income.............................. 0.19 0.76 0.95
Global Dollar Government...................................... 0.00 0.95 0.95
Utility Income................................................ 0.19 0.76 0.95
Global Bond................................................... 0.44 0.50 0.94
Premier Growth................................................ 0.72 0.23 0.95
Total Return.................................................. 0.46 0.49 0.95
Worldwide Privatization....................................... 0.10 0.85 0.95
Technology1................................................... 0.33 0.62 0.95
Quasar1....................................................... 0.00 0.95 0.95
Real Estate Investment2....................................... 0.00 0.95 0.95
High Yield 3.................................................. 0.00 0.95 0.95
- -----------------------
</TABLE>
1 The expense percentages for the Technology and Quasar Portfolios have been
annualized because as of December 31, 1996, the portfolios had not been in
existence for a full year.

2 Computed for the period January 1, 1997 (inception), through March 31,
1997, annualized.

3 Estimated.

4 Annual operating expenses as a percentage of the average daily net assets
of each portfolio before reimbursement by the Fund's investment adviser
were estimated to be .69% for Money Market, .93% for Growth, .82% for
Growth and Income, 1.91% for International, .98% for U.S. Government/High
Grade Securities, 1.41% for North American Government Income, 1.97% for
Global Dollar Government, 1.51% for Utility Income, 1.15% for Global Bond,
1.23% for Premier Growth, 1.12% for Total Return, 1.85% for Worldwide
Privatization, 1.62% for Technology, 4.44% for Quasar, 6.00% for Real
Estate Investment, and 1.75% for High Yield Portfolio.

The purpose of the table set forth above is to assist the Owner 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 ____ and "Management of the Fund" in
the Fund's Prospectus.) The table does not reflect the charges applicable to
certain death benefit options offered under the Contracts. (See "Charges and
Deductions -- Deduction for Equity Assurance Plan" on page ___; "Charges and
Deductions -- Deduction for Annual Ratchet Plan" on page ___; "Charges and
Deductions --Deduction for Enhanced Equity Assurance Plan" on page ___; "Charges
and Deductions -- Deduction for Accidental Death Benefit" on page ___.)

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 Taxes" on page
____.)

7
<PAGE>

In the event that an Owner withdraws all or a portion of the Contract Value
in excess of the Free Withdrawal Amount for the first withdrawal in a Contract
Year, or makes subsequent withdrawals in a Contract Year, a Surrender Charge may
be imposed. The Free Withdrawal Amount is equal to 10% of the Premium paid, less
any prior withdrawals at the time of withdrawal. (See "Charges and Deductions
- --Deduction for Surrender Charge" on page ___.)

Example

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

If you surrender
Portfolio 1 Year 3 Years 5 Years 10 Years
- --------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Money Market ...................................... $76 $112 $151 $248
Growth ............................................ 78 120 164 273
Growth and Income ................................. 77 116 158 262
International ..................................... 78 120 165 275
U.S. Government/High Grade Securities ............. 78 119 163 272
North American Government Income .................. 78 120 165 275
Global Dollar Government .......................... 78 120 165 275
Utility Income .................................... 78 120 165 275
Global Bond ....................................... 78 120 164 274
Premier Growth .................................... 78 120 165 275
Total Return ...................................... 78 120 165 275
Worldwide Privatization ........................... 78 120 165 275
Technology ........................................ 78 120 165 275
Quasar ............................................ 78 120 165 275
Real Estate Investment ............................ 78 120 165 275
High Yield ........................................ 78 120 165 275
</TABLE>

8
<PAGE>

If you annuitize or if you do not surrender
Portfolio 1 Year 3 Years 5 Years 10 Years
- --------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Money Market ...................................... $22 $67 $115 $274
Growth ............................................ 24 75 128 273
Growth and Income ................................. 23 71 122 262
International ..................................... 24 75 129 275
U.S. Government/High Grade Securities ............. 24 74 127 272
North American Government Income .................. 24 75 129 275
Global Dollar Government .......................... 24 75 129 275
Utility Income .................................... 24 75 129 275
Global Bond ....................................... 24 75 128 274
Premier Growth .................................... 24 75 129 275
Total Return ...................................... 24 75 129 275
Worldwide Privatization ........................... 24 75 129 275
Technology ........................................ 24 75 129 275
Quasar ............................................ 24 75 129 275
Real Estate Investment ............................ 24 75 129 275
High Yield......................................... 24 75 129 275
</TABLE>
The Example should not be considered a representation of past or future
expenses and actual expenses may be greater or less than those shown.

9
<PAGE>

CONDENSED FINANCIAL INFORMATION
ACCUMULATION UNIT VALUES

1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
MONEY MARKET
Accumulation Unit Value
Beginning of Period................. 10.64 10.27 10.07 10.00 N/A
End of Period....................... 10.99 10.64 10.27 10.07 N/A
Accum Units o/s @ end of period ..... 890,464.95 551,555.84 206,34.73 1,590.74 N/A

GROWTH
Accumulation Unit Value
Beginning of Period ................ 13.99 10.48 11.13 10.00 10.00
End of Period....................... 17.73 13.99 10.48 11.13 10.00
Accum Units o/s @ end of period....... 1,541,465.58 777,108.88 56,104.84 35,271.53 2,081.43

GROWTH AND INCOME
Accumulation Unit Value
Beginning of Period................. 15.52 11.57 11.76 10.66 10.00
End of Period....................... 18.99 15.52 11.57 11.76 10.66
Accum Units o/s @ end of period....... 1,324,216.31 502,667.80 179,245.69 37,573.04 7,731.36

INTERNATIONAL
Accumulation Unit Value
Beginning of Period................. 12.22 11.27 10.69 10.00 N/A
End of Period....................... 12.92 12.22 11.27 10.69 N/A
Accum Units o/s @ end of period....... 525,023.12 228,254.81 122,616.95 22,441.08 N/A

U.S. GOVERNMENT/HIGH GRADE SECURITIES
Accumulation Unit Value
Beginning of Period ................ 11.38 .66 10.17 10.00 N/A
End of Period....................... 11.50 11.38 9.66 10.17 N/A
Accum Units o/s @ end of period ...... 552,183.99 390,483.21 75,881.31 7,608.84 N/A

NORTH AMERICAN GOVERNMENT INCOME
Accumulation Unit Value
Beginning of Period ................ 10.55 8.71 10.00 N/A N/A
End of Period ...................... 12.35 10.55 8.71 N/A N/A
Accum Units o/s @ end of period ...... 279,368.63 95,031.46 89,164.68 N/A N/A

GLOBAL DOLLAR GOVERNMENT
Accumulation Unit Value
Beginning of Period ................ 11.81 9.73 10.00 N/A N/A
End of Period ...................... 14.55 11.81 9.73 N/A N/A
Accum Units o/s @ end of period ...... 76,451.58 16,171.63 5,958.18 N/A N/A

UTILITY INCOME
Accumulation Unit Value
Beginning of Period ................ 11.64 9.71 10.00 N/A N/A
End of Period ...................... 12.38 11.64 9.71 N/A N/A
Accum Units o/s @ end of period....... 305,608.09 103,042.86 13,690.19 N/A N/A

10
<PAGE>

GLOBAL BOND
Accumulation Unit Value
Beginning of Period ................ 12.24 9.94 10.61 10.00 N/A
End of Period ...................... 12.82 12.24 9.94 10.61 N/A
Accum Units o/s @ end of period ...... 145,722.74 76,604.28 27,806.30 5,589.55 N/A

PREMIER GROWTH
Accumulation Unit Value
Beginning of Period ................ 15.25 10.66 10.00 N/A N/A
End of Period ...................... 18.45 15.25 10.66 N/A N/A
Accum Units o/s@ end of period ....... 1,026,432.81 420,662.68 108,111.20 N/A N/A

TOTAL RETURN
Accumulation Unit Value
Beginning of Period ................ 11.90 9.75 10.00 N/A N/A
End of Period ...................... 13.52 11.90 9.75 N/A N/A
Accum Units o/s @ end of period....... 455,709.19 121,094.82 4,871.12 N/A N/A

WORLDWIDE PRIVATIZATION
Accumulation Unit Value
Beginning of Period ................ 11.01 10.05 10.00 N/A N/A
End of Period ...................... 12.86 11.01 10.05 N/A N/A
Accum Units o/s @ end of period....... 224,339.58 62,769.30 6,357.69 N/A N/A

TECHNOLOGY
Accumulation Unit Value
Beginning of Period ................ 10.00 N/A N/A N/A N/A
End of Period ...................... 10.90 N/A N/A N/A N/A
Accum Units o/s @ end of period....... 431,529.41 N/A N/A N/A N/A

QUASAR
Accumulation Unit Value
Beginning of Period ................ 10.00 N/A N/A N/A N/A
End of Period ...................... 10.58 N/A N/A N/A N/A
Accum Units o/s @ end of period ...... 179,808.73 N/A N/A N/A N/A
</TABLE>

No financial information has been reported for the High Yield and Real
Estate Investment Portfolios of the Fund because for the fiscal year ended
December 31, 1996, the Variable Account had not commenced operations with
respect to those portfolios.
<TABLE>
<CAPTION>
Funds were first invested in the portfolios on the following dates:
<S> <C>
Money Market Portfolio May 13, 1993
Growth Portfolio August 12, 1994
Growth and Income Portfolio April 16, 1992
International Portfolio June 1, 1993
U.S. Government/High Grade 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
Global Bond Portfolio May 10, 1993

11
<PAGE>

Premier Growth Portfolio December 7, 1992
Total Return Portfolio September 12, 1994
Worldwide Privatization Portfolio October 17, 1994
Technology Portfolio January 22, 1996
Quasar Portfolio August 15, 1996
Real Estate Investment Portfolio January 7, 1997
High Yield Portfolio September 9, 1997
</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.

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.

12
<PAGE>

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
Contracts; 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 may be found in the Statement of
Additional Information. No financial statements for the Variable Account have
been provided in the Statement of Additional Information as no Contracts had
been issued during the reporting period.

THE COMPANY

The Company is a stock life insurance company which was organized under the
laws of the State of Delaware in 1962. The Company provides a full range of
individual and group life, disability, and accidental death and dismemberment
insurance policies and annuities. 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 approximately 130 countries and jurisdictions around the world.

13
<PAGE>

Ratings

The Company may from time-to-time publish in advertisements, sales
literature and reports to Owners, the ratings and other information assigned to
it by one or more independent rating organizations such as A.M. Best Company,
Moody's, and Standard & Poor's. The purpose of the ratings is to reflect the
financial strength and/or claims-paying ability of the Company and should not be
considered as bearing on the investment performance of assets held in the
separate account. Each year the A.M. Best Company reviews the financial status
of thousands of insurers, culminating in the assignment of Best's Ratings. These
ratings reflect A.M. Best's current opinion of the relative financial strength
and operating performance of an insurance company in comparison to the norms of
the life/health insurance industry. In addition, the claims-paying ability of
the Company as measured by Standard & Poor's Insurance Ratings Services, and the
financial strength of the Company as measured by Moody's Investors Services, may
be referred to in advertisements, sales literature or in reports to Owners.
These ratings are their opinion of an operating insurance company's financial
capacity to meet the obligations of its life insurance policies and annuity
contracts in accordance with their terms. In regard to their ratings of the
Company, these ratings are explicitly based on the existence of a Support
Agreement, dated as of December 31, 1991, between the Company and AIG, pursuant
to which AIG has agreed to cause the Company to maintain a positive net worth
and to provide the Company with funds on a timely basis sufficient to meet the
Company's obligations to its policyholders. The Support Agreement is not,
however, a direct or indirect guarantee by AIG to any person of the payment of
any of the Company's indebtedness, liabilities or other obligations (including
obligations to the Owners).

The ratings are not recommendations to purchase the Company's life
insurance or annuity products, or to hold or sell these products, and the
ratings do not comment on the suitability of such products for a particular
investor. There can be no assurance that any rating will remain in effect for
any given period of time or that any rating will not be lowered or withdrawn
entirely by a rating organization if, in such organization's judgment, future
circumstances relating to the Support Agreement, such as a lowering of AIG's
long-term debt rating, so warrant. The ratings do not reflect the investment
performance of the Variable Account or the degree of risk associated with an
investment in the Variable Account.

THE VARIABLE ACCOUNT

The Company owns the assets in the Variable Account and obligations under
the Contracts 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 and
subaccounts. The assets of the Variable Account, equal to the reserves and other
contract liabilities with respect to the Variable Account and Subaccount, 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 and each Subaccount 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 and subaccount maintained by the Company.

14
<PAGE>

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 funding vehicles for the Contracts. If deemed
to be in the best interests of persons having voting rights under the Contracts,
the Variable Account may be operated as a management company under the
Investment Company Act of 1940 (the "1940 Act"), may be deregistered under the
1940 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 the Variable Account and are
described in other prospectuses.

THE FUND

Alliance Variable Products Series Fund, Inc. will act as the funding
vehicle for the Contracts offered by this Prospectus. The Fund is a diversified
open-end management investment company, which is intended to meet differing
investment objectives. The Fund is managed by Alliance Capital Management L.P.
(the "Advisor"). The Advisor has entered into a sub-advisory agreement with AIG
Global Investment Corp. (the "Sub-Advisor"), a wholly-owned subsidiary of AIG
and an affiliate of the Company, to provide investment advice for the Global
Bond Portfolio. A summary of investment objectives for each portfolio is set
forth below. More detailed information regarding investment objectives,
management of the portfolios, and investment advisory fees and other charges may
be found in the current Prospectus for the Fund, which also 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.

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 affiliates, 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.

The portfolios available under the Fund and their investment objectives 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. An investment in the money market portfolio is neither
insured nor guaranteed by the U.S. Government. There can be no assurance that
the Portfolio will be able to maintain a stable net asset value of $1.00 per
share, although it expects to do so.

15
<PAGE>

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.

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.

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 U.S. Dollars.

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.

16
<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.

Global Bond Portfolio

This portfolio seeks to provide the highest level of current income
consistent with what the Advisor and Sub-Advisor 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.

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 Advisor to be
beneficiaries of the privatization process.

Technology Portfolio

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

Quasar Portfolio

This portfolio seeks growth of capital by pursuing aggressive investment
policies. The portfolio invests principally in a diversified portfolio of equity
securities of any company and industry and in any type of security which is
believed to offer possibilities for capital appreciation.

17
<PAGE>

Real Estate Investment Portfolio

This portfolio seeks a total return on its assets from long-term growth of
capital and from income principally through investing in a portfolio of equity
securities of issuers that are primarily engaged in or related to the real
estate industry.

High Yield Portfolio

This portfolio seeks the highest level of current income available without
assuming undue risk by investing principally in high-yielding fixed income
securities. As a secondary objective, this portfolio seeks capital appreciation
where consistent with its primary objective. Many of the high-yielding
securities in which the High Yield Portfolio invests are rated in the lower
rating categories (i.e., below investment grade) by nationally recognized rating
services. These securities, which are often referred to as "junk bonds," are
subject to greater risk of loss of principal and interest than higher rated
securities and are considered to be predominately speculative with respect to
the issuer's capacity to pay interest and repay principal.

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 each of the Subaccounts of
the Variable Account will be invested in shares of a corresponding portfolio of
the Fund. The Fund does not hold regular meetings of shareholders. 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 persons 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.

18
<PAGE>

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 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 CONTRACTS

The Contracts described in this Prospectus are flexible premium deferred
variable annuity contracts.

Parties to the Contracts

Owner

As the purchaser of a 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 Contracts may be subject to unintended and adverse tax
consequences. For possible tax considerations of these changes, see "Taxes" on
page ___.

19
<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 a Contract is the Effective
Date.

If We have not received sufficient information to issue a Contract within
five days of the receipt of the initial Premium, 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 may 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. ("AIGESC"), 80 Pine Street, New York, New York, acts
as the distributor of the Contracts. AIGESC is a wholly-owned subsidiary of AIG
and an affiliate of the Company. Commissions not to exceed 6.5% of Premiums will
be paid to entities which sell the Contracts. Additional payments may be made
for other services not directly related to the sale of the Contracts, 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 AIGESC, 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.

20
<PAGE>

Premium and Allocation to Your Investment Options

The initial Premium must be at least $2,000. You may make additional
payments of Premium prior to the Annuity Date in amounts of at least $1,000, or
as little as $100 if You are a participant in the automatic investment plan.
There is no maximum limit on the additional Premium 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.

The initial Premium is allocated among the Subaccounts and Guaranteed
Account on the Effective Date. Your allocation instructions will specify what
percentage of Your initial Premium is to be credited to each Subaccount and to
the Guaranteed Account. Allocation instructions must be expressed in whole
percentages of not less than 10%. Allocations for Additional Premium will be
made on the same basis as the initial Premium unless We receive 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 IRA or 403(b) Plan 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 Contracts to Your
situation. (See "Taxes" on page ____.)

Right to Examine Period

The Contracts provide a 10-day period giving You the opportunity to cancel
a Contract (the "Right to Examine Period"). You must return the Contract with
written notice to Us. If We receive the Contract and Your written notice within
ten (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 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 .

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

21
<PAGE>

Unit Value and Contract Value

After the deduction of certain charges 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 invests. 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.

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 twelve (12) per
Contract Year. There are no fees for the first twelve (12) transfers in any one
Contract Year. For each transfer in excess of twelve (12) within one Contract
Year, We impose a transfer fee of $10. The transfer fee, if any, is deducted
from the amount transferred. (See "Guaranteed Account Transfers" in the
Appendix, page ____.)

Transfers may be made by written request or by telephone as described in
the Contracts 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, depending upon the Annuity Option selected, 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.

22
<PAGE>

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"
below.) For additional limitations regarding transfers out of the Guaranteed
Account, see "Guaranteed Account Transfers" 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 Contracts by authorizing
the Company to make periodic allocations of Contract Value from either the Money
Market Subaccount or the Guaranteed Account to one or more of the other
Subaccounts ("Dollar Cost Averaging"). 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 twelve (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.

To elect Dollar Cost Averaging, the Contract Value must be at least $12,000
and a request in proper form must be received by the Company. A Dollar Cost
Averaging request form is available from the Administrative Office. 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 both Dollar Cost Averaging and Asset Rebalancing.

Asset Rebalancing

The Company currently offers an option under which Owners may authorize the
Company to automatically exchange Contract Value periodically to maintain a
particular percentage allocation among the Subaccounts as selected by the Owner
("Asset Rebalancing"). The Contract Value allocated to each Subaccount will grow
or decline in value at different rates during the selected period, and Asset
Rebalancing automatically reallocates the Contract Value in the Subaccounts 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 Asset Rebalancing, the Contract Value must be at least $12,000 and
a request in proper form must be received by the Company. An Asset Rebalancing
request form is available from the Administrative Office. If Asset Rebalancing
is elected, all Contract Value allocated to the Subaccounts must be included in
the election. An Owner may not have in effect at the same time both Dollar Cost
Averaging and Asset Rebalancing.

23
<PAGE>

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

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 Equity Assurance Plan

If the Owner has elected the Equity Assurance Plan, the Company deducts for
each Valuation Period an Equity Assurance Plan Charge equal on an annual basis
to .07% of the average daily net asset value of the Variable Account for Owners
attained age 0-59 and .20% of the average daily net asset value of the Variable
Account for Owners attained age 60-85.

24
<PAGE>

Deduction for Annual Ratchet Plan

If the Owner has elected the Annual Ratchet Plan, the Company deducts for
each Valuation Period an Annual Ratchet Plan Charge equal on an annual basis to
.10% of the average daily net asset value of the Variable Account.

Deduction for Enhanced Equity Assurance Plan

If the Owner has elected the Enhanced Equity Assurance Plan, the Company
deducts for each Valuation Period an Enhanced Equity Assurance Plan Charge equal
on an annual basis to .17% of the average daily net asset value of the Variable
Account for Owners attained age 0-59 and .30% of the average daily net asset
value of the Variable Account for Owners attained age 60-85.

Deduction for Accidental Death Benefit

If the Owner has elected the Accident Death Benefit, the Company deducts
for each Valuation Period an Accidental Death Benefit Charge equal on an annual
basis to .05% of the average daily net asset value of the Variable Account.

Deduction for Surrender Charge

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 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 seven (7) 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
will be subject to the following charges:

Premium Year Applicable Surrender Charge

1 6%
2 6%
3 5%
4 5%
5 4%
6 3%
7 2%
8 and thereafter None

The Surrender Charge is a deferred sales charge 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.

25
<PAGE>

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

Deduction for Administrative Charge

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 compensate Us
for administrative expenses, both during the accumulation period and following
the Annuity Date.

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 Charge is waived if the Contract Value is greater than $50,000 on
the date of deduction of the charge. These charges are paid to the Company for
the costs it incurs relating to maintenance of the Contracts, the Variable
Account, and the Guaranteed Account. If the Contracts are surrendered, we will
deduct the Contract Maintenance Charge at the time of surrender for the then
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.

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.
(See also "Taxes" on page ____.)

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 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 the Contracts to certain groups, or other sponsored arrangements, including
those in which a single owner, including a trustee or an employer, for
example, purchases a Contract covering several individuals.

Our costs for sales, administration, and mortality generally vary with
the size and stability of the group among other factors. We take all these
factors into account when reducing charges. To qualify for reduced charges, a
group or similar arrangement must meet certain requirements, including our
requirements for size and number of years in existence. Group or group
sponsored arrangements that have been set up solely to buy the 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 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.

26
<PAGE>

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 must be the first day of a calendar month.

Without the approval of the Company, the new Annuity Date cannot be
earlier than one year after the Effective Date. In addition, for IRA or 403
(b) Plan, certain provisions of your retirement plan or the Code may further
restrict your choice of an Annuity Date. (See "Taxes" on 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 Value between the Guaranteed Account and the Variable
Account after the Annuity Date, but may, subject to certain conditions,
transfer Contract Value from one Subaccount to another Subaccount. (See
"Transfers" on page ____.)

If the Owner has not made any Annuity 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 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.

27
<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 Contracts are 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 Company may also offer additional options at its own discretion.

Annuity Payments

If the Contract Value applied to Annuity 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
Contracts for the option selected, divided by 1,000. If at the time of
annuitization, the Company is using annuity tables or factors that result in a
larger annuity payment, the Company will pay the larger annuity payment.

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 Contracts;
(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 Contracts 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 an Owner's 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. The death benefit will be calculated in accordance with the terms of one
of the options described below, as designated by the Owner at the time of
application. If no optional death benefit is elected by the Owner at the time
of application, the Traditional Death Benefit will be paid. If there has been
a change of Owner from one natural person to another natural person, the death
benefit will equal the Contract Value, unless the change in ownership results
from the election, made by a surviving spouse as designated beneficiary, to
continue the Contract. All death benefit options may not be available in all
states.

Traditional Death Benefit

Under the Traditional Death Benefit, We will pay a death benefit equal
to the greatest of:

1. the total of all Premium, reduced proportionately by
withdrawals and surrenders;

2. the Contract Value ; or

28
<PAGE>

3. the greatest of the Contract Value at the seventh Contract
Anniversary reduced proportionally by any surrenders
subsequent to that Contract Anniversary in the same
proportion that the Contract Value was reduced on the date
of a surrender, plus any Premium paid subsequent to that
Contract Anniversary.

The Traditional Death Benefit will be in effect if no optional death
benefit has been selected by the Owner.

Option I - Equity Assurance Plan

If at the time of application the Owner has selected a death benefit
under the terms of the Equity Assurance Plan, We will pay a death benefit
equal to the greatest of:

1. the Contract Value;

2. the greatest Contract Value on any seventh Contract
Anniversary plus any Premiums subsequent to the Contract
Anniversary reduced proportionally by any surrenders
subsequent to that Contract Anniversary in the same
proportion that the Contract Value was reduced on the date
of a surrender; or

3. an amount equal to (a) plus (b) where:

(a) is equal to the total of all Premiums paid on or
before the first Contract Anniversary following Your
85th birthday, adjusted for surrenders as described
below and then accumulated at the compound interest
rates shown below for the number of complete years, not
to exceed 10, from the date of receipt of each Premium
to the earlier of the date of death or the first
Contract Anniversary following Your 85th birthday:

(1) 0% per annum if death occurs during the 1st
through 24th month from the date of Premium
payment;

(2) 2% per annum if death occurs during the
25th through 48th month from the date of
Premium payment;

(3) 4% per annum if death occurs during the
49th through 72nd month from the date of
Premium payment;

(4) 6% per annum if death occurs during the
73rd through 96th month from the date of
Premium payment;

(5) 8% per annum if death occurs during the
97th through 120th month from the date of
Premium payment;

(6) 10% per annum (for a maximum of 10 years)
if death occurs more than 120 months from the
date of Premium payment; and

(b) is equal to all Premiums paid after the first
Contract Anniversary following Your 85th birthday,
adjusted for surrenders as described below.

29
<PAGE>

The Company deducts for each Valuation Period an Equity Assurance Plan
Charge equal on an annual basis to .07% of the average daily net asset value
of the Variable Account for Owners attained age 0-59 and .20% of the average
daily net asset value of the Variable Account for Owners attained age 60-85.

Adjustments for surrenders. In the determination of the death benefit,
for each surrender a proportionate reduction will be made to each Premium paid
prior to the surrender. The proportion is determined by dividing the amount of
the Contract Value surrendered by the Contract Value immediately prior to each
surrender.

The Equity Assurance Plan will be in effect if:

1. the Owner elected it on the Application; and

2. the charge for the Equity Assurance Plan is shown on the
Contract Schedule.

The Equity Assurance Plan will cease to be in effect upon receipt by the
Company of the Owner's written request to discontinue it or upon the
allocation of Contract Value to either the Money Market Subaccount or
Guaranteed Account, unless such allocation is made as part of Dollar Cost
Averaging.

Option II - Annual Ratchet Plan

If at any time of application, the Owner has selected a death benefit
under the terms of the Annual Ratchet Plan, We will pay a death benefit equal
to the greatest of:

1. the total of all Premiums paid, less surrenders;

2. the Contract Value ; or

3. the greatest Contract Value at any Contract Anniversary
reduced proportionally by any surrenders subsequent to
that Contract Anniversary in the same proportion that
the Contract Value was reduced on the date of a
surrender, plus any Premium paid subsequent to that
Contract Anniversary.

The Company deducts for each Valuation Period a daily charge for the
Annual Ratchet Plan which is equal on an annual basis to .10% of the average
daily net asset value of the Variable Account.

The Annual Ratchet Plan will be in effect if:

1. the Owner designates this option on the Application; and

2. the Annual Ratchet Plan charge is shown on the Contract
Schedule.

The Annual Ratchet Plan will cease to be in effect upon receipt by the
Company of the Owner's written request to discontinue it.

Option III - Enhanced Equity Assurance Plan

If at the time of application the Owner has selected a death benefit
under the terms of the Enhanced Equity Assurance Plan, We will pay a death
benefit equal to the greatest of:

30
<PAGE>

1. the Contract Value ; or

2. the greatest Contract Value on any Contract Anniversary
plus any Premiums subsequent to the Contract Anniversary
reduced proportionally by any surrenders subsequent to
that Contract Anniversary in the same proportion that
the Contract Value was reduced on the date of a
surrender; or

3. an amount equal to (a) plus (b) where:

(1) 0% per annum if death occurs during the
first through 24th month from the date of
Premium payment;

(2) 2% per annum if death occurs during the
25th through 48th month from the date of
Premium payment;

(3) 4% per annum if death occurs during the
49th through 72nd month from the date of
Premium payment;

(4) 6% per annum if death occurs during the
73rd through 96th month from the date of
Premium payment;

(5) 8% per annum if death occurs during the
97th through 120th month from the date of
Premium payment;

(6) 10% per annum (for a maximum of 10 years)
if death occurs more than 120 months from the
date of Premium payment; and

(b) is equal to all Premiums paid after the first
Contract Anniversary following Your 85th birthday,
adjusted for surrenders as described below.

The Company deducts for each Valuation Period an Enhanced Equity
Assurance Plan Charge equal on an annual basis to .17% of the average daily
net asset value of the Variable Account for Owners attained age 0-59 and .30%
of the average daily net asset value of the Variable Account for Owners
attained age 60- 85.

Adjustment for surrenders. In the determination of the death benefit,
for each surrender a proportionate reduction will be made to each Premium paid
prior to the surrender. The proportion is determined by dividing the amount of
the Contract Value surrendered by the Contract Value immediately prior to each
surrender.

The Enhanced Equity Assurance Plan will be in effect if:

31
<PAGE>

1. the Owner elected it on the Application; and

2. the charge for this Rider is shown on the Contract Schedule.

The Enhanced Equity Assurance Plan will cease to be in effect upon
written receipt by the Company of the Owner's written request to discontinue
it or upon the allocation of Contract Value to either the Money Market
Subaccount or Guaranteed Account, unless such allocation is made as part of
Dollar Cost Averaging.

Accidental Death Benefit

The Owner may select the Accidental Death Benefit in addition to any of
the death benefit options. If at the time of application the Owner selected
the Accidental Death Benefit, the death benefit payable under this option will
be equal to the lesser of:

1. the Contract Value as of the date the death benefit is
determined; or

2. $250,000.

The Company deducts for each Valuation Period a daily charge for the
Accidental Death Benefit which is equal on an annual basis to .05% of the
average daily net asset value of the Variable Account.

The Accidental Death Benefit is payable if the death of the primary
Owner occurs prior to the Contract Anniversary next following his/her 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 Accident Death Benefit will not be paid for any death caused by or
resulting in whole or in part from the following:

1. suicide or attempted suicide while sane or insane;

2. intentionally self-inflicted injuries;

3. 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;

4. 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;

5. declared or undeclared war or any act thereof; or

6. service in the military, naval or air service of any
country.

The Accidental Death Benefit will be in effect if the Accidental Death
Benefit Charge is shown on the Contract Schedule.

32
<PAGE>

The Accidental Death Benefit will cease to be in effect upon receipt by
the Company of the Owner's request to discontinue it.

Payment to Beneficiary

Upon the death of the Owner prior to the Annuity Date, the Beneficiaries
may elect the death benefit to be paid as follows:

1. payment of the entire death benefit within 5 years of the date of
the Owner's death; or

2. payment over the lifetime of the designated beneficiary with
distribution beginning within 1 year of the date of death of the
Owner (see "Annuity Options" on page ____); or

3. if the designated beneficiary is Your spouse, he/she can continue
a Contract in his/her own name.

If no payment option is elected within sixty (60) days of Our receipt of
proof of the Owner's death, a single sum settlement will be made at the end of
the 60-day period following such receipt. Upon payment to the death benefit,
the Contracts will end.

After the Annuity Date

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 the Contracts. 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. If the Owner is not an individual, the Annuitant shall
be treated as the Owner and any change of such first named Annuitant, will be
treated as if the Owner died.

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 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 Value 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;

33
<PAGE>

(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

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 Contracts will terminate.

Withdrawals (including systematic withdrawals discussed below) may be
taxable and subject to a penalty tax. (See "Taxes" on page ____.)

Systematic Withdrawal

The systematic withdrawal program involves making regularly scheduled
withdrawals from Your Contract Value. 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 seven years. You may not elect this program if you have taken a
prior withdrawal during the same Contract Year.
(See "Withdrawals" above and "Deduction for Surrender Charge" on page ____.)

Systematic withdrawals will begin on the first scheduled withdrawal date
selected by You following the date We process Your request. Withdrawals will
be deducted proportionally based on Your value in each Subaccount and the
Guaranteed Account.

All parties to the Contracts are cautioned that the rights of any person
to implement the systematic withdrawal program under Contracts issued in
connection with IRAs or 403(b) Plans may be subject to the terms and
conditions of the retirement plan, regardless of the terms and conditions of
the Contracts. (See "Taxes" 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.

34
<PAGE>

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

Prior to the Annuity Date You may surrender the Contracts for the
surrender value by withdrawing the entire Contract Value. You must submit a
written request for surrender and return the Contracts to Us. The surrender
value 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
Contracts may not be surrendered after the Annuity Date. A surrender may be
taxable and subject to a tax penalty. (See "Taxes" on page ____.)

Surrender Value

The surrender value of the Contracts varies each day depending on the
investment results of the Subaccounts selected by the Owner. The surrender
value will be the Contract Value, 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
"Deferral of Payment" discussion below. (Also see "Delay of Payments" in the
Statement of Additional Information.)

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
certain distributions from 403(b) Plan Contracts. Additionally, the Code
provides that a 10% penalty tax may be imposed on certain early withdrawals
and surrenders. (See "Taxes -- Withholding" on page ____ and "Taxes --
Tax-Favored Plans" on page ____.)

Deferral of Payment

Payment of any withdrawal, surrender, or lump sum death proceeds from
the Variable Account will usually occur within seven (7) 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 Securities and
Exchange Commission or the Securities and Exchange Commission requires that
trading be restricted; (3) the Securities and Exchange Commission 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 fifteen (15)
days).

35
<PAGE>

We may defer payment of any withdrawal or surrender from the Guaranteed
Account for up to six (6) months from the date we receive Your written
request.

TAXES
Introduction

The Contracts are designed to accumulate Contract Value for retirement
plans which, except for IRAs and 403(b) Plans, are generally not tax-qualified
plans. The ultimate effect of Federal income taxes on the amounts held under
the Contracts, 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
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 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 the Contracts until some form of
withdrawal or distribution is made. However, under certain circumstances, the
increase in value may be subject to tax currently. (See "Contracts Owned by
Non-Natural Persons" on page and "Diversification Standards" on page ____.)

Withdrawals prior to the Annuity Date

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

36
<PAGE>

Withdrawals on or after the Annuity Date

Upon receipt of a lump sum payment on full surrender of the Contracts,
the recipient is taxed on the portion of the payment that exceeds the
investment in the Contracts. The taxable portion is taxed as ordinary income.

If the recipient receives annuity payments rather than a lump sum
payment, a portion of the payment is included in taxable income when received.
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 Contracts bears to the total
expected amount of annuity payments for the term of the Contracts. 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
Contracts by the total number of expected periodic payments. The remaining
portion of each payment is taxed as ordinary income.

The recipient is able to exclude a portion of the payments received from
taxable income until the investment in the Contracts is fully recovered.
Annuity payments are fully taxable after the investment in the Contracts is
recovered. If the recipient dies before the investment in the Contracts is
recovered, the recipient's estate is allowed a deduction for the remainder.

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
Contracts); (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 Contracts 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.

37
<PAGE>

Assignments

Any assignment or pledge of the Contracts 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 Contracts.

Generation Skipping Transfer Tax

A transfer of the Contracts or the designation of a beneficiary who is
either 37 1/2 years younger than the Owner or a grandchild of the Owner may
have Generation Skipping Transfer Tax consequences.

Distribution-at-Death Rules

In order to be treated as an annuity contract for Federal income tax
purposes, the Contracts 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 Contracts 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. The designated beneficiary is the person to whom ownership
of the Contracts passes by reason of death and must be a natural person. If
the beneficiary is the spouse of the Owner, the Contracts 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).

Contracts Owned by Non-Natural Persons

If the Contracts are held by a non-natural person (for example, a
corporation or trust), the Contracts are generally not treated as annuity
contracts for Federal income tax purposes, and the income on the Contracts
(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 Contracts
are acquired by the estate of a decedent, when the Contracts are held under
certain qualified plans, when the Contracts are a qualified funding asset for
structured settlements, when the Contracts are purchased on behalf of an
employee upon termination of a qualified plan, and in the case of an immediate
annuity.

38
<PAGE>

Section 1035 Exchanges

Code Section 1035 generally provides that no gain or loss shall be
recognized on the exchange of an annuity contract for another annuity
contract, unless money is distributed as part of the exchange. 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.

Withholding

The Company is required to withhold Federal income taxes on withdrawals,
lump sum distributions, and annuity payments that include taxable income
unless the payee elects to not have any withholding or in certain other
circumstances. Special withholding rules apply to payments made to
non-resident aliens.

Lump-Sum Distribution or Withdrawal

The Company is required to withhold 10% of the taxable portion of any
withdrawal or lump sum distribution unless You elect out of withholding.

Annuity Payments

The Company will withhold on the taxable portion of annuity payments
based on a withholding certificate You file with the Company. If you do not
file a certificate, You will be treated, for purposes of determining your
withholding rates, as a married person with three exemptions.

You are liable for payment of Federal income taxes on the taxable
portion of any withdrawal, distribution, or annuity payment. You may be
subject to penalties under the estimated tax rules if your withholding and
estimated tax payments are not sufficient.

39
<PAGE>

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 a 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 Contracts may need to be
modified to comply with such rules. For these reasons, the Company reserves
the right to modify the Contracts, as necessary, to prevent the Owner from
being considered the owner of the assets of the Variable Account.

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.

Tax-Favored 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 Contracts
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 Contracts as an
investment vehicle for his or her qualified plan.

While the Contracts will not be available in connection with retirement
plans designed by the Company which qualify for the federal tax advantages
available under Sections 401 and 457 of the Code, the Contracts can be used as
the investment medium for an individual Owner's separately qualified 401
retirement plan. Distributions from a 401 qualified plan or 403(b) 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,
403(b) Plan or an IRA. 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 tax if the recipient is under age 59 1/2 (unless
another exception applies under Code Section 72(t)). A prospective Owner
considering use of the Contracts in this manner should consult a competent tax
adviser with regard to the suitability of the Contracts for this purpose and
for information concerning the provisions of the Code applicable to qualified
plans, 403(b) Plans and IRAs.

40
<PAGE>

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. In addition, distributions from an IRA may be rolled
over to another IRA, provided certain conditions are met. 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. Contracts offered in connection with
an IRA 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, 403(b) Plans are subject to
additional requirements, including: eligibility, limits on contributions,
minimum distributions, and nondiscrimination requirements applicable to the
employer. Owners and their employers are responsible for compliance with these
rules. Contracts offered in connection with a 403(b) Plan by this Prospectus
are not available in all states.

LEGAL PROCEEDINGS

The Company knows of no legal proceeding pending to which the Variable
Account is a party or which would materially affect the Variable Account.

LEGAL MATTERS

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

41
<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................................................
Method of Determining Contract Value ..............................
Annuity Provisions.................................................
Variable Annuity Payment Values..................................
Annuity Unit.....................................................
Net Investment Factor............................................
Additional Provisions............................................
Financial Statements...............................................

42
<PAGE>

APPENDIX

Guaranteed Account Option

Under this Guaranteed Account option, Contract Value is 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 1940 Act. 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 Contracts. 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 Administrative
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 Administrative Office.

The Guaranteed Account may not be available in all states.

Allocations To The Guaranteed Account

The minimum amount that may be allocated to the Guaranteed Account,
either from the initial or a subsequent Premium, is $3,000. Amounts allocated
in the Guaranteed Account are credited with interest on a daily basis at the
then applicable effective guaranteed rate. The effective guaranteed 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 guaranteed rate associated with that amount. The
effective guaranteed 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 Value to or from a Subaccount of
the Variable Account to or from the Guaranteed Account at any time, subject to
the conditions set out under "Transfers" on page .

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-1
<PAGE>

Rule 497(e)
File No. 33-39171

STATEMENT OF ADDITIONAL INFORMATION

FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACTS

issued by

VARIABLE ACCOUNT I

and

AIG LIFE INSURANCE COMPANY

THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS. IT SHOULD
BE READ IN CONJUNCTION WITH THE PROSPECTUS DESCRIBING THE FLEXIBLE PREMIUM
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 MAY 1, 1997, AS
SUPPLEMENTED FEBRUARY 9, 1998, 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:
May 1, 1997, as supplemented February 9, 1998

<PAGE>

TABLE OF CONTENTS

Page
General Information..............................................
The Company...................................................
Independent Accountants.......................................
Legal Counsel.................................................
Distributor...................................................
Calculation of Performance Related Information................
Delay of Payments.............................................
Method of Determining Contract Value.............................
Annuity Provisions...............................................
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 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., a wholly owned subsidiary of American
International Group, Inc. and an affiliate of the Company, acts as the
distributor. Commissions are paid by the Variable Account directly to selling
dealers and representatives on behalf of the Distributor. Commissions retained
by the Distributor in 1996 were $20,363.

Calculation of Performance Related Information

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

The yield quotation for the Money Market Subaccount 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.

B-3

<PAGE>

Any effective yield quotation for the Money Market Subaccount 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

For purposes of the yield and effective yield computations, the
hypothetical charge reflects all deductions that are charged to all Owner
accounts in proportion to the length of the base period. For any fees that
vary with the size of the account, the account size is assumed to be the Money
Market Subaccount's mean account size. The yield and effective yield
quotations do not reflect the Surrender Charge that 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
Contracts and whether withdrawals had been previously made during that
Contract Year. (See "Charges and Deductions - Deduction for Surrender Charge"
in 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 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.

B-4

<PAGE>

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 also assume a
total withdrawal as of the end of the particular period. Subaccount
performance information has not been provided because for the fiscal year
ended December 31, 1996, no Contracts were issued.
<TABLE>
<CAPTION>
Funds were first invested in the portfolios on the following dates:
<S> <C>
Money Market Portfolio May 13, 1993
Growth Portfolio August 12, 1994
Growth & Income Portfolio April 16, 1992
International Portfolio June 1, 1993
U.S. Government/High Yield Securities Portfolio June 14, 1993
North American Government Income Portfolio April 8, 1994
Utility Income Portfolio June 15, 1994
Global Bond Portfolio May 10, 1993
Global Dollar Government Portfolio May 26, 1994
Premier Growth Portfolio December 7, 1992
Total Return Portfolio September 12, 1994
Worldwide Privatization Portfolio October 17, 1994
Technology Portfolio January 22, 1996
Quasar Portfolio August 15, 1996
Real Estate Investment Portfolio January 7, 1997
High Yield Portfolio September 9, 1997
</TABLE>
C. Yield Quotations for the U.S. Government/High Grade Securities and Global
Bond Subaccounts

The yield quotations for the U.S. Government/High Grade Securities and
Global Bond Subaccounts 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 + 1)6 - 1]
cd

Where: a = net investment income earned during the period by
the corresponding portfolio 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.

B-5

<PAGE>

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

For the purposes of the yield quotations for the U.S. Government/High
Grade Securities and the 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 premium was held under the Contracts, and whether withdrawals had
been previously made during that Contract Year. (See "Charges and Deductions -
Deduction for Surrender Charge" in the Prospectus.) There is currently a
transfer charge of $10 per transfer after a specified number of transfers in
each Contract Year. (See "Transfers" in the Prospectus).

D. Non-Standardized Performance Data

1. Total Return Quotations

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.

B-6

<PAGE>

2. Tax Deferred Accumulation

In reports or other communications to You or in advertising or sales
materials, the Company may also describe the effects of tax-deferred
compounding on the separate account's investment returns or upon returns in
general. These effects may be illustrated in charts or graphs and may include
comparisons at various points in time of returns under the Contracts or in
general on a tax-deferred basis with the returns on a taxable basis. Different
tax rates may be assumed.

In general, individuals who own annuity contracts are not taxed on
increases in the value under the annuity contract until some form of
distribution is made from the contract. Thus, the annuity contract will
benefit from tax deferral during the Accumulation Period, which generally will
have the effect of permitting an investment in an annuity contract to grow
more rapidly than a comparable investment under which increases in value are
taxed on a current basis. The chart shows accumulations on an initial
investment or Premium of a given amount, assuming hypothetical gross annual
returns compounded annually, and a stated assumed rate. The values shown for
the taxable investment do not include any deduction for management fees or
other expenses but assume that taxes are deducted annually from investment
returns. The values shown for the variable annuity in a chart reflect the
deduction of contractual expenses such as the 1.25% Mortality and Expense Risk
Charge, the 0.15% Administrative Fee, and the $30 Contract Maintenance Charge,
but not the expenses of an underlying investment vehicle. In addition, these
values assume that the Owner does not surrender the Contract or make any
withdrawals until the end of the period shown. The chart assumes a full
withdrawal, at the end of the period shown, of all Contract Value and the
payment of taxes at the 31% rate on the amount in excess of the Premium.

In developing tax-deferral charts, the Company will follow general
principles: (1) the assumed rate of earnings will be realistic; (2) the chart
will (a) depict accurately the effect of all fees and charges, or (b) provide
a narrative that prominently discloses all fees and charges; (3) comparative
charts for accumulation values for tax-deferred and non-tax-deferred
investments will depict the implications of withdrawals and surrenders; and
(4) a narrative accompanying the chart will disclose prominently that there
may be a 10% tax penalty on withdrawals by Owners who have not reached age 59
1/2.

The rates of return illustrated in a chart will be hypothetical and are
not an estimate or guaranty of performance. Actual tax rates may vary for
different taxpayers from that illustrated and, as noted above, withdrawals by
Owners who have not reached age 59 1/2 may be subject to a tax penalty of 10%.

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;

B-7

<PAGE>

(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 VALUE

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 Value, 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.

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

B-8

<PAGE>

ANNUITY PROVISIONS

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 Contracts. 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 Contract Value 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 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%.

B-9

<PAGE>

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 Contracts. 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 in full 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.

B-10

<PAGE>

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
settlement contract for the payment option.

You may assign a 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 are incorporated by reference
herein and shall be considered only as bearing upon the ability of the Company
to meet its obligations under the Contracts. No financial statements for the
Variable Account have been provided as no Contracts had been issued during the
reporting period.

B-11

<PAGE>

Rule 497(e)
File No. 33-39171

INDIVIDUAL AND GROUP 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 describes an individual flexible premium deferred
variable annuity contract (the "Individual Contract") and a group flexible
premium deferred variable annuity contract (the "Group Contract")
(collectively, the "Contracts") offered by AIG Life Insurance Company (the
"Company"). The Contracts provide for the accumulation of Contract Value and
payment of monthly annuity payments for individuals. Under the Group Contract,
these individuals are within groups under sponsored arrangements, which may
include, for example, those instances where an employer, a financial
institution, an association, or group otherwise permitted by state insurance
law, allows the Company to sell contracts to its employees, depositors, or
members. An Owner may be issued a certificate as evidence of individual
participation under a group arrangement. The description of the Contract in
this Prospectus is fully applicable to any certificate that may be issued
under the Group Contract. As used herein the words "Contract" and "Contracts"
include any such certificate.

Premiums for the Contracts will be allocated to Variable Account I (the
"Variable Account"), a segregated investment account of the Company. Premiums
allocated among the subaccounts of the Variable Account (the "Subaccounts")
will be invested in shares of corresponding portfolios of Alliance Variable
Products Series Fund, Inc. (the "Alliance Fund") and Merrill Lynch Variable
Series Funds, Inc. (the "Merrill Lynch Fund") (collectively, the "Funds"). The
following portfolios of the Alliance Fund are available: Growth Portfolio;
Growth and Income Portfolio; U.S. Government/High Grade Securities Portfolio;
Global Dollar Government Portfolio; Premier Growth Portfolio; Total Return
Portfolio; Worldwide Privatization Portfolio; Technology Portfolio; Quasar
Portfolio; Real Estate Investment Portfolio; and High Yield Portfolio. The
following portfolios of the Merrill Lynch Fund are available: Domestic Money
Market Fund; Prime Bond Fund; High Current Income Fund; Quality Equity Fund;
Special Value Focus Fund; Natural Resources Focus Fund; Global Strategy Focus
Fund; Basic Value Focus

<PAGE>

Fund; Global Utility Focus Fund; International Equity Focus Fund; and
Developing Capital Markets Focus Fund. (See "The Funds" 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 calling the service office at 1-800-255-8402. The Statement
of Additional Information dated May 1, 1997, as supplemented February 9, 1998,
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: May 1, 1997, as supplemented February 9, 1998

Distributor:
AIG Equity Sales Corp.
Attention: Variable Products
80 Pine Street
New York, New York 10270
1-800-888-7485

<PAGE>

TABLE OF CONTENTS
Page

Definitions.........................................................
Highlights..........................................................
Fee Table...........................................................
Summary of Expenses ................................................
Condensed Financial Information ....................................
The Company ........................................................
The Variable Account ...............................................
The Funds...........................................................
The Contracts ......................................................
Charges and Deductions .............................................
Annuity Benefits ...................................................
Death Benefit ......................................................
Distributions under the Contracts ..................................
Taxes ..............................................................
Legal Proceedings...................................................
Legal Matters.......................................................
Table of Contents of the Statement of Additional Information........
Appendix ...........................................................

<PAGE>

DEFINITIONS

Accumulation Period -- The period prior to the Annuity Date.

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
the Contracts.

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 Contracts.

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

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.

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

Premium -- A purchase payment for the Contracts is referred to as a 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 -- The sales charge that may be applied against amounts
withdrawn prior to the Annuity Date if withdrawal is within 7 years of
purchase.

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 a Contract.

<PAGE>

HIGHLIGHTS

This Prospectus describes the Contracts and a segregated investment
account of the Company which account has been designated Variable Account I.
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.
The Contracts may be purchased in connection with a retirement plan which may
qualify as a 403 (b) Plan or as an IRA. The Contracts 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 ____.)

Contracts are purchased with a minimum initial Premium of $2,000.
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 a 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 Funds
and will accumulate on a variable basis. Each Subaccount invests exclusively
in one of the available portfolios. (See "The Funds" 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 Variable Account.

The Company does not deduct sales charges from any Premium received.
However, the Contracts provide for a Surrender Charge that may be assessed in
the event that an Owner surrenders all or a portion of the Contract Value
within seven Contract Years following payment of any Premium. The maximum
Surrender Charge is 6% of Premium to which the charge is applicable. (See
"Summary of Expenses" on page ___ and "Charges and Deductions -- Deduction for
Surrender Charge" on 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 (the "Free Withdrawal Amount"). (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 is no Mortality and Expense Risk Charge deducted for
amounts in the Guaranteed Account. (See "Charges and Deductions -- Deduction
for Mortality and Expense Risk Charge" on page ___.)

The Company deducts daily an Administrative Charge which is equal on an
annual basis to 0.15% of the average daily net asset value of the Variable
Account. The Administrative Charge is not assessed to the Guaranteed Account.
In addition, the Company deducts from the Contract Value an annual Contract
Maintenance Charge which is $30 per year. The Contract Maintenance Charge is
waived if the Contract Value is greater than $50,000 on the date of the
charge. (See "Charges and Deductions -- Deduction for Administrative Charge;
Deduction for Contract Maintenance Charge" on page ___.)

<PAGE>

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

The Owner may return a Contract within ten (10) days (the "Right to
Examine 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 Period, an
amount equal to the Premium paid less any withdrawals, the Company will refund
such an amount.
<TABLE>
<CAPTION>
FEE TABLE
<S> <C>
Owner Transaction Expenses

Sales Load Imposed on Purchases None

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

Annual Contract Fee (waived for Owners with Contract Values of $50,000 or greater) $30

Variable Account Expenses (as a percentage of average account value):
Mortality and Expense Risk Fees 1.25%
Account Fees and Expenses 0.15%

Total Variable Account Annual Expenses 1.40%

</TABLE>
6

<PAGE>

SUMMARY OF EXPENSES

Annual Fund Expenses After Expense Reimbursements
Total
Management Other Operating
Alliance Fund1 Fee Expenses Expenses
<S> <C> <C> <C>

Growth ..................................................... 0.74% 0.19% 0.93%
Growth and Income .......................................... 0.63 0.19 0.82
U.S. Government/High Grade Securities....................... 0.54 0.38 0.92
Global Dollar Government.................................... 0.00 0.95 0.95
Premier Growth.............................................. 0.72 0.23 0.95
Total Return................................................ 0.46 0.49 0.95
Worldwide Privatization..................................... 0.10 0.85 0.95
Technology2................................................. 0.33 0.62 0.95
Quasar2..................................................... 0.00 0.95 0.95
Real Estate Investment3..................................... 0.00 0.95 0.95
High Yield4................................................. 0.00 0.95 0.95

Merrill Lynch Fund5

Domestic Money Market....................................... 0.50 0.04 0.54
Prime Bond.................................................. 0.44 0.05 0.49
High Current Income......................................... 0.49 0.05 0.54
Quality Equity.............................................. 0.44 0.05 0.49
Special Value Focus......................................... 0.75 0.06 0.81
Natural Resources Focus..................................... 0.65 0.13 0.78
Global Strategy Focus....................................... 0.65 0.06 0.71
Basic Value Focus........................................... 0.60 0.06 0.66
Global Utility Focus........................................ 0.60 0.06 0.66
International Equity Focus.................................. 0.75 0.14 0.89
Developing Capital Markets Focus6........................... 1.00 0.25 1.25
</TABLE>
-----------------------

1 Annual operating expenses as a percentage of the average daily net assets
of each portfolio of the Alliance Fund before reimbursement by the Fund's
investment adviser were estimated to be .93% for Growth Portfolio, .82% for
Growth and Income Portfolio, .98% for U.S. Government/High Grade Securities
Portfolio, 1.97% for Global Dollar Government Portfolio, 1.23% for Premier
Growth Portfolio, 1.12% for Total Return Portfolio, 1.85% for Worldwide
Privatization Portfolio, 1.62% for Technology Portfolio, 4.44% for Quasar
Portfolio, 6.00% for Real Estate Investment Portfolio, and 1.75% for High
Yield Portfolio.

2 The expense percentages for the Technology Portfolio and Quasar Portfolio
have been annualized because as of December 31, 1996, the portfolios had
not been in existence for a full year.

3 Computed for the period January 1, 1997 (inception), through March 31,
1997, annualized.

4 Estimated.

5 With the exception of the Developing Capital Markets Focus Fund, the
expenses of the portfolios of the Merrill Lynch Fund are actual operating
expenses without expense reimbursement.

6 Pursuant to a voluntary agreement, fees and expenses were reimbursed to the
extent expenses exceeded 1.25%. Without such reimbursements, total
operating expenses for Developing Capital Markets Focus Fund would have
been 1.31%.

<PAGE>

The purpose of the table set forth above is to assist the Owner 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 Funds. (See "Charges and Deductions" on page ____ and each Fund's
Prospectus.) The table does not reflect the charges applicable to certain
death benefit options offered under the Contracts. (See "Charges and
Deductions -- Deduction for Equity Assurance Plan" on page ___; "Charges and
Deductions -- Deduction for Annual Ratchet Plan" on page ___; "Charges and
Deductions -- Deduction for Enhanced Equity Assurance Plan" on page ___;
"Charges and Deductions -- Deduction for Accidental Death Benefit" on page
___.)

In the event that an Owner withdraws all or a portion of the Contract
Value in excess of the Free Withdrawal Amount for the first withdrawal in a
Contract Year, or makes subsequent withdrawals in a Contract Year, a Surrender
Charge may be imposed. The Free Withdrawal Amount is equal to 10% of the
Premium paid, less any prior withdrawals at the time of withdrawal. (See
"Charges and Deductions --Deduction for Surrender Charge" on page ___.)

Example

Expenses on a hypothetical $1,000 Contract, assuming 5% growth:
<TABLE>
<CAPTION>
If you surrender
Alliance Fund 1 Year 3 Years 5 Years 10 Years
------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>

Growth .......................................... $78 $120 $164 $273
Growth and Income ............................... 77 116 158 262
U.S. Government/High Grade Securities ........... 78 119 163 272
Global Dollar Government ........................ 78 120 165 275
Premier Growth .................................. 78 120 165 275
Total Return .................................... 78 120 165 275
Worldwide Privatization ......................... 78 120 165 275
Technology ...................................... 78 120 165 275
Quasar .......................................... 78 120 165 275
Real Estate Investment .......................... 78 120 165 275
High Yield ...................................... 78 120 165 275

<PAGE>

Merrill Lynch Fund

Domestic Money Market............................ 74 108 144 233
Prime Bond....................................... 74 106 141 227
High Current Income.............................. 74 108 144 233
Quality Equity................................... 74 106 141 227
Special Value Focus.............................. 77 116 158 261
Natural Resources Focus.......................... 77 115 156 257
Global Strategy Focus............................ 76 113 152 250
Basic Value Focus................................ 76 111 150 245
Global Utility Focus............................. 76 111 150 245
International Equity Focus....................... 78 118 162 269
Developing Capital Markets Focus................. 81 129 179 304
</TABLE>

If you annuitize or if you do not surrender
Alliance Fund 1 Year 3 Years 5 Years 10 Years
------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Growth .......................................... $24 $75 $128 $273
Growth and Income ............................... 23 71 122 262
U.S. Government/High Grade Securities ........... 24 74 127 272
Global Dollar Government ........................ 24 75 129 275
Premier Growth .................................. 24 75 129 275
Total Return .................................... 24 75 129 275
Worldwide Privatization ......................... 24 75 129 275
Technology ...................................... 24 75 129 275
Quasar .......................................... 24 75 129 275
Real Estate Investment .......................... 24 75 129 275
High Yield....................................... 24 75 129 275

Merrill Lynch Fund

Domestic Money Market............................ 20 63 108 233
Prime Bond....................................... 20 61 105 227
High Current Income.............................. 20 63 108 233
Quality Equity................................... 20 61 105 227
Special Value Focus.............................. 23 71 122 261
Natural Resources Focus.......................... 23 70 120 257
Global Strategy Focus............................ 22 68 116 250
Basic Value Focus................................ 22 66 114 245
Global Utility Focus............................. 22 60 114 245
International Equity Focus....................... 24 73 126 269
Developing Capital Markets Focus................. 27 84 143 304
</TABLE>
The Example should not be considered a representation of past or future
expenses and actual expenses may be greater or less than those shown.

<PAGE>

CONDENSED FINANCIAL INFORMATION
ACCUMULATION UNIT VALUES

1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
GROWTH
Accumulation Unit Value
Beginning of Period ............... 13.99 10.48 11.13 10.00 10.00
End of Period...................... 17.73 13.99 10.48 11.13 10.00
Accum Units o/s @ end of period...... 1,541,465.58 777,108.88 56,104.84 35,271.53 2,081.43

GROWTH AND INCOME
Accumulation Unit Value
Beginning of Period................ 15.52 11.57 11.76 10.66 10.00
End of Period...................... 18.99 15.52 11.57 11.76 10.66
Accum Units o/s @ end of period...... 1,324,216.31 502,667.80 179,245.69 37,573.04 7,731.36

U.S. GOVERNMENT/HIGH GRADE SECURITIES
Accumulation Unit Value
Beginning of Period ............... 11.38 .66 10.17 10.00 N/A
End of Period...................... 11.50 11.38 9.66 10.17 N/A
Accum Units o/s @ end of period ..... 552,183.99 390,483.21 75,881.31 7,608.84 N/A

GLOBAL DOLLAR GOVERNMENT
Accumulation Unit Value
Beginning of Period ............... 11.81 9.73 10.00 N/A N/A
End of Period ..................... 14.55 11.81 9.73 N/A N/A
Accum Units o/s @ end of period ..... 76,451.58 16,171.63 5,958.18 N/A N/A

PREMIER GROWTH
Accumulation Unit Value
Beginning of Period ............... 15.25 10.66 10.00 N/A N/A
End of Period ..................... 18.45 15.25 10.66 N/A N/A
Accum Units o/s @ end of period ..... 1,026,432.81 420,662.68 108,111.20 N/A N/A

TOTAL RETURN
Accumulation Unit Value
Beginning of Period ............... 11.90 9.75 10.00 N/A N/A
End of Period ..................... 13.52 11.90 9.75 N/A N/A
Accum Units o/s @ end of period ..... 455,709.19 121,094.82 4,871.12 N/A N/A

WORLDWIDE PRIVATIZATION
Accumulation Unit Value
Beginning of Period ............... 11.01 10.05 10.00 N/A N/A
End of Period ..................... 12.86 11.01 10.05 N/A N/A
Accum Units o/s @ end of period...... 224,339.58 62,769.30 6,357.69 N/A N/A

TECHNOLOGY
Accumulation Unit Value
Beginning of Period ............... 10.00 N/A N/A N/A N/A
End of Period ..................... 10.90 N/A N/A N/A N/A
Accum Units o/s @ end of period..... 431,529.41 N/A N/A N/A N/A

QUASAR
Accumulation Unit Value

<PAGE>

Beginning of Period ............... 10.00 N/A N/A N/A N/A
End of Period ..................... 10.58 N/A N/A N/A N/A
Accum Units o/s @ end of period ..... 179,808.73 N/A N/A N/A N/A
</TABLE>

No financial information has been reported for the High Yield Portfolio
and Real Estate Investment Portfolio of the Alliance Fund or for any of the
portfolios of the Merrill Lynch Fund because for the fiscal year ended
December 31, 1996, the Variable Account had not commenced operations with
respect to those portfolios.

Funds were first invested in the portfolios on the following dates:
<TABLE>
<CAPTION>
<S> <C>
Growth Portfolio August 12, 1994
Growth and Income Portfolio April 16, 1992
U.S. Government/High Grade Securities Portfolio June 14, 1993
Global Dollar Government Portfolio May 26 , 1994
Premier Growth Portfolio December 7, 1992
Total Return Portfolio September 12, 1994
Worldwide Privatization Portfolio October 17, 1994
Technology Portfolio January 22, 1996
Quasar Portfolio August 15, 1996
Real Estate Investment Portfolio January 7, 1997
High Yield Portfolio September 9, 1997
</TABLE>
No dates have been provided with respect to the portfolios of the
Merrill Lynch Fund because as of the date of this Prospectus no funds had been
invested therein.

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.

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.

<PAGE>

When the Company advertises the performance of the Domestic Money
Market Subaccount, it may advertise in addition to the total return either the
yield or the effective yield. The yield of the Domestic 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 Domestic 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 Contracts; 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

THE COMPANY

The Company is a stock life insurance company which was organized under
the laws of the State of Delaware in 1962. The Company provides a full range
of individual and group life, disability, and accidental death and
dismemberment insurance policies and annuities. 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 approximately 130 countries and
jurisdictions around the world.

<PAGE>

Ratings

The Company may from time-to-time publish in advertisements, sales
literature and reports to Owners, the ratings and other information assigned
to it by one or more independent rating organizations such as A.M. Best
Company, Moody's, and Standard & Poor's. The purpose of the ratings is to
reflect the financial strength and/or claims-paying ability of the Company and
should not be considered as bearing on the investment performance of assets
held in the separate account. Each year the A.M. Best Company reviews the
financial status of thousands of insurers, culminating in the assignment of
Best's Ratings. These ratings reflect A.M. Best's current opinion of the
relative financial strength and operating performance of an insurance company
in comparison to the norms of the life/health insurance industry. In addition,
the claims-paying ability of the Company as measured by Standard & Poor's
Insurance Ratings Services, and the financial strength of the Company as
measured by Moody's Investors Services, may be referred to in advertisements,
sales literature or in reports to Owners. These ratings are their opinion of
an operating insurance company's financial capacity to meet the obligations of
its life insurance policies and annuity contracts in accordance with their
terms. In regard to their ratings of the Company, these ratings are explicitly
based on the existence of a Support Agreement, dated as of December 31, 1991,
between the Company and AIG, pursuant to which AIG has agreed to cause the
Company to maintain a positive net worth and to provide the Company with funds
on a timely basis sufficient to meet the Company's obligations to its
policyholders. The Support Agreement is not, however, a direct or indirect
guarantee by AIG to any person of the payment of any of the Company's
indebtedness, liabilities or other obligations (including obligations to the
Owners).

THE VARIABLE ACCOUNT

The Company owns the assets in the Variable Account and obligations
under the Contracts 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
and subaccounts. The assets of the Variable Account, equal to the reserves and
other contract liabilities with respect to the Variable Account and
Subaccount, 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 and each Subaccount
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 and subaccount
maintained by the Company.

<PAGE>

The Variable Account is divided into Subaccounts, with the assets of
each Subaccount invested in shares of one portfolio of the Funds. The Company
may, from time to time, add additional portfolios of the Funds, and, when
appropriate, additional mutual funds to act as funding vehicles for the
Contracts. If deemed to be in the best interests of persons having voting
rights under the Contracts, the Variable Account may be operated as a
management company under the Investment Company Act of 1940 (the "1940 Act"),
may be deregistered under the 1940 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
the Variable Account and are described in other prospectuses.

THE FUNDS

The Alliance Fund and Merrill Lynch Fund are each registered with the
Securities and Exchange Commission as a diversified open-end management
investment company under the 1940 Act. Each is made up of different series or
portfolios and the Prospectus for each Fund may include series or portfolios
which are not available under this Contract. A summary of investment
objectives for each available portfolio is set forth below. More detailed
information regarding investment objectives, management of the portfolios, and
investment advisory fees and other charges may be found in the relevant Fund
Prospectus, which contains a discussion of the risks involved in investing in
the Fund. The Prospectus for each Fund is included with this Prospectus.
Please read all Prospectuses carefully before investing.

Shares of the Funds may be sold only to separate accounts of life
insurance companies. The shares of the Funds will be sold to separate accounts
of the Company and its affiliates, 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 Funds
simultaneously. Although neither the Company nor the Funds currently foresees
any such disadvantages, either to variable life insurance policyowners or to
variable annuity owners, each 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.

Alliance Variable Products Series Fund, Inc.

The Alliance Fund will act as a funding vehicle for the Contract. The
Alliance Fund is managed by Alliance Capital Management L.P. ("Alliance
Capital"). Alliance Capital is a leading international investment manager
supervising client accounts with assets totaling more than $182 billion, of
which approximately $63 billion represents the assets of investment companies.
Its principal business address is 1345 Avenue of the Americas, New York, New
York 10105.

The portfolios available under the Alliance Fund and their investment
objectives are as follows:

<PAGE>

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.

U.S. Government/High Grade Securities Portfolio

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.

Premier Growth Portfolio

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.

<PAGE>

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 Alliance Capital
to be beneficiaries of the privatization process.

Technology Portfolio

Quasar Portfolio

This portfolio seeks growth of capital by pursuing aggressive
investment policies. The portfolio invests principally in a diversified
portfolio of equity securities of any company and industry and in any type of
security which is believed to offer possibilities for capital appreciation.

Real Estate Investment Portfolio

This portfolio seeks a total return on its assets from long-term growth
of capital and from income principally through investing in a portfolio of
equity securities of issuers that are primarily engaged in or related to the
real estate industry.

High Yield Portfolio

This portfolio seeks the highest level of current income available
without assuming undue risk by investing principally in high-yielding fixed
income securities. As a secondary objective, this portfolio seeks capital
appreciation where consistent with its primary objective. Many of the
high-yielding securities in which the High Yield Portfolio invests are rated
in the lower rating categories (i.e., below investment grade) by nationally
recognized rating services. These securities, which are often referred to as
"junk bonds," are subject to greater risk of loss of principal and interest
than higher rated securities and are considered to be predominately
speculative with respect to the issuer's capacity to pay interest and repay
principal.

Merrill Lynch Variable Series Funds, Inc.

The Merrill Lynch Fund will act as a funding vehicle for the Contract.
Merrill Lynch Asset Management, L.P. ("MLAM"), an indirect subsidiary of
Merrill Lynch & Co., Inc., is the investment adviser to the Merrill Lynch
Fund. MLAM is a worldwide mutual fund leader with more than $145.7 billion in
assets under management. Its principal business address is 800 Scudder Mill
Road, Plainsboro, New Jersey 08536.

The portfolios available under the Merrill Lynch Fund and their
investment objectives are as follows:

<PAGE>

Domestic Money Market Fund

This portfolio seeks preservation of capital, liquidity, and the
highest possible current income consistent with the foregoing objectives by
investing in short-term domestic money market securities.

Prime Bond Fund

This portfolio seeks to obtain as high a level of current income as is
consistent with the investment policies of the portfolio and with prudent
investment management, and capital appreciation to the extent consistent with
the foregoing objective. The portfolio invests primarily in long-term
corporate bonds rated in the top three ratings categories by established
rating services.

High Current Income Fund

This portfolio seeks to obtain as high a level of current income as is
consistent with the investment policies of the portfolio and with prudent
investment management, and capital appreciation to the extent consistent with
the foregoing objective. The portfolio invests principally in fixed-income
securities that are rated in the lower categories of established rating
services or in unrated securities of comparable quality (commonly known as
"junk bonds").

Quality Equity Fund

This portfolio seeks to attain the highest total investment return
consistent with prudent risk. The portfolio employs a fully managed investment
policy utilizing equity securities, primarily common stocks of large
capitalization companies, as well as investment grade debt and convertible
securities.

Special Value Focus Fund

This portfolio seeks to attain long-term growth of capital by investing
in a diversified portfolio of securities, primarily common stocks, of
relatively small companies that MLAM believes have special investment value,
and of emerging growth companies regardless of size.

Natural Resources Focus Fund

This portfolio seeks to attain long-term growth of capital and
protection of the purchasing power of capital by investing primarily in equity
securities of domestic and foreign companies with substantial natural
resources assets.

Global Strategy Focus Fund

This portfolio seeks high total investment return by investing
primarily in a portfolio of equity and fixed income securities, including
securities, of U.S. and foreign issuers. The portfolio seeks to achieve its
objective by investing primarily in securities of issuers located in the
United States, Canada, Western Europe, the Far East and Latin America.

<PAGE>

Basic Value Focus Fund

This portfolio seeks to attain capital appreciation, and secondarily,
income by investing in securities, primarily equities, that management of the
portfolio believes are undervalued and therefore represent basic investment
value. Particular emphasis is placed on securities which provide and
above-average dividend return and sell at a below-average price/earnings
ratio.

Global Utility Focus Fund

This portfolio seeks to obtain capital appreciation and current income
through investment of at least 65% of its total assets in equity and debt
securities issued by domestic and foreign companies which are, in the opinion
of management of the portfolio, primarily engaged in the ownership or
operation of facilities used to generate, transmit or distribute electricity,
telecommunications, gas or water.

International Equity Focus Fund

This portfolio seeks to obtain capital appreciation and, secondary
income by investing in a diversified portfolio of equity securities, of
issuers located in countries other than the United States. Under normal
conditions, at least 65% of the portfolio's net assets will be invested in
such equity securities.

Developing Capital Markets Focus Fund

This portfolio seeks long-term capital appreciation by investing in
securities, principally equities, of issuers in countries having smaller
capital markets. For purposes of its investment objective, the portfolio
considers countries having smaller capital markets to be all countries other
than the four countries having the largest equity market capitalizations.

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 each of the Subaccounts
of the Variable Account will be invested in shares of a corresponding
portfolio of a Fund. The Funds do not hold regular meetings of shareholders.
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 persons 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.

<PAGE>

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 Funds, 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.

Substitution of Shares

If the shares of a Fund (or any portfolio within a 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 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 CONTRACTS

The Contracts described in this Prospectus are flexible premium
deferred variable annuity contracts.

Parties to the Contracts

Owner

As the purchaser of a 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

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.

<PAGE>

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 Contracts may be subject to unintended and adverse tax
consequences. For possible tax considerations of these changes, see "Taxes" on
page ___.

How to Purchase a Contract

If We have not received sufficient information to issue a Contract
within five days of the receipt of the initial Premium, 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 may 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. ("AIGESC"), 80 Pine Street, New York, New York,
acts as the distributor of the Contracts. AIGESC is a wholly-owned subsidiary of
AIG and an affiliate of the Company. Commissions not to exceed 6.5% of Premiums
will be paid to entities which sell the Contracts. Additional payments may be
made for other services not directly related to the sale of the Contracts,
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 AIGESC, 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.

<PAGE>

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

All Premium to IRA or 403(b) Plan 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 Contracts to Your situation. (See "Taxes" on page ____.)

Right to Examine Period

The Contracts provide a 10-day period giving You the opportunity to
cancel a Contract (the "Right to Examine Period"). You must return the Contract
with written notice to Us. If We receive the Contract and Your written notice
within ten (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 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.

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

<PAGE>

Unit Value and Contract Value

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.

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 twelve (12) per
Contract Year. There are no fees for the first twelve (12) transfers in any one
Contract Year. For each transfer in excess of twelve (12) within one Contract
Year, We impose a transfer fee of $10. The transfer fee, if any, is deducted
from the amount transferred. (See "Guaranteed Account Transfers" in the
Appendix, page ____.)

Transfers may be made by written request or by telephone as described
in the Contracts 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.

<PAGE>

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"
below.) For additional limitations regarding transfers out of the Guaranteed
Account, see "Guaranteed Account Transfers" 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 Contracts by
authorizing the Company to make periodic allocations of Contract Value from
either the Domestic Money Market Subaccount or the Guaranteed Account to one or
more of the other Subaccounts ("Dollar Cost Averaging"). 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 twelve (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.

To elect Dollar Cost Averaging, the Contract Value must be at least
$12,000 and a request in proper form must be received by the Company. A Dollar
Cost Averaging request form is available from the Administrative Office. 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 both Dollar Cost Averaging and Asset Rebalancing.

Asset Rebalancing

The Company currently offers an option under which Owners may authorize
the Company to automatically exchange Contract Value periodically to maintain a
particular percentage allocation among the Subaccounts as selected by the Owner
("Asset Rebalancing"). The Contract Value allocated to each Subaccount will grow
or decline in value at different rates during the selected period, and Asset
Rebalancing automatically reallocates the Contract Value in the Subaccounts to
the allocation selected by the Owner.

To elect Asset Rebalancing, the Contract Value must be at least $12,000
and a request in proper form must be received by the Company. An Asset
Rebalancing request form is available from the Administrative Office. If Asset
Rebalancing is elected, all Contract Value allocated to the Subaccounts must be
included in the election. An Owner may not have in effect at the same time both
Dollar Cost Averaging and Asset Rebalancing.

<PAGE>

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

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.

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 Equity Assurance Plan

If the Owner has elected the Equity Assurance Plan, the Company deducts
for each Valuation Period an Equity Assurance Plan Charge equal on an annual
basis to .07% of the average daily net asset value of the Variable Account for
Owners attained age 0-59 and .20% of the average daily net asset value of the
Variable Account for Owners attained age 60-85.

<PAGE>

Deduction for Annual Ratchet Plan

If the Owner has elected the Annual Ratchet Plan, the Company deducts
for each Valuation Period an Annual Ratchet Plan Charge equal on an annual basis
to .10% of the average daily net asset value of the Variable Account.

Deduction for Enhanced Equity Assurance Plan

If the Owner has elected the Enhanced Equity Assurance Plan, the
Company deducts for each Valuation Period an Enhanced Equity Assurance Plan
Charge equal on an annual basis to .17% of the average daily net asset value of
the Variable Account for Owners attained age 0-59 and .30% of the average daily
net asset value of the Variable Account for Owners attained age 60-85.

Deduction for Accidental Death Benefit

If the Owner has elected the Accident Death Benefit, the Company
deducts for each Valuation Period an Accidental Death Benefit Charge equal on an
annual basis to .05% of the average daily net asset value of the Variable
Account.

Deduction for Surrender Charge

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 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 seven (7) 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
will be subject to the following charges:
<TABLE>
<CAPTION>
<S> <C>
Premium Year Applicable Surrender Charge

1.............................................................6%
2 ............................................................6%
3 ............................................................5%
4 ............................................................5%
5 ............................................................4%
6 ............................................................3%
7 ............................................................2%
8 and thereafter............................................None
</TABLE>

The Surrender Charge is a deferred sales charge 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.

<PAGE>

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

Deduction for Administrative Charge

Deduction for Contract Maintenance Charge

Deduction for Income Taxes

Other Expenses

There are deductions from and expenses paid out of the assets of each of
the Funds which are described in the accompanying Prospectuses for the Funds.

Group and Sponsored Arrangements

<PAGE>

ANNUITY BENEFITS

Annuitization

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.

Annuity Options

The Annuity Options are:

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

<PAGE>

The Company may also offer additional options at its own discretion.

Annuity Payments

DEATH BENEFIT

Prior to the Annuity Date

Traditional Death Benefit

Under the Traditional Death Benefit, We will pay a death benefit equal
to the greatest of:

1. the total of all Premium, reduced proportionately by withdrawals
and surrenders;

2. the Contract Value; or

<PAGE>

3. the greatest of the Contract Value at the seventh Contract
Anniversary reduced proportionally by any surrenders subsequent
to that Contract Anniversary in the same proportion that the
Contract Value was reduced on the date of a surrender, plus any
Premium paid subsequent to that Contract Anniversary.

The Traditional Death Benefit will be in effect if no optional death
benefit has been selected by the Owner.

Option I - Equity Assurance Plan

If at the time of application the Owner has selected a death benefit
under the terms of the Equity Assurance Plan, We will pay a death benefit
equal to the greatest of:

1. the Contract Value;

2. the greatest Contract Value on any seventh Contract Anniversary
plus any Premiums subsequent to the Contract Anniversary reduced
proportionally by any surrenders subsequent to that Contract
Anniversary in the same proportion that the Contract Value was
reduced on the date of a surrender; or

3. an amount equal to (a) plus (b) where:

(1) 0% per annum if death occurs during the 1st
through 24th month from the date of Premium
payment;

(2) 2% per annum if death occurs during the
25th through 48th month from the date of
Premium payment;

(3) 4% per annum if death occurs during the
49th through 72nd month from the date of
Premium payment;

(4) 6% per annum if death occurs during the
73rd through 96th month from the date of
Premium payment;

(5) 8% per annum if death occurs during the
97th through 120th month from the date of
Premium payment;

(6) 10% per annum (for a maximum of 10 years)
if death occurs more than 120 months from the
date of Premium payment; and

(b) is equal to all Premiums paid after the first
Contract Anniversary following Your 85th birthday,
adjusted for surrenders as described below.

<PAGE>

The Equity Assurance Plan will be in effect if:

1. the Owner elected it on the Application; and

2. the charge for the Equity Assurance Plan is shown on the
Contract Schedule.

The Equity Assurance Plan will cease to be in effect upon receipt by the
Company of the Owner's written request to discontinue it or upon the
allocation of Contract Value to either the Domestic Money Market Subaccount or
Guaranteed Account, unless such allocation is made as part of Dollar Cost
Averaging.

Option II - Annual Ratchet Plan

If at any time of application, the Owner has selected a death benefit
under the terms of the Annual Ratchet Plan, We will pay a death benefit equal
to the greatest of:

1. the total of all Premiums paid, less surrenders;

2. the Contract Value; or

3. the greatest Contract Value at any Contract Anniversary
reduced proportionally by any surrenders subsequent to that
Contract Anniversary in the same proportion that the
Contract Value was reduced on the date of a surrender, plus
any Premium paid subsequent to that Contract Anniversary.

The Company deducts for each Valuation Period a daily charge for the
Annual Ratchet Plan which is equal on an annual basis to .10% of the average
daily net asset value of the Variable Account.

The Annual Ratchet Plan will be in effect if:

1. the Owner designates this option on the Application; and

2. the Annual Ratchet Plan charge is shown on the Contract
Schedule.

The Annual Ratchet Plan will cease to be in effect upon receipt by the
Company of the Owner's written request to discontinue it.

Option III - Enhanced Equity Assurance Plan

If at the time of application the Owner has selected a death benefit
under the terms of the Enhanced Equity Assurance Plan, We will pay a death
benefit equal to the greatest of:

<PAGE>

1. the Contract Value; or

3. an amount equal to (a) plus (b) where:

(1) 0% per annum if death occurs during the
first through 24th month from the date of
Premium payment;

(2) 2% per annum if death occurs during the
25th through 48th month from the date of
Premium payment;

(3) 4% per annum if death occurs during the
49th through 72nd month from the date of
Premium payment;

(4) 6% per annum if death occurs during the
73rd through 96th month from the date of
Premium payment;

(5) 8% per annum if death occurs during the
97th through 120th month from the date of
Premium payment;

(6) 10% per annum (for a maximum of 10 years)
if death occurs more than 120 months from the
date of Premium payment; and

(b) is equal to all Premiums paid after the first
Contract Anniversary following Your 85th birthday,
adjusted for surrenders as described below.

The Enhanced Equity Assurance Plan will be in effect if:

1. the Owner elected it on the Application; and

<PAGE>

2. the charge for this Rider is shown on the Contract Schedule.

The Enhanced Equity Assurance Plan will cease to be in effect upon
written receipt by the Company of the Owner's written request to discontinue
it or upon the allocation of Contract Value to either the Domestic Money
Market Subaccount or Guaranteed Account, unless such allocation is made as
part of Dollar Cost Averaging.

Accidental Death Benefit

1. the Contract Value as of the date the death benefit is
determined; or

2. $250,000.

The Company deducts for each Valuation Period a daily charge for the
Accidental Death Benefit which is equal on an annual basis to .05% of the
average daily net asset value of the Variable Account.

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

1. suicide or attempted suicide while sane or insane;

2. intentionally self-inflicted injuries;

4. 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;

5. declared or undeclared war or any act thereof; or

6. service in the military, naval or air service of any country.

The Accidental Death Benefit will be in effect if the Accidental Death
Benefit Charge is shown on the Contract Schedule.

The Accidental Death Benefit will cease to be in effect upon receipt by
the Company of the Owner's request to discontinue it.

<PAGE>

Payment to Beneficiary

Upon the death of the Owner prior to the Annuity Date, the Beneficiaries
may elect the death benefit to be paid as follows:

1. payment of the entire death benefit within 5 years of the
date of the Owner's death; or

2. payment over the lifetime of the designated beneficiary with
distribution beginning within 1 year of the date of death of
the Owner (see "Annuity Options" on page ____); or

3. if the designated beneficiary is Your spouse, he/she can
continue a Contract in his/her own name.

After the Annuity Date

Death of the Annuitant

DISTRIBUTIONS UNDER THE CONTRACT

Withdrawals

The Owner may withdraw Contract Value 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;

<PAGE>

Withdrawals (including systematic withdrawals discussed below) may be
taxable and subject to a penalty tax. (See "Taxes" on page ____.)

Systematic Withdrawal

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

The Company reserves the right to discontinue this program at any time.

<PAGE>

Surrender

Surrender Value

Payment of Withdrawals and Surrender Values

Deferral of Payment

We may defer payment of any withdrawal or surrender from the Guaranteed
Account for up to six (6) months from the date we receive Your written
request.

<PAGE>

TAXES
Introduction

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

Company Tax Status

Taxation of Annuities in General -- Non-Qualified Plans

Withdrawals prior to the Annuity Date

<PAGE>

Withdrawals on or after the Annuity Date

Penalty Tax on Certain Withdrawals

<PAGE>

Assignments

Generation Skipping Transfer Tax

A transfer of the Contracts or the designation of a beneficiary who is
either 37 1/2 years younger than the Owner or a grandchild of the Owner may
have Generation Skipping Transfer Tax consequences.

Distribution-at-Death Rules

Gifts of Contracts

Contracts Owned by Non-Natural Persons

<PAGE>

Section 1035 Exchanges

Multiple Contracts

Withholding

Lump-Sum Distribution or Withdrawal

The Company is required to withhold 10% of the taxable portion of any
withdrawal or lump sum distribution unless You elect out of withholding.

Annuity Payments

<PAGE>

Diversification Standards

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.

Tax-Favored Plans

<PAGE>

Individual Retirement Annuities

403(b) Plans

LEGAL PROCEEDINGS

The Company knows of no legal proceeding pending to which the Variable
Account is a party or which would materially affect the Variable Account.

LEGAL MATTERS

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

<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................................................
Method of Determining Contract Value...............................
Annuity Provisions.................................................
Variable Annuity Payment Values..................................
Annuity Unit.....................................................
Net Investment Factor............................................
Additional Provisions............................................
Financial Statements...............................................

<PAGE>

APPENDIX

Guaranteed Account Option

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 Administrative
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 Administrative Office.

The Guaranteed Account may not be available in all states.

Allocations To The Guaranteed Account

Guaranteed Account Transfers

Minimum Surrender Value

A-1

<PAGE>

Rule 497(e)
File No. 33-39171

STATEMENT OF ADDITIONAL INFORMATION

FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACTS

issued by

VARIABLE ACCOUNT I

and

AIG LIFE INSURANCE COMPANY

Date of Statement of Additional Information:
May 1, 1997, as supplemented February 9, 1998

<PAGE>

TABLE OF CONTENTS

Page
General Information.............................................
The Company..................................................
Independent Accountants......................................
Legal Counsel................................................
Distributor..................................................
Calculation of Performance Related Information...............
Delay of Payments............................................
Method of Determining Contract Value............................
Annuity Provisions..............................................
Variable Annuity Payment Values..............................
Annuity Unit.................................................
Net Investment Factor........................................
Additional Provisions........................................
Financial Statements............................................

B-2

<PAGE>

GENERAL INFORMATION

The Company

Independent Accountants

The 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

Distributor

Calculation of Performance Related Information

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

The yield quotation for the Domestic Money Market Subaccount 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 Domestic 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 Domestic Money Market Subaccount
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 Domestic 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>

For purposes of the yield and effective yield computations, the
hypothetical charge reflects all deductions that are charged to all Owner
accounts in proportion to the length of the base period. For any fees that
vary with the size of the account, the account size is assumed to be the
Domestic Money Market Subaccount's mean account size. The yield and effective
yield quotations do not reflect the Surrender Charge that 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 Contracts and whether withdrawals had been previously made during that
Contract Year. (See "Charges and Deductions - Deduction for Surrender Charge"
in 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 Domestic Money
Market Subaccount and the Funds are excluded from the calculation of yield.

B. Total Return Quotations

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.

Funds were first invested in the portfolios on the following dates:
<TABLE>
<CAPTION>
<S> <C>
Growth & Income Portfolio April 16, 1992
Premier Growth Portfolio December 7, 1992
U.S. Government/High Yield Securities Portfolio June 14, 1993
Global Dollar Government Portfolio May 26 , 1994
Growth Portfolio August 12, 1994
Total Return Portfolio September 12, 1994
Worldwide Privatization Portfolio October 17, 1994

B-4

<PAGE>

Technology Portfolio January 22, 1996
Quasar Portfolio August 15, 1996
Real Estate Investment Portfolio January 7, 1997
High Yield Portfolio September 9, 1997
</TABLE>
No dates have been provided above with respect to the portfolios of the
Merrill Lynch Fund because as of the date of the Prospectus and this Statement
of Additional Information no funds had been invested therein.

C. Yield Quotations for the U.S. Government/High Grade Securities Subaccount

The yield quotations for the U.S. Government/High Grade Securities
Subaccount 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 + 1)6 - 1]
cd

Where: a = net investment income earned during the period by
the corresponding portfolio 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 U.S. Government/High
Grade Securities Subaccount, 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.

D. Non-Standardized Performance Data

1. Total Return Quotations

B-5

<PAGE>

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.

2. Tax Deferred Accumulation

B-6

<PAGE>

Delay of Payments

(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 VALUE

When the first shares of the respective portfolios of the Funds 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

B-7

<PAGE>

(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.

ANNUITY PROVISIONS

Variable Annuity Payment Values

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.

B-8

<PAGE>

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

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

Net Investment Factor

The net investment factor is used to determine how investment results
of the Funds 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.

B-9

<PAGE>

(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

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
settlement contract for the payment option.

FINANCIAL STATEMENTS

B-10

<PAGE>