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Registration Number 33-36525
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
Post-Effective Amendment No. 11
AMERICAN NATIONAL VARIABLE LIFE SEPARATE ACCOUNT
(Exact Name of Registrant)
AMERICAN NATIONAL INSURANCE COMPANY
(Exact Name of Depositor)
One Moody Plaza
Galveston, Texas 77550
(Complete Address of Depositor's Principal Executive Offices)
Rex D. Hemme Jerry L. Adams
Vice President, Actuary Greer, Herz & Adams, L.L.P.
American National With copy to: One Moody Plaza, 18th Floor
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Insurance Company Galveston, Texas 77550
One Moody Plaza
Galveston, Texas 77550
(Name and Address of Agent for Service)
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Declaration Required By Rule 24f-2(a)(1): An indefinite number of securities of
- ----------------------------------------
the Registrant has been registered under the Securities Act of 1933 pursuant to
Rule 24f-2 under the Investment Company Act of 1940. Notice required by Rule
- ---------- ----
24f-2(b)(1) has been filed in the Office of the Securities and Exchange
- -----------
Commission on __________, 1999 for the Registrant's fiscal year ending December
31, 1998.
================================================================================
It is proposed that this filing will become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[ ] on (date) pursuant to paragraph (b) of Rule 485
[x] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[ ] on (date) pursuant to paragraph (a)(1) of Rule 485
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
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Title of securities being registered: Variable Life Insurance Policies
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INVESTRAC GOLD VARIABLE UNIVERSAL LIFE
Issued by
American National Insurance Company
Home Office: One Moody Plaza, Galveston, Texas 77550
1-800-306-2959
Prospectus Dated May 1, 1999
This prospectus describes a variable universal life insurance policy
offered by American National Insurance Company. The policy provides life
insurance protection with flexibility to vary the amount and timing of premium
payments and the level of death benefit. The death benefits available under your
policy can increase if the value of the policy increases.
The value of your policy will vary with the investment performance of
investment options you choose. You can choose to have your net premium payments
(premium payments less applicable charges) allocated to subaccounts of the
American National Variable Life Separate Account and to our general account.
Each subaccount invests in a corresponding portfolio of American National
Investment Accounts, Inc., Variable Insurance Products Fund, Variable Insurance
Products Fund II, Variable Insurance Products Fund III, T. Rowe Price
International Series, Inc. or T. Rowe Price Equity Series, Inc. The portfolios
currently available for purchase by the subaccounts are:
. AN Money Market . VIP Overseas
. AN Growth . VIP Contrafund
. AN Balanced . VIP Asset Manager: Growth
. AN Managed . VIP Investment Grade Bond
. T. Rowe Price Equity Income . VIP Asset Manager
. T. Rowe Price Mid-Cap Growth . VIP Index 500
. T. Rowe Price International Stock . VIP Balanced
. VIP Money Market . VIP Growth and Income
. VIP Equity-Income . VIP Mid Cap Portfolio
. VIP High Income . VIP Growth Opportunities
. VIP Growth
The Securities and Exchange Commission has not approved or disapproved the
policy or passed upon the adequacy of this prospectus. Any representation to the
contrary is a criminal offense.
The policy is not a deposit or obligation of, or guaranteed or endorsed by,
any bank, nor is it federally insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board, or any other agency. The policy involves
investment risks, including possible loss of principal.
Please read this prospectus and keep it for future reference.
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TABLE OF CONTENTS
Section Page
- ------- ----
Definitions........................................................
Summary............................................................
The Policy....................................................
Allocation of Premiums........................................
Policy Benefits and Rights....................................
Charges.......................................................
Taxes.........................................................
Policy Benefits...............................................
Purposes of the Policy........................................
Death Benefit Proceeds........................................
Benefits at Maturity..........................................
Death Benefit Options.........................................
Guaranteed Coverage Benefit...................................
Duration of the Policy........................................
Accumulation Value ...........................................
Payment of Policy Benefits....................................
Policy Rights......................................................
Loan Benefits.................................................
Surrenders....................................................
Transfers.....................................................
Refund Privilege..............................................
Right to Exchange for a Universal Life Policy.................
Payment and Allocation of Premiums.................................
Issuance of a Policy..........................................
Premiums......................................................
Premium Flexibility...........................................
Allocation of Premiums and Accumulation Value.................
Grace Period and Reinstatement................................
Charges and Deductions.............................................
Premium Charges...............................................
Charges from Accumulation Value...............................
Monthly Deduction.........................................
Surrender Charge..........................................
Transfer Charge...........................................
Partial Surrender Charge..................................
Daily Charges Against the Separate Account................
Fees and Expenses Incurred by
Eligible Portfolios....................................
Taxes.....................................................
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Exceptions to Charges........................................
American National Insurance Company, the Separate
Account, the Funds and the Fixed Account..........................
American National Insurance Company..........................
The Separate Account.........................................
The Funds....................................................
Fixed Account................................................
Federal Tax Matters...............................................
Introduction.................................................
Tax Status of the Policy ....................................
Tax Treatment of Policy Proceeds ............................
American National's Income Taxes.............................
Other Information.................................................
Sale of the Policy...........................................
Year 2000....................................................
The Contract.................................................
Dividends....................................................
Legal Matters................................................
Legal Proceedings............................................
Registration Statement.......................................
Experts......................................................
Senior Executive Officers and Directors of
American National Insurance Company...............................
Financial Statements..............................................
Appendix..........................................................
Illustrations of Death Benefits,
Accumulation Values and Surrender Values.....................
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DEFINITIONS
Accumulation Value The total amount that a Policy provides for investment
at any time.
Age at Issue The age at the Insured's last birthday before the Date
of Issue.
American National Fund American National Investment Accounts, Inc.
Attained Age Age at Issue plus the number of complete Policy Years.
Beneficiary The Beneficiary designated in the application or the
latest change, if any, filed and recorded with us.
Daily Asset Charge A charge equal to an annual rate of 0.90% of the
average daily Accumulation Value of each subaccount.
Date of Issue The Date of Issue in the Policy and any riders to the
Policy.
Death Benefit The amount of insurance coverage provided under the
selected Death Benefit option.
Death Benefit Proceeds The proceeds payable upon death of the Insured.
Declared Rate The rate at which interest is credited in the Fixed
Account.
Effective Date The later of the Date of Issue or the date on which:
. the first premium, as shown on the Policy Data
Page, has been paid; and
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. the Policy has been delivered during the Insured's
lifetime and good health.
Any increase in Specified Amount, addition of a benefit
rider, or reinstatement of coverage will take effect on
the Monthly Deduction Date which coincides with or next
follows the date we approve an application for such
change or for reinstatement of the Policy.
Eligible Portfolio A Portfolio of American National Investment Accounts,
Inc., Variable Insurance Products Fund, Variable
Insurance Products Fund II, Variable Insurance Products
Fund III, T. Rowe Price International Series, Inc., and
T. Rowe Price Equity Series, Inc., in which a
subaccount can be invested.
Fidelity Funds Variable Insurance Products Fund, Variable Insurance
Products Fund II and Variable Insurance Products Fund
III
Fixed Account A part of our General Account which accumulates
interest at a fixed rate.
General Account Includes all of our assets except assets segregated
into separate accounts.
Guaranteed Coverage Our agreement to keep the Policy in force if the
Benefit Guaranteed Coverage Premium is paid and other Policy
provisions are met.
Guaranteed Coverage A specified premium which, if paid in advance as
Premium required, will keep the Policy in force so long as
other Policy provisions are met.
Insured The person upon whose life the Policy is issued.
Monthly Deduction The sum of (1) cost of insurance charge, (2) charge
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for any riders, and (3) administrative charge shown on
the Policy Data Page.
Monthly Deduction Date The same date in each succeeding month as the Date of
Issue, except that whenever the Monthly Deduction Date
falls on a date other than a Valuation Date, the
Monthly Deduction Date will be deemed to be the next
Valuation Date. The Date of Issue is the first Monthly
Deduction Date.
Net Amount at Risk Your Death Benefit minus your Accumulation Value.
Net Premium Premium less premium charges (sales load charge,
premium tax charge and transaction charge).
Planned Periodic Scheduled premiums selected by you.
Premiums
Policy The variable universal life insurance policy described
in this prospectus.
Policy Data Page The pages of the Policy so titled.
Policy Debt The sum of all unpaid Policy loans and accrued interest
thereon.
Policyowner ("You") The owner of the Policy, as designated in the
application or as subsequently changed. If a Policy
has been absolutely assigned, the assignee is the
Policyowner. A collateral assignee is not the
Policyowner.
Policy Year The period from one Policy anniversary date until the
next Policy anniversary date.
Satisfactory Proof of Submission of the following:
Death . a certified copy of the death certificate;
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. a claimant statement;
. the Policy; and
. any other information that we may reasonably
require to establish the validity of the claim.
Specified Amount The minimum Death Benefit under the Policy until the
Insured reaches Attained Age of 95. The Specified
Amount is an amount you select in accordance with
Policy requirements.
Surrender Value The Accumulation Value less Policy Debt and surrender
charges.
T. Rowe Price Funds T. Rowe Price International Series, Inc. and T. Rowe
Price Equity Series, Inc.
Valuation Date The close of business on each day the New York Stock
Exchange is open for regular trading.
Valuation Period The period between Valuation Dates.
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SUMMARY
The Policy is not available in some states. You should rely only on the
information contained in this prospectus or to which you have been referred. We
have not authorized anyone to provide you with information that is different.
You should read the following summary in conjunction with the detailed
information appearing elsewhere in this prospectus. Unless otherwise indicated,
the description of the Policy assumes that the Policy is in effect and there is
no Policy Debt.
THE POLICY
The Policy is a flexible premium variable universal life insurance policy.
You do not have a fixed schedule for premium payments. You can establish a
schedule of Planned Periodic Premiums, but you are not required to follow such
schedule. (See Premium Flexibility, page ___.)
The Death Benefit under the Policy may, and the Accumulation Value will,
reflect the investment performance of the investments you choose. (See Death
Benefits, page ___ and Accumulation Value, page ___). You benefit from any
increase in value and bear the risk that your chosen investment options may
decrease in value. The amount and duration of the life insurance coverage
provided by the Policy is not guaranteed, except under the Guaranteed Coverage
Benefit provision. Further, the Accumulation Value is not guaranteed, except in
the Fixed Account.
ALLOCATION OF PREMIUMS
You can allocate premiums to one or more of the subaccounts and to the
Fixed Account. (See The Separate Account, page ___ and Fixed Account, page ___).
The assets of the various subaccounts are invested in Eligible Portfolios. The
prospectuses or prospectus profiles for the Eligible Portfolios accompany this
prospectus.
Premium payments received before the Date of Issue are held in our General
Account without interest. On the Date of Issue, premiums received on or before
that date are allocated to the subaccount for the VIP Money Market Portfolio.
Premium payments received within 15 days after the Date of Issue are also
allocated to the VIP Money Market Portfolio. Thereafter, premium payments and
Accumulation Value are allocated in accordance with your instructions. The
minimum percentage that you may allocate to any one subaccount or to the Fixed
Account is 10% of the premium, and fractional percentages may not be used.
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POLICY BENEFITS AND RIGHTS
Death Benefit. The Death Benefit is available in two options. (See Death
Benefit Options, page ___.) The Death Benefit Proceeds may be paid in a lump sum
or in accordance with an optional payment plan. (See Payment of Policy Benefits,
page ___.)
Adjustments to Death Benefit. You can adjust the Death Benefit by changing
the Death Benefit option and by increasing or deceasing the Specified Amount.
Changes in the Specified Amount or the Death Benefit option are subject to
certain limitations. (See Death Benefit Options, page ___ and Change in
Specified Amount, page ___).
Accumulation Value and Surrender Value. The Accumulation Value reflects the
investment performance of the chosen subaccounts, the rate of interest paid on
the Fixed Account, premiums paid, partial surrenders, and charges deducted from
the Policy. There is no guaranteed minimum Accumulation Value. You can withdraw
the entire Surrender Value. Subject to certain limitations, you can also
withdraw a portion of the Surrender Value. Partial surrenders reduce both the
Accumulation Value and the Death Benefit payable under the Policy. A surrender
charge will be deducted from the amount paid upon a partial withdrawal. (See
Partial Surrender Charge, page ___. See Surrenders, page ___). Surrenders may
have tax consequences. (See Federal Income Tax Considerations, page ___).
Policy Loans. You can borrow money from us using the Policy as security for
the loan. (See Loan Benefits, page ___). Policy loans may have tax consequences.
(See Federal Income Tax Considerations, page ___).
Free Look Period. You have a free look period in which to examine a Policy
and return it for a refund. The free look period runs until the later of:
. 45 days after the application is signed
. 10 days after you receive the Policy
. 10 days after we deliver a notice concerning cancellation
(See Refund Privilege, page ___.)
Policy Lapse and Guaranteed Coverage Benefit. During the first two Policy
Years, we will provide a Guaranteed Coverage Benefit so long as the Guaranteed
Coverage Premium is paid and other Policy provisions are met. After the
Guaranteed Coverage Benefit period, the Policy will lapse at any time the
Surrender Value is insufficient to pay the Monthly Deductions and the grace
period expires without sufficient
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additional premium payment. The grace period starts when written notice of lapse
is mailed to your last known address and expires 61 days later. Unless the
Guaranteed Coverage Benefit requirements have been met, lapse can occur even if
Planned Periodic Premiums are paid. (See Payment and Allocation of Premiums,
page ___.)
CHARGES
Premium Charges. Your premiums will be reduced by the following charges
before being allocated in the subaccounts or the Fixed Account:
. a sales charge of 4% of each premium, plus
. premium taxes, which vary among the states and range from 0% to 4%;
plus
. a transaction charge of $2.00.
Charges from Accumulation Value. The Accumulation Value of the Policy will
be reduced by certain Monthly Deductions and Daily Asset Charges as follows:
. On each Monthly Deduction Date by:
. Cost of Insurance Charge. Because the cost of insurance depends
upon several variables, the cost can vary from month to month. We
will determine the monthly cost of insurance charges by
multiplying the applicable cost of insurance rate by the Net
Amount at Risk, as of the Monthly Deduction Date, for each Policy
month.
The monthly cost of insurance rate is based on the Insured's sex
(if Policy is issued on a sex distinct basis), Attained Age,
Specified Amount and underwriting risk class. The rate may vary
if the Insured is a tobacco user or tobacco non-user, if the
Insured is in a preferred or standard risk classification, or if
the Insured is in a substandard risk classification and rated
with a tabular extra rating.
. Charge for the Cost of any Riders.
. Monthly Administrative Charge. During the first 12 Policy months
and during the first 12 Policy months following an increase in
Specified Amount (other
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than increases caused by a change in Death Benefit option), an
administrative charge will be deducted from the Accumulation
Value. The administrative charge ranges from $2.50 plus $0.0632
per $1,000 of Specified Amount at age 0 to $2.50 plus $2.59 per
$1,000 of Specified Amount at age 75, and thereafter $2.50 plus
$0.025 per $1,000 of Specified Amount.
. On each Valuation Date, by a Daily Asset Charge not to exceed 0.90%
annually of the average daily Accumulation Value in each subaccount.
(See Charges and Deductions, page ___.)
Eligible Portfolio Expenses. The values of the units in each subaccount
will reflect the net asset value of shares in the corresponding Eligible
Portfolios. The net asset value of those shares is reduced by the Eligible
Portfolios' expenses.
ELIGIBLE PORTFOLIO EXPENSES
---------------------------
(as a percentage of average net assets)
Management Other Total
Portfolio Fees Expenses Expenses
- --------- ---- -------- --------
AN Money Market
AN Growth
AN Balanced
AN Managed
VIP High Income
VIP Money Market
VIP Equity-Income
VIP Growth
VIP Overseas
VIP Investment
Grade Bond
VIP Asset Manager
VIP Index 500
VIP Contrafund
VIP Asset Manager:
Growth
VIP Balanced
VIP Growth and
Income
VIP Mid Cap
VIP Growth
Opportunities
T. Rowe Price
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Equity Income
T. Rowe Price
Mid-Cap Growth
T. Rowe Price
International Stock
See the prospectuses for American National Investment Accounts, Inc.,
Variable Insurance Products Fund, Variable Insurance Products Fund II, Variable
Insurance Products Fund III, T. Rowe Price International Series, Inc. and T.
Rowe Price Equity Series, Inc. for more detailed information about the Eligible
Portfolios' fees and expenses.
Surrender Charges. If you surrender all or a portion of your Policy, a
surrender charge will be assessed. The surrender charge for a full surrender is
assessed based on the amount of premiums paid and the amount of surrender
premium shown on the Policy Data Page, with the charges being calculated
separately for the original Specified Amount and each increase, if any, in
Specified Amount. If you surrender your Policy before the 10/th/ Policy
anniversary or within 10 years after an increase in Specified Amount, we will
deduct a surrender charge. The surrender charge is 26% of premiums paid up to
the amount of surrender premium, plus 5% of the additional premiums paid up to:
. for issue (or increase) ages 0-64, an amount equal to nine times
the amount of surrender premium
. for issue (or increase) ages 65-70, an amount equal to five times
the amount of surrender premium
. for issue (or increase) ages 71-75, an amount equal to three
times the amount of surrender premium
(See Surrender Charge, page ___.) A partial surrender charge is made against the
Accumulation Value being withdrawn and is proportional to the charge for a full
surrender. In addition, we will charge $25 for each partial surrender. (See
Partial Surrender Charge, page ___).
Transfer Charge. The first 4 transfers of Accumulation Value in a Policy
Year are free. Thereafter, a transfer charge of $25 will be deducted from the
amount transferred. (See Transfer Charge, page ___.)
TAXES
We intend for the Policy to satisfy the definition of life insurance under
the Internal Revenue Code. Therefore, the Death Benefit Proceeds generally
should be excludible from the gross income of the recipient. Similarly, you
should not be taxed on increases in the Accumulation Value until there is a
distribution from the Policy.
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Under certain circumstances, a Policy could be a Modified Endowment
Contract. If so, all pre-death distributions, including Policy loans, will be
treated first as distributions of taxable income and then as a return of basis
or investment in the policy. In addition, prior to age 59 1/2 any such
distributions generally will be subject to a 10% penalty tax.
If the Policy is not a Modified Endowment Contract, distributions generally
will be treated first as a return of basis or investment in the policy and then
as distributing taxable income. Moreover, loans will not be treated as
distributions and neither distributions nor loans are subject to the 10% penalty
tax.
See "Federal Tax Matters," page __, for a discussion of when
distributions, such as surrenders and loans, could be subject to federal income
tax.
POLICY BENEFITS
PURPOSES OF THE POLICY
The Policy is designed to provide you:
. life insurance protection,
. Death Benefits which may and Accumulation Value which will vary
with performance of your chosen investment options,
. flexibility in the amount and frequency of premium payments,
. flexibility in the level of life insurance protection, subject to
certain limitations, and
. a Guaranteed Coverage Benefit, if you pay the Guaranteed Coverage
Premium and meet the other Policy requirements.
DEATH BENEFIT PROCEEDS
We will, upon Satisfactory Proof of Death, pay the Death Benefit Proceeds
in accordance with the Death Benefit option in effect when the Insured dies. The
amount of the Death Benefit will be determined at the end of the Valuation
Period in which the Insured dies. Death Benefit Proceeds equal:
. the Death Benefit; plus
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. additional life insurance proceeds provided by riders; minus
. Policy Debt; minus
. unpaid Monthly Deduction.
Subject to the rights of any assignee, we will pay the Death Benefit
Proceeds to:
. the Beneficiary or Beneficiaries, or
. if no Beneficiary survives the Insured, the Insured's estate will
receive the proceeds.
The Death Benefit Proceeds may be paid to the Beneficiary in a lump sum or under
one or more of the payment options in the Policy. (See Payment of Policy
Benefits, page ___.)
BENEFITS AT MATURITY
The Policy will mature on the Policy anniversary after the Insured's 95/th/
birthday, if Insured is living. Upon maturity of the Policy, we will pay you
the Accumulation Value less Policy Debt.
DEATH BENEFIT OPTIONS
You choose one of two Death Benefit options in the application. The Death
Benefit under either option will equal or exceed the current Specified Amount of
the Policy.
Option A. Under Option A the Death Benefit is the Specified Amount or, if
greater, the corridor percentage of Accumulation Value at the end of the
Valuation Period that includes the date of death. The applicable percentage
declines as the age of the Insured increases as shown in the following Corridor
Percentage Table:
CORRIDOR PERCENTAGE TABLE
Attained Age Corridor Percentage
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40 or younger 250
41 243
42 236
43 229
44 222
45 215
46 209
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47 203
48 197
49 191
50 185
51 178
52 171
53 164
54 157
55 150
56 146
57 142
58 138
59 134
60 130
61 128
62 126
63 124
64 122
65 120
66 119
67 118
68 117
69 116
70 115
71 113
72 111
73 109
74 107
75 to 90 105
91 104
92 103
93 102
94 101
OPTION A EXAMPLE. Assume that the Insured's Attained Age is between 0 and
40. A Policy with a $50,000 Specified Amount will generally pay $50,000 in Death
Benefits. However, the Death Benefit will be the greater of $50,000 or 250% of
Accumulation Value. Anytime the Accumulation Value exceeds $20,000, the Death
Benefit will exceed the $50,000 Specified Amount. Each additional dollar added
to Accumulation Value above $20,000 will increase the Death Benefit by $2.50. If
the Accumulation Value exceeds $20,000 and increases by $100 because of
investment performance or premium payments, the Death Benefit will increase by
$250. A Policy with an Accumulation Value of $30,000 will provide a Death
Benefit of $75,000 ($30,000 x 250%); an Accumulation Value of $40,000 will
provide a Death Benefit of $100,000 ($40,000 x 250%); and, an Accumulation Value
of $50,000 will provide a Death
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Benefit of $125,000 ($50,000 x 250%).
Similarly, so long as Accumulation Value exceeds $20,000, each dollar
decrease in Accumulation Value will reduce the Death Benefit by $2.50. If, for
example, the Accumulation Value is reduced from $25,000 to $20,000 because of
partial withdrawals, charges or negative investment performance, the Death
Benefit will be reduced from $62,500 to $50,000.
Option B. The Death Benefit is the Specified Amount plus the Accumulation
Value or, if greater, the applicable corridor percentage of the Accumulation
Value at the end of the Valuation Period that includes the Insured's date of
death. The corridor percentage is the same as under Option A: 250% at Attained
Age 40 or younger on the Policy anniversary before the date of death, and for an
Attained Age over 40 on that Policy anniversary the percentage declines as shown
in the Corridor Percentage Table. The amount of the Death Benefit will always
vary as the Accumulation Value varies but will never be less than the Specified
Amount.
OPTION B EXAMPLE. Assume that the Insured is age 40 or younger. A Policy
with a Specified Amount of $50,000 will generally provide a Death Benefit of
$50,000 plus Accumulation Value. For example, for a Policy with Accumulation
Value of $5,000, the Death Benefit will be $55,000 ($50,000 + $5,000); for an
Accumulation Value of $10,000, the Death Benefit will be $60,000 ($50,000 +
$10,000). The Death Benefit, however, must be at least 250% of Accumulation
Value. As a result, if the Accumulation Value exceeds approximately $33,334, the
Death Benefit will be greater than the Specified Amount plus Accumulation Value.
Each additional dollar of Accumulation Value above $33,334 will increase the
Death Benefit by $2.50. If the Accumulation Value exceeds $33,334 and increases
by $100 because of investment performance or premium payments, the Death Benefit
will increase by $250. For a Policy with Accumulation Value of $20,000, the
Death Benefit will be $70,000 (Specified Amount $50,000 plus $20,000
Accumulation Value); for an Accumulation Value of $30,000, the Death Benefit
will be $80,000 ($50,000 plus $30,000); and for an Accumulation Value of
$50,000, the Death Benefit will be $125,000 ($50,000 x 250% is greater than
$50,000 plus $50,000).
Similarly, any time Accumulation Value exceeds $33,334, each dollar taken
out of Accumulation Value will reduce the Death Benefit by $2.50. If, for
example, the Accumulation Value is reduced from $40,000 to $35,000 because of
partial surrenders, charges, or negative investment performance, the Death
Benefit will be reduced from $100,000 to $87,500.
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If at any time, however, the Accumulation Value multiplied by the applicable
corridor percentage is less than the Specified Amount plus the Accumulation
Value, the Death Benefit will be the Specified Amount plus the Accumulation
Value.
If you want favorable investment performance to:
. increase your Death Benefit, you should:
. choose Option A if your Accumulation Value times corridor
percentage is greater than your Specified Amount, or
. choose Option B if:
- your Accumulation Value times corridor percentage is
less than your Specified Amount, or
- your Accumulation Value times corridor percentage is
greater than your Specified Amount plus Accumulation
Value
. keep your cost of insurance charges to a minimum, you should:
. choose Option A if your Accumulation Value times corridor
percentage is less than your Specified Amount, or
. choose Option B if your Accumulation Value times corridor
percentage is greater than your Specified Amount.
Change in Death Benefit Option. You may change the Death Benefit option at
any time by sending us a written request. The effective date of a change will be
the Monthly Deduction Date on or following the date we receive the written
request. A change may have Federal Tax consequences. (See Federal Income Tax
Considerations, page ___.)
If you change from Option A to Option B, the Specified Amount will equal
the Specified Amount before the change minus the Accumulation Value on the
effective date of the change. If you change from Option B to Option A, the
Specified Amount after the change will equal the Death Benefit under Option B on
the effective date of change. You cannot change your Death Benefit option if the
Specified Amount remaining in force after the change would be less than $50,000.
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An increase in Specified Amount due to a Death Benefit option change will
increase the Monthly Deduction and the Guaranteed Coverage Premium.
A change in the Death Benefit option may affect subsequent cost of
insurance charges which vary with our Net Amount at Risk. In addition, a change
may affect subsequent monthly policy charges. (See Charges and Deductions, page
___.)
Change in Specified Amount. Subject to certain limitations, you may
increase the Specified Amount of your Policy at any time and may decrease the
Specified Amount at any time after the first two Policy Years. A change in
Specified Amount may affect the cost of insurance rate and our Net Amount at
Risk, both of which may affect your cost of insurance charge and have Federal
Tax consequences. (See Cost of Insurance, page ___ and Federal Income Tax
Considerations, page ___.)
The Specified Amount after a decrease may not be less than $50,000.
If following the decrease in Specified Amount, the Policy would not comply
with the maximum premium limitations required by federal tax law, the decrease
may be limited or a portion of Accumulation Value may be returned to you at your
election, to the extent necessary to meet these requirements.
You cannot decrease the Specified Amount if the Insured's Attained Age
exceeds 94. A decrease in Specified Amount will take effect on the Monthly
Deduction Date which coincides with or next follows the date we receive your
written request.
If you want to increase the Specified Amount, you must submit a written
supplemental application and provide evidence of insurability. You may have a
different underwriting risk classification for the initial Specified Amount and
each increase in Specified Amount. (See Charges from Accumulation Value, page
___.) An additional premium may be required. (See Premiums Upon Increase in
Specified Amount, page ___.) The minimum amount of any increase is $5,000. You
cannot increase the Specified Amount if the Insured's Attained Age is over 75.
An increase in the Specified Amount will increase certain charges. Those charges
will be deducted from the Accumulation Value on each Monthly Deduction Date. An
increase in the Specified Amount during the time the Guaranteed Coverage Benefit
provision is in effect will increase the Guaranteed Coverage Premium
requirement. (See Charges and Deductions, page ___.)
You have a "free look period" for each increase in Specified
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Amount. The free look period will apply only to the increase in Specified
Amount. (See Refund Privilege, page ___.)
Methods of Affecting Insurance Protection. Your "pure insurance protection"
will be the difference between your Death Benefit and your Accumulation Value.
You may increase or decrease the pure insurance protection provided by a Policy
as your insurance needs change. You can change the pure insurance protection by
increasing or decreasing the Specified Amount, changing the level of premium
payments, or making a partial surrender of the Policy. Some of these changes may
have federal tax consequences. Although the consequences of each change will
depend upon individual circumstances, they can be summarized as follows:
. A decrease in Specified Amount will, subject to the applicable
corridor percentage limitations, decrease insurance protection and
cost of insurance charges.
. An increase in Specified Amount may increase pure insurance
protection, depending on the amount of Accumulation Value and the
corridor percentage limitation. If insurance protection is increased,
the Policy charges generally increase as well.
. If Option A is in effect, increased premium payments may reduce pure
insurance protection, until the corridor percentage of Accumulation
Value exceeds the Specified Amount. Increased premiums should also
increase the amount of funds available to keep the Policy in force.
. If Option A is in effect, reduced premium payments generally will
increase the amount of pure insurance protection, depending on the
corridor percentage limitations. Reducing premium payments may also
result in a reduced amount of Accumulation Value and increase the
possibility that the Policy will lapse.
. A partial surrender will reduce the Death Benefit. However, a partial
surrender only affects the amount of pure insurance protection if the
percentage from the Corridor Percentage Table is applicable in
determining the Death Benefit. Otherwise, the decrease in Death
Benefit is offset by the amount of Accumulation Value withdrawn. The
primary use of a partial surrender is to withdraw Accumulation Value.
GUARANTEED COVERAGE BENEFIT
We will keep the Policy in force for the first two Policy Years so
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long as the sum of premiums paid at any time during such period is at least:
. the sum of Guaranteed Coverage Premium for each month from the
start of the period, including the current month, and
. partial surrenders and Policy Debt.
DURATION OF THE POLICY
The Policy will remain in force so long as the Surrender Value is
sufficient to pay the Monthly Deduction. Where, however, the Surrender Value is
insufficient to pay the Monthly Deduction and the grace period expires without
an adequate payment, the Policy will lapse and terminate without value. (See
Grace Period and Reinstatement, page ___.)
ACCUMULATION VALUE
Determination of Accumulation Value. On each Valuation Date, Accumulation
Value is determined as follows:
. the aggregate of the value in each subaccount, determined by
multiplying a subaccount's unit value by the number of units in
the subaccount; plus
. the value in the Fixed Account; plus
. Net Premiums received on the Valuation Date, plus
. Accumulation Value securing Policy Debt; less
. partial surrenders, and related charges, processed on that
Valuation Date; less
. any Monthly Deduction processed on that Valuation Date; less
. any federal or state income taxes.
The number of subaccount units allocated to the Policy is determined after
any transfers among subaccounts, or the Fixed Account (and deduction of transfer
charges), but before any other Policy transactions on the Valuation Date.
Determination of Unit Value. The unit value of each subaccount is equal
to:
. the per share net asset value of the corresponding
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Eligible Portfolio on the Valuation Date, multiplied by
. the number of shares held by the subaccount, after the purchase
or redemption of any shares on that date, minus
. the Daily Asset Charge, and divided by
. the total number of units held in the subaccount on the Valuation
Date, after any transfers among subaccounts, or the Fixed Account
(and deduction of transfer charges), but before any other Policy
transactions.
PAYMENT OF POLICY BENEFITS
Death Benefit Proceeds will usually be paid within seven days after we
receive Satisfactory Proof of Death. Policy loans and surrenders will ordinarily
be paid within seven days after receipt of your written request. We may defer
payment of any surrender, refund or Policy loan until a premium payment made by
check clears the banking system. Payments may also be postponed in certain other
circumstances. (See Postponement of Payments, page ___.) You can decide how
benefits will be paid. During the Insured's lifetime, you may arrange for the
Death Benefit Proceeds to be paid in a lump sum or under one or more of the
optional methods of payment described below. These choices are also available if
the Policy is surrendered. When Death Benefit Proceeds are payable in a lump sum
and no election of an optional payment method is in force at the death of the
Insured, the Beneficiary may select one or more of the optional payment methods.
If you or the Beneficiary do not elect one of these options, we will pay the
benefits in a lump sum.
An election or change of method of payment must be in writing. A change in
Beneficiary revokes any previous election. Further, if the Policy is assigned,
any amount due to the assignee will be paid first in a lump sum. The balance, if
any, may be applied under any payment option. Once payments have begun, the
payment option may not be changed.
Optional Methods of Payment. In addition to a lump sum payment of benefits
under the Policy, any proceeds to be paid under the Policy may be paid in any of
the following four methods:
Option 1. Equal Installments for a Fixed Number of Years. Installments will
include interest at the effective rate of 3.5% per year or at a higher rate, as
our option.
Option 2. Installments for Life with the Option to Choose a Period
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Certain. The fixed period may be 10 or 20 years.
Option 3. Equal Installments of a Fixed Amount Payable Annually, semi-
annually, quarterly, or monthly. The sum of the installments paid in one year
must be at least $40.00 for each $1,000.00 of proceeds. Installments will be
paid until the total of the following amount is exhausted: (1) the net sum
payable; plus (2) interest at the effective rate of 3.5% per year; plus (3) any
additional interest that we may elect to pay. The final installment will be the
balance of the proceeds payable plus interest.
Option 4. Interest Only. We will hold the proceeds and pay interest at the
effective rate of 3.5% per year or at a higher rate, at our option. On interest
due dates, the payee may withdraw an amount of at least $100.00 from the amount
held.
Any amount left with us for payment under a settlement option will be
transferred to our General Account and will not be affected by the investment
performance associated with the Separate Account. We may make other options
available in the future.
When proceeds become payable in accordance with a settlement option, the
Policy will be exchanged for a supplementary contract specifying all rights and
benefits. The effective date will be the date of the Insured's death or other
termination of the Policy.
Amounts under the supplemental contact remaining payable after the
Beneficiary's death will be paid to the estate of the Beneficiary or in any
other manner provided for in the supplementary contract or as otherwise provided
under applicable law.
General Provisions for Settlement Options. If the amount held falls below
$2,000.00, we will pay the entire amount held to the payee. The first
installment under Option 1, 2 or 3 will be paid the date the proceeds are
available. With our consent, the first installment may be postponed for up to
ten years. If payment is postponed, the proceeds will accumulate with compound
interest at the effective rate of 3.5% per year.
To avoid paying installments of less than $20.00 each, we will:
. change the installments to a quarterly, semi-annual or annual
basis; and/or
. reduce the number of installments.
If you elect an option, you may restrict the Beneficiary's right to assign,
encumber, or obtain the discounted present value of any unpaid amount.
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Except as permitted by law, unpaid amounts are not subject to claims of a
Beneficiary's creditors.
At our option, a Beneficiary may be permitted to receive the discounted
present value of installments, except under option 2. If the payee dies, under
Option 1 or 2 we will pay the discounted present value of any unpaid fixed-
period installments to the payee's estate except Option 2 lifetime. Under Option
3 or 4, we will pay any balance to the payee's estate. The effective interest
rate used to compute discounted present value is 3.5%. With our consent, the
option elected may provide for payment in another manner.
Limitations. You must obtain our consent to have an option under which
proceeds are payable to:
. joint or successive payees, or
. other than a natural person.
POLICY RIGHTS
LOAN BENEFITS
Loan Privileges. You can borrow money from us using your Policy as security
for the loan. The minimum loan amount is $100. Except as otherwise required by
applicable state law or regulation:
. during the first two Policy Years, you cannot borrow more than
75% of the Surrender Value, as calculated at the end of the
Valuation Period during which your loan request is received
. after the first two Policy years, you can borrow up to 90% of the
Surrender Value, as calculated at the end of the Valuation Period
during which your loan request is received
Preferred loans accrue interest at a lower rate. You cannot obtain a
preferred loan until after the seventh Policy Year. We determine whether a loan
is preferred at the time the loan is made. The amount available for a preferred
loan is equal to the lesser of:
. the above-mentioned loan limits, or
. the Accumulation Value less Policy Debt and less premiums paid
(adjusted by partial surrenders).
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The loan may be repaid in whole or in part during the Insured's lifetime.
Loans generally are funded within seven days after receipt of a written request.
(See Postponement of Payments, page ___.) Loans may have tax consequences. (See
Federal Income Tax Considerations, page ___.)
Interest. Loans will accrue interest on a daily basis at a rate of 6.0% per
year. Interest is due and payable on each Policy anniversary date or when a loan
payment is made if earlier. If unpaid, interest will be added to the amount of
the loan and bear interest at the same rate.
Amounts held to secure Policy loans will earn interest at the annual rate
of 4.5%, or 6.0% on preferred loans, credited on the Policy anniversary. We will
allocate interest to the subaccounts and the Fixed Account on each Policy
anniversary in the same proportion that premiums are being allocated to those
subaccounts and the Fixed Account at that time.
Effect of Policy Loans. When a loan is made, we transfer Accumulation Value
equal to the loan amount from the Separate Account and the Fixed Account to our
General Account as security for the Policy Debt. The Accumulation Value
transferred will be deducted from the subaccounts and the Fixed Account in
accordance with your instructions. The minimum amount which can remain in a
subaccount or the Fixed Account as a result of a loan is $100. If you do not
provide allocation instructions, the Accumulation Value transferred will be
allocated among the subaccounts and the Fixed Account pro-rata. If allocation
instructions conflict with the $100 minimum described above, we may allocate the
Accumulation Value transferred among the subaccounts and the Fixed Account pro-
rata. We will also transfer Accumulation Value from the subaccounts and the
Fixed Account to the General Account to secure unpaid loan interest. We will
allocate this transfer among the subaccounts and the Fixed Account as described
above. We will not impose a charge for these transfers. A Policy loan may have
tax consequences. (See Federal Income Tax Considerations, page ___.)
A Policy loan may permanently affect the Accumulation Value, even if
repaid. The effect could be favorable or unfavorable depending on whether the
investment performance of the Subacccount(s)/Fixed Account chosen by you is
greater or less than the interest rate credited to the Accumulation Value held
in the General Account to secure the loan. In comparison to a Policy under which
no loan was made, the Accumulation Value will be lower if the General Account
interest rate is less than the investment performance of the subaccount(s)/Fixed
Account, and greater if the General Account interest rate is higher than the
investment performance of the subaccount(s)/Fixed Account. Since your Death
Benefit may be affected by Accumulation Value, a Policy loan may also affect the
amount of the Death Benefit, even if repaid.
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Policy Debt. Policy Debt reduces Death Benefit Proceeds and Surrender
Value. If the Policy Debt exceeds the Accumulation Value less any surrender
charge, you must pay the excess or your Policy will lapse. We will notify you of
the amount which must be paid. (See Grace Period and Reinstatement, page ___.)
Repayment of Policy Debt. If we receive payments while a Policy loan is
outstanding, those payments are treated as additional premiums, unless you
request otherwise. As Policy Debt is repaid, we will transfer Accumulation Value
equal to the loan amount repaid from the General Account to the subaccounts and
the Fixed Account. We will allocate the transfers among the subaccounts and the
Fixed Account in the same proportion that premiums are being allocated at the
time of repayment. We will make the allocation at the end of the Valuation
Period during which the repayment is received. If you do not repay the Policy
Debt, we will deduct the amount of the Policy Debt from any amount payable under
the Policy.
SURRENDERS
During the life of the Insured, you can surrender the Policy in whole or in
part by sending us a written request. The maximum amount available for surrender
is the Surrender Value at the end of the Valuation Period during which the
surrender request is received at our Home Office. Surrenders will generally be
paid within seven days of receipt of the written request. (See Postponement of
Payments, page ___.) Any proceeds payable upon full surrender shall be paid in
one sum unless an optional method of payment is elected. (See Payment of Policy
Benefits, page ___.) Surrenders may have tax consequences. (See Federal Income
Tax Considerations, page ___.)
Full Surrenders. If the Policy is being fully surrendered, you must return
the Policy to us with your request. Coverage under the Policy will terminate as
of the date of a full surrender. We may deduct a surrender charge. (See
Surrender Charge, page ___.)
Partial Surrenders. The amount of a partial surrender may not exceed the
Surrender Value at the end of the Valuation Period during which the request is
received less an amount sufficient to cover Monthly Deductions for three months.
The minimum partial surrender is $100.
The Accumulation Value will be reduced by the amount of partial surrender
and any applicable partial surrender charge. (See Partial Surrender Charge, page
___.) This amount will be deducted from the Accumulation Value at the end of the
Valuation Period during which the request is received. The deduction will be
allocated to the subaccounts and the Fixed Account according to your
instructions, provided that the
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minimum amount remaining in a subaccount as a result of the allocation is $100.
If you do not provide allocation instructions or if your allocation instructions
conflict with the $100 minimum described above, we will allocate the partial
surrender among the subaccounts and the Fixed Account pro-rata.
Partial surrenders reduce the Death Benefit by the amount the Accumulation
Value is reduced. If Option A is in effect, the Specified Amount will be reduced
by the amount of the partial surrender. Where increases in Specified Amount
occurred, a partial surrender will reduce the increases in order of the more
recent increase first, and finally the initial Specified Amount. Thus, partial
surrenders may affect the cost of insurance charge and the Net Amount at Risk.
(See Cost of Insurance, page ___; Methods of Affecting Insurance Protection,
page ___.) If Option B is in effect, the Specified Amount will not change, but
the Accumulation Value will be reduced.
The Specified Amount remaining in force after a partial surrender may not
be less than the minimum Specified Amount shown in the following table:
MINIMUM SPECIFIED AMOUNT TABLE
During Policy Year Minimum Specified Amount
------------------ ------------------------
1 $50,000
2 $45,000
3 $40,000
4 $35,000
Thereafter $25,000
The amount of any partial surrender will generally be paid within seven (7)
days after receipt of your written request. (See Postponement of Payments, page
___.)
TRANSFERS
You can transfer Accumulation Value among the subaccounts or from the
subaccounts to the Fixed Account as often as you like. You can make transfers in
person, by mail, or, if a telephone transfer authorization form is on file, by
telephone. The minimum transfer from a subaccount is $250, or the balance of the
subaccount, if less. The minimum that may remain in a subaccount after a
transfer is $100. We will make transfers and determine all values in connection
with transfers on the later of the end of the Valuation Period which includes
the requested transfer date or during which the transfer request is received.
Accumulation Value on the date of a transfer will not be affected except to the
extent of the transfer charge, if applicable. The first four transfers in a
Policy Year will be free.
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We will charge $25 for each additional transfer. Such charge will be deducted
from the amount transferred. (See Transfer Charge, page ___.) Transfers
resulting from Policy loans will not be subject to a transfer charge or be
counted for purposes of determining the number of free transfers.
During the thirty day period beginning on the Policy anniversary, you may
make one transfer from the Fixed Account to the subaccounts. This transfer is
free. The maximum amount you can transfer from the Fixed Account to the
subaccounts is the greater of:
. twenty-five percent of the amount in the Fixed Account, or
. $1,000.
If we receive a request to transfer funds out of the Fixed Account before the
Policy anniversary, the transfer will be made at the end of the Valuation Period
during which the Policy anniversary occurs. If we receive a proper transfer
request within 30 days after the Policy anniversary, the transfer will be made
as of the end of the Valuation Period in which we received the transfer request.
We will employ reasonable procedures to confirm that the transfer
instructions communicated by telephone are genuine. These procedures may include
some form of personal identification before acting, providing you written
confirmation of the transaction, and making a tape recording of the telephoned
instructions.
REFUND PRIVILEGE
You have a free look period in which to examine a Policy and return it for
a refund. If the Policy is canceled during the free look period, you will
receive a refund equal to premiums paid adjusted by investment gains during the
15-day period such premiums have been allocated to the VIP Money Market
Portfolio and by investment gains and losses thereafter. (See Allocation of
Premiums, page ___.) A free look period also applies to any increase in
Specified Amount. If you cancel the increase, you will receive the amount
premiums paid attributable to such increase in Specified Amount adjusted by
investment gains or losses.
To cancel the Policy, you should mail or deliver the Policy to our Home
Office or to the office of one of our agents. We may delay paying a refund of
premiums paid by check until the check has cleared your bank. (See Postponement
of Payments, page ___.)
RIGHT TO EXCHANGE FOR A UNIVERSAL LIFE POLICY
During the first two Policy years, you can exchange the Policy for
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a universal life policy we issue. No evidence of insurability will be required
for the exchange. The new policy will have the same Date of Issue and premium
class as the Policy. Any rider in force with the Policy will be issued with the
new policy. You can have the specified amount of the new policy equal:
. if under Death Benefit option A, the Death Benefit less Policy
Debt, or
. if under Death Benefit option B, the Death Benefit minus
Accumulation Value less Policy Debt.
The new policy will become effect when:
. we have received a written request for the exchange,
. we have received the Policy, and
. all financial contractual and administrative requirements have
been met and processed.
PAYMENT AND ALLOCATION OF PREMIUMS
ISSUANCE OF A POLICY
If you want to purchase a Policy, you must complete an application and
submit it to our Home Office. We will only issue a Policy to individuals 75
years of age or less on their last birthday who supply satisfactory evidence of
insurability. Acceptance is subject to our underwriting rules.
The Date of Issue is used to determine Policy anniversary dates, Policy
Years and Policy months.
PREMIUMS
You must pay the initial premium for the Policy to be in force. The initial
premium must be at least 1/12 of the first year Guaranteed Coverage Premium.
The initial premium and all other premiums are payable at our Home Office.
Subject to certain limitations, you have flexibility in determining the
frequency and amount of premiums since the Planned Periodic Premium schedule is
not binding on you.
PREMIUM FLEXIBILITY
You may make unscheduled premium payments at any time in any amount,
subject to the premium limitations described herein.
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Planned Periodic Premiums. At the time the Policy is issued, you can
determine a Planned Periodic Premium schedule. The amounts and frequency of the
Planned Periodic Premiums will be shown on the Policy Data Page. During the
Guaranteed Coverage Benefit period, the Planned Periodic Premium must be at
least the Guaranteed Coverage Premium. You are not required to pay premiums in
accordance with this schedule.
You can change the frequency and amount of Planned Periodic Premiums by
sending a written request to our Home Office. We may limit any increase in
premium to comply with applicable federal tax law. We will send premium payment
notices annually, semi-annually, quarterly or monthly depending upon the
frequency of the Planned Periodic Premiums. Payment of the Planned Periodic
Premiums does not guarantee that the Policy will remain in force unless the
Guaranteed Coverage Benefit provision is in effect.
Premium Limitations. Total premiums paid cannot exceed the current maximum
premium limitations established by federal tax laws. If a premium is paid which
would cause total premiums to exceed such maximum premium limitations, we will
only accept that portion of the premium equal to the maximum. We will return any
part of the premium in excess of that amount or apply it as otherwise agreed. No
further premiums will be accepted until permitted under the laws prescribing
maximum premium limitations. We may refuse to accept a premium or require
additional evidence of insurability if the premium would increase Net Amount at
Risk. We may also establish a minimum acceptable premium amount.
Premiums Upon Increase in Specified Amount. If you request an increase in
the Specified Amount, we will notify you if any additional premium is required.
Whether additional premium will be required will depend upon
. the Accumulation Value of the Policy at the time of the increase,
and
. the amount of the increase you request.
ALLOCATION OF PREMIUMS AND ACCUMULATION VALUE
Allocation of Premiums. After deduction of premium charges, premiums are
allocated according to your instructions. (See Charges and Deductions, page
____.) You can change the allocation without charge by providing proper
notification to our Home Office. Your notice must include the policy number to
which the instructions apply. Your revised allocation instructions will apply to
premiums received by us on or after the date proper notification is received.
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Accumulation Value. The value of subaccounts will vary with the investment
performance of these subaccounts and the you bear the risk that those
investments might actually lose money. The performance of these investments
affects the Policy's Accumulation Value, and may affect the Death Benefit as
well.
GRACE PERIOD AND REINSTATEMENT
Grace Period. If the Surrender Value is insufficient to pay the Monthly
Deduction, you have a grace period of sixty-one days to pay an additional
premium. The grace period begins on the date Surrender Value is insufficient to
cover the Monthly Deduction. At the beginning of the grace period, we will mail
you notice to your last known address we have on file advising you of the
necessary additional premium. If you do not pay the additional premium during
the grace period, the Policy will terminate. If the Insured dies during the
grace period, any overdue Monthly Deductions and Policy Debt will be deducted
from the Death Benefit Proceeds.
Reinstatement. A Policy may be reinstated any time within five years after
termination. A Policy cannot be reinstated if it was surrendered. Reinstatement
will be effected based on the Insured's underwriting classification at the time
of the reinstatement.
Reinstatement is subject to the following:
. evidence of insurability satisfactory to us;
. reinstatement or repayment of Policy Debt;
. payment of Monthly Deductions not collected during the grace
period;
. payment of the premium sufficient to pay the Monthly Deduction
for three months after the date of reinstatement.
The original Date of Issue, and the Effective Dates of increases in
Specified Amount (if applicable), will be used for purposes of calculating
Monthly Deductions and the surrender charge. If any Policy Debt was reinstated,
the amount of the debt will be held in our General Account. During the lapse
period, Policy Debt will accrue interest at a rate of 6%. Accumulation Value
will then be calculated as described under Accumulation Value on page ___. The
Effective Date of reinstatement
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will be the first Monthly Deduction Date on or next following the date of we
approve the application for reinstatement.
CHARGES AND DEDUCTIONS
PREMIUM CHARGES
Your premiums will be reduced by a sales charge, premium taxes and a
transaction charge before being allocated in the subaccounts or the Fixed
Account.
Sales Charge. The sales charge compensates us for the costs of selling the
Policy. These costs include agents' commissions, printing prospectuses and sales
literature and advertising.
Premium Taxes. States and certain other jurisdictions tax premium payments
and levy other charges. The level of the tax varies based upon the jurisdiction
in which the Insured resides. Accordingly, you should notify us if the Insured
moves. The taxes are charges against the Company, so you cannot deduct the tax
payments on your income tax return.
Transaction Charge. The transaction charge compensates us for the costs of
sending premium bills and transaction confirmations to you.
CHARGES FROM ACCUMULATION VALUE
We will deduct the following charges from the Accumulation Value:
Monthly Deduction. The Monthly Deduction is the sum of the cost of
insurance charge, applicable charge for any riders, and the administrative
charge. The Monthly Deduction compensates us for providing the insurance
benefits and administering the Policy. We deduct the Monthly Deduction as of the
Date of Issue and on each Monthly Deduction Date thereafter. We will allocate
the deduction among the subaccounts and the Fixed Account pro-rata. The cost of
insurance and the administrative charge are described in more detail below.
Because portions of the Monthly Deduction, such as the cost of insurance, can
vary from month to month, the Monthly Deduction itself may vary in amount from
month to month.
Cost of Insurance. For the initial Specified Amount, the cost of insurance
rate will not exceed those in the Schedule of Monthly Guaranteed Maximum Cost of
Insurance Rates shown on the Policy Data Page. These guaranteed rates are based
on the Insured's age last birthday. The current rates range between 60% and 100%
of the guaranteed rates. Any change in the current cost of insurance rates will
apply to all persons
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of the same age, sex, risk class and Specified Amount.
Guaranteed Maximum Cost of Insurance Rates are equal to the 1980 Insurance
Commissioners Standard Ordinary Smoker or Non-Smoker, Male or Female Mortality
Tables. Policies issued on a non-sex distinct basis are based upon the 1980
Insurance Commissioner's Standard Ordinary Table B assuming 80 male and 20
female lives.
These rates are the maximum that may be charged. The administrative charge
compensates us for the costs of premium billing, record keeping, processing
Death Benefit claims, surrenders and Policy changes, and preparing and mailing
reports. We do not expect to make a profit on the administrative charges.
The underwriting risk class for the initial Specified Amount and the
Specified Amount for any increase may be different. As a result the cost of
insurance rate for the initial Specified Amount and each increase in Specified
Amount may be different. Decreases will also be reflected in the cost of
insurance rate. (See Change in Specified Amount, page ___.)
The actual charges made during the Policy Year will be shown in the annual
report delivered to you.
The rate class of an Insured may affect the cost of insurance rate. We
currently place insureds into either a preferred rate class, standard rate
class, or substandard rate class that involves a higher mortality risk. In an
otherwise identical Policy, an Insured in the standard rate class will typically
have a lower cost of insurance than an Insured in a substandard rate class.
Similarly, in an otherwise identical Policy, an Insured in a preferred rate
class typically has a lower cost of insurance than one in a standard class. If a
Policy is rated at issue with a tabular extra rating, the guaranteed rate is
generally a multiple of the guaranteed rate for a standard issue.
Insureds may also be assigned a flat extra rating to reflect certain
additional risks. The flat extra rating will not impact the cost of insurance
rate but 1/12 of any annualized flat extra cost will be deducted as part of
the Monthly Deduction.
Surrender Charge. The surrender charge is to compensate us for the costs of
distributing the Policy. The charge is based upon the amount of premiums paid on
the Policy and the amount of the surrender premium which is shown on the Policy
Data Page. The surrender premium does not exceed the Securities and Exchange
Commission's Annual Guideline Premium.
No surrender charge will be charged for decreases in Specified Amount.
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The surrender charge is more substantial in early Policy Years.
Accordingly, the Policy is more suitable for long-term purposes.
Transfer Charge. We will make the first four transfers of Accumulation
Value in any Policy Year without a transfer charge. A charge of $25 will be
deducted from the amount transferred for each additional transfer among the
subaccounts or from the subaccounts to the Fixed Account. This charge
compensates us for the costs of effecting the transfer. The transfer charge
cannot be increased.
Partial Surrender Charge. A charge will be deducted from each partial
surrender. The partial surrender charge compensates us for the administrative
costs of processing the surrender. The charge is in proportion to the charge
that would apply to a full surrender. The proportion is calculated by dividing
the Accumulation Value withdrawn by the total Surrender Value. In addition, we
impose a $25 fee for each partial surrender. We do not expect to make a profit
on partial surrender charges.
Daily Charges Against the Separate Account. On each Valuation Date, we will
deduct a Daily Asset Charge from the Separate Account. This charge is to
compensate us for mortality and expense risks. The mortality risk is that
Insureds may live for a shorter time than we assumed. If so, we will have to pay
Death Benefits greater than we estimated. The expense risk is that expenses
incurred in issuing and administering the Policies will exceed our estimates.
Such charge shall not exceed 0.90% annually of the average daily Accumulation
Value of each subaccount, but not the Fixed Account. We will deduct the daily
charge from the Accumulation Value of the Separate Account on each Valuation
Date. The deduction will equal the 0.90% annual rate divided by 365 and
multiplying the result by the number of days since the last Valuation Date. We
will not deduct a Daily Asset Charge from the Fixed Account.
Fees and Expenses Incurred by Eligible Portfolios. In addition, the
managers of the Eligible Portfolios will charge certain fees and expenses
against the Eligible Portfolios. (See Eligible Portfolio Annual Expenses, page
___. Also, see the funds' prospectuses.) No portfolio fees or expenses will be
charged from the Fixed Account.
Taxes. Currently, we will not make a charge against the Separate Account
for federal, state or local income taxes. We may, however, make such a charge in
the future if income or gains within the Separate Account will incur any Federal
tax, or any significant state or local tax treatment of our Company changes. We
would deduct such charges, if any, from the Separate Account and/or the Fixed
Account. We would not realize a profit on such tax charges with respect to the
Policy.
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EXCEPTIONS TO CHARGES
We may reduce the surrender charge, monthly policy charge, cost of
insurance and daily asset charge for, or credit additional amounts on, sales of
the Policy to a trustee, employer, or similar entity where we determine that
such sales result in savings of sales or administrative expenses. In addition,
directors, officers and bona fide full-time employees (and their spouses and
minor children) of the Company or Securities Management and Research, Inc. may
be permitted to purchase the Policy with substantial reductions of surrender
charge, monthly policy charge, cost of insurance or daily asset charge.
The Policy may be sold directly, without compensation, to: (1) a registered
representative, (2) employees, officers, directors, and trustees of our Company
and its affiliated companies, and spouses and immediate family members (i.e.,
children, siblings, parents, and grandparents) of the foregoing, and (3)
employees, officers, directors, trustees and registered representatives of any
broker-dealer authorized to sell the Policy, and spouses and immediate family
member of the foregoing. If sold under these circumstances, a Policy may be
credited in part or in whole with any cost savings resulting from the sale being
direct, rather than through an agent with an associated commission, but only if
such credit will not be unfairly discriminatory to any person.
AMERICAN NATIONAL INSURANCE COMPANY, THE SEPARATE ACCOUNT, THE FUNDS AND THE
FIXED ACCOUNT
AMERICAN NATIONAL INSURANCE COMPANY
We are a stock life insurance company chartered under Texas law in 1905. We
write life, health and accident insurance and annuities and are licensed to do
life insurance business in 49 states, the District of Columbia, Puerto Rico,
Guam and American Samoa. Our home office is located at the American National
Insurance Building, One Moody Plaza, Galveston, Texas 77550. The Moody
Foundation, a charitable foundation established for charitable and educational
purposes, owns approximately 23.7% of our stock and the Libbie S. Moody Trust, a
private trust, owns approximately 37.6%.
We are subject to regulation by the Texas Department of Insurance. In
addition, we are subject to the insurance laws and regulations of other states
within which we are licensed to operate. On or before March 1 of each year we
must submit to the Texas Department of Insurance a filing describing our
operations and reporting on our financial condition and that of the Separate
Account as of December 31 of the preceding year. Periodically, the Department
examines our liabilities and reserves and those of the Separate Account and
certifies their adequacy. A
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full examination of our operations is also conducted periodically by the
National Association of Insurance Commissioners.
THE SEPARATE ACCOUNT
We established the Separate Account under Texas law on July 30, 1987. The
assets of the Separate Account are held exclusively for your benefit and the
benefit of other people entitled to payments under variable life policies we
issue. We are the legal holder of the Separate Account's assets. The assets are
held separate and apart from the General Account assets. We maintain records of
all purchases and redemptions of shares of Eligible Portfolios by each of the
subaccounts. We will at all times maintain assets in the Separate Account with a
total market value at least equal to the reserve and other contract liabilities
of the Separate Account. Liabilities arising out of other aspects of our
business cannot be charged against the assets of the Separate Account. Income,
as well as both realized and unrealized gains or losses from the Separate
Account's assets, are credited to or charged against the Separate Account
without regard to income, gains or losses arising out of other aspects of our
business. If, however, the Separate Account's assets exceed its liabilities, the
excess shall be available to cover the liabilities of our General Account.
The Separate Account is registered with the Securities and Exchange
Commission ("SEC") as a unit investment trust, which is a type of investment
company. Such registration does not involve any SEC supervision of the
management or investment policies or practices of the Separate Account.
The Separate Account will purchase and redeem shares of the Eligible
Portfolios at net asset value. The net asset value of a share is equal to the
total assets of the portfolio less the total liabilities of the portfolio
divided by the number of shares outstanding.
We will redeem shares in the Eligible Portfolios as needed to:
. collect charges,
. pay the Surrender Value,
. secure Policy loans,
. provide benefits, or
. transfer assets from one subaccount to another, or to the Fixed
Account.
Any dividend or capital gain distribution received from an Eligible
Portfolio will be reinvested immediately at net asset value in shares of that
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Eligible Portfolio and retained as assets of the corresponding subaccount.
The Separate Account may include other subaccounts that are not available
under the Policy. We may from time to time discontinue the availability of some
of the subaccounts. If the availability of a subaccount is discontinued, we may
redeem any shares in the corresponding Eligible Portfolio and substitute shares
of another registered, open-end management company.
We may also establish additional subaccounts. Each new subaccount would
correspond to a portfolio of a registered, open-end management company. We would
establish the terms upon which existing Policyowners could purchase shares in
such portfolios.
If any of these substitutions or changes are made, we may change the Policy
by sending an endorsement. We may:
. operate the Separate Account as a management company,
. de-register the Separate Account if registration is no longer
required,
. combine the Separate Account with other separate accounts,
. restrict or eliminate any voting rights associated with the
Separate Account, or
. transfer the assets of the Separate Account relating to the
Policies to another separate account.
We would, of course, not make any changes to the menu of Eligible
Portfolios or to the Separate Account without complying with applicable laws and
regulations. Such laws and regulations may require notice to and approval from
the Policyholders, the SEC and state insurance regulatory authorities.
Since we are the legal holder of the Eligible Portfolio shares held by the
Separate Account, we can vote on any matter that may be voted upon at a
shareholders' meeting. To the extent required by law, we will vote all shares of
the Eligible Portfolios held in the Separate Account at shareholders' meetings
in accordance with instructions we receive from you and other policyowners. The
number of votes for which each policyowner has the right to provide instructions
will be determined as of the record date selected by the Board of Directors of
the American National Fund, the Fidelity Funds or the T. Rowe Price Funds, as
the case may be. We will furnish Policyowners with the proper forms, materials
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and reports to enable them to give us these instructions. We will vote Eligible
Portfolio shares held in each subaccount for which no timely instructions from
policyowners are received and shares held in each subaccount which do not
support Policyowner interests in the same proportion as those shares in that
subaccount for which timely instructions are received. Voting instructions to
abstain on any item to be voted will be applied on a pro rata basis to reduce
the votes eligible to be cast. Should applicable federal securities laws or
regulations permit, we may vote shares of the American National Fund, the
Fidelity Funds or the T. Rowe Price Funds in our own right. We may, if required
by state insurance officials, disregard voting instructions if those
instructions would require shares to be voted to cause a change in the
subclassification or investment objectives or policies of one or more of the
Eligible Portfolios, or to approve or disapprove an investment adviser or
principal underwriter for the Eligible Portfolios. In addition, we may disregard
voting instructions that would require changes in the investment objectives or
policies of any Eligible Portfolio or in an investment adviser or principal
underwriter for the Eligible Portfolios, if we reasonably disapprove those
changes in accordance with applicable federal regulations. If we do disregard
voting instructions, we will advise Policyowners of that action and our reasons
for the action in the next annual report or proxy statement to Policyowners.
The Separate Account is not the only separate account that invests in the
Eligible Portfolios. Other separate accounts, including those funding other
variable life policies, variable annuity contracts, other insurance contracts
and retirement plans, invest in certain of the Eligible Portfolios. We do not
currently see any disadvantages to you resulting from the Eligible Portfolios
selling shares to fund products other than the Policy. However, there is a
possibility that a material conflict of interest may arise between the
Policyowners and the owners of variable life insurance policies and the owners
of variable annuity contracts whose values are allocated to another separate
account investing in the Eligible Portfolios. In addition, there is a
possibility that a material conflict may arise between the interests of
Policyowners or owners of other contracts and the retirement plans which invest
in the Eligible Portfolios or those plans participants. If a material conflict
arises, we will take any necessary steps, including removing the Eligible
Portfolio from the Separate Account, to resolve the matter. The Board of
Directors of each Eligible Portfolio will monitor events in order to identify
any material conflicts that may arise and determine what action, if any, should
be taken in response to those events or conflicts. See the accompanying
prospectuses for the Eligible Portfolios for more information.
THE FUNDS
Each of the twenty-one subaccounts of the Separate Account will invest in
shares of a corresponding Eligible Portfolio.
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The investment objectives and policies of each Eligible Portfolio are
summarized below. The Eligible Portfolios may not achieve their stated
objectives. You will be notified of any material change in the investment policy
of any portfolio in which you have an interest.
Each Eligible Portfolio's total operating expenses will include fees for
management, shareholder services and other expenses, such as custodial, legal,
and other miscellaneous fees. The prospectuses for the American National Fund,
the Fidelity Funds and the T. Rowe Price Funds contain more detailed information
about the Eligible Portfolios, including a description of investment objectives,
restrictions, expenses and risks. You should carefully read those prospectuses
and retain them for future reference.
You should periodically review your allocation to make sure that your
investment choices are still appropriate in light of any market developments or
changes in your personal financial situation.
The American National Fund's current Eligible Portfolios and respective
investment objectives are as follows:
The AN Money Market Portfolio seeks the highest current income consistent
with the preservation of capital and maintenance of liquidity.
The AN Growth Portfolio seeks to achieve capital appreciation.
The AN Balanced Portfolio seeks to conserve principal, produce reasonable
current income, and achieve long-term capital appreciation.
The AN Managed Portfolio seeks to achieve growth of capital and/or current
income.
Securities Management and Research, Inc. ("SM&R") is the investment adviser
and manager of the American National Fund. SM&R also provides investment
advisory and portfolio management services to our Company and other clients.
SM&R maintains a staff of experienced investment personnel and related support
facilities.
The Fidelity Funds' current Eligible Portfolios and respective investment
objectives are as follows:
VIP Money Market Portfolio ... seeks as high a level of current income as
is consistent with the preservation of capital and liquidity.
VIP Investment Grade Bond Portfolio ... seeks as high a level of current
income as is consistent with the preservation of capital.
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VIP High Income Portfolio ... seeks a high level of current income while
also considering growth of capital.
VIP Asset Manager Portfolio ... seeks high total return with reduced risk
over the long-term by allocating its assets among stocks, bonds and short-term
instruments.
VIP Asset Manager: Growth Portfolio ... seeks to maximize total return by
allocating its assets among stocks, bonds, short-term instruments, and other
investments.
VIP Balanced Portfolio ... seeks both income and growth of capital.
VIP Equity-Income Portfolio ... seeks reasonable income. The fund will
also consider the potential for capital appreciation. The fund seeks a yield
which exceeds the composite yield on the securities comprising the S&P 500.
VIP Index 500 Portfolio ... seeks investment results that correspond to
the total return of common stocks publicly traded in the United States, as
represented by the S&P 500.
VIP Growth and Income Portfolio ... seeks high total return through a
combination of current income and capital appreciation.
VIP Mid Cap Portfolio ... seeks long-term growth of capital.
VIP Growth Opportunities Portfolio ... seeks to provide capital growth.
VIP Contrafund Portfolio ... seeks long-term capital appreciation.
VIP Growth Portfolio ... seeks capital appreciation.
VIP Overseas Portfolio ... seeks long-term growth of capital.
Fidelity Management and Reseach Company ("FMR"), the Fidelity Funds'
investment adviser, was founded in 1946. FMR provides a number of mutual funds
and other clients with investment research and portfolio management services.
It maintains a large staff of experienced investment personal and a full
compliment of related support facilities. Fidelity Management & Research (U.K.)
Inc. ("FMR U.K.") and Fidelity Management and Research (Far East) Inc. ("FMR Far
East") are wholly owned subsidiaries of FMR that provide research with respect
to foreign securities. FMR U.K. and FMR Far East maintain their principal
business offices in London and Tokyo, respectively. As of December 31, 1998,
FMR advised funds having more than 39 million shareholder accounts
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with a total value of more than $694 billion. Fidelity Distributors Corporation
distributes shares for the Fidelity Funds. FMR Corp. is the holding company for
the Fidelity companies. Through ownership of voting common stock, Edward C.
Johnson 3d, President and a Trustee of the Fidelity Funds, and various trusts
for the benefit of Johnson family members form a controlling group with respect
to FMR Corp.
The T. Rowe Price Funds' current Eligible Portfolios and respective
investment objectives are as follows:
T. Rowe Price International Series, Inc.
T. Rowe Price International Stock Portfolio ... seeks to provide long-term
growth of capital through investments primarily in common stocks of established
non-U.S. companies.
T. Rowe Price Equity Series, Inc.
T. Rowe Price Mid-Cap Growth Portfolio ... seeks to provide long-term
capital appreciation by investing in mid-cap stocks with potential for above-
average earnings growth.
T. Rowe Price Equity Income Portfolio ... seeks to provide substantial
dividend income as well as long-term growth of capital through investments in
common stocks of established companies.
T. Rowe Price Associates, Inc. is responsible for selection and management
of the portfolio investments of T. Rowe Price Equity Series, Inc. Rowe Price-
Fleming International, Inc., incorporated in 1979 as a joint venture between T.
Rowe Price Associates, Inc. and Robert Fleming Holdings Limited, is responsible
for selection and management of the portfolio investments of T. Rowe Price
International Series, Inc.
We have entered into or may enter into agreements with the investment
advisor or distributor for certain of the Eligible Portfolios. These agreements
require us to provide administrative and other services. In return, we receive a
fee based upon an annual percentage of the average net assets amount we invested
on behalf of the Separate Account and our other separate accounts. Some
advisors or distributors may pay us a greater percentage than others.
FIXED ACCOUNT
You can allocate some or all of your premium payments to the Fixed Account.
You can also, subject to certain limitations, transfer amounts from the Separate
Account to the Fixed Account or from the Fixed Account to the Separate Account.
(See Transfers, page ___.)
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We establish the Declared Rate and may adjust the rate each month; however,
we guarantee an effective annual rate of at least 4.0% compounded daily.
Payments allocated to the Fixed Account and transfers from the Separate
Account to the Fixed Account are placed in our General Account which supports
insurance and annuity obligations. The General Account includes all of our
assets, except those assets segregated in our separate accounts. We have
discretion over the investment of assets of the General Account, subject to
applicable law. We bear the risk that the investments in the General Account
will lose money. You bear the risk that the Declared Rate will fall to a lower
rate.
Interests in the General Account have not been registered with the SEC as
securities and the General Account has not been registered as an investment
company. Accordingly, neither the General Account nor any interest in the
General Account is generally subject to the provisions of federal securities
laws. The SEC has not reviewed the disclosures in this prospectus relating to
the Fixed Account portion of the Contract; however, disclosures regarding the
Fixed Account portion of the Contract may be subject to generally applicable
provisions of the federal securities laws regarding the accuracy and
completeness of statements made in prospectuses.
FEDERAL TAX MATTERS
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT TAX ADVICE.
INTRODUCTION
The following summary provides a general description of the federal income
tax considerations relating to the Policy. This summary is based upon our
understanding of the present federal income tax laws as they are currently
interpreted by the Internal Revenue Service ("IRS"). Because of the complexity
of such laws and the fact that tax results will vary according to the factual
status of the specific Policy involved, tax advice from a qualified tax advisor
may be needed by a person contemplating the purchase of a Policy or the exercise
of certain elections under the Policy. These comments concerning federal income
tax consequences are not an exhaustive discussion of all tax questions that
might arise under the Policy. Further, these comments do not take into account
any federal estate tax and gift, state, or local tax considerations which may be
involved in the purchase of a Policy or the exercise of certain elections under
the Policy. For complete information on such federal and state tax
considerations, a qualified tax advisor should be consulted. We do not make any
guarantee regarding the tax status of any Policy, and the following summary is
not tax advice.
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TAX STATUS OF THE POLICY
In order to qualify as a life insurance contract for federal income tax
purposes and to receive the tax treatment normally accorded life insurance
contracts under federal tax law, a Policy must satisfy certain requirements
which are set forth in the Internal Revenue Code (the "Code"). Guidance as to
how these requirements apply is limited. Nevertheless, we believe that Policies
issued on a standard or preferred basis should satisfy the applicable
requirements. There is less guidance, however, with respect to Policies issued
on a sub-standard basis and it is not clear whether such Policies will in all
cases satisfy the applicable requirements. We reserve the right to restrict
Policy transactions and to make other modifications in order to bring the Policy
into compliance with such requirements.
In certain circumstances, owners of variable life insurance contracts may
be considered for federal income tax purposes to be the owners of the assets of
the separate account supporting their contracts due to their ability to exercise
investment control over those assets. Where this is the case, the contract
owners would be taxed on income and gains attributable to separate account
assets. There is little guidance in this area, and some features of the
Policies, such as the flexibility of a Policyowner to allocate premium payments
and transfer Accumulation Value, have not been explicitly addressed in published
rulings. While we believe that the Policies do not give Policyowners investment
control over Separate Account assets, we reserve the right to modify the
Policies as necessary to prevent a Policyowner from being treated as the owner
of the Separate Account assets.
In addition, the Code requires that the investments of the Separate Account
be "adequately diversified" in order for the Policies to be treated as life
insurance contracts for federal income tax purposes. It is intended that the
Separate Account, through the Eligible Portfolios, will satisfy these
diversification requirements.
The following discussion assumes that the Policy will qualify as a life
insurance contract for federal income tax purposes.
TAX TREATMENT OF POLICY PROCEEDS
In General. We believe that the Death Benefit Proceeds under a Policy will
be excludable from the gross income of the Beneficiary.
Generally, the Policyowner will not be deemed to be in constructive receipt
of the Accumulation Value until there is a distribution. When distributions from
a Policy occur, or when loans are taken out from or secured by a Policy, the tax
consequences depend on whether the Policy is classified as a "Modified Endowment
Contract."
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Modified Endowment Contracts. Whether a Policy is treated as a Modified
Endowment Contract depends upon the amount of premiums paid in relation to the
Death Benefit provided under the Policy. The rules for determining whether a
Policy is a Modified Endowment Contract are extremely complex. In general,
however, a Policy will be considered to be a Modified Endowment Contract if the
accumulated premium payments made at any time during the first seven Policy
Years exceed the sum of the net level premiums which would have been paid on or
before such time if the Policy provided for paid-up future benefits after the
payment of seven level annual premium payments.
In addition, if a Policy is "materially changed," it may cause such Policy
to be treated as a Modified Endowment Contract. The material change rules for
determining whether a Policy is a Modified Endowment Contract are also extremely
complex. In general, however, the determination of whether a Policy will be a
Modified Endowment Contract after a material change depends upon (i) the
relationship of the Death Benefit at the time of change to the Accumulation
Value at the time of such change, and (ii) the additional premiums paid in the
seven Policy Years following the date on which the material change occurs.
The manner in which the premium limitation and material change rules should
be applied to certain features of the Policy is unclear. If we determine that
a Policyowner has made excessive premium payments which will cause a Policy to
be considered a Modified Endowment Contract, we will notify the Policyowner of
the tax consequences and give the Policyowner the option of having the excessive
premiums refunded. If the Policyowner requests a refund within 30 days after
receipt of such notice, we will refund the excessive premium payments to prevent
the Policy from becoming a Modified Endowment Contract.
Due to the Policy's flexibility, classification of a Policy as a Modified
Endowment Contract will depend upon the individual circumstances of each Policy.
Accordingly, a prospective Policyowner should contact a qualified tax advisor
before purchasing a Policy to determine the circumstances under which the Policy
would be a Modified Endowment Contract. In addition, a Policyowner should
contact a tax advisor before making any change to a Policy, exchanging a Policy,
or reducing Policy benefits, to determine whether such change would cause the
Policy (or the new Policy in the case of an exchange) to be treated as a
Modified Endowment Contract.
If a Policy becomes a Modified Endowment Contract, distributions such as
partial surrenders and Policy loans that occur during the Policy Year it becomes
a Modified Endowment Contract and any subsequent Policy Year will be taxed as
distributions from a Modified Endowment Contract. In addition, distributions
from a Policy within two years before
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it becomes a Modified Endowment Contract will be taxed in this manner. This
means that a distribution made from a Policy that is not a Modified Endowment
Contract could later become taxable as a distribution from a Modified Endowment
Contract.
Whether a Policy is or is not a Modified Endowment Contract, upon a
complete surrender or a lapse or termination of a Policy or when benefits are
paid at its Maturity Date, if the amount received plus the amount of any
indebtedness exceeds the total investment in the Policy (described below), the
excess will generally be treated as ordinary income subject to tax.
Distributions Other Than Death Benefit Proceeds from Modified Endowment
Contracts. Policies classified as Modified Endowment Contracts will be subject
to the following tax rules:
(1) All distributions from such a Policy (including distributions upon
partial or full surrender and benefits paid at maturity) are treated
as ordinary income subject to tax up to the amount equal to the excess
(if any) of the Accumulation Value immediately before the distribution
over the investment in the Policy at such time.
(2) Loans taken from (or secured by) such a Policy are treated as
distributions from such a Policy and taxed accordingly. This includes
unpaid loan interest that is added to the principal of a loan.
(3) A 10 percent penalty tax is imposed on the portion of any distribution
from such a Policy that is included in income. This includes any loan
taken from or secured by such a Policy. This penalty tax does not
apply if the distribution or loan:
(a) is made on or after the Policyowner reaches actual age 59 1/2;
(b) is attributable to the Policyowner's becoming disabled; or
(c) is part of a series of substantially equal periodic payments for
(i) the life (or life expectancy) of the Policyowner, or (ii) the
joint lives (or joint life expectancies) of the Policyowner and
the Beneficiary.
Distributions Other Than Death Benefit Proceeds from Policies that are not
Modified Endowment Contracts. Distributions other than
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Death Benefit Proceeds from a Policy that is not classified as a Modified
Endowment Contract generally are treated first as a recovery of the
Policyowner's investment in the Policy. After the recovery of all investment in
the Policy, additional amounts distributed are taxable income. However, certain
distributions which must be made in order to enable the Policy to continue to
qualify as a life insurance contract for federal income tax purposes if Policy
benefits are reduced during the first 15 Policy Years may be treated in whole or
in part as ordinary income subject to tax.
Policy Loans. Loans from a Policy (or secured by a Policy) that is not a
Modified Endowment Contract are generally not treated as distributions.
However, the tax consequences associated with Policy loans that are outstanding
after the first 15 Policy Years are less clear and a tax adviser should be
consulted about such loans. Interest paid on a Policy loan generally is not
tax-deductible. The Policyowner should consult a tax advisor regarding the
deductibility of interest paid on a Policy loan.
Finally, neither distributions from nor loans from (or secured by) a Policy
that is not a Modified Endowment Contract are subject to the 10 percent
additional income tax.
Investment in the Policy. "Investment in the policy" means:
(a) the aggregate amount of any premium payments or other consideration
paid for a Policy; minus
(b) the aggregate amount of distributions received under the Policy which
is excluded from the gross income of the Policyowner (except that the
amount of any loan from, or secured by, a Policy that is a Modified
Endowment Contract, to the extent such amount is excluded from gross
income, will be disregarded); plus
(c) the amount of any loan from, or secured by, a Policy that is a
Modified Endowment Contract to the extent that such amount is included
in the gross income of the Policyowner.
Multiple Policies. All Modified Endowment Contracts that are issued by us
(or our affiliates) to the same Policyowner during any calendar year are treated
as one Modified Endowment Contract. This applies to determining the amount
includible in the Policyowner's income when a taxable distribution occurs.
Other Policyowner Tax Matters.
Businesses can use the Policies in various arrangements, including
nonqualified deferred compensation or salary continuance plans, split
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dollar insurance plans, executive bonus plans, tax exempt and nonexempt welfare
benefit plans, retiree medical benefit plans and others. The tax consequences of
such plans may vary depending on the particular facts and circumstances. If you
are purchasing the Policy for any arrangement the value of which depends in part
on its tax consequences, you should consult a qualified tax adviser. In recent
years, moreover, Congress has adopted new rules relating to life insurance owned
by businesses. Any business contemplating the purchase of a new Policy or a
change in an existing Policy should consult a tax adviser.
Federal, state and local estate, inheritance, transfer, and other tax
consequences of ownership or receipt of Policy proceeds depend on the
circumstances of each Policyowner or Beneficiary. A tax advisor should be
consulted on these consequences.
Possible Tax Law Changes. Although the likelihood of legislative changes
is uncertain, there is always the possibility that the tax treatment of the
Policy could change by legislation or otherwise. Moreover, it is possible that
any change could be retroactive (that is, effective prior to the date of
change). Consult a tax adviser with respect to legislative developments and
their effect on the Policy.
AMERICAN NATIONAL'S INCOME TAXES
American National is taxed as a life insurance company under the Code.
Under current federal income tax law, American National is not taxed on the
Separate Account's operations. Thus, we currently do not deduct a charge from
the Separate Account for federal income taxes. Nevertheless, we reserve the
right in the future to make a charge for any such tax that we determine to be
properly attributable to the Separate Account or to the Policies.
Under current laws in some states, we may incur state and local taxes (in
addition to premium taxes for which a deduction from premium payments is
currently made). At present, these taxes are not significant and we are not
currently charging for them. However, we may deduct charges for such taxes in
the future.
OTHER INFORMATION
SALE OF THE POLICY
SM&R, one of our wholly-owned subsidiaries, is the principal underwriter of
the Policy. SM&R was organized December 15, 1964 under the laws of the State of
Florida. SM&R is a registered broker-dealer and a member of the National
Association of Securities Dealers. (See the American National Fund's
prospectus.)
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SM&R will pay commissions to its registered representatives who sell the
Policies based upon a commission schedule. In Policy Years one through five,
the commissions to the registered representatives will not exceed 12% of the
total premium contribution. In later years, the registered representatives will
receive renewal commissions which will not exceed 0.25% of the Accumulation
Value. We may pay registered representatives who meet certain production
standards additional compensation. SM&R will pay overriding commissions to
managers and we may pay bonuses to the managers for the sale of the Policy.
SM&R and the Company may also authorize other registered broker-dealers and
their registered representatives to sell the Policy.
YEAR 2000
Many of the services provided to the Separate Account and Policyowners
depend on the smooth functioning of computer systems. Many computer software
systems in use today cannot distinguish the year 2000 from the year 1900 because
of the way dates are encoded and calculated, referred to as the "Year 2000
Problem." The Year 2000 Problem could have a negative impact on handling
securities trades, payment of interest and dividends, pricing and account
services. Like all financial services providers, we utilize systems that may be
affected by Year 2000 Problems and we rely on service providers, including the
Eligible Portfolios, that may also be affected. We have developed, and are
continuing to implement, a Year 2000 transition plan, and we are confirming that
our service providers are doing the same. It is difficult to predict with
precision whether the outcome of these efforts will have any negative impact on
our Company. As of the date of this prospectus, we do not anticipate that you
will experience any negative effects on your Accumulation Value, or on the
services provided in connection with your Policy, as a result of Year 2000
Problems. At this time, however, there can be no assurance that these steps
will be sufficient to avoid any adverse impact on the Separate Account or the
Policyowners.
THE CONTRACT
The Policy, the application, any supplemental applications, and any riders,
amendments or endorsements make up the entire contract. Only statements in the
application attached to the Policy and any supplemental applications made a part
of the Policy can be used to contest a claim or the validity of the Policy. Any
changes must be approved in writing by the President, Vice President or
Secretary of American National. No agent has the authority to alter or modify
any of the terms, conditions or agreements of the Policy or to waive any of its
provisions. Differences in state laws may require us to offer a Policy in a
state which has suicide, incontestability, refund provisions, surrender charges
or other provisions more favorable than provisions in other states.
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Control of Policy. Subject to the rights of any irrevocable Beneficiary
and assignee of record, all rights, options, and privileges belong to the
Policyowner, if living; otherwise to any contingent owner or owners, if living;
otherwise to the estate of the last Policyowner to die. If the Policyowner is a
minor, first the Applicant, then the Beneficiary, if living and legally
competent, may exercise all rights of ownership.
Beneficiary. You can name primary and contingent beneficiaries. Initial
Beneficiary(ies) are specified in the application. Payments will be shared
equally among Beneficiaries of the same class unless otherwise stated. If a
Beneficiary dies before the Insured, payments will be made to any surviving
Beneficiaries of the same class; otherwise to any Beneficiary(ies) of the next
class; otherwise to the estate of the Insured.
Change of Beneficiary. Unless the Beneficiary designation is irrevocable,
you can change the Beneficiary by written request on a Change of Beneficiary
form at any time during the Insured's lifetime. We may require that the Policy
be returned to the Home Office for endorsement of any change, or that other
forms be completed. The change will take effect as of the date the change is
recorded at the Home Office. We will not be liable for any payment made or
action taken before the change is recorded. There is no limit on the number of
changes that may be made.
Change in Policyowner or Assignment. In order to change the Policyowner or
assign Policy rights, an assignment of the Policy must be made in writing and
filed at our Home Office. The change will take effect as of the date the change
is recorded at our Home Office, and we will not be liable for any payment made
or action taken before the change is recorded. Payment of proceeds is subject
to the rights of any assignee of record. No partial or contingent assignment of
the Policy will be permitted. A collateral assignment is not a change of
ownership.
Incontestability. The Policy is incontestable after it has been in force
for two years from the Date of Issue during the lifetime of the Insured. An
increase in the Specified Amount or addition of a rider after the Date of Issue
shall be incontestable after such increase or addition has been in force for two
years from its Policy Date during the lifetime of the Insured. However, this
two year provision shall not apply to riders that provide disability or
accidental death benefits. Any reinstatement of a Policy shall be incontestable
during the lifetime of the Insured only after having been in force for two years
after the Policy Date of the reinstatement.
Misstatement of Age or Sex. If the age or sex of the Insured or any person
insured by rider has been misstated, the amount of the Death Benefit will be
adjusted as provided for in the Policy.
48
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Suicide. Suicide within two years after Date of Issue is not covered by
the Policy unless otherwise provided by a state's insurance law. If the Insured,
while sane or insane, commits suicide within two years after the Date of Issue,
we will pay only the premiums received less any partial surrenders and Policy
Debt. If the Insured, while sane or insane, commits suicide within two years
after the Policy Date of any increase in the Specified Amount, our liability
with respect to such increase will only be the total cost of insurance applied
to the increase. If the Insured, while sane or insane, commits suicide within
two years from the Policy Date of reinstatement, our liability with respect to
such reinstatement will only be for the return of cost of insurance and
expenses, if any, paid on or after the reinstatement.
Postponement of Payments. Payment of any amount upon refund, full
surrender, partial surrender, Policy loans, benefits payable at death, and
transfers, which require valuation of a subaccount, may be postponed whenever:
(1) the New York Stock Exchange is closed other than customary week-end and
holiday closings, or trading on the New York Stock Exchange is restricted as
determined by the SEC; (2) the SEC by order permits postponement for the
protection of Policyowners; or (3) an emergency exists, as determined by the
SEC, as a result of which disposal of securities is not reasonably practicable
or it is not reasonably practicable to determine the value of the Separate
Account's Accumulation Value. Surrenders, loans or partial surrenders from the
Fixed Account may be deferred for up to 6 months from the date of written
request.
Additional Insurance Benefits (Riders). Subject to certain requirements,
certain additional optional benefits may be obtained. The cost of any such
additional insurance benefits, which will be provided by "riders" to the Policy,
will be deducted as part of the Monthly Deduction. Riders in force during the
time the Guaranteed Coverage Benefit is in effect will increase the Guaranteed
Coverage Premium requirement.
DIVIDENDS
The Policy is non-participating and therefore is not eligible for dividends
and does not participate in any distribution of our surplus.
LEGAL MATTERS
Greer, Herz and Adams, L.L.P., our general counsel, has reviewed various
matters of Texas law pertaining to the Policy, including the validity of the
Policy and our right to issue the Policy.
LEGAL PROCEEDINGS
The Company and its affiliates, like other life insurance companies, are
involved in lawsuits, including class action lawsuits. In
49
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some class action and other lawsuits involving insurers, substantial damages
have been sought and/or material settlement payments have been made. Although
the outcome of any litigation cannot be predicted with certainty, we believe
that at the present time no lawsuits are pending or threatened that reasonably
likely to have a material adverse impact on the Separate Account or us.
REGISTRATION STATEMENT
We filed a registration statement covering information about the Policy
with the SEC. The registration statement, and its subsequent amendments,
included this prospectus, but it also contained additional information. This
prospectus is simply a summary of the contents of the Policy and related legal
instruments. If you want more complete information regarding any of the matters
described in this prospectus, you should consult the registration statement.
EXPERTS
The consolidated financial statements of our Company and its subsidiaries
as of December 31, 1998 and 1997, and for the years then ended, included in this
prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
reports.
As stated in his opinion which was filed as an exhibit to the registration
statement, Rex D. Hemme has examined the actuarial matters included in this
prospectus.
SENIOR EXECUTIVE OFFICERS AND DIRECTORS OF
AMERICAN NATIONAL INSURANCE COMPANY
Name and Position(s) with American National Insurance Company/
Principal Occupations Last Five Years and Other Positions Held
ROBERT L. MOODY
CHAIRMAN OF THE BOARD, DIRECTOR, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
American National: President, January 1996 to present; Chairman of the Board,
April 1982 to present; Chief Executive Officer, July 1991 to present; and
Director, March 1960 to present.
ANREM Corporation: Director, September 1985 to present. Moody Bancshares, Inc.:
Director and President, 1982 to present. Moody Bank Holding Company, Inc.:
Director and President, 1988 to present. Moody National Bank of Galveston:
President, 1980 to 1993; Chairman of the Board, Director and Chief Executive
Officer, 1980 to present. National
50
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Western Insurance Company: Chairman of the Board, Director and Chief Executive
Officer, 1971 to present. The Moody Foundation: Trustee, 1955 to present. Gal-
Tex Hotel Corporation: Chairman of the Board and Director, 1954 to present. Gal-
Tenn Hotel Corporation: Director. GTG Corporation: Director. Gal-Tex Management
Co.: Director. Gal-Tex Woodstock, Inc.: Director. New Paxton Hotel Corporation:
Director. Transitional Learning Community at Galveston: Chairman of the Board
and Director. The Moody Endowment: Chairman of the Board and Director.
G. RICHARD FERDINANDTSEN
DIRECTOR, SENIOR EXECUTIVE VICE PRESIDENT
AND CHIEF OPERATING OFFICER
American National: Director, 1998 to present; Senior Executive Vice President
and Chief Operating Officer, April 1997 to present; Senior Executive Vice
President and Chief Administrative Officer, April 1996 to April 1997; Senior
Vice President, Health Insurance Operations, April 1993 to April 1996; Senior
Vice President, Director of Group Insurance, July 1990 to April 1993. American
National Life Insurance Company of Texas: Chairman of the Board, President and
Director, 1998 to present; and Vice President, Health Insurance Operations,
April 1993 to 1998. American National Property and Casualty Company: Director,
November 1992 to present; and Vice Chairman of the Board, 1998 to present.
American National General Insurance Company: Director, November 1992 to present;
and Vice Chairman of the Board, 1998 to present. McMarr Properties (formerly
American Securities Company): Director, April 1978 to present. McCreless
Foundation: Director, April 1992 to present. United Land: Director, January 1985
to present. Commonwealth Life and Accident Insurance Company: Director, June
1993 until company was merged in December 1994. American National Lloyds
Insurance Company: Underwriter, March 1994 to present. Pacific P & C, Inc.:
Director, 1995 to present; and Vice Chairman of the Board. Standard Life and
Accident Insurance Company: Director, January 1996 to present; Chairman of the
Board, President and Chief Executive Officer, 1998 to present. Garden State Life
Insurance Company: Director. Securities Management & Research, Inc.: Director.
Comprehensive Investment Services, Inc.: Director. Alternative Benefit
Management, Inc.: Director, President and Chief Executive Officer. ANMEX
International Services, Inc.: Director and President. ANMEX International, Inc.:
Director and President.
IRWIN M. HERZ, JR.
DIRECTOR
American National: Director: 1984 to present. Greer, Herz & Adams, L.L.P.:
Partner, March 1980 to present, General Counsel to American National. Three R
Trust: Trustee, April 1971 to present. Commonwealth Life and Accident Insurance
Company: Director, April 1983 until company was merged in December 1994. Garden
State Life Insurance
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Company: Director, June 1992 to present. American National Property and Casualty
Company: Director. American National General Insurance Company: Director.
Pacific P & C, Inc.: Director.
R. EUGENE LUCAS
DIRECTOR
American National: Director, April 1981 to present. Gal-Tex Hotel Corporation:
President and Director, March 1971 to present. Gal-Tenn Hotel Corporation:
President and Director, March 1971 to present. Gal-Tex Management Company:
President and Director, May 1985 to present. Gal-Tex Woodstock, Inc.: President
and Director, November 1995 to present. New Paxton Hotel Corporation: President
and Director. Securities Management and Research, Inc.: Director, November 1982
to present. ANREM Corporation: Director, September 1982 to present. Colonel
Museum, Inc.: Director, March 1985 to present.
E. DOUGLAS MCLEOD
DIRECTOR
American National: Director, April 1984 to present. ANREM Corporation: Director,
October 1979 to present. National Western Life Insurance Company: Director, 1986
to present. Independent County Mutual Fire Insurance Company of Texas: Director,
June 1984 to present. Attorney. The Moody Foundation: Director of Development,
May 1982 to present. McLeod Properties: Owner. Texas State House of
Representatives: Past Member. Moody Gardens, Inc.: Chairman and Director, 1988
to present. Colonel Museum, Inc.: Vice President and Director, 1985 to present.
Center for Transportation and Commerce: Director, 1983 to present.
FRANCES ANNE MOODY
DIRECTOR
American National: Director, April 1987 to present. The Moody Foundation:
Executive Director, January 1998 to present and Regional Grants Advisor,
September 1996 to present. National Western Life Insurance Company: Director,
1990 to present. The Moody Endowment: Director, 1991 to present. Investments,
Dallas, Texas.
RUSSELL S. MOODY
DIRECTOR
American National: Director, April 1986 to present. National Western Life
Insurance Company: Director, 1988 to March 1996. Gal-Tex Hotel Corporation:
Director, 1981 to 1997. Seal Fleet, Inc.: Director, 1982 to 1996.
52
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WILLIAM L. MOODY IV
DIRECTOR
American National: Director, March 1951 to present. Moody National Bank of
Galveston: Director, January 1969 to March 1996, and Advisory Director, March
1996 to present. Moody Ranches, Inc.: President and Director, May 1959 to
present. American National Life Insurance Company of Texas: Director, November
1969 to present. Rosenberg Library: Board of Trustees, 1970 to present.
University of Texas Medical Branch Development Board: Director, 1970 to present.
JOE MAX TAYLOR
DIRECTOR
American National: Director, April 1992 to present. County of Galveston, Texas:
Sheriff, 1980 to present. Moody Gardens, Inc.: Director and President, 1988 to
present. Transitional Learning Community at Galveston: Director, 1985 to
present. Galveston County Bail-Bond Board: President, 1981 to present. Fifty
Club Board of Galveston: Director, 1981 to present. Landry's Seafood
Restaurants, Inc.: Director, 1992 to present. Pre-Trial Release Board of
Galveston County: 1982 to present. Juvenile Crime Prevention-Intervention Task
Force: Chairman, 1993 to present. University of Texas Medical Branch:
President's Cabinet, 1994 to present.
ROBERT A. FRUEND
EXECUTIVE VICE PRESIDENT
American National: Executive Vice President, Director of Multiple Line
Marketing, April 1989 to present. American National Life Insurance Company of
Texas: Director and Vice President, April 1989 to present. American National
Property and Casualty Insurance Company: Chairman of the Board; and Director,
November 1979 to present. American National General Insurance Company: Chairman
of the Board; and Director, November 1981 to present. Securities Management and
Research, Inc.: Director, November 1988 to present: Pacific P & C, Inc.:
Director, 1995 to present; and Chairman of the Board. American National
Insurance Service Company: Director, November 1988 to present. ANPAC Lloyds
Insurance Management, Inc.: Director, December 1995 to present. American
National Lloyds Insurance Company: Director, December 1995 to present.
BILL J. GARRISON
EXECUTIVE VICE PRESIDENT
American National: Executive Vice President, Director of Home Service Division,
April 1991 to present. ANMEX International Services, Inc.: Vice President. ANMEX
International, Inc.: Vice President. Commonwealth Life and Accident Insurance
Company: Director, February 1993 until company was merged in December 1994.
MICHAEL W. MCCROSKEY
EXECUTIVE VICE PRESIDENT
53
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American National: Executive Vice President- Investments, 1995 to present; and
Senior Vice President-Real Estate and Mortgage Loans, 1986 to 1995. ANREM
Corporation: Director, June 1977 to present; and President, October 1986 to
present. American National Life Insurance Company of Texas: Assistant Secretary,
December 1986 to present. Standard Life and Accident Insurance Company: Vice
President, May 1988 to present. ANTAC, Inc.: President and Director, 1995 to
present. Securities Management and Research, Inc.: President, Chief Executive
Officer and Director, 1994 to present. American National Funds Group: President
and Director, 1994 to present. SM&R Investments, Inc. (formerly SM&R Capital
Funds, Inc.): Chief Executive Officer; President and Director, 1994 to present.
American National Investment Accounts, Inc.: President and Director, 1994 to
present. Pacific P & C, Inc.: Vice President, 1995 to present. Garden State Life
Insurance Company: Vice President, May 1994 to present. American National
Property and Casualty Company Vice President: June 1994 to present. American
National General Insurance Company: Vice President, June 1994 to present. SM&R
Growth Fund, Inc.: Director and President. SM&R Equity Income Fund, Inc.:
Director and President. SM&R Balanced Fund, Inc.: Director and President. ANDV
'97: Director and President. Comprehensive Investment Services, Inc.: Director.
JAMES E. POZZI
EXECUTIVE VICE PRESIDENT
American National: Executive Vice President, Independent Markets, April 1996 to
present; and Senior Vice President, Corporate Planning and Development, June
1992 to April 1996. American National Life Insurance Company of Texas: Vice
President, April 1993 to present.
RONALD J. WELCH
EXECUTIVE VICE PRESIDENT
American National: Executive Vice President and Chief Actuary, April 1996 to
present; and Senior Vice President and Chief Actuary, April 1986 to April 1996.
Standard Life and Accident Insurance Company: Director, December 1987 to
present. American National Property and Casualty Company: Director, November
1987 to present. American National General Insurance Company: Director, November
1987 to present. American National Life Insurance Company of Texas: Director,
November 1986 to present, Actuary, April 1980 to present, and Senior Vice
President, April 1990 to present. Commonwealth Life and Accident Insurance
Company: Vice President, until company was merged in December 1994. Garden State
Life Insurance Company: Chairman of the Board and Director, June 1992 to
present: Pacific P & C, Inc.: Director, 1995 to present. American National
Insurance Service Company: Director, December 1995 to present. Securities,
Research & Management, Inc.: Director. ANMEX International Services, Inc.:
Director and Vice President. ANMEX International, Inc.: Director and Vice
President. Alternative Benefit Management, Inc.: Director.
54
<PAGE>
CHARLES H. ADDISON
SENIOR VICE PRESIDENT
American National: Senior Vice President, Systems Planning and Computing, April
1978 to present. American National Property and Casualty Company: Director,
November 1981 to present. American National General Insurance Company: Director,
November 1981 to present. Pacific P & C, Inc.: Director, 1995 to present.
Standard Life and Accident Insurance Company: Director, January 1996 to present.
ALBERT L. AMATO
SENIOR VICE PRESIDENT
American National: Senior Vice President, Life Policy Administration, April 1994
to present; and Vice President, Life Policy Administration, April 1984 to April
1994. American National Life Insurance Company of Texas: Vice President, May
1984 to present. Garden State Life Insurance Company: Vice President, August
1992 to present, Director, August 1992 to December 1993, and Advisory Director,
December 1993 to present. Standard Life and Accident Insurance Company: Vice
President, Life Policy Administration. Alternative Benefit Management, Inc.:
Director and Senior Vice President. Commonwealth Life and Accident Insurance
Company: Director, August 1992 until company was merged in December 1994.
GLENN C. LANGLEY
SENIOR VICE PRESIDENT
American National: Senior Vice President, Human Resources, November 1995 to
present; Vice President, Assistant Personnel Director, April 1983 to November
1995; Assistant Vice President, Equal Employment Opportunity/Affirmative Action
Program Coordinator, April 1976 to April 1983; and Assistant Vice President,
Personnel Placement Director, April 1969 to April 1976. Standard Life and
Accident Insurance Company: Vice President, Director of Human Resources.
STEPHEN E. PAVLICEK
SENIOR VICE PRESIDENT AND CONTROLLER
American National: Senior Vice President and Controller, April 1996 to present;
Vice President and Controller, 1994 to April 1996; and Assistant Vice President
- - Financial Reports, 1983 to 1994. ANTAC, Inc.: Assistant Treasurer, 1995 to
present. Garden State Life Insurance Company: Controller, June 1992 to present.
American National Life Insurance Company of Texas: Controller, August 1994 to
present. ANREM Corporation: Director. American National Property and Casualty
Company: Director. American National General Insurance Company: Director.
Pacific P & C, Inc.: Director. Standard Life and Accident Insurance Company:
Vice President, Controller and Director. ANDV '97: Assistant Treasurer. ANMEX
International Services, Inc.: Controller. ANMEX International, Inc.: Controller.
Alternative Benefit Management, Inc.: Senior Vice President, Controller and
Director.
55
<PAGE>
STEVEN H. SCHOUWEILER
SENIOR VICE PRESIDENT
American National: Senior Vice President, Health Insurance Operations, May 1998
to present. Standard Life and Accident Insurance Company: Vice President,
Claims, May 1998 to present. American National Life Insurance Company of Texas:
Director and Senior Vice President, May 1998 to present. Alternative Benefit
Management, Inc.: Chief Administrative Officer, Senior Vice President and
Director. Galveston Health Network, Inc.: President. Conseco Group Risk
Management: President and Chief Executive Officer, December 1989 to April 1998.
JAMES R. THOMASON
SENIOR VICE PRESIDENT
American National: Senior Vice President, Credit Insurance Services, April 1987
to present.
GARETH W. TOLMAN
SENIOR VICE PRESIDENT
American National: Senior Vice President, Corporate Affairs, April 1996 to
present; and Vice President, Corporate Affairs, April 1976 to April 1996.
VINCENT E. SOLER, JR.
VICE PRESIDENT, SECRETARY AND
TREASURER
American National: Vice President, Secretary and Treasurer, 1994 to present; and
Vice President and Controller, March, 1984 to 1994. ANREM Corporation:
Treasurer, October 1984 to present. American National Life Insurance Company of
Texas: Treasurer, April 1984 to present; Controller, April 1984 to August 1994;
and Secretary, August 1994 to present. Standard Life and Accident Insurance
Company: Secretary and Treasurer, 1998 to present; Assistant Secretary, January
1996 to 1998. ANTAC, Inc.: Secretary, 1995 to present. Garden State Life
Insurance Company: Secretary and Treasurer, August 1994 to present. American
National Property and Casualty Company: Assistant Secretary, August 1994 to
present. American National General Insurance Company: Assistant Secretary.
Pacific P & C, Inc.: Assistant Secretary. Galveston Health Network, Inc.:
Secretary. ANDV '97: Secretary. ANMEX International Services, Inc.: Secretary
and Treasurer. ANMEX International, Inc.: Secretary and Treasurer. Comprehensive
Investment Services, Inc.: Secretary. Alternative Benefit Management, Inc.:
Secretary and Treasurer.
The principal business address of each person listed above is American National
Insurance Company, One Moody Plaza, Galveston, Texas 77550-7999.
FINANCIAL STATEMENTS
56
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Our financial statements which are included in this prospectus should be
considered only as bearing on our ability to meet our obligations under the
Policy. Our financial statements should not be considered as bearing on the
investment performance of the assets held in the Separate Account.
[financial statements to be inserted in subsequent amendment]
57
<PAGE>
APPENDIX
ILLUSTRATIONS OF DEATH BENEFITS, ACCUMULATION VALUES AND SURRENDER VALUES
The tables on pages ___ through ___ illustrate how Accumulation Value,
Surrender Value and Death Benefit of a Policy may change with the investment
performance of the Eligible Portfolios. These illustrations are hypothetical
and may not be used to project or predict investment results.
The tables on pages ___ through ___ illustrate how Accumulation Value,
Surrender Value and Death Benefit of a Policy may change with the investment
performance of the Eligible Portfolios. These illustrations are hypothetical
and may not be used to project or predict investment results. The illustrations
assume:
. a gross annual investment rate of return (i.e. investment income
and capital gains and losses) of 0%, 6% or 12%,
. a $100,000 Specified Amount,
. the Insured is a male, age 45,
. the Policy is issued under a preferred tobacco non-user
underwriting risk classification,
. the premium is paid at the beginning of each Policy Year,
. all Accumulation Value is allocated to the Separate Account,
. no Policy Loans are made,
. no changes in the Specified Amount,
. no partial surrenders
. no riders
. no transfers to the Fixed Account,
. no more than twelve transfers among Subaccounts, and
. fees and expenses for the Eligible Portfolios at a
58
<PAGE>
hypothetical annual rate of 0.73% of net assets (the rate is a
simple average, for all Eligible Portfolios, of the "Management
Fees" and "Other Expenses", indicated for each Eligible Portfolio
in the Eligible Portfolio Annual Expenses table. Certain fee
waiver and expense reimbursement arrangements exist and are
reflected in this average. Excluding the effect of these
arrangements, the simple average of the "Management Fees" and
"Other Expenses" would be 0.84%).
The Accumulation Value, Surrender Value and Death Benefit shown in the
illustrations may be different if any of the above assumptions changed.
The second column of the tables shows the value of the premiums paid
accumulated at a 5% annual interest rate.
The tables on pages ___ and ___ are based on the current schedule of
Monthly Deductions. We may, however, change the current schedule of Monthly
Deductions at any time and for any reason. Accordingly, you should not construe
the tables as guarantees or estimates of amounts to be paid in the future.
The tables on pages ___ and ___ are based on the assumption that the
maximum allowable Monthly Deductions are made throughout the life of the Policy.
The tables show that the net investment return of each subaccount is lower
than the gross return of the assets held in its corresponding Eligible Portfolio
because of the charges against the subaccounts.
Illustrations also reflect the Daily Asset Charge, which is levied against
each Subaccount at an annual rate of 1.25% of average daily Accumulation Value.
After adjustment to reflect the Daily Asset Charge and the average Eligible
Portfolio Annual Expenses, the illustrated hypothetical gross annual investment
rates of return of 0%, 6% and 12% correspond to approximate hypothetical net
annual rates of -1.96%, 3.96% and 9.89%.
The illustrations do not reflect any charges for federal income tax burden
attributable to the Separate Account, since we are not currently making such
charges. However, such charges may be made in the future, and, in that event,
the gross annual investment rate of return would have to exceed 0%, 6% or 12% by
an amount sufficient to cover the tax charges in order to produce the values
illustrated. (See Federal Income Tax Considerations, page ___.)
If a Policy Loan is made, both Surrender Value and Death Benefit
59
<PAGE>
Proceeds will be reduced by the amount of outstanding Policy Debt. Even if
repaid, Policy Debt may permanently affect the Policy's values. The effect could
be favorable or unfavorable depending on whether the investment performance of
the subaccount(s)/Fixed Account you selected is less than or greater than the
interest rate credited to the Accumulation Value held to secure the loan.
If a partial surrender is made, the surrender will immediately reduce the
values by the amount of the partial surrender, a $25 fee for each partial
surrender and any applicable surrender charge. If the Policy is surrendered, a
surrender charge may be imposed and the Policyowner may receive less than the
total premium paid. In the illustrations, the difference between the
Accumulation Value and the Surrender Value in any year is the surrender charge.
Upon request, we will provide a comparable illustration based upon the
proposed Insured's age, sex and underwriting classification, the Specified
Amount, the Death Benefit option, and Planned Periodic Premium schedule and any
available riders requested.
[actual illustrations to be inserted in subsequent amendment]
60
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UNDERTAKING TO FILE REPORTS
SUBJECT TO THE TERMS AND CONDITIONS OF SECTION 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE UNDERSIGNED REGISTRANT HEREBY UNDERTAKES TO FILE WITH
THE SECURITIES AND EXCHANGE COMMISSION SUCH SUPPLEMENTARY AND PERIODIC
INFORMATION, DOCUMENTS AND REPORTS AS MAY BE PRESCRIBED BY ANY RULE OR
REGULATION OF THE COMMISSION HERETOFORE OR HEREAFTER DULY ADOPTED PURSUANT TO
AUTHORITY CONFERRED IN THAT SECTION.
RULE 484 UNDERTAKING
INSOFAR AS INDEMNIFICATION FOR LIABILITY ARISING UNDER THE SECURITIES ACT
OF 1933 (THE "ACT") MAY BE PERMITTED TO DIRECTORS, OFFICERS AND CONTROLLING
PERSONS OF THE REGISTRANT PURSUANT TO THE FOREGOING PROVISIONS, OR OTHERWISE,
THE REGISTRANT HAS BEEN ADVISED THAT IN THE OPINION OF THE SECURITIES AND
EXCHANGE COMMISSION SUCH INDEMNIFICATION IS AGAINST PUBLIC POLICY AS EXPRESSED
IN THE ACT AND IS, THEREFORE, UNENFORCEABLE. IN THE EVENT THAT A CLAIM FOR
INDEMNIFICATION AGAINST SUCH LIABILITIES (OTHER THAN THE PAYMENT BY THE
REGISTRANT OF EXPENSES INCURRED OR PAID BY A DIRECTOR, OFFICER OR CONTROLLING
PERSON OF THE REGISTRANT IN THE SUCCESSFUL DEFENSE OF ANY ACTION, SUIT OR
PROCEEDING) IS ASSERTED BY SUCH DIRECTOR, OFFICER OR CONTROLLING PERSON IN
CONNECTION WITH THE SECURITIES BEING REGISTERED, THE REGISTRANT WILL, UNLESS IN
THE OPINION OF ITS COUNSEL THE MATTER HAS BEEN SETTLED BY CONTROLLING PRECEDENT,
SUBMIT TO A COURT OF APPROPRIATE JURISDICTION THE QUESTION WHETHER SUCH
INDEMNIFICATION BY IT IS AGAINST PUBLIC POLICY AS EXPRESSED IN THE ACT AND WILL
BE GOVERNED BY THE FINAL ADJUDICATION OF SUCH ISSUE.
REPRESENTATION PURSUANT TO SECTION 26(E)(2)(A)
AMERICAN NATIONAL INSURANCE COMPANY HEREBY REPRESENTS THAT THE FEES AND
CHARGES DEDUCTED UNDER THE CONTRACTS DESCRIBED IN THIS PRE-EFFECTIVE AMENDMENT
ARE, IN THE AGGREGATE, REASONABLE IN RELATIONSHIP TO THE SERVICES RENDERED, THE
EXPENSES EXPECTED TO BE INCURRED, AND THE RISKS ASSUMED BY AMERICAN NATIONAL
INSURANCE COMPANY.
CONTENTS OF REGISTRATION STATEMENT
THIS REGISTRATION STATEMENT COMPRISES THE FOLLOWING PAPERS AND DOCUMENTS:
THE FACING SHEET.
THE PROSPECTUS CONSISTING OF ___ PAGES.
UNDERTAKING TO FILE REPORTS.
RULE 484 UNDERTAKING.
REPRESENTATION PURSUANT TO SECTION 26(E)(2)(A).
SIGNATURES.
WRITTEN CONSENTS
1
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THE FOLLOWING EXHIBITS, CORRESPONDING TO THOSE REQUIRED BY THE INSTRUCTIONS
AS TO EXHIBITS IN FORM N-8B-2:
EXHIBIT 1 .... RESOLUTION OF THE BOARD OF DIRECTORS OF AMERICAN NATIONAL
INSURANCE COMPANY AUTHORIZING ESTABLISHMENT OF AMERICAN
NATIONAL VARIABLE LIFE SEPARATE ACCOUNT (PREVIOUSLY FILED IN
POST-EFFECTIVE AMENDMENT NO. 8 ON APRIL 26, 1996)
EXHIBIT 2 .... NOT APPLICABLE
EXHIBIT 3(A) .... DISTRIBUTION AND ADMINISTRATIVE SERVICES AGREEMENT
(PREVIOUSLY FILED IN POST-EFFECTIVE NO. 8 ON APRIL 26, 1996)
EXHIBIT 3(B) .... NOT APPLICABLE
EXHIBIT 3(C) .... SCHEDULE OF SALES COMMISSIONS (PREVIOUSLY FILED IN POST-
EFFECTIVE AMENDMENT NO. 8 ON APRIL 26, 1996)
EXHIBIT 4 .... NOT APPLICABLE
EXHIBIT 5 .... FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY (PREVIOUSLY
FILED IN POST-EFFECTIVE AMENDMENT NO. 8 ON APRIL 26, 1996)
EXHIBIT 6(1) .... ARTICLES OF INCORPORATION OF AMERICAN NATIONAL INSURANCE
COMPANY (PREVIOUSLY FILED IN POST-EFFECTIVE AMENDMENT NO. 8
ON APRIL 26, 1996)
EXHIBIT 6(2) .... BY-LAWS OF AMERICAN NATIONAL INSURANCE COMPANY (PREVIOUSLY
FILED IN POST-EFFECTIVE AMENDMENT NO. 8 ON APRIL 26, 1996)
EXHIBIT 7 .... NOT APPLICABLE
EXHIBIT 8(1) .... FORM OF AMERICAN NATIONAL INVESTMENT ACCOUNTS, INC. FUND
PARTICIPATION AGREEMENT (PREVIOUSLY FILED IN POST-EFFECTIVE
AMENDMENT NO. 8 ON APRIL 26, 1996)
EXHIBIT 8(2) .... FORM OF VARIABLE INSURANCE PRODUCTS FUND FUND PARTICIPATION
AGREEMENT (PREVIOUSLY FILED IN POST-EFFECTIVE AMENDMENT NO.
8 ON APRIL 26, 1996)
EXHIBIT 8(3) .... FORM OF VARIABLE INSURANCE PRODUCTS FUND II FUND
PARTICIPATION AGREEMENT (PREVIOUSLY FILED IN POST-EFFECTIVE
AMENDMENT NO. 8 ON APRIL 26, 1996)
2
<PAGE>
EXHIBIT 9 .... NOT APPLICABLE
EXHIBIT 10 .... APPLICATION FORM (PREVIOUSLY FILED IN POST-EFFECTIVE
AMENDMENT NO. 8 ON APRIL 26, 1996)
EXHIBIT 11 .... INDEPENDENT AUDITORS' CONSENT (TO BE FILED IN SUBSEQUENT
AMENDMENT)
EXHIBIT 12 .... OPINION OF COUNSEL (TO BE FILED IN SUBSEQUENT AMENDMENT)
EXHIBIT 13 .... CONSENT OF COUNSEL (TO BE FILED IN SUBSEQUENT AMENDMENT)
EXHIBIT 14 .... ACTUARIAL OPINION (TO BE FILED IN SUBSEQUENT AMENDMENT)
EXHIBIT 15 .... ACTUARIAL BASIS OF PAYMENT AND CASH VALUE ADJUSTMENT
PURSUANT TO RULE 6E-3(T)(B)(V)(B) (PREVIOUSLY FILED IN POST-
EFFECTIVE AMENDMENT NO. 8 ON APRIL 26, 1996)
EXHIBIT 16 .... PROCEDURES MEMORANDUM PURSUANT TO RULE 6E-3(T)(B)(12)(III)
(PREVIOUSLY FILED IN POST-EFFECTIVE AMENDMENT NO. 8 ON APRIL
26, 1996)
EXHIBIT 27 .... FINANCIAL DATA SCHEDULE (TO BE FILED IN SUBSEQUENT
AMENDMENT)
3
<PAGE>
As required by the Securities Act of 1933, the Registrant has caused this
amended registration statement to be signed on its behalf, in the City of
Galveston, and the State of Texas on the 25th day of February, 1999.
American National Variable Life Separate Account
(Registrant)
By: American National Insurance Company
/s/ ROBERT L. MOODY
By:________________________________________
Robert L. Moody, Chairman of
the Board, President and Chief
Executive Officer
American National Insurance Company
(Depositor)
/s/ ROBERT L. MOODY
By:______________________________________________
Robert L. Moody, Chairman of the Board,
President and Chief Executive Officer
attest:
/s/ VINCENT E. SOLER, JR.
_______________________________________
Vincent E. Soler, Jr.,
Vice President, Secretary and Treasurer
As required by the Securities Act of 1933, this amended registration
statement has been signed by the following persons in their capacities and on
the dates indicated:
Signature Title Date
- --------- ----- ----
/s/ MICHAEL W. MCCROSKEY Executive Vice President - February 25, 1999
________________________ _________________
Michael W. McCroskey Investments (Principal
Financial Officer)
/s/ STEPHEN E. PAVLICEK Senior Vice President and February 25, 1999
________________________ Controller (Principal _________________
Stephen E. Pavlicek Accounting Officer)
4
<PAGE>
Signature Title Date
- --------- ----- ----
/s/ ROBERT L. MOODY Chairman of the Board, February 25, 1999
____________________________ Director, President and Chief _________________
Robert L. Moody Executive Officer
/s/ G. RICHARD FERDINANDTSEN February 25, 1999
____________________________ Director _________________
G. Richard Ferdinandtsen
/s/ IRWIN M. HERZ, JR. February 25, 1999
____________________________ Director _________________
Irwin M. Herz, Jr.
/s/ R. EUGENE LUCAS February 25, 1999
____________________________ Director _________________
R. Eugene Lucas
____________________________ Director _________________
E. Douglas McLeod
____________________________ Director _________________
Frances Anne Moody
____________________________ Director _________________
Russell S. Moody
/s/ W. L. MOODY, IV February 25, 1999
____________________________ Director _________________
W. L. Moody, IV
____________________________ Director ______________
Joe Max Taylor
5
