Statement of Additional Information
For the
Scudder Horizon Plan
A Flexible Premium Variable Deferred Annuity
Issued through
Intramerica Variable Annuity Account
offered by
Intramerica Life Insurance Company
(A New York Stock Life Insurance Company)
Customer Service Center
8301 Maryland Ave.
St. Louis, MO 63105
1-800-833-0194
This Statement of Additional Information expands upon subjects discussed in
the current Prospectus for the Scudder Horizon Plan, a flexible premium variable
deferred annuity (the "Contract") offered by Intramerica Life Insurance Company.
You may obtain a copy of the Prospectus dated May 1, 1999, by calling (800)
225-2470 or writing to:
Scudder Insurance Agency of New York, Inc.,
345 Park Avenue,
New York, New York 10154.
Terms used in the current Prospectus for the Contract are incorporated in
this Statement.
This Statement of Additional Information is not a prospectus and should be read
only in conjunction with the Prospectus for the Contract.
Dated May 1, 1999, as supplemented July 1, 1999
<PAGE>
Table of Contents
State Regulation of Intramerica...........................................1
Certain Federal Income Tax Consequences of................................1
Safekeeping of the Variable Account's Assets..............................1
Purchase and Services Agreements..........................................1
Calculation of Yields and Total Returns...................................1
Money Market Subaccount Yields.........................................1
Other Subaccount Yields................................................1
Total Returns..........................................................1
Effect of the Records Maintenance Charge on Performance Data...........1
Other Performance Data....................................................1
Cumulative Total Returns...............................................1
Adjusted Historic Portfolio Performance................................1
Comparison of Performance and Expense Information......................1
Legal Matters.............................................................1
Independent Accountants...................................................1
Financial Statements......................................................1
<PAGE>
In order to supplement the description in the Prospectus, this document
provides additional information about Intramerica and the Contract that may be
of interest to you.
State Regulation of Intramerica
We are a stock life insurance company organized under the laws of the State
of New York on March 24, 1966. We are subject to regulation by the State of New
York Insurance Department. We file quarterly statements covering the operations
and reporting on the financial condition of Intramerica with the New York
Superintendent of Insurance. Periodically, the Superintendent examines the
financial condition of Intramerica, including the liabilities and reserves of
the Variable Account and any other separate account of which we are the
depositor.
Intramerica is an indirect wholly-owned subsidiary of Charter National Life
Insurance Company ("Charter"), a Missouri stock life insurance company. Charter
is engaged principally in the offering of insurance products on a direct
marketing basis in 49 states, the District of Columbia and Puerto Rico. Charter
is a wholly-owned subsidiary of Allstate Life Insurance Company ("Allstate").
The Variable Account was originally established by First Charter Life
Insurance Company ("First Charter"), a subsidiary of Charter, on June 8, 1988.
At that time, First Charter's corporate name was "Baldwin Life Insurance
Company" and the Variable Account was named "Baldwin Variable Annuity Account."
These names were changed to "First Charter Life Insurance Company" and "First
Charter Variable Annuity Account" respectively, in October, 1988. On November 1,
1992, First Charter was merged with and into Intramerica. Pursuant to the
merger, Intramerica acquired the Variable Account which was then renamed
"Intramerica Variable Annuity Account."
Certain Federal Income Tax Consequences of
Certain Exchanges and Surrenders
Under Section 1035 of the Code, generally no gain or loss is recognized on
a qualifying exchange of an annuity contract for another annuity contract. A
direct exchange of an annuity contract for the Contract qualifies as an exchange
under Section 1035 of the Code. There are, however, certain exceptions to this
rule. Moreover, although the issue is not free from doubt, certain surrenders
under an annuity contract followed by an investment in the Contract also may
qualify as exchanges under Section 1035 of the Code. Due to the uncertainty of
the rules regarding the determination of whether a transaction qualifies under
Section 1035 of the Code, prospective purchasers are urged to consult their own
tax advisers.
In addition to being nontaxable events, certain exchanges under Section
1035 of the Code also may result in a carry-over of the federal income tax
treatment of the old annuity contract to the new annuity contract. Due to the
complexity of the rules regarding the proper treatment of an exchange qualifying
under Section 1035 of the Code prospective purchasers are urged to consult their
own tax advisers.
Safekeeping of the Variable Account's Assets
We hold the assets of the Variable Account. The assets are kept segregated
and held separate and apart from Intramerica's general funds. We maintain
records of all purchases and redemptions of the shares of each Portfolio. A
blanket fidelity bond in the amount of $10,000,000 covers all of the officers
and employees of Intramerica.
Purchase and Services Agreements
On September 2, 1998 Intramerica and Leucadia National Corporation,
Intramerica's parent company at that time, entered into a coinsurance agreement
("the Agreement") with Allstate Life Insurance Company of New York
("Allstate-NY") reinsuring 25% of Intramerica's rights, liabilities and
obligations with respect to the Variable Account under the Contract. On the same
date, Intramerica and Allstate-NY entered into an administrative services
agreement ("Services Agreement") under which Allstate-NY, or its designee, has
agreed to provide the administrative services in connection with the Contract
and the Variable Account on behalf of Intramerica. Included among such services
are premium payment processing, all transfer, withdrawal or surrender requests,
prepare all records (including records of all purchases and redemption of the
shares of each portfolio) and reports relating to the Variable Account and the
Contract. As compensation for its services, Allstate-NY retains the charges
deducted from Separate Account or Contract Values. Allstate-NY is responsible
for payment of all expenses in connection with the Contract and the Separate
Account. Allstate-NY's principal address is P.O. Box 9075, Farmingville, New
York 11738-9075.
On July 1, 1999, Allstate announced that it had purchased Intramerica from
Leucadia National Corporation ("Leucadia").
CNL, Inc. ("CNL") is the principal underwriter of the Contract. On
September 2, 1998, Leucadia, then the sole owner of all of CNL's stock, sold all
of its CNL stock to Allstate. Allstate is now sole owner of CNL.
Calculation of Yields and Total Returns
From time to time, we may disclose yields, total returns and other
performance data pertaining to the Contracts for the subaccounts in accordance
with the standards deemed by the Securities and Exchange Commission. Because of
the charges and deductions imposed under the Contract, the yield for the
subaccounts will be lower than the yield for their respective Portfolios. Also,
because of differences in Variable Account charges for different variable
annuity contracts invested in the Variable Account, the yields, total returns
and other performance data for the subaccounts will be different for the
Contract than for such other variable annuity contracts. The calculations of
yields, total returns and other performance data do not reflect the effect of
any premium tax since no premium tax on the Contract is currently payable under
New York law.
The yields and total returns for periods prior to the date the
subaccounts commenced operations, when disclosed, are based on the performance
of the Scudder Variable Life Investment Fund's Portfolios and the assumption
that the subaccounts were in existence for the same periods as the Fund's
Portfolios with the level of Contract charges equal to those currently assessed
against the subaccounts. The subaccounts and Portfolios commenced operations as
indicated:
Subaccount/Portfolio Subaccount Portfolio
-------------------- ---------- ---------
Money Market July, 1990 July, 1985
Bond July, 1990 July, 1985
Balanced July, 1990 July, 1985
Capital Growth July, 1990 July, 1985
International July, 1990 May, 1987
Growth and Income May, 1994 May, 1994
Global Discovery May, 1996 May, 1996
Money Market Subaccount Yields
We compute the Current Yield by determining the net change (exclusive of
realized gains and losses on the sale of securities and unrealized appreciation
and depreciation and exclusive of income other than investment income) at the
end of a seven-day period in the value of a hypothetical account having a
balance of one unit of the Money Market subaccount at the beginning of the
seven-day period, dividing the net change in account value by the value of the
account at the beginning of the period to determine the base period return, and
annualizing this quotient on a 365-day basis. The net change in account value
reflects (i) net income from the Portfolio attributable to the hypothetical
account and (ii) charges and deductions imposed under the Contract that are
attributable to the hypothetical account. The charges and deductions include the
per unit charges for the hypothetical account for the Administration Charge and
the Mortality and Expense Risk Charge. The Current Yield is calculated according
to the following formula:
Current Yield = ((NCS - ES) / UV) x (365/ 7)
We may also disclose the Effective Yield of the Money Market subaccount for the
same seven-day period determined on a compounded basis. The seven-day Effective
Yield is calculated by compounding the unannualized base period return according
to the following formula:
Effective Yield = (1 + ((NCS - ES) / UV)) (365/7) - 1
Where, for both formulas:
NCS = The net change in the value of the Portfolio (exclusive of realized gains
and losses on the sale of securities and unrealized appreciation and
depreciation and exclusive of income other than investment income) for the
seven-day period attributable to a hypothetical account having a balance of
one Subaccount unit under a Contract.
ES = Per unit expenses of the subaccount for the Contracts for the seven-day
period.
UV = The unit value for a Contract on the first day of the seven-day period.
The Current and Effective Yield on amounts held in the Money Market
subaccount normally will fluctuate on a daily basis. Therefore, the disclosed
yield for any given past period is not an indication or representation of future
yields or rates of return. The Money Market subaccount's actual yield is
affected by changes in interest rates on money market securities, average
maturity of the Money Market Portfolio, the types and quality of securities held
by the Money Market Portfolio and its operating expenses.
Other Subaccount Yields
The 30-Day Yield refers to income generated by the Bond subaccount over a
specific 30-day period. Because the yield is annualized, the yield generated
during the 30-day period is assumed to be generated each 30-day period over a
12-month period. The yield is computed by: (i) dividing the net investment
income of the Portfolio attributable to the subaccount units less subaccount
expenses attributable to the Contracts for the period, by (ii) the maximum
offering price per unit on the last day of the period times the daily average
number of units outstanding for the period, by (iii) compounding that yield for
a 6-month period and (iv) multiplying that result by 2. Expenses attributable to
the Bond subaccount for the Contracts include the Administration Charge and the
Mortality and Expense Risk Charge. The 30-Day Yield is calculated according to
the following formula:
30-Day Yield = 2 x ((((NI -ES) / (U x UV)) + 1)(to the power of 6)- 1)
Where:
NI = Net income of the portfolio for the 30-day period attributable to the
Subaccount's units.
ES = Expenses of the subaccount for the Contracts for the 30-day period.
U = The average daily number of units outstanding attributable to the
Contracts.
UV = The unit value for a Contract at the close (highest) of the last day in
the 30-day period.
The 30-Day Yield on amounts held in the Bond subaccount normally will
fluctuate over time. Therefore, the disclosed yield for any given past period is
not an indication or representation of future yields or rates of return. The
Bond subaccount's actual yield is affected by the types and quality of
securities held by the Portfolio and its operating expenses.
Total Returns
We may disclose Standard Average Annual Total Returns ("Total Returns") for
one or more of the subaccounts for various periods of time. One of the periods
of time will include the period measured from the date the subaccount commenced
operations. When a Subaccount has been in operation for one, five and ten years,
respectively, the Total Returns for these periods will be provided. Total
Returns for other periods of time may, from time to time, also be disclosed.
Based on the method of calculation described below, the Total Returns for the
subaccounts were as follows:
<TABLE>
<CAPTION>
- ----------------------- --------------------- -------------------- --------------------- --------------------
Ten Year Period
One Year Period Five Year Period Ending 12/31/98 or Subaccount
Subaccount Ending 12/31/98 Ending 12/31/98 Since Inception Inception Dates
- ----------------------- --------------------- -------------------- --------------------- --------------------
<S> <C> <C> <C> <C>
Money Market* 4.55% 4.25% 3.98% 7/90
- ----------------------- --------------------- -------------------- --------------------- --------------------
Bond 5.82% 5.36% 7.85% 7/90
- ----------------------- --------------------- -------------------- --------------------- --------------------
Balanced 22.32% 15.44% 12.79% 7/90
- ----------------------- --------------------- -------------------- --------------------- --------------------
Capital Growth 22.36% 17.65% 16.04% 7/90
- ----------------------- --------------------- -------------------- --------------------- --------------------
International 17.66% 9.54% 8.21% 7/90
- ----------------------- --------------------- -------------------- --------------------- --------------------
Growth and Income** 6.15% N/A 19.28% 5/94
- ----------------------- --------------------- -------------------- --------------------- --------------------
Global Discovery*** 15.63% N/A 12.06% 5/96
- ----------------------- --------------------- -------------------- --------------------- --------------------
</TABLE>
* The Yield quotations for the Money Market Subaccount quoted above more closely
reflect the current earnings of this subaccount than the total return
quotations.
** Five- and Ten-Year Average Annual Total Returns are not available for the
Growth and Income Subaccount as it began operations on May 1, 1994.
*** Five- and Ten-Year Average Annual Total Returns are not available for the
Global Discovery Subaccount as it began operations on May 1, 1996.
Total Returns represent the average annual compounded rates of return that
would equate a single investment of $1,000 to the redemption value of that
investment as of the last day of each of the periods. The ending date for each
period for which Total Return quotations are provided will be for the most
recent month end practicable, considering the type and media of the
communication, and will be stated in the communication.
We will calculate Total Returns using subaccount Unit Values which
Intramerica calculates on each Valuation Date based on the performance of the
subaccount's underlying Portfolio, and the deductions for the Mortality and
Expense Risk Charge of 0.40%, the Administration Charge of 0.30% and (for
periods prior to January 25, 1991) the Records Maintenance Charge. An average
per dollar Records Maintenance Charge attributable to the hypothetical account
for the period is used.
The Total Return is calculated according to the following formula:
TR=(ERV / P )(to the power of 1 / N) - 1
Where:
TR = The average annual total return net of subaccount recurring charges for
the Contracts.
ERV = The ending redeemable value of the hypothetical account at the end of the
period.
P = A hypothetical single payment of $1,000.
N = The number of years in the period.
Effect of the Records Maintenance Charge on Performance Data
While the Contract permits us to deduct an annual $40 Records Maintenance
Charge at the end of each Contract Year proportionately from each subaccount
based on the value of the amounts in the subaccount, we are not deducting the
Records Maintenance Charge at this time. For purposes of reflecting the Records
Maintenance Charge on performance information prior to January 25, 1991, the $40
annual charge was converted into a per dollar per day charge based on the
average Account Value of all Contracts on the last day of the period for which
quotations are provided.
The assumed average Records Maintenance Charge did not, except in rare
instances, reflect its actual effect on a particular Contract.
<PAGE>
Other Performance Data
Cumulative Total Returns
Based on the method of calculation described below, the Cumulative Total
Returns for the subaccounts for the periods ending December 31, 1998, were as
follows:
<TABLE>
<CAPTION>
- ----------------------- --------------------- -------------------- --------------------- --------------------
Ten Year Period
One Year Period Five Year Period Ending 12/31/98 or Subaccount
Subaccount Ending 12/31/98 Ending 12/31/98 Since Inception Inception Dates
- ----------------------- --------------------- -------------------- --------------------- --------------------
<S> <C> <C> <C> <C>
Money Market* 4.55% 23.16% 39.26% 7/90
- ----------------------- --------------------- -------------------- --------------------- --------------------
Bond 5.82% 29.86% 89.84% 7/90
- ----------------------- --------------------- -------------------- --------------------- --------------------
Balanced 22.32% 105.06% 177.48% 7/90
- ----------------------- --------------------- -------------------- --------------------- --------------------
Capital Growth 22.36% 125.47% 253.08% 7/90
- ----------------------- --------------------- -------------------- --------------------- --------------------
International 17.66% 57.77% 95.20% 7/90
- ----------------------- --------------------- -------------------- --------------------- --------------------
Growth and Income** 6.15% N/A 127.88% 5/94
- ----------------------- --------------------- -------------------- --------------------- --------------------
Global Discovery*** 15.63% N/A 35.50% 5/96
- ----------------------- --------------------- -------------------- --------------------- --------------------
</TABLE>
* The Yield quotations for the Money Market Subaccount quoted above more closely
reflect the current earnings of this subaccount than the total return
quotations.
** Five- and Ten-Year Average Annual Total Returns are not available for the
Growth and Income Subaccount as it began operations on May 1, 1994.
*** Five- and Ten-Year Average Annual Total Returns are not available for the
Global Discovery Subaccount as it began operations on May 1, 1996.
The Cumulative Total Returns are calculated using the following formula:
CTR = (ERV / P) - 1
Where:
CTR = The Cumulative Total Return net of subaccount recurring charges for the
period.
ERV = The ending redeemable value of the hypothetical investment at the end of
the period.
P = A hypothetical single payment of $1,000.
All non-standard performance data will only be disclosed if the standard
performance data for the required periods is also disclosed.
Adjusted Historic Portfolio Performance
We may also disclose yield and total return for the Fund's portfolios,
including for periods before the date that the Variable Account began
operations. For periods prior to the date the Variable Account commenced
operations, adjusted historical portfolio performance information will be
calculated based on the performance of the underlying portfolios and the
assumption that the subaccounts were in existence for the same periods as those
of the underlying Funds, with some or all of the charges equal to those
currently assessed against the subaccounts.
In the tables below, average annual total returns for the Portfolios were
reduced by all current fees and charges under the Contract, including the
Mortality and Expense Risk Charge of 0.40% and an Administrative Expense Charge
of 0.30%.
<TABLE>
<CAPTION>
- ----------------------- --------------------- -------------------- --------------------- --------------------
Ten Year Period
One Year Period Five Year Period Ending 12/31/98 or Portfolio
Ending 12/31/98 Ending 12/31/98 Since Inception Inception
Portfolio Dates
- ----------------------- --------------------- -------------------- --------------------- --------------------
<S> <C> <C> <C> <C> <C>
Money Market 4.55% 4.25% 4.51% 7/16/85
- ----------------------- --------------------- -------------------- --------------------- --------------------
Bond 5.82% 5.36% 7.83% 7/16/85
- ----------------------- --------------------- -------------------- --------------------- --------------------
Balanced 22.32% 15.44% 12.89% 7/16/85
- ----------------------- --------------------- -------------------- --------------------- --------------------
Capital Growth 22.36% 17.65% 15.98% 7/16/85
- ----------------------- --------------------- -------------------- --------------------- --------------------
International 17.66% 9.57% 11.10% 5/1/87
- ----------------------- --------------------- -------------------- --------------------- --------------------
Growth and Income 6.15% N/A 19.28% 5/2/94
- ----------------------- --------------------- -------------------- --------------------- --------------------
Global Discovery 15.63% N/A 12.06% 5/1/96
- ----------------------- --------------------- -------------------- --------------------- --------------------
</TABLE>
Comparison of Performance and Expense Information
Expenses and performance information for the Contract and each Subaccount
may be compared in advertising, sales literature, and other communications to
expenses and performance information of other variable annuity products
investing in mutual funds (or investment portfolios of mutual funds) with
investment objectives similar to each of the Subaccounts tracked by independent
services such as Lipper Analytical Services, Inc. ("Lipper"), Morningstar and
the Variable Annuity Research Data Service ("V.A.R.D.S."). Lipper, Morningstar
and V.A.R.D.S. monitor and rank the performance and expenses of variable annuity
issuers in each of the major categories of investment objectives on an
industry-wide basis.
Lipper's and Morningstar's rankings include variable life insurance issuers
as well as variable annuity issuers. V.A.R.D.S. rankings only compare variable
annuity issuers. The performance analyses prepared by Lipper and V.A.R.D.S. each
rank such issuers on the basis of total return, assuming reinvestment of
distributions, but do not take sales charges or certain expense deductions at
the separate account level into consideration. The performance analyses prepared
by Morningstar rate subaccount performance relative to its investment class
based on total returns. Morningstar deducts front-end loads from total returns
and deducts half of the surrender charge, if applicable, for the relevant time
period when calculating performance figures. In addition, Morningstar and
V.A.R.D.S. prepare risk adjusted rankings, which consider the effects of market
risk on total return performance. This type of ranking provides data as to which
funds provide the highest total return within various categories defined by the
degree of risk inherent in their investment objectives.
From time to time, we may also compare the performance of each Subaccount
to indices that measure stock market performance, such as Standard & Poors 500
Composite ("S & P 500") or the Dow Jones Industrial Average ("Dow"). Unmanaged
indices such as these may assume reinvestment of dividends but generally do not
reflect deductions for the expenses of operating and managing an investment
portfolio.
Legal Matters
Sutherland Asbill & Brennan LLP of Washington, D.C. has provided advice on
certain legal matters relating to the Federal Securities Laws. All matters of
New York law pertaining to the Contracts, including the validity of the Contract
and Intramerica's authority to issue the Contract under New York Insurance Law,
have been passed upon by John R. Petrowski, General Counsel of Intramerica Life
Insurance Company.
Independent Accountants
The financial statements of the Intramerica Variable Annuity Account as of
December 31, 1998 and for each of the two years in the period ended December 31,
1998 and the financial statements of Intramerica Life Insurance Company as of
December 31, 1998 and 1997 and for each of the three years in the period ended
December 31, 1998 have been included in this Statement of Additional Information
in reliance on the reports of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in accounting and
auditing.
Financial Statements
The financial statements of Intramerica, which are included in this
Statement of Additional Information, should be considered only as bearing on the
ability of Intramerica to meet its obligation under the Contract. They should
not be considered as bearing on the investment performance of the assets held in
the Variable Account.
