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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. 13
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
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 March 30, 2000 for the Registrant's fiscal year ending December
31, 1999.
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It is proposed that this filing will become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on May 1, 2000 pursuant to paragraph (b) of Rule 485
[ ] 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
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
PROSPECTUS MAY 1, 2000 1-800-306-2959
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:
AMERICAN NATIONAL FUND FIDELITY FUNDS
. Money Market Portfolio . Equity-Income Portfolio
. Growth Portfolio . High Income Portfolio
. Balanced Portfolio . Growth Portfolio
. Equity Income Portfolio . Overseas Portfolio
. High Yield Portfolio . Money Market Portfolio
. International Stock Portfolio . Contrafund Portfolio
. Small-Cap/Mid-Cap Portfolio . Asset Manager: Growth Portfolio
. Government Bond Portfolio . Investment Grade Bond Portfolio
. Asset Manager Portfolio
T. ROWE PRICE FUNDS . Index 500 Portfolio
. Equity Income Portfolio . Balanced Portfolio
. Mid-Cap Growth Portfolio . Growth and Income Portfolio
. International Stock Portfolio . Mid Cap Portfolio
. Growth Opportunities Portfolio
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. For a full description of the
American National Fund, T. Rowe Price Funds and Fidelity Funds, their investment
policies and regulations, risks, charges and expenses and other aspects of their
operation, see their prospectuses.
Please read this prospectus and keep it for future reference.
Form 5427 *5427* Rev. 5-00
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TABLE OF CONTENTS
PAGE
Definitions............................................ 4
Summary................................................ 6
The Policy............................................ 6
Issuance of a Policy.................................. 6
Allocation of Premiums................................ 6
Policy Benefits and Rights............................ 7
Charges............................................... 8
Taxes................................................. 10
Policy Benefits........................................ 12
Purposes of the Policy................................ 12
Death Benefit Proceeds................................ 12
Benefits at Maturity.................................. 12
Death Benefit Options................................. 12
Guaranteed Coverage Benefit........................... 16
Duration of the Policy................................ 16
Accumulation Value.................................... 17
Payment of Policy Benefits............................ 17
Policy Rights.......................................... 20
Loan Benefits......................................... 20
Surrenders............................................ 21
Transfers............................................. 22
Refund Privilege...................................... 23
Right to Exchange for a Universal Life Policy......... 23
Payment and Allocation of Premiums..................... 25
Issuance of a Policy.................................. 25
Premiums.............................................. 25
Premium Flexibility................................... 25
Allocation of Premiums and Accumulation Value......... 26
Grace Period and Reinstatement........................ 26
Charges and Deductions................................. 28
Premium Charges....................................... 28
Charges from Accumulation Value....................... 28
Monthly Deduction..................................... 28
Cost of Insurance..................................... 28
Surrender Charge...................................... 29
Transfer Charge....................................... 29
Partial Surrender Charge.............................. 29
Daily Charges Against the Separate Account............ 29
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Fees and Expenses Incurred by Eligible Portfolios..... 30
Taxes................................................. 30
Exceptions to Charges................................. 30
American National Insurance Company, the Separate
Account, the Funds and the Fixed Account.............. 31
American National Insurance Company................... 31
The Separate Account.................................. 31
The Funds............................................. 33
Fixed Account......................................... 36
Federal Tax Matters.................................... 38
Introduction.......................................... 38
Tax Status of the Policy.............................. 38
Tax Treatment of Policy Proceeds...................... 39
American National's Income Taxes...................... 42
Other Information...................................... 43
Sale of the Policy.................................... 43
The Contract.......................................... 43
Dividends............................................. 45
Legal Matters......................................... 45
Legal Proceedings..................................... 45
Registration Statement................................ 45
Experts............................................... 45
Senior Executive Officers and Directors of
American National Insurance Company................... 47
Financial Statements................................... 54
Appendix............................................... 105
Illustrations of Death Benefits,
Accumulation Values and Surrender Values.............. 107
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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
. 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 BENEFIT. Our agreement to keep the Policy in force if the
Guaranteed Coverage Premium is paid and other Policy provisions are met.
GUARANTEED COVERAGE PREMIUM. A specified premium which, if paid in advance as
required, will keep the Policy in force so long as other Policy provisions are
met.
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INSURED. The person upon whose life the Policy is issued.
MONTHLY DEDUCTION. The sum of (1) cost of insurance charge, (2) charge 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 PREMIUMS. Scheduled premiums selected by you.
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 DEATH. Submission of the following:
. a certified copy of the death certificate;
. 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. Each day the New York Stock Exchange ("NYSE") is open for
regular trading. A redemption, transfer or purchase can be made only on days
that American National is open. American National will be open on each day the
NYSE is open except for the day after Thanksgiving and the Friday before
Christmas Eve.
VALUATION PERIOD. The close of business on one Valuation Date to the close of
business on another.
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SUMMARY
The Policy is not available in some states. You should rely only on the
information contained or incorporated by reference in this prospectus. 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 25.)
The Death Benefit under the Policy may, and the Accumulation Value will, reflect
the investment performance of the investments you choose. (See "Death Benefit,"
page 7 and "Accumulation Value," page 17). 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.
ISSUANCE OF A POLICY
In order to purchase a Policy, you must submit an application to us. We review
the application to determine whether the Policy can be issued in accordance with
our underwriting standards. Once the underwriting process is completed, the Date
of Issue is designated. You, however, must submit your initial premium for the
Policy to have an Effective Date. Accordingly, the Date of Issue may be before
the Effective Date. If the underwriting process is not completed within 45 days
after you submit your application and initial premium, we will refund your
premium. Your initial premium can be re-submitted if the underwriting review of
the application is later completed.
ALLOCATION OF PREMIUMS
You can allocate premiums to one or more of the subaccounts and to the Fixed
Account. (See "The Separate Account," page 31 and "Fixed Account," page 37). 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 Fidelity Money Market
Portfolio. Premium payments received within 15 days after the Date of Issue are
also allocated to the Fidelity Money Market Portfolio. After the 15 day period,
premium payments and Accumulation Value are allocated among the Eligible
Portfolios in accordance with
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your instructions as contained in the application. 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.
POLICY BENEFITS AND RIGHTS
Death Benefit. The Death Benefit is available in two options. (See "Death
Benefit Options," page 12.) 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 17.)
Adjustments to Death Benefit. You can adjust the Death Benefit by changing the
Death Benefit option and by increasing or decreasing the Specified Amount.
Changes in the Specified Amount or the Death Benefit option are subject to
certain limitations. (See "Death Benefit Options," page 12 and "Change in
Specified Amount," page 15).
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 29. See "Surrenders," page 21). Surrenders may
have tax consequences. (See "Federal Tax Matters," page 38).
Policy Loans. You can borrow money from us using the Policy as security for the
loan. (See "Loan Benefits," page 20). Policy loans may have tax consequences.
(See Federal Tax Matters," page 38).
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
The date you receive your Policy will not necessarily be the date you submit
your premium.
(See "Refund Privilege," page 23.)
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 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
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Coverage Benefit requirements have been met, lapse can occur even if Planned
Periodic Premiums are paid. (See "Payment and Allocation of Premiums," page 25.)
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 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 28.)
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.
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ELIGIBLE PORTFOLIO ANNUAL EXPENSES
(as a percentage of average net assets)
<TABLE>
<CAPTION>
MANAGEMENT OTHER EXP. TOTAL EXP. MANAGEMENT OTHER EXP. TOTAL EXP.
FEES WITH WITH WITH FEES WITHOUT WITHOUT WITHOUT
PORTFOLIO REDUCTION REDUCTION REDUCTION REDUCTION REDUCTION REDUCTION
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<S> <C> <C> <C> <C> <C> <C>
American National Money Market Portfolio/1/ 0.09% 0.78% 0.87% 0.50% 0.87% 1.37%
American National Growth Portfolio/1/ 0.43% 0.44% 0.87% 0.50% 0.44% 0.94%
American National Balanced Portfolio/1/ 0.26% 0.64% 0.90% 0.50% 0.64% 1.14%
American National Equity Income Portfolio/1/ 0.49% 0.44% 0.93% 0.50% 0.49% 0.99%
American National High Yield Bond Portfolio 0.55% 0.30% 0.85% 0.55% 0.30% 0.85%
American National International Stock Portfolio 0.75% 0.35% 1.10% 0.75% 0.35% 1.10%
American National Small-Cap/Mid-Cap Portfolio 1.25% 0.25% 1.50% 1.25% 0.25% 1.50%
American National Governmental Bond Portfolio 0.50% 0.30% 0.80% 0.50% 0.30% 0.80%
Fidelity High Income Portfolio 0.58% 0.11% 0.69% 0.58% 0.11% 0.69%
Fidelity Money Market Portfolio 0.18% 0.09% 0.27% 0.18% 0.09% 0.27%
Fidelity Equity-Income Portfolio/2/ 0.48% 0.08% 0.56% 0.48% 0.09% 0.57%
Fidelity Growth Portfolio/2/ 0.58% 0.07% 0.65% 0.58% 0.08% 0.66%
Fidelity Overseas Portfolio/2/ 0.73% 0.14% 0.87% 0.73% 0.18% 0.91%
Fidelity Investment Grade Bond Portfolio 0.43% 0.11% 0.54% 0.43% 0.11% 0.54%
Fidelity Asset Manager Portfolio/2/ 0.53% 0.10% 0.63% 0.53% 0.10% 0.63%
Fidelity Index 500 Portfolio/2/ 0.24% 0.04% 0.28% 0.24% 0.10% 0.34%
Fidelity Contrafund Portfolio/2/ 0.58% 0.07% 0.65% 0.58% 0.09% 0.67%
Fidelity Asset Manager Growth Portfolio/2/ 0.58% 0.12% 0.70% 0.58% 0.13% 0.71%
Fidelity Balanced Portfolio/2/ 0.43% 0.12% 0.55% 0.43% 0.14% 0.57%
Fidelity Growth and Income Portfolio/2/ 0.48% 0.11% 0.59% 0.48% 0.12% 0.60%
Fidelity Mid Cap Portfolio/2/ 0.57% 0.40% 0.97% 0.57% 2.77% 3.34%
Fidelity Growth Opportunities Portfolio/2/ 0.58% 0.10% 0.68% 0.58% 0.11% 0.69%
T. Rowe Price Equity Income Portfolio/3/ 0.85% 0.00% 0.85% 0.85% 0.00% 0.85%
T. Rowe Price Mid-Cap Growth Portfolio/3/ 0.85% 0.00% 0.85% 0.85% 0.00% 0.85%
T. Rowe Price International Stock Portfolio/3/ 1.05% 0.00% 1.05% 1.05% 0.00% 1.05%
</TABLE>
/1/ Under its Administrative Service Agreement with the American National Fund,
Securities Management and Research, Inc. ("SM&R"), the American National Fund's
investment advisor and manager, has agreed to pay (or to reimburse each
Portfolio for ) each Portfolio's expenses (including the advisory fee and
administrative services fee paid to SM&R, but exclusive of interest,
commissions, and other expenses incidental to Portfolio transactions) in excess
of 1.50% per year of such Portfolio's average daily net assets. In addition,
SM&R has entered into a separate undertaking with the American National Fund
effective May 1, 1994 until April 30, 2001, pursuant to which SM&R has agreed to
reimburse the AN Money Market Portfolio and the AN Growth Portfolio for expenses
in excess of 0.87%; the AN Balanced Portfolio for expenses in excess of 1.18%;
and the AN Equity Income Portfolio for expenses in excess or 0.65%, of each of
such portfolio's average daily net assets during such period. SM&R is under no
obligation to renew this undertaking for any Portfolio at the end of such period
/2/ A portion of the brokerage commissions that certain funds pay was used to
reduce fund expenses. In addition, certain funds have entered into arrangements
with their custodian and transfer agent whereby interest earned on uninvested
cash balances was used to reduce custodian and transfer agent expenses
/3/ T. Rowe Price Equity Income and Mid-Cap Growth Portfolios pay T. Rowe Price
an annual all-inclusive fee of 0.85% based on such Portfolios' average daily net
assets. T. Rowe Price International Stock Portfolio pays Rowe Price-Fleming
International, Inc. an annual all-inclusive fee of 1.05% based on such
Portfolio's average daily net assets. These fees pay for investment management
services and other operating costs of the Portfolios.
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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 29.) 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 29).
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 29.)
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.
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.
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See "Federal Tax Matters," page 38, for a discussion of when distributions, such
as surrenders and loans, could be subject to federal income tax.
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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
. 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 17.)
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.
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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:
<TABLE>
<CAPTION>
CORRIDOR PERCENTAGE TABLE
ATTAINED CORRIDOR ATTAINED CORRIDOR ATTAINED CORRIDOR
AGE PERCENTAGE AGE PERCENTAGE AGE PERCENTAGE
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<S> <C> <C> <C> <C> <C>
40 or younger 250 54 157 68 117
41 243 55 150 69 116
42 236 56 146 70 115
43 229 57 142 71 113
44 222 58 138 72 111
45 215 59 134 73 109
46 209 60 130 74 107
47 203 61 128 75 to 90 105
48 197 62 126 91 104
49 191 63 124 92 103
50 185 64 122 93 102
51 178 65 120 94 101
52 171 66 119
53 164 67 118
</TABLE>
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 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
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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. 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.
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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 Tax Matters," page
38.)
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.
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 28.)
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 28 and "Federal Tax Matters," page
38.)
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
28.) An additional premium may be required. (See "Premiums Upon Increase in
Specified Amount," page 26.) 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 28.)
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You have a "free look period" for each increase in Specified Amount. The free
look period will apply only to the increase in Specified Amount. (See "Refund
Privilege," page 23.)
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 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
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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 26.)
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 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 44.) 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
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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 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:
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. 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.
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.
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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).
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 44.) Loans may have tax consequences. (See
"Federal Tax Matters," page 38.)
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
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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 Tax Matters," page 38.)
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.
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 26.)
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 44.) 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 17.) Surrenders may have tax consequences. (See "Federal Tax
Matters," page 38.)
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 29.)
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
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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
29.) 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 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 28; "Methods of Affecting Insurance Protection,"
page 16.) 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
44.)
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. We will charge $25 for each additional
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transfer. Such charge will be deducted from the amount transferred. (See
"Transfer Charge," page 29.) 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
26.) 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 44.)
RIGHT TO EXCHANGE FOR A UNIVERSAL LIFE POLICY
During the first two Policy years, you can exchange the Policy for 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
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. if under Death Benefit option B, the Death Benefit minus Accumulation Value
less Policy Debt.
The new policy will become effective 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.
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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.
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
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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
28.) 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.
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
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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 17. The Effective Date of
reinstatement will be the first Monthly Deduction Date on or next following the
date of we approve the application for reinstatement.
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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 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.
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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 15.)
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.
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
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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 9. 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.
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.
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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 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.
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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 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
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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 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-five subaccounts of the Separate Account will invest in
shares of a corresponding Eligible Portfolio.
The investment objectives and policies of each Eligible Portfolio are summarized
below. The Eligible Portfolios may not achieve their stated objectives. You will
be
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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 AMERICAN NATIONAL MONEY MARKET PORTFOLIO ... seeks the highest current
income consistent with the preservation of capital and maintenance of
liquidity.
. The AMERICAN NATIONAL GROWTH PORTFOLIO ... seeks to achieve capital
appreciation.
. The AMERICAN NATIONAL BALANCED PORTFOLIO ... seeks to conserve principal,
produce reasonable current income, and achieve long-term capital
appreciation.
. The AMERICAN NATIONAL EQUITY INCOME PORTFOLIO ... seeks to achieve growth of
capital and/or current income.
. The AMERICAN NATIONAL HIGH YIELD PORTFOLIO ... seeks to provide a high level
of current income. As a secondary investment objective, the Portfolio seeks
capital appreciation.
. The AMERICAN NATIONAL INTERNATIONAL STOCK PORTFOLIO ... seeks to obtain
long-term growth of capital through investments primarily in the equity
securities of established, non-U.S. countries.
. The AMERICAN NATIONAL SMALL-CAP/MID-CAP PORTFOLIO ... seeks to provide long-
term capital growth by investing primarily in stocks of small to medium-
sized companies.
. The AMERICAN NATIONAL GOVERNMENT BOND PORTFOLIO ... seeks to provide as high
a level of current income, liquidity, and safety of principal as is
consistent with prudent investment risks through investment in a Portfolio
consisting primarily of securities issued or guaranteed by the U.S.
government, its agencies, or instrumentalities.
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.
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. The Fidelity Funds' current Eligible Portfolios and respective investment
objectives are as follows:
. FIDELITY MONEY MARKET PORTFOLIO ... seeks as high a level of current income
as is consistent with the preservation of capital and liquidity.
. FIDELITY INVESTMENT GRADE BOND PORTFOLIO ... seeks as high a level of
current income as is consistent with the preservation of capital.
. FIDELITY HIGH INCOME PORTFOLIO ... seeks a high level of current income
while also considering growth of capital.
. FIDELITY 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.
. FIDELITY ASSET MANAGER: GROWTH PORTFOLIO ... seeks to maximize total return
by allocating its assets among stocks, bonds, short-term instruments, and
other investments.
. FIDELITY BALANCED PORTFOLIO ... seeks both income and growth of capital.
. FIDELITY 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.
. FIDELITY 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.
. FIDELITY GROWTH AND INCOME PORTFOLIO ... seeks high total return through a
combination of current income and capital appreciation.
. FIDELITY MID CAP PORTFOLIO ... seeks long-term growth of capital.
. FIDELITY GROWTH OPPORTUNITIES PORTFOLIO ... seeks to provide capital growth.
. FIDELITY CONTRAFUND PORTFOLIO ... seeks long-term capital appreciation.
. FIDELITY GROWTH PORTFOLIO ... seeks capital appreciation.
. FIDELITY OVERSEAS PORTFOLIO ... seeks long-term growth of capital.
Fidelity Management and Research 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, 1999, FMR advised funds
having more than 39 million shareholder accounts 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
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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 22.)
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
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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.
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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.
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
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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."
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
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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 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 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.
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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 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
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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.
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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.)
SM&R will pay commissions to its registered representatives who sell the
Policies based upon a commission schedule. In Policy year one, the commissions
to the registered representatives will not exceed 50% of the Guaranteed Coverage
Premium plus the first year cost of any riders. The registered representatives
will receive a maximum commission of 4% on any premiums paid in excess of the
Guaranteed Coverage Premium plus the cost of any riders. In later years , the
registered representatives will receive renewal commissions which will not
exceed 3.00% of any premiums paid. Commissions will also be paid upon any
increase in Specified Amount or any increases in riders. 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.
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.
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.
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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.
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
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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 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 are 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 American National Insurance Company and
subsidiaries as of December 31, 1999 and 1998, and for the years then ended, and
the statements of net assets of American National Variable Life Separate Account
as of December 31, 1999, and the related statements of operations and statements
of changes in net assets for each of the three years in the period 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.
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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.
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SENIOR EXECUTIVE OFFICERS AND
DIRECTORS OF
AMERICAN NATIONAL INSURANCE COMPANY
NAME
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 and Director, 1980 to present.
National 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. The Mary Moody Northen, Inc.: 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,
Chief Executive Officer 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
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to present; and Vice Chairman of the Board, 1998 to present. American National
Lloyds Insurance Company: Underwriter, March 1993 to present. Pacific P & C,
Inc.: Director, 1995 to present; and Vice Chairman of the Board. Standard Life
and Accident Insurance Company: Director, Chairman of the Board, President and
Chief Executive Officer, May 1996 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. Garden State Life Insurance Company:
Director, June 1992 to present. American National Property and Casualty Company:
Director. Galveston Housing Authority: Commissioner and Chairman.
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. 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. GTG
Corporation: President and Director.
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: Chairman and Director, 1983 to present.
South Texas College of Law: Director.
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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. Investments, Austin, Texas.
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.
Investments, Ranching, Oil & Gas, Galveston, Texas.
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, and Vice President. 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.
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;
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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 and
Director. ANMEX International, Inc.: Vice President and Director. American
National de Mexico, Compania de Seguros de Vida, S.A. de C.V.: Director.
American National Promotora de Ventas, S.A. de C.V.: Director. Servicios de
Administracion American National: Director.
MICHAEL W. M/C/CROSKEY
EXECUTIVE VICE PRESIDENT
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, June 1992 to
April 1996; and Senior Vice President, Corporate Planning and Development, April
1996 to present. American National Life Insurance Company of Texas: Vice
President, April 1993 to present.
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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. 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.
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.
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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. Garden
State Life Insurance Company: Vice President, 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
1998. 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.
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. 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.
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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.
American National Life Insurance Company of Texas: Vice President. Garden State
Life Insurance Company, Vice President, Corporate Affairs. Standard Life and
Accident Insurance Company, Vice President, Corporate Affairs.
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:
Secretary, 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. 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.
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<PAGE>
FINANCIAL STATEMENTS
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.
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Board of Directors and Contract Owners of American National Variable Life
Separate Account:
We have audited the accompanying statements of net assets of the American
National Variable Life Separate Account (comprised of American National (AN)
Growth, AN Money Market, AN Balanced, AN Equity Income, Fidelity VIP II
Investment Grade Bond, Fidelity VIP II Asset Manager, Fidelity VIP II Index 500,
Fidelity VIP Money Market, Fidelity VIP Equity Income, Fidelity VIP High Income,
Fidelity VIP Growth, Fidelity VIP Overseas, Fidelity VIP II Contra Fund,
Fidelity VIP II Asset Manager Growth, Fidelity VIP III Growth Opportunities,
Fidelity VIP III Growth & Income, Fidelity VIP III Mid-Cap Growth, T. Rowe Price
Equity Income, T. Rowe Price International and T. Rowe Price Mid-Cap Growth
Subaccounts) (collectively, the Account) as of December 31, 1999, and the
related statements of operations and the statements of changes in net assets for
each of the three years in the period then ended. These financial statements are
the responsibility of the Account's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1999 by correspondence with
the custodians. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Account as of December 31,
1999 and the results of its operations and the changes in net assets for each of
the three years in the period then ended, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
April 21, 2000
55
<PAGE>
AMERICAN NATIONAL VARIABLE LIFE SEPARATE ACCOUNT
STATEMENTS OF NET ASSETS
December 31, 1999
(In thousands, except for number of shares)
<TABLE>
<CAPTION>
AN AN
AN Money AN Equity
Growth Market Balanced Income
Portfolio Portfolio Portfolio Portfolio
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Investment in shares of mutual funds, at market $ 12,074 $ 2,507 $ 5,417 $ 8,661
============================================================================================================================
Liabilities:
Contract owner reserves $ 6,536 $ 48 $ 1,140 $ 3,308
Equity of sponsor 5,538 2,459 4,277 5,353
- --------------------------------------------------------------------------------------------------------------------------
Total liabilities $ 12,074 $ 2,507 $ 5,417 $ 8,661
============================================================================================================================
Investment Portfolio Information:
Number of shares 5,860,960 2,507,117 3,563,774 4,707,286
Cost $ 7,954 $ 2,507 $ 4,146 $ 6,153
============================================================================================================================
</TABLE>
AMERICAN NATIONAL VARIABLE LIFE SEPARATE ACCOUNT
STATEMENTS OF NET ASSETS
December 31, 1999
(In thousands, except for number of shares)
<TABLE>
<CAPTION>
Fidelity
VIP II Fidelity Fidelity Fidelity
Investment VIP II VIP II VIP
Grade Asset Index Money
Bond Manager 500 Market
Portfolio Portfolio Portfolio Portfolio
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Investment in shares of mutual funds, at market $ 108 $ 1,233 $ 9,333 $ 114
============================================================================================================================
Liabilities:
Contract owner reserves $ 108 $ 1,233 $ 9,333 $ 114
============================================================================================================================
Investment Portfolio Information:
Number of shares 8,868 66,044 55,751 114,093
Cost $ 111 $ 1,088 $ 6,454 $ 114
============================================================================================================================
</TABLE>
56
<PAGE>
AMERICAN NATIONAL VARIABLE LIFE SEPARATE ACCOUNT
STATEMENTS OF NET ASSETS
December 31, 1999
(In thousands, except for number of shares)
<TABLE>
<CAPTION>
Fidelity Fidelity
VIP VIP Fidelity Fidelity
Equity High VIP VIP
Income Income Growth Overseas
Fund Fund Fund Fund
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Investment in shares of mutual funds, at market $ 3,471 $ 427 $ 8,543 $ 1,217
=============================================================================================================================
Liabilities:
Contract owner reserves $ 3,471 $ 427 $ 8,543 $ 1,217
=============================================================================================================================
Investment Portfolio Information:
Number of shares 135,023 37,756 155,526 44,351
Cost $ 3,044 $ 460 $ 5,407 $ 872
=============================================================================================================================
</TABLE>
AMERICAN NATIONAL VARIABLE LIFE SEPARATE ACCOUNT
STATEMENTS OF NET ASSETS
December 31, 1999
(In thousands, except for number of shares)
<TABLE>
<CAPTION>
Fidelity Fidelity
VIP II VIP III Fidelity
Fidelity Asset Growth VIP III
VIP II Manager Opport- Growth &
Contra Growth unities Income
Fund Fund Fund Fund
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Investment in shares of mutual funds, at market $ 2,934 $ 618 $ 6 $ 16
=======================================================================================================================
Liabilities:
Contract owner reserves $ 2,934 $ 618 $ 6 $ 16
=======================================================================================================================
Investment Portfolio Information:
Number of shares 100,666 33,617 278 935
Cost $ 2,095 $ 530 $ 6 $ 15
=======================================================================================================================
</TABLE>
57
<PAGE>
AMERICAN NATIONAL VARIABLE LIFE SEPARATE ACCOUNT
STATEMENTS OF NET ASSETS
December 31, 1999
(In thousands, except for number of shares)
<TABLE>
<CAPTION>
Fidelity
VIP III T. Rowe T. Rowe T. Rowe
Mid Price Price Price
Cap Equity Internat- Mid-Cap
Growth Income ional Growth
Portfolio Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Investment in shares of mutual funds, at market $ 2 $ - $ 1 $ 1
==============================================================================================================================
Liabilities:
Contract owner reserves $ 2 $ - $ 1 $ 1
==============================================================================================================================
Investment Portfolio Information:
Number of shares 100 3 59 38
Cost $ 1 $ - $ 1 $ 1
==============================================================================================================================
</TABLE>
58
<PAGE>
AMERICAN NATIONAL VARIABLE LIFE SEPARATE ACCOUNT
STATEMENTS OF OPERATIONS
(In thousands)
<TABLE>
<CAPTION>
AN Growth Portfolio AN Money Market Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Year ended December 31, Year ended December 31,
------------------------------------- ------------------------------------
1999 1998 1997 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment income
Dividend from mutual funds $ 59 $ 88 $ 111 $ 92 $ 107 $ 104
Expenses
Charges to contract owners for assuming
mortality and expense risks (53) (41) (26) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 6 $ 47 $ 85 $ 92 $ 107 $ 104
- ------------------------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain
on investments
Net realized gain on investments $ 153 $ 89 $ 26 $ -- $ -- $ --
Capital gains distributions from mutual funds 4 329 541 -- -- --
Net unrealized appreciation (depreciation)
of investments during the period 1,306 1,119 461 -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
on investments $ 1,463 $ 1,537 $ 1,028 $ -- $ -- $ --
- ------------------------------------------------------------------------------------------------------------------------------------
Increase in net assets
resulting from operations $ 1,469 $ 1,584 $ 1,113 $ 92 $ 107 $ 104
====================================================================================================================================
</TABLE>
AMERICAN NATIONAL VARIABLE LIFE SEPARATE ACCOUNT
STATEMENTS OF OPERATIONS
(In thousands)
<TABLE>
<CAPTION>
AN Balanced Portfolio
- ----------------------------------------------------------------------------------------
Year ended December 31,
-----------------------------------
1999 1998 1997
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment income
Dividend from mutual funds $ 29 $ 121 $ 129
Expenses
Charges to contract owners for assuming
mortality and expense risks (10) (9) (6)
- ---------------------------------------------------------------------------------------
Net investment income $ 19 $ 112 $ 123
- ---------------------------------------------------------------------------------------
Realized and unrealized gain
on investments
Net realized gain on investments $ 42 $ 29 $ 24
Capital gains distributions from mutual funds 66 116 203
Net unrealized appreciation (depreciation)
of investments during the period (95) 445 304
- ---------------------------------------------------------------------------------------
Net realized and unrealized gain
on investments $ 13 $ 590 $ 531
- ---------------------------------------------------------------------------------------
Increase in net assets
resulting from operations $ 32 $ 702 $ 654
=======================================================================================
</TABLE>
59
<PAGE>
AMERICAN NATIONAL VARIABLE LIFE SEPARATE ACCOUNT
STATEMENTS OF OPERATIONS
(In thousands)
<TABLE>
<CAPTION>
Fidelity VIP II Investment
AN Equity Income Portfolio Grade Bond Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Year ended December 31, Year ended December 31,
----------------------------------- -------------------------------------------
1999 1998 1997 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment income
Dividend from mutual funds $ 42 $ 88 $ 94 $ 4 $ 2 $ 1
Expenses
Charges to contract owners for assuming
mortality and expense risks (27) (20) (13) (1) (1) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 15 $ 68 $ 81 $ 3 $ 1 $ 1
- ------------------------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss)
on investments
Net realized gain on investments $ 110 $ 42 $ 29 $ -- $ 2 $ --
Capital gains distributions from mutual funds 280 125 303 1 -- --
Net unrealized appreciation (depreciation)
of investments during the period 309 704 572 (6) 1 1
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments $ 699 $ 871 $ 904 $ (5) $ 3 $ 1
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
resulting from operations $ 714 $ 939 $ 985 $ (2) $ 4 $ 2
====================================================================================================================================
</TABLE>
AMERICAN NATIONAL VARIABLE LIFE SEPARATE ACCOUNT
STATEMENTS OF OPERATIONS
(In thousands)
<TABLE>
<CAPTION>
Fidelity VIP II Asset Manager Portfolio
- ----------------------------------------------------------------------------------------------------
Year ended December 31,
------------------------------------------
1999 1998 1997
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment income
Dividend from mutual funds $ 36 $ 27 $ 22
Expenses
Charges to contract owners for assuming
mortality and expense risks (10) (9) (7)
- ----------------------------------------------------------------------------------------------------
Net investment income $ 26 $ 18 $ 15
- ----------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss)
on investments
Net realized gain on investments $ 20 $ 26 $ 16
Capital gains distributions from mutual funds 45 81 56
Net unrealized appreciation (depreciation)
of investments during the period 21 3 44
- ----------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments $ 86 $ 110 $ 116
- ----------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
resulting from operations $ 112 $ 128 $ 131
====================================================================================================
</TABLE>
60
<PAGE>
AMERICAN NATIONAL VARIABLE LIFE SEPARATE ACCOUNT
STATEMENTS OF OPERATIONS
(In thousands)
<TABLE>
<CAPTION>
Fidelity VIP II Index 500 Portfolio Fidelity VIP Money Market Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
Year ended December 31, Year ended December 31,
---------------------------------- -------------------------------------
1999 1998 1997 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment income
Dividend from mutual funds $ 69 $ 43 $ 14 $ 6 $ 6 $ 10
Expenses
Charges to contract owners for assuming
mortality and expense risks (72) (46) (19) (1) (1) (2)
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) $ (3) $ (3) $ (5) $ 5 $ 5 $ 8
- ---------------------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain
on investments
Net realized gain on investments $ 115 $ 123 $ 51 $ -- $ -- $ --
Capital gains distributions from mutual funds 47 100 29 -- -- --
Net unrealized appreciation (depreciation)
of investments during the period 1,296 1,022 443 -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
on investments $ 1,458 $ 1,245 $ 523 $ -- $ -- $ --
- ---------------------------------------------------------------------------------------------------------------------------------
Increase in net assets
resulting from operations $ 1,455 $ 1,242 $ 518 $ 5 $ 5 $ 8
==================================================================================================================================
Fidelity VIP Equity Income Fund Portfolio
- ----------------------------------------------------------------------------------------------------
Year ended December 31,
--------------------------------------------
1999 1998 1997
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment income
Dividend from mutual funds $ 49 $ 33 $ 22
Expenses
Charges to contract owners for assuming
mortality and expense risks (31) (25) (15)
- ------------------------------------------------------------------------------------------------------
Net investment income (loss) $ 18 $ 8 $ 7
- ------------------------------------------------------------------------------------------------------
Realized and unrealized gain
on investments
Net realized gain on investments $ 68 $ 73 $ 42
Capital gains distributions from mutual funds 108 119 109
Net unrealized appreciation (depreciation)
of investments during the period (22) 82 231
- ------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
on investments $ 154 $ 274 $ 382
- ------------------------------------------------------------------------------------------------------
Increase in net assets
resulting from operations $ 172 $ 282 $ 389
======================================================================================================
</TABLE>
61
<PAGE>
AMERICAN NATIONAL VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF OPERATIONS
(In thousands)
<TABLE>
<CAPTION>
Fidelity VIP High Income Fund Portfolio Fidelity VIP Growth Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
Year ended December 31, Year ended December 31,
----------------------------------- ---------------------------------------
1999 1998 1997 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment income
Dividend from mutual funds $ 42 $ 27 $ 20 $ 10 $ 20 $ 17
Expenses
Charges to contract owners for assuming
mortality and expense risks (4) (4) (3) (61) (42) (28)
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) $ 38 $ 23 $ 17 $ (51) $ (22) $ (11)
- ---------------------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss)
on investments
Net realized gain (loss) on investments $ (7) $ 9 $ 17 $ 91 $ 125 $ 104
Capital gains distributions from mutual funds 2 17 2 657 516 76
Net unrealized appreciation (depreciation)
of investments during the period 1 (75) 14 1,517 948 433
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments $ (4) $ (49) $ 33 $ 2,265 $ 1,589 $ 613
- ---------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
resulting from operations $ 34 $ (26) $ 50 $ 2,214 $ 1,567 $ 602
=================================================================================================================================
<CAPTION>
Fidelity VIP Overseas Portfolio
--------------------------------------------
Year ended December 31,
--------------------------------------------
1999 1998 1997
--------------------------------------------
<S> <C> <C> <C>
Investment income
Dividend from mutual funds $ 13 $ 13 $ 7
Expenses
Charges to contract owners for assuming
mortality and expense risks (8) (7) (5)
- -------------------------------------------------------------------------------------------------
Net investment income (loss) $ 5 $ 6 $ 2
- -------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss)
on investments
Net realized gain (loss) on investments $ 37 $ 15 $ 12
Capital gains distributions from mutual funds 21 38 30
Net unrealized appreciation (depreciation)
of investments during the period 276 18 1
- -------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments $ 334 $ 71 $ 43
- -------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
resulting from operations $ 339 $ 77 $ 45
=================================================================================================
</TABLE>
62
<PAGE>
AMERICAN NATIONAL VARIABLE LIFE SEPARATE ACCOUNT
STATEMENTS OF OPERATIONS
(In thousands)
<TABLE>
<CAPTION>
Fidelity VIP II
Fidelity VIP II Contra Fund Asset Manager Growth
- -------------------------------------------------------------------------------------------------------------------------
Year ended December 31, Year ended December 31,
------------------------------------ ----------------------------
1999 1998 1997 1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment income
Dividend from mutual funds $ 10 $ 8 $ 3 $ 14 $ 7 $ --
Expenses
Charges to contract owners for assuming
mortality and expense risks (21) (13) (6) (5) (4) (2)
- --------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) $ (11) $ (5) $ (3) $ 9 $ 3 $ (2)
- --------------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain
on investments
Net realized gain (loss) on investments $ 47 $ 48 $ 30 $ 17 $ 11 $ 6
Capital gains distributions from mutual funds 72 58 9 23 33 --
Net unrealized appreciation
of investments during the period 412 294 99 31 23 32
- --------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
on investments $ 531 $ 400 $ 138 $ 71 $ 67 $ 38
- --------------------------------------------------------------------------------------------------------------------------
Increase in net assets
resulting from operations $ 520 $ 395 $ 135 $ 80 $ 70 $ 36
==========================================================================================================================
<CAPTION>
Fidelity Fidelity Fidelity
Growth VIP III VIP III
Opport- Growth & Mid Cap
unities Income Growth
Fund Fund Fund
- ----------------------------------------------------------------------------------------------------
Year ended December 31,
------------------------------------------------
1999 1999 1999
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment income
Dividend from mutual funds $ -- $ -- $ --
Expenses
Charges to contract owners for assuming
mortality and expense risks -- -- --
- --------------------------------------------------------------------------------------------------
Net investment income (loss) $ -- $ -- $ --
- --------------------------------------------------------------------------------------------------
Realized and unrealized gain
on investments
Net realized gain (loss) on investments $ -- $ (1) $ --
Capital gains distributions from mutual funds -- -- --
Net unrealized appreciation
of investments during the period -- 1 1
- --------------------------------------------------------------------------------------------------
Net realized and unrealized gain
on investments $ -- $ -- $ 1
- ---------------------------------------------------------------------------------------------------
Increase in net assets
resulting from operations $ -- $ -- $ 1
===================================================================================================
</TABLE>
63
<PAGE>
AMERICAN NATIONAL VARIABLE LIFE SEPARATE ACCOUNT
STATEMENTS OF OPERATIONS
(In thousands)
<TABLE>
<CAPTION>
T. Rowe T. Rowe
Price T. Rowe Price
Equity Price Mid-Cap
Income International Growth
Portfolio Portfolio Portfolio
- ---------------------------------------------------------------------------------------------------
Year ended December 31,
------------------------------------------------
1999 1999 1999
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment income
Dividend from mutual funds $ -- $ -- $ --
Expenses
Charges to contract owners for assuming
mortality and expense risks -- -- --
- ---------------------------------------------------------------------------------------------------
Net investment income $ -- $ -- $ --
- ---------------------------------------------------------------------------------------------------
Realized and unrealized gain
on investments
Net realized gain on investments $ -- $ 7 $ --
Capital gains distributions from mutual funds -- -- --
Net unrealized appreciation
of investments during the period -- -- --
- ---------------------------------------------------------------------------------------------------
Net realized and unrealized gain
on investments $ -- $ 7 $ --
- ---------------------------------------------------------------------------------------------------
Increase in net assets
resulting from operations $ -- $ 7 $ --
===================================================================================================
</TABLE>
64
<PAGE>
AMERICAN NATIONAL VARIABLE LIFE SEPARATE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
(In thousands except for unit information)
<TABLE>
<CAPTION>
AN Growth Portfolio
- -------------------------------------------------------------------------------------------------------------
Year ended December 31,
--------------------------------------------
1999 1998 1997
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations:
Net investment income $ 6 $ 47 $ 85
Net realized gain on investments 153 89 26
Capital gains distributions from mutual funds 4 329 541
Net unrealized appreciation (depreciation)
of investments during the year 1,306 1,119 461
- -------------------------------------------------------------------------------------------------------------
Increase in net assets
resulting from operations $ 1,469 $ 1,584 $ 1,113
- -------------------------------------------------------------------------------------------------------------
From policy related transactions:
Purchase payments and other transfers $ 1,363 $ 2,085 $ 1,803
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees (1,107) (997) (676)
- -------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets resulting from
policy related transactions $ 256 $ 1,088 $ 1,127
- -------------------------------------------------------------------------------------------------------------
Total increase in net assets $ 1,725 $ 2,672 $ 2,240
Net assets, beginning of period 10,349 7,677 5,437
- -------------------------------------------------------------------------------------------------------------
Net assets, end of period $ 12,074 $ 10,349 $ 7,677
=============================================================================================================
Change in units outstanding:
Accumulation units beginning of year 2,147,002 1,685,437 1,135,752
Purchase payments 650,780 982,414 1,055,430
Policy withdrawals and charges (572,113) (520,849) (505,745)
- -------------------------------------------------------------------------------------------------------------
Accumulation units end of year 2,225,669 2,147,002 1,685,437
=============================================================================================================
Accumulation unit value $ 2.936 $ 2.577 $ 2.191
=============================================================================================================
<CAPTION>
AN Money Market Portfolio AN Balanced Portfolio
--------------------------------------------------------------------
Year ended December 31, Year ended December 31,
------------------------------- ---------------------------------
1999 1998 1997 1999 1998 1997
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment income $ 92 $ 107 $ 104 $ 19 $ 112 $ 123
Net realized gain on investments - - - 42 29 24
Capital gains distributions from mutual funds - - - 66 116 203
Net unrealized appreciation (depreciation)
of investments during the year - - - (95) 445 304
- ----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets
resulting from operations $ 92 $ 107 $ 104 $ 32 $ 702 $ 654
- ----------------------------------------------------------------------------------------------------------------------------------
From policy related transactions:
Purchase payments and other transfers $ 28 $ 15 $ (4) $ 565 $ 261 $ 188
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees (5) (12) (5) (209) (166) (128)
- ----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets resulting from
policy related transactions $ 23 $ 3 $ (9) $ 356 $ 95 $ 60
- ----------------------------------------------------------------------------------------------------------------------------------
Total increase in net assets $ 115 $ 110 $ 95 $ 388 $ 797 $ 714
Net assets, beginning of period 2,392 2,282 2,187 5,029 4,232 3,518
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period $ 2,507 $ 2,392 $ 2,282 $ 5,417 $ 5,029 $ 4,232
==================================================================================================================================
Change in units outstanding:
Accumulation units beginning of year 26,510 23,789 31,620 495,551 447,269 417,080
Purchase payments 16,530 14,500 17,314 124,983 158,715 207,226
Policy withdrawals and charges (5,985) (11,779) (25,145) (126,803) (110,433) (177,037)
- ----------------------------------------------------------------------------------------------------------------------------------
Accumulation units end of year 37,055 26,510 23,789 493,731 495,551 447,269
==================================================================================================================================
Accumulation unit value $ 1.299 $ 1.259 $ 1.191 $ 2.309 $ 2.157 $ 1.867
==================================================================================================================================
</TABLE>
65
<PAGE>
AMERICAN NATIONAL VARIABLE LIFE SEPARATE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
(In thousands except for unit information)
<TABLE>
<CAPTION>
Fidelity VIP II Investment
AN Equity Income Portfolio Grade Bond Portfolio
- -------------------------------------------------------------------------------------------------------------------------------
Year ended December 31, Year ended December 31,
----------------------------------- ---------------------------
1999 1998 1997 1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment income $ 15 $ 68 $ 81 $ 3 $ 1 $ 1
Net realized gain on investments 110 42 29 - 2 --
Capital gains distributions from mutual funds 280 125 303 1 - --
Net unrealized appreciation (depreciation)
of investments during the year 309 704 572 (6) 1 1
- ------------------------------------------------------------------------------------------------------------------------------
Increase in net assets
resulting from operations $ 714 $ 939 $ 985 $ (2)$ 4 $ 2
- ------------------------------------------------------------------------------------------------------------------------------
From policy related transactions:
Purchase payments and other transfers $ 1,094 $ 1,060 $ 821 $ 23 $ 62 $ 34
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees (468) (440) (269) (9) (10) (13)
- ------------------------------------------------------------------------------------------------------------------------------
Increase in net assets resulting from
policy related transactions $ 626 $ 620 $ 552 $ 14 $ 52 $ 21
- ------------------------------------------------------------------------------------------------------------------------------
Total increase in net assets $ 1,340 $ 1,559 $ 1,537 $ 12 $ 56 $ 23
Net assets, beginning of period 7,321 5,762 4,225 96 40 17
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period $ 8,661 $ 7,321 $ 5,762 $ 108 $ 96 $ 40
==============================================================================================================================
Change in units outstanding:
Accumulation units beginning of year 1,138,122 863,138 577,332 71,888 32,256 15,113
Purchase payments 336,505 508,472 512,013 29,206 68,764 30,889
Policy withdrawals and charges (294,570) (233,488) (226,207) (18,575) (29,132) (13,746)
- ------------------------------------------------------------------------------------------------------------------------------
Accumulation units end of year 1,180,057 1,138,122 863,138 82,519 71,888 32,256
==============================================================================================================================
Accumulation unit value $ 2.804 $ 2.416 $ 2.104 $ 1.307 $ 1.333 $ 1.236
==============================================================================================================================
<CAPTION>
Fidelity VIP II Asset Manager Program
--------------------------------------
Year ended December 31,
--------------------------------------
1999 1998 1997
--------------------------------------
<S> <C> <C> <C>
Operations:
Net investment income $ 26 $ 18 $ 15
Net realized gain on investments 20 26 16
Capital gains distributions from mutual funds 45 81 56
Net unrealized appreciation (depreciation)
of investments during the year 21 3 44
- --------------------------------------------------------------------------------------------
Increase in net assets
resulting from operations $ 112 $ 128 $ 131
- --------------------------------------------------------------------------------------------
From policy related transactions:
Purchase payments and other transfers $ 196 $ 298 $ 259
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees (151) (200) (174)
- --------------------------------------------------------------------------------------------
Increase in net assets resulting from
policy related transactions $ 45 $ 98 $ 85
- --------------------------------------------------------------------------------------------
Total increase in net assets $ 157 $ 226 $ 216
Net assets, beginning of period 1,076 850 634
- --------------------------------------------------------------------------------------------
Net assets, end of period $ 1,233 $ 1,076 $ 850
============================================================================================
Change in units outstanding:
Accumulation units beginning of year 653,294 590,100 526,795
Purchase payments 148,822 212,164 246,245
Policy withdrawals and charges (121,811) (148,970) (182,940)
- --------------------------------------------------------------------------------------------
Accumulation units end of year 680,305 653,294 590,100
============================================================================================
Accumulation unit value $ 1.812 $ 1.646 $ 1.440
============================================================================================
</TABLE>
66
<PAGE>
AMERICAN NATIONAL VARIABLE LIFE SEPARATE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
(In thousands except for unit information)
<TABLE>
<CAPTION>
Fidelity VIP II Index 500 Fund Fidelity VIP Money Market Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Year ended December 31, Year ended December 31,
------------------------------------- ----------------------------------------
1999 1998 1997 1999 1998 1997
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Operations:
Net investment income (loss) $ (3) $ (3) $ (5) $ 5 $ 5 $ 8
Net realized gain on investments 115 123 51 - - -
Capital gains distributions from mutual funds 47 100 29 - - -
Net unrealized appreciation (depreciation)
of investments during the year 1,296 1,022 443 - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets
resulting from operations $ 1,455 $ 1,242 $ 518 $ 5 $ 5 $ 8
- -----------------------------------------------------------------------------------------------------------------------------------
From policy related transactions:
Purchase payments and other transfers $ 2,434 $ 3,534 $ 2,489 $ 28 $ 128 $ 184
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees (1,442) (1,252) (773) (39) (131) (198)
- -----------------------------------------------------------------------------------------------------------------------------------
Increase net assets resulting from
policy related transactions $ 992 $ 2,282 $ 1,716 $ (11) $ (3) $ (14)
- -----------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets $ 2,447 $ 3,524 $ 2,234 $ (6) $ 2 $ (6)
Net assets, beginning of period 6,886 3,362 1,128 120 118 124
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period $ 9,333 $ 6,886 $ 3,362 $ 114 $ 120 $ 118
===================================================================================================================================
Change in units outstanding:
Accumulation units beginning of year 2,518,622 1,564,744 689,690 96,614 99,306 108,971
Purchase payments 1,078,313 1,677,279 1,392,020 441,497 2,144,418 2,808,229
Policy withdrawals and charges (738,227) (723,401) (516,966) (449,990) (2,147,110) (2,817,110)
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation units end of year 2,858,708 2,518,622 1,564,744 88,121 96,614 99,306
===================================================================================================================================
Accumulation unit value $ 3.265 $ 2.734 $ 2.149 $ 1.294 $ 1.242 $ 1.189
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Fidelity VIP Equity Income Fund
- ---------------------------------------------------------------------------------------------
Year ended December 31,
---------------------------------------
1999 1998 1997
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
Operations:
Net investment income (loss) $ 18 $ 8 $ 7
Net realized gain on investments 68 73 42
Capital gains distributions from mutual funds 108 119 109
Net unrealized appreciation (depreciation)
of investments during the year (22) 82 231
- ---------------------------------------------------------------------------------------------
Increase in net assets
resulting from operations $ 172 $ 282 $ 389
- ---------------------------------------------------------------------------------------------
From policy related transactions:
Purchase payments and other transfers $ 606 $ 1,126 $ 1,245
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees (526) (533) (532)
- ---------------------------------------------------------------------------------------------
Increase net assets resulting from
policy related transactions $ 80 $ 593 $ 713
- ---------------------------------------------------------------------------------------------
Total increase (decrease) in net assets $ 252 $ 875 $ 1,102
Net assets, beginning of period 3,219 2,344 1,242
- ---------------------------------------------------------------------------------------------
Net assets, end of period $ 3,471 $ 3,219 $ 2,344
=============================================================================================
Change in units outstanding:
Accumulation units beginning of year 1,456,873 1,175,683 791,383
Purchase payments 378,739 647,393 779,052
Policy withdrawals and charges (344,673) (366,203) (394,752)
- --------------------------------------------------------------------------------------------
Accumulation units end of year 1,490,939 1,456,873 1,175,683
============================================================================================
Accumulation unit value $ 2.328 $ 2.210 $ 1.993
- --------------------------------------------------------------------------------------------
</TABLE>
67
<PAGE>
AMERICAN NATIONAL VARIABLE LIFE SEPARATE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
(In thousands except for unit information)
<TABLE>
<CAPTION>
Fidelity VIP High Income Fund Fidelity VIP Growth Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Year ended December 31, Year ended December 31,
------------------------------------ -------------------------------------
1999 1998 1997 1999 1998 1997
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Operations:
Net investment income (loss) $ 38 $ 23 $ 17 $ (51) $ (22) $ (11)
Net realized gain (loss) on investments (7) 9 17 91 125 104
Capital gains distributions from mutual funds 2 17 2 657 516 76
Net unrealized appreciation (depreciation)
of investments during the year 1 (75) 14 1,517 948 433
- -----------------------------------------------------------------------------------------------------------------------------------
Increase net assets
resulting from operations $ 34 $ (26) $ 50 $ 2,214 $ 1,567 $ 602
- -----------------------------------------------------------------------------------------------------------------------------------
From policy related transactions:
Purchase payments and other transfers $ 7 $ 195 $ 131 $ 1,520 $ 1,363 $ 1,692
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees (65) (80) (112) (1,016) (884) (928)
- -----------------------------------------------------------------------------------------------------------------------------------
Increase net assets resulting from
policy related transactions $ (58) $ 115 $ 19 $ 504 $ 479 $ 764
- -----------------------------------------------------------------------------------------------------------------------------------
Total increase in net assets $ (24) $ 89 $ 69 $ 2,718 $ 2,046 $ 1,366
Net assets, beginning of period 451 362 293 5,825 3,779 2,413
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period $ 427 $ 451 $ 362 $ 8,543 $ 5,825 $ 3,779
===================================================================================================================================
Change in units outstanding:
Accumulation units beginning of year 319,669 243,238 229,426 2,335,876 2,097,171 1,639,026
Purchase payments 67,497 166,392 150,869 653,953 872,710 1,226,338
Policy withdrawals and charges (104,754) (89,961) (137,057) (474,839) (634,005) (768,193)
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation units end of year 282,412 319,669 243,238 2,514,990 2,335,876 2,097,171
===================================================================================================================================
Accumulation unit value $ 1.512 $ 1.411 $ 1.487 $ 3.397 $ 2.494 $ 1.802
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Fidelity VIP Overseas Fund
- ---------------------------------------------------------------------------------------------------
Year ended December 31,
-------------------------------------
1999 1998 1997
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
Operations:
Net investment income (loss) $ 5 $ 6 $ 2
Net realized gain (loss) on investments 37 15 12
Capital gains distributions from mutual funds 21 38 30
Net unrealized appreciation (depreciation)
of investments during the year 276 18 1
- ---------------------------------------------------------------------------------------------------
Increase net assets
resulting from operations $ 339 $ 77 $ 45
- ---------------------------------------------------------------------------------------------------
From policy related transactions:
Purchase payments and other transfers $ 259 $ 247 $ 301
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees (193) (136) (137)
- ---------------------------------------------------------------------------------------------------
Increase net assets resulting from
policy related transactions $ 66 $ 111 $ 164
- ---------------------------------------------------------------------------------------------------
Total increase in net assets $ 405 $ 188 $ 209
Net assets, beginning of period 812 624 415
- ---------------------------------------------------------------------------------------------------
Net assets, end of period $ 1,217 $ 812 $ 624
===================================================================================================
Change in units outstanding:
Accumulation units beginning of year 566,871 486,951 358,029
Purchase payments 216,678 192,519 277,039
Policy withdrawals and charges (182,336) (112,599) (148,117)
- ---------------------------------------------------------------------------------------------------
Accumulation units end of year 601,213 566,871 486,951
===================================================================================================
Accumulation unit value $ 2.024 $ 1.432 $ 1.282
- ---------------------------------------------------------------------------------------------------
</TABLE>
68
<PAGE>
AMERICAN NATIONAL VARIABLE LIFE SEPARATE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
(In thousands except for unit information)
<TABLE>
<CAPTION>
Fidelity VIP II Asset
Fidelity VIP II Contra Fund Manager Growth Fund
- ----------------------------------------------------------------------------------------------------------------------------------
Year ended December 31, Year ended December 31,
----------------------------------- -------------------------------
1999 1998 1997 1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment income $ (11) $ (5) $ (3) $ 9 $ 3 $ (2)
Net realized gain (loss) on investments 47 48 30 17 11 6
Capital gains distributions from mutual funds 72 58 9 23 33 --
Net unrealized appreciation
of investments during the year 412 294 99 31 23 32
- ----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets
resulting from operations $ 520 $ 395 $ 135 $ 80 $ 70 $ 36
- ----------------------------------------------------------------------------------------------------------------------------------
From policy related transactions:
Purchase payments and other transfers $ 1,005 $ 907 $ 888 $ 104 $ 265 $ 295
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees (528) (421) (341) (128) (101) (60)
- ----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets resulting
from policy related transactions $ 477 $ 486 $ 547 $ (24) $ 164 $ 235
- ----------------------------------------------------------------------------------------------------------------------------------
Total increase in net assets $ 997 $ 881 $ 682 $ 56 $ 234 $ 271
Net assets, beginning of period 1,937 1,056 374 562 328 57
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period $ 2,934 $ 1,937 $ 1,056 $ 618 $ 562 $ 328
==================================================================================================================================
Change in units outstanding:
Accumulation units beginning of year 875,835 615,183 268,243 304,979 207,403 44,756
Purchase payments 470,911 503,143 643,516 88,275 174,100 216,107
Policy withdrawals and charges (269,173) (242,491) (296,576) (99,872) (76,524) (53,460)
- ----------------------------------------------------------------------------------------------------------------------------------
Accumulation units end of year 1,077,573 875,835 615,183 293,382 304,979 207,403
==================================================================================================================================
Accumulation unit value $ 2.723 $ 2.212 $ 1.717 $ 2.106 $ 1.844 $ 1.583
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity Fidelity Fidelity
Growth VIP III VIP III
Opport- Growth & Mid Cap
unities Income Growth
- ------------------------------------------------------------------------------------------------------
Year ended December 31,
----------------------------------------
1999 1999 1999
- ------------------------------------------------------------------------------------------------------
Operations:
Net investment income $ -- $ -- $ --
Net realized gain (loss) on investments -- (1) --
Capital gains distributions from mutual funds -- -- --
Net unrealized appreciation
of investments during the year -- 1 1
- ------------------------------------------------------------------------------------------------------
Increase in net assets
resulting from operations $ -- $ -- $ 1
- ------------------------------------------------------------------------------------------------------
From policy related transactions:
Purchase payments and other transfers $ 6 $ 17 $ 1
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees -- (1) --
- ------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets resulting
from policy related transactions $ 6 $ 16 $ 1
- ------------------------------------------------------------------------------------------------------
Total increase in net assets $ 6 $ 16 $ 2
Net assets, beginning of period -- -- --
- ------------------------------------------------------------------------------------------------------
Net assets, end of period $ 6 $ 16 $ 2
======================================================================================================
Change in units outstanding:
Accumulation units beginning of year -- -- --
Purchase payments 7,165 16,256 1,162
Policy withdrawals and charges (669) (579) (64)
- ------------------------------------------------------------------------------------------------------
Accumulation units end of year 6,496 15,677 1,098
======================================================================================================
Accumulation unit value $0.989 $1.032 $1.383
- ------------------------------------------------------------------------------------------------------
69
</TABLE>
<PAGE>
AMERICAN NATIONAL VARIABLE LIFE SEPARATE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
(In thousands except for unit information)
<TABLE>
<CAPTION>
T. Rowe T. Rowe
Price T. Rowe Price
Equity Price Mid-Cap
Income International Growth
Portfolio Portfolio Portfolio
- -------------------------------------------------------------------------------------------------------------------
Year ended December 31,
--------------------------------------------
1999 1999 1999
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
Operations:
Net investment income $ - $ - $ -
Net realized gain on investments - 7 -
Capital gains distributions from mutual funds - - -
Net unrealized appreciation
of investments during the year - - -
- -------------------------------------------------------------------------------------------------------------------
Increase in net assets
resulting from operations $ - $ 7 $ -
- -------------------------------------------------------------------------------------------------------------------
From policy related transactions:
Purchase payments and other transfers $ - $ (6) $ 1
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees - - -
- -------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets resulting from
policy related transactions $ - $ (6) $ 1
- -------------------------------------------------------------------------------------------------------------------
Total increase in net assets $ - $ 1 $ 1
Net assets, beginning of period - - -
- -------------------------------------------------------------------------------------------------------------------
Net assets, end of period $ - $ 1 $ 1
===================================================================================================================
Change in units outstanding:
Accumulation units beginning of year - - -
Purchase payments 121 1,028 751
Policy withdrawals and charges (62) (133) (167)
- -------------------------------------------------------------------------------------------------------------------
Accumulation units end of year 59 895 584
===================================================================================================================
Accumulation unit value $0.913 $1.259 $1.139
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
70
<PAGE>
AMERICAN NATIONAL VARIABLE LIFE SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL ... American National Variable Life Separate Account (Separate Account)
was established on July 30,1987 under Texas law as a separate investment account
of American National Insurance Company (the Sponsor). The Separate Account
began operations on February 20, 1991. The assets of the Separate Account are
segregated from the Sponsor's other assets and are used only to support variable
life products issued by the Sponsor. The Separate Account is registered under
the Investment Company Act of 1940, as amended, as a unit investment trust.
These financial statements report the results of the subaccounts for the
Investrac Gold Variable Universal Life product. There are currently 20
subaccounts within the Separate Account. Each of the subaccounts is invested
only in a corresponding portfolio of the American National (AN), Fidelity Funds
or T. Rowe Price Funds. The American National Funds were organized and are
managed for a fee by Securities Management & Research, Inc. (SM&R) which is a
wholly-owned subsidiary of the Sponsor.
BASIS OF PRESENTATION ... The financial statements of the Separate Account have
been prepared on an accrual basis in accordance with generally accepted
accounting principles.
INVESTMENTS ... Investments in shares of the separate investment portfolios are
stated at market value which is the net asset value per share as determined by
the respective portfolios. Investment transactions are accounted for on the
trade date. Realized gains and losses on investments are determined on the
basis of identified cost. Capital gain distributions and Dividends from mutual
funds are recorded and reinvested upon receipt.
FEDERAL TAXES ... The operations of the Separate Account form a part of, and are
taxed with, the operations of the Sponsor. Under the Internal Revenue Code, all
ordinary income and capital gains allocated to the contract owners are not taxed
to the Sponsor. As a result, the net asset values of the subaccounts are not
affected by federal income taxes on distributions received by the subaccounts.
Accordingly, no provision for income taxes is required in the accompanying
financial statements.
USE OF ESTIMATES ... The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities as of
the date of the financial statements and the reported amounts of income and
expenses during the period. Operating results in the future could vary from the
amounts derived from management's estimates.
RECLASSIFICATIONS ... Certain items in the 1997 and 1998 financial statements
were reclassified to conform with the 1999 presentation.
71
<PAGE>
(2) SPONSOR'S INVESTMENT
On March 1, 1991 the Sponsor made a $7,000,000 initial investment in the
Separate Account. This investment had a total market value of $17,562,000 at
December 31, 1999. This initial investment may be withdrawn at the discretion
of the Sponsor without penalty.
(3) SECURITY PURCHASES AND SALES
The aggregate cost of purchases (including reinvestment of dividend
distributions) and proceeds from sales of investments in the mutual fund
portfolios, for the years ended December 31, 1997, 1998, and 1999, were as
follows (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
PURCHASES SALES PURCHASES SALES PURCHASES SALES
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
AN Growth Portfolio $ 698 $ 485 $ 1,700 $ 236 $ 1,827 $ 74
AN Money Market Portfolio 110 5 127 15 122 27
AN Balanced Portfolio 217 135 423 102 524 138
AN Equity Income Portfolio 664 266 923 109 1,035 100
Fidelity VIP II Investment Grade Bond 35 18 91 37 32 11
Fidelity VIP II Asset Manager 211 95 339 141 254 99
Fidelity VIP II Index 500 1,523 488 2,660 281 1,924 184
Fidelity VIP Money Market 319 326 96 93 1,623 1,629
Fidelity VIP Equity Income Fund 532 326 992 270 1,005 177
Fidelity VIP High Income Fund 90 108 240 84 142 105
Fidelity VIP Growth 1,503 392 1,349 377 1,139 310
Fidelity VIP Overseas 254 162 220 65 259 62
Fidelity VIP II Contrafund 731 192 692 153 668 115
Fidelity VIP II Asset Manager Growth 117 109 272 72 262 28
Fidelity VIP III Growth Opportunities 7 --
Fidelity VIP III Growth & Income 17 2
Fidelity VIP III Mid Cap 1 --
T. Rowe Price Equity Income -- --
T. Rowe Price International 1 --
T. Rowe Price Mid-Cap 1 --
- ------------------------------------------------------------------------------------------------------------
Totals $7,031 $3,109 $10,124 $2,035 $10,816 $3,059
============================================================================================================
</TABLE>
(4) POLICY CHARGES AND DEDUCTIONS
MORTALITY AND EXPENSE RISK CHARGES ... The mortality risk and expense risk
charges, at an effective annual rate of up to 0.90%, are applied daily against
the net assets representing equity of contract owners held in each subaccount.
MONTHLY ADMINISTRATIVE CHARGES ... A monthly administrative charge is deducted
from each policy.During the first twelve (12) policy months, this charge will be
$2.50 plus a fee ranging from $0.0632 to $2.59 per $1,000 of the policyowner's
death benefit from age 0 to 75, respectively.Thereafter, such monthly
administrative charge shall be a maximum of $2.50, plus $0.025 per $1,000 of the
policyowner's death benefit.
SURRENDER CHARGE ... A surrender charge is imposed upon the surrender of
variable life insurance contracts to compensate the Sponsor for sales and other
marketing expenses.The amount of any surrender charge will depend on the number
of years that have elapsed since the contract was issued.No surrender charge
will be imposed on death benefits.
72
<PAGE>
TRANSFER CHARGE ... A $25 transfer charge is imposed after the first four
transfers in any one policy year for transfers made among the subaccounts.
PREMIUM CHARGES ... Premiums paid will be reduced by a 4% sales charge to
compensate the Sponsor for expenses associated with distributing the policy.In
addition, a $2.00 transaction charge will be deducted to reimburse the Sponsor
for billings and confirmations.Premium taxes for certain jurisdictions are
deducted from premiums paid at rates ranging from zero to 4%.
73
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors,
American National Insurance Company
We have audited the accompanying consolidated statements of financial position
of American National Insurance Company and subsidiaries (the Company) as of
December 31, 1999 and 1998, and the related consolidated statements of income,
changes in stockholders' equity and cash flows for the years then ended. These
consolidated financial statements (pages 75 through 104) are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of American National
Insurance Company and subsidiaries as of December 31, 1999 and 1998, and the
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
February 11, 2000
74
<PAGE>
AMERICAN NATIONAL INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except for per share data)
<TABLE>
<CAPTION>
DECEMBER DECEMBER
1999 1998
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
PREMIUMS AND OTHER REVENUE
Premiums
Life......................................................................... $ 300,326 $ 295,207
Annuity...................................................................... 41,704 45,079
Accident and health.......................................................... 396,072 393,602
Property and casualty........................................................ 392,576 354,820
Other policy revenues........................................................... 100,258 105,041
Net investment income........................................................... 473,949 475,242
Gain from sale of investments................................................... 149,061 49,768
Other income.................................................................... 35,668 25,906
- -----------------------------------------------------------------------------------------------------------
Total revenues............................................................... 1,889,614 1,744,665
- -----------------------------------------------------------------------------------------------------------
BENEFITS AND EXPENSES
Death and other benefits:
Life......................................................................... 218,109 217,122
Annuity...................................................................... 45,464 41,888
Accident and health.......................................................... 290,846 289,553
Property and casualty........................................................ 311,723 280,036
Increase (decrease) in liability for future policy benefits:
Life......................................................................... 15,546 13,304
Annuity...................................................................... 9,748 21,831
Accident and health.......................................................... 4,787 (262)
Interest credited to policy account balances.................................... 117,411 126,914
Commissions for acquiring and servicing policies................................ 264,808 247,015
Other operating costs and expenses.............................................. 210,877 199,294
Increase (decrease) in deferred policy acquisition costs, net of amortization... (2,188) 9,795
Taxes, licenses and fees........................................................ 33,744 32,334
- -----------------------------------------------------------------------------------------------------------
Total benefits and expenses.................................................. 1,520,875 1,478,824
- -----------------------------------------------------------------------------------------------------------
INCOME FROM OPERATIONS BEFORE EQUITY IN EARNINGS OF
UNCONSOLIDATED AFFILIATES AND FEDERAL INCOME TAXES.............................. 368,739 265,841
EQUITY IN EARNINGS OF UNCONSOLIDATED AFFILIATES................................... 19,942 8,048
- -----------------------------------------------------------------------------------------------------------
GAIN FROM OPERATIONS BEFORE FEDERAL INCOME TAXES.................................. 388,681 273,889
PROVISION (BENEFIT) FOR FEDERAL INCOME TAXES
Current......................................................................... 132,128 77,707
Deferred........................................................................ (10,060) (1,216)
- -----------------------------------------------------------------------------------------------------------
NET INCOME........................................................................ $ 266,613 $ 197,398
===========================================================================================================
NET INCOME PER COMMON SHARE - BASIC AND DILUTED $ 10.07 $ 7.45
===========================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
75
<PAGE>
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(In thousands)
<TABLE>
<CAPTION>
DECEMBER 31,
- -----------------------------------------------------------------------------------------------
1999 1998
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, other than investments in unconsolidated affiliates
Debt securities:
Bonds held-to-maturity, at amortized cost..................... $3,636,786 $3,565,974
Bonds available-for-sale, at market........................... 838,161 720,818
Marketable equity securities, at market:
Preferred stocks.............................................. 39,752 41,664
Common stocks................................................. 963,337 1,051,926
Mortgage loans on real estate................................... 1,033,330 1,025,683
Policy loans.................................................... 293,287 296,109
Investment real estate, net of
accumulated depreciation of $110,658 and $109,415.............. 251,529 238,714
Short-term investments.......................................... 95,352 90,368
Other invested assets........................................... 102,001 112,207
- -----------------------------------------------------------------------------------------------
Total investments............................................. 7,253,535 7,143,463
Cash............................................................... 14,376 22,228
Investments in unconsolidated affiliates........................... 119,372 120,098
Accrued investment income.......................................... 110,161 104,405
Reinsurance ceded receivables...................................... 104,216 65,667
Prepaid reinsurance premiums....................................... 194,969 171,116
Premiums due and other receivables................................. 96,703 91,518
Deferred policy acquisition costs.................................. 758,796 731,703
Property and equipment, net........................................ 50,132 40,860
Other assets....................................................... 103,443 94,302
Separate account assets............................................ 284,823 230,292
- -----------------------------------------------------------------------------------------------
TOTAL ASSETS.................................................. $9,090,526 $8,815,652
===============================================================================================
LIABILITIES
Policyholder funds
Future policy benefits:
Life.......................................................... $1,872,066 $1,853,759
Annuity....................................................... 186,650 175,637
Accident and health........................................... 64,901 60,113
Policy account balances......................................... 2,283,428 2,324,310
Policy and contract claims...................................... 403,984 359,953
Other policyholder funds........................................ 557,103 510,130
- -----------------------------------------------------------------------------------------------
Total policyholder liabilities................................ 5,368,132 5,283,902
Current federal income taxes....................................... 9,218 (20,515)
Deferred federal income taxes...................................... 221,341 259,243
Other liabilities.................................................. 143,866 148,118
Separate account liabilities....................................... 284,823 230,292
- -----------------------------------------------------------------------------------------------
TOTAL LIABILITIES............................................. 6,027,380 5,901,040
- -----------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Capital stock...................................................... 30,832 30,832
Additional paid-in capital......................................... 211 211
Accumulated other comprehensive income............................. 254,820 299,176
Retained earnings.................................................. 2,880,010 2,687,120
Treasury stock, at cost............................................ (102,727) (102,727)
- -----------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY.................................... 3,063,146 2,914,612
- -----------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.................... $9,090,526 $8,815,652
===============================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
76
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In thousands, except for per share data)
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER
CAPITAL PAID-IN COMPREHENSIVE RETAINED TREASURY
STOCK CAPITAL INCOME EARNINGS STOCK TOTAL
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE DECEMBER 31, 1997 $30,832 $211 $215,883 $2,561,218 $(102,727) $2,705,417
Comprehensive income
(net of taxes):
Net income 197,398 197,398
Change in unrealized gains
on marketable securities 83,293 83,293
- -----------------------------------------------------------------------------------------------------------------------
Comprehensive income 280,691
Dividends to stockholders
($2.70 per share) (71,496) (71,496)
- -----------------------------------------------------------------------------------------------------------------------
BALANCE DECEMBER 31, 1998 $30,832 $211 $299,176 $2,687,120 $(102,727) $2,914,612
Comprehensive income
(net of taxes):
Net income 266,613 266,613
Change in unrealized gains
on marketable securities (44,328) (44,328)
Foreign exchange adjustments (28) (28)
- -----------------------------------------------------------------------------------------------------------------------
Comprehensive income 222,257
Dividends to stockholders
($2.78 per share) (73,723) (73,723)
- -----------------------------------------------------------------------------------------------------------------------
BALANCE DECEMBER 31, 1999 $30,832 $211 $254,820 $2,880,010 $(102,727) $3,063,146
=======================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
77
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
1999 1998
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income.......................................................................... $ 266,613 $ 197,398
Adjustments to reconcile net income to net cash provided by operating activities:
Increase in liabilities for policyholders' funds................................. 125,112 120,343
Charges to policy account balances............................................... (101,739) (105,111)
Interest credited to policy account balances..................................... 117,411 126,914
Deferral of policy acquisition costs............................................. (141,450) (140,707)
Amortization of deferred policy acquisition costs................................ 135,385 149,116
Deferred federal income tax benefit.............................................. (10,060) (1,216)
Depreciation..................................................................... 19,598 17,351
Accrual and amortization of discounts and premiums............................... (15,183) (13,993)
Gain from sale of investments.................................................... (149,061) (49,768)
Equity in earnings of unconsolidated affiliates.................................. (19,942) (8,048)
Increase in premiums receivable.................................................. (5,185) (7,243)
Increase in accrued investment income............................................ (5,756) (2,044)
Capitalization of interest on policy and mortgage loans.......................... (17,099) (15,365)
Other changes, net............................................................... (25,883) (98,634)
- -------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities...................................... 172,761 168,993
- -------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Proceeds from sale or maturity of investments:
Bonds............................................................................ 257,398 316,067
Stocks........................................................................... 374,615 247,951
Real estate...................................................................... 32,921 33,186
Other invested assets............................................................ 96,670 171
Principal payments received on:
Mortgage loans................................................................... 176,394 154,333
Policy loans..................................................................... 37,594 42,093
Purchases of investments:
Bonds............................................................................ (508,205) (373,401)
Stocks........................................................................... (160,465) (237,868)
Real estate...................................................................... (29,124) (7,462)
Mortgage loans................................................................... (146,513) (35,420)
Policy loans..................................................................... (22,461) (24,034)
Other invested assets............................................................ (137,683) (79,081)
Decrease (increase) in short-term investments, net.................................. (4,984) 36,418
Increase (decrease) in investment in unconsolidated affiliates, net................. 726 (19,210)
Increase in property and equipment, net............................................. (17,219) (14,188)
- -------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities............................ (50,336) 39,555
- -------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Policyholders' deposits to policy account balances.................................. 309,885 289,654
Policyholders' withdrawals from policy account balances............................. (366,439) (409,975)
Dividends to stockholders........................................................... (73,723) (71,496)
- -------------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities.......................................... (130,277) (191,817)
- -------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH....................................................... (7,852) 16,731
Cash:
Beginning of the year............................................................ 22,228 5,497
- -------------------------------------------------------------------------------------------------------------------------
End of the year.................................................................. $ 14,376 $ 22,228
=========================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
78
<PAGE>
(1) NATURE OF OPERATIONS
American National Insurance Company (American National) is a multiple line
insurance company offering a broad line of insurance coverages, including
individual and group life, health, and annuities; personal lines property and
casualty; and credit insurance. In addition, through its subsidiaries, American
National offers mutual funds and invests in real estate. The majority (99%) of
revenues is generated by the insurance business. With the exception of New York,
business is conducted in all states, as well as Puerto Rico, Guam and American
Samoa. American National is also authorized to sell its products to American
military personnel in Western Europe and, through subsidiaries, business is
conducted in Mexico. Various distribution systems are utilized, including home
service, multiple line ordinary, group brokerage, credit, independent third
party marketing organizations and direct sales to the public.
American National's insurance subsidiaries are American National Life Insurance
Company of Texas (ANTEX), Garden State Life Insurance Company, Standard Life and
Accident Insurance Company, American National Property and Casualty Company
(ANPAC), American National General Insurance Company (ANGIC), American National
Lloyds Insurance Company (ANPAC Lloyds) and American National de Mexico. The
major non-insurance subsidiaries are Securities Management and Research, Inc.,
Comprehensive Investment Services, Inc., Alternative Benefit Management, Inc.,
ANTAC, Inc. and ANREM Corporation. As part of its investment portfolio, American
National also owns interests in unconsolidated affiliates, primarily real estate
and equity fund joint ventures and partnerships.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION--The consolidated
financial statements include the accounts of American National Insurance Company
and its wholly owned subsidiaries. All significant intercompany transactions
have been eliminated in consolidation. Investments in unconsolidated affiliates
are shown at cost plus equity in undistributed earnings since the dates of
acquisition.
The consolidated financial statements have been prepared on the basis of
Generally Accepted Accounting Principles (GAAP) which, for the insurance
companies, differs from the basis of accounting followed in reporting to
insurance regulatory authorities. (See Note 14.)
Certain reclassifications have been made to the 1998 financial information to
conform to the 1999 presentation.
USE OF ESTIMATES--The preparation of financial statements in conformity with
Generally Accepted Accounting Principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from reported results using
those estimates.
RECENT ACCOUNTING PRONOUNCEMENTS
REPORTING COMPREHENSIVE INCOME--Effective January 1, 1998, American National
adopted FAS No. 130, "Reporting Comprehensive Income." This statement
establishes standards for presenting comprehensive income and its components
prominently in the financial statements.
American National has elected to display comprehensive income as part of the
consolidated statements of changes in stockholders' equity. Additional
information regarding the components of comprehensive income is reported in Note
11.
DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION--Effective
January 1, 1998, American National adopted FAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." This statement establishes
standards for presenting information about operating segments in financial
statements. The statement requires disclosure of information on
79
<PAGE>
operating segments that are evaluated regularly by the chief operating decision
maker in deciding how to allocate resources and assess performance. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. The adoption of this standard had no
effect on American National's financial position or results from operations. The
segment disclosures are presented in Note 13.
PENSION AND OTHER POSTRETIREMENT BENEFIT DISCLOSURES--As of December 31, 1998,
American National adopted FAS No. 132 "Employers' Disclosures about Pensions and
Other Postretirement Benefits." This statement establishes revised standards for
disclosures about pensions and other postretirement benefit plans. The adoption
of this new standard had no effect on American National's financial position or
results from operations. The retirement benefits disclosures are presented in
Note 15.
ACCOUNTING FOR DERIVATIVE INSTRUMENTS--FAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," as amended by FAS No. 137, is effective for
all quarters of all fiscal years beginning after June 15, 2000. This statement
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. The statement requires that entities recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value.
American National intends to adopt FAS No. 133, as amended, on January 1, 2001.
Management believes that the adoption of FAS No. 133 will not have a significant
effect on American National's financial position or results from operations.
INVESTMENTS
DEBT SECURITIES--Bonds that are intended to be held-to-maturity are carried at
amortized cost. The carrying value of these debt securities is expected to be
realized, due to American National's ability and intent to hold these securities
until maturity.
Bonds held as available-for-sale are carried at market.
PREFERRED STOCKS--All preferred stocks are classified as available-for-sale and
are carried at market.
COMMON STOCKS-- All common stocks are classified as available-for-sale and are
carried at market.
UNREALIZED GAINS--For all investments carried at market, the unrealized gains or
losses (differences between amortized cost and market value), net of applicable
federal income taxes, are reflected in stockholders' equity as a component of
accumulated other comprehensive income.
MORTGAGE LOANS--Mortgage loans on real estate are carried at amortized cost,
less allowance for valuation impairments.
The mortgage loan portfolio is closely monitored through the review of loan and
property information, such as debt service coverage, annual operating statements
and property inspection reports. This information is evaluated in light of
current economic conditions and other factors, such as geographic location and
property type. As a result of this review, impaired loans are identified and
valuation allowances are established. Impaired loans are loans where, based on
current information and events, it is probable that American National will be
unable to collect all amounts due according to the contractual terms of the loan
agreement.
POLICY LOANS--Policy loans are carried at cost.
80
<PAGE>
INVESTMENT REAL ESTATE--Investment real estate is carried at cost, less
allowance for depreciation and valuation impairments. Depreciation is measured
over the estimated useful lives of the properties (15 to 50 years) using
straight-line and accelerated methods.
American National's real estate portfolio is closely monitored through the
review of operating information and periodic inspections. This information is
evaluated in light of current economic conditions and other factors, such as
geographic location and property type. As a result of this review, if there is
any indication of an adverse change in the economic condition of a property, a
complete cash flow analysis is performed to determine whether or not an
impairment allowance is necessary. If a possible impairment is indicated, the
fair market value of the property is estimated using a variety of techniques,
including cash flow analysis, appraisals and comparison to the values of similar
properties. If the book value is greater than the estimated fair market value,
an impairment allowance is established.
SHORT-TERM INVESTMENTS--Short-term investments (primarily commercial paper) are
carried at amortized cost.
OTHER INVESTED ASSETS--Other invested assets are carried at cost, less allowance
for valuation impairments. Valuation allowances for other invested assets are
considered on an individual basis in accordance with the same procedures used
for investment real estate.
INVESTMENT VALUATION ALLOWANCES AND IMPAIRMENTS--Investment valuation allowances
are established for other than temporary impairments of mortgage loans, real
estate and other assets in accordance with the policies established for each
class of asset. The increase in the valuation allowances is reflected in current
period income as a realized loss.
Management believes that the valuation allowances are adequate. However, it is
possible that a significant change in economic conditions in the near term could
result in losses exceeding the amounts established.
CASH AND CASH EQUIVALENTS
American National considers cash on-hand and in-banks plus amounts invested in
money market funds as cash for purposes of the consolidated statements of cash
flows.
INVESTMENTS IN UNCONSOLIDATED AFFILIATES
These assets are primarily investments in real estate and equity fund joint
ventures, and are accounted for under the equity method of accounting.
PROPERTY AND EQUIPMENT
These assets consist of buildings occupied by the companies, electronic data
processing equipment, and furniture and equipment. These assets are carried at
cost, less accumulated depreciation. Depreciation is measured using straight-
line and accelerated methods over the estimated useful lives of the assets (3 to
50 years).
FOREIGN CURRENCIES
Assets and liabilities recorded in foreign currencies are translated at the
exchange rate on the balance sheet date. Revenue and expenses are translated at
average rates of exchange prevailing during the year. Translation adjustments
resulting from this process are charged or credited to other accumulated
comprehensive income.
INSURANCE SPECIFIC ASSETS AND LIABILITIES
DEFERRED POLICY ACQUISITION COSTS--Certain costs of acquiring new insurance
business have been deferred. For life, annuity and accident and health business,
such costs consist of inspection
81
<PAGE>
report and medical examination fees, commissions, related fringe benefit costs
and the cost of insurance in force gained through acquisitions. The amount of
commissions deferred includes first-year commissions and certain subsequent year
commissions that are in excess of ultimate level commission rates.
The deferred policy acquisition costs on traditional life and health products
are amortized with interest over the anticipated premium-paying period of the
related policies, in proportion to the ratio of annual premium revenue to be
received over the life of the policies. Expected premium revenue is estimated by
using the same mortality and withdrawal assumptions used in computing
liabilities for future policy benefits. The amount of deferred policy
acquisition costs is reduced by a provision for possible inflation of
maintenance and settlement expenses in the determination of such amounts by
means of grading interest rates.
Costs deferred on universal life, limited pay and investment type contracts are
amortized as a level percentage of the present value of anticipated gross
profits from investment yields, mortality, and surrender charges. The effect on
the deferred policy acquisition costs that would result from realization of
unrealized gains (losses) is recognized with an offset to accumulated other
comprehensive income in consolidated stockholders' equity as of the balance
sheet date. It is possible that a change in interest rates could have a
significant impact on the deferred policy acquisition costs calculated for these
contracts.
Deferred policy acquisition costs associated with property and casualty
insurance business consist principally of commissions, underwriting and issue
costs. These costs are amortized over the coverage period of the related
policies, in relation to premium revenue recognized.
FUTURE POLICY BENEFITS--For traditional products, liabilities for future policy
benefits have been provided on a net level premium method based on estimated
investment yields, withdrawals, mortality, and other assumptions that were
appropriate at the time that the policies were issued. Estimates used are based
on the companies' experience, as adjusted to provide for possible adverse
deviation. These estimates are periodically reviewed and compared with actual
experience. When it is determined that future expected experience differs
significantly from existing assumptions, the estimates are revised for current
and future policy issues.
Future policy benefits for universal life and investment-type contracts reflect
the current account value before applicable surrender charges. In the near term,
it is possible that a change in interest rates could have a significant impact
on the values calculated for these contracts.
RECOGNITION OF PREMIUM REVENUE AND POLICY BENEFITS
TRADITIONAL ORDINARY LIFE AND HEALTH--Life and accident and health premiums are
recognized as revenue when due. Benefits and expenses are associated with earned
premiums to result in recognition of profits over the life of the policy
contracts. This association is accomplished by means of the provision for
liabilities for future policy benefits and the amortization of deferred policy
acquisition costs.
ANNUITIES--Revenues from annuity contracts represent amounts assessed against
contract holders. Such assessments are principally surrender charges and, in the
case of variable annuities, administrative fees. Policy account balances for
annuities represent the premiums received plus accumulated interest less
applicable accumulated administrative fees. It is possible that a change in
interest rates could have a significant impact on the values calculated for
these contracts.
UNIVERSAL LIFE AND SINGLE PREMIUM WHOLE LIFE--Revenues from universal life
policies and single premium whole life policies represent amounts assessed
against policyholders. Included in such assessments are mortality charges,
surrender charges actually paid, and earned policy service fees. Policyholder
account balances consist of the premiums received plus credited interest, less
accumulated policyholder assessments. Amounts included in expense represent
benefits in excess of account balances returned to policyholders.
82
<PAGE>
PROPERTY AND CASUALTY--Property and casualty premiums are recognized as revenue
proportionately over the contract period. Policy benefits consist of actual
claims and the change in reserves for losses and loss adjustment expenses. The
reserves for losses and loss adjustment expenses are estimates of future
payments of reported and unreported claims and the related expenses with respect
to insured events that have occurred. These reserves are calculated using case
basis estimates for reported losses and experience for claims incurred but not
reported. These loss reserves are reported net of an allowance for salvage and
subrogation. Management believes that American National's reserves have been
appropriately calculated, based on available information as of December 31,
1999. However, it is possible that the ultimate liabilities may vary
significantly from these estimated amounts.
PARTICIPATING INSURANCE POLICIES--The allocation of dividends to participating
policyowners is based upon a comparison of experienced rates of mortality,
interest and expenses, as determined periodically for representative plans of
insurance, issue ages and policy durations, with the corresponding rates assumed
in the calculation of premiums. Participating business comprised approximately
2.6% of the life insurance in force at December 31, 1999 and 5.5% of life
premiums in 1999.
FEDERAL INCOME TAXES
American National and all but one of its subsidiaries will file a consolidated
life/non-life federal income tax return for 1999. Alternative Benefit
Management, Inc. files a separate return.
Deferred federal income tax assets and liabilities have been recognized to
reflect the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled.
SEPARATE ACCOUNT ASSETS AND LIABILITIES
The separate account assets and liabilities represent funds maintained to meet
the investment objectives of contract holders who bear the investment risk. The
investment income and investment gains and losses from these separate funds
accrue directly to the contract holders of the policies supported by the
separate accounts. The assets of each separate account are legally segregated
and are not subject to claims that arise out of any other business of American
National. The assets of these accounts are carried at market value. Deposits,
net investment income and realized investment gains and losses for these
accounts are excluded from revenues, and related liability increases are
excluded from benefits and expenses in this report.
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<PAGE>
(3) INVESTMENTS
The amortized cost and estimated market values of investments in held-to-
maturity and available-for-sale securities are shown below (in thousands):
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
DECEMBER 31, 1999: COST GAINS LOSSES VALUE
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Debt securities
Bonds held-to-maturity:
U. S. Government and agencies........ $ 141,247 $ 286 $ (1,891) $ 139,642
States, and political subdivisions... 44,624 52 (3,858) 40,818
Foreign governments.................. 107,250 1,279 (636) 107,893
Public utilities..................... 1,126,456 4,833 (29,482) 1,101,807
All other corporate bonds............ 2,118,267 11,476 (70,222) 2,059,521
Mortgage-backed securities........... 98,942 3,570 (70) 102,442
- --------------------------------------------------------------------------------------------------
Total bonds held-to-maturity....... 3,636,786 21,496 (106,159) 3,552,123
- --------------------------------------------------------------------------------------------------
Bonds available-for-sale:
U. S. Government and agencies........ 54,506 -- (651) 53,855
States, and political subdivisions... 38,538 -- (3,836) 34,702
Foreign governments.................. 27,469 1,023 (15) 28,477
Public utilities..................... 184,126 1,728 (2,298) 183,556
All other corporate bonds............ 552,529 5,477 (20,435) 537,571
- --------------------------------------------------------------------------------------------------
Total bonds available-for-sale..... 857,168 8,228 (27,235) 838,161
- --------------------------------------------------------------------------------------------------
Total debt securities.................. 4,493,954 29,724 (133,394) 4,390,284
- --------------------------------------------------------------------------------------------------
Marketable equity securities:
Preferred stock...................... 39,145 1,287 (680) 39,752
Common stock......................... 551,064 413,522 (1,249) 963,337
- --------------------------------------------------------------------------------------------------
Total marketable equity securities... 590,209 414,809 (1,929) 1,003,089
- --------------------------------------------------------------------------------------------------
Total investments in securities............ $5,084,163 $444,533 $(135,323) $5,393,373
==================================================================================================
</TABLE>
84
<PAGE>
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
DECEMBER 31, 1998: COST GAINS LOSSES VALUE
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Debt securities
Bonds held-to-maturity:
U. S. Government and agencies........ $ 166,206 $ 5,503 $ -- $ 171,709
States, and political subdivisions... 39,427 692 (24) 40,095
Foreign governments.................. 106,924 9,436 -- 116,360
Public utilities..................... 1,210,677 73,784 (135) 1,284,326
All other corporate bonds............ 1,914,950 132,731 (491) 2,047,190
Mortgage-backed securities........... 127,790 8,344 (1) 136,133
- --------------------------------------------------------------------------------------------------
Total bonds held-to-maturity....... 3,565,974 230,490 (651) 3,795,813
- --------------------------------------------------------------------------------------------------
Bonds available-for-sale:
U. S. Government and agencies........ 71,579 1,368 -- 72,947
Foreign governments.................. 42,780 4,758 -- 47,538
Public utilities..................... 230,534 16,738 -- 247,272
All other corporate bonds............ 328,132 25,310 (381) 353,061
- --------------------------------------------------------------------------------------------------
Total bonds available-for-sale..... 673,025 48,174 (381) 720,818
- --------------------------------------------------------------------------------------------------
Total debt securities.................. 4,238,999 278,664 (1,032) 4,516,631
- --------------------------------------------------------------------------------------------------
Marketable equity securities:
Preferred stock...................... 39,264 2,427 (27) 41,664
Common stock......................... 619,197 473,099 (40,370) 1,051,926
- --------------------------------------------------------------------------------------------------
Total marketable equity securities... 658,461 475,526 (40,397) 1,093,590
- --------------------------------------------------------------------------------------------------
Total investments in securities............ $4,897,460 $754,190 $(41,429) $5,610,221
==================================================================================================
</TABLE>
DEBT SECURITIES--The amortized cost and estimated market value, by contractual
maturity of debt securities at December 31, 1999, are shown below (in
thousands). Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without call
or prepayment penalties.
<TABLE>
<CAPTION>
BONDS HELD-TO-MATURITY BONDS AVAILABLE-FOR-SALE
- ----------------------------------------------------------------------------------------------
ESTIMATED ESTIMATED
AMORTIZED MARKET AMORTIZED MARKET
COST VALUE COST VALUE
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Due in one year or less.................. $ 56,902 $ 57,441 $ -- $ --
Due after one year through five years.... 963,942 958,745 319,676 322,278
Due after five years through ten years... 2,470,818 2,391,315 485,431 468,007
Due after ten years...................... 46,182 42,180 52,061 47,876
- ---------------------------------------------------------------------------------------------
3,537,844 3,449,681 857,168 838,161
Without single maturity date............. 98,942 102,442 -- --
- ---------------------------------------------------------------------------------------------
$3,636,786 $3,552,123 $857,168 $838,161
=============================================================================================
</TABLE>
Proceeds from sales of investments in securities classified as available-for-
sale (bonds and stocks) totaled $466,899,000 for 1999. Gross gains of
$148,762,000 and gross losses of $6,043,000 were realized on those sales.
Included in the proceeds from sales of available-for-sale securities are
$33,813,000 of proceeds from the sale of bonds that had been reclassified from
bonds held-to-maturity. The bonds had been reclassified due to evidence of a
significant deterioration in the issuer's creditworthiness. The net gain from
the sale of these bonds was $5,314,000.
Proceeds from sales of investments in securities classified as available-for-
sale (bonds and stocks) totaled $317,556,000 for 1998. Gross gains of
$71,935,000 and gross losses of $36,975,000 were realized on those sales.
Included in the proceeds from sales of available-for-sale securities are
$40,454,000 of proceeds from the sale of bonds that had been reclassified from
bonds held-to-maturity. The bonds had been reclassified due to evidence of a
significant
85
<PAGE>
deterioration in the issuer's creditworthiness. The net gain from the sale of
these bonds was $1,073,000.
Bonds were called or otherwise redeemed by the issuers during 1999, which
resulted in proceeds of $163,596,000 from the disposal. Gross gains of $688,000
were realized on those disposals. Bonds were called by the issuers during 1998,
which resulted in proceeds of $89,205,000 from the disposal. Gross gains of
$747,000 were realized on those disposals.
All gains and losses were determined using specific identification of the
securities sold.
UNREALIZED GAINS ON SECURITIES--Unrealized gains on marketable equity securities
and bonds available-for-sale, presented in the stockholder's equity section of
the consolidated statements of financial position, are net of deferred tax
liabilities of $137,222,000 and $160,912,000 for 1999 and 1998, respectively.
The change in the net unrealized gains on investments for the years ended
December 31 are summarized as follows (in thousands):
1999 1998
- ---------------------------------------------------------------------------
Bonds available-for-sale............................ $(66,800) $ 10,482
Preferred stocks.................................... (1,793) 969
Common stocks....................................... (20,456) 124,921
Amortization of deferred policy acquisition costs... 21,028 (8,229)
- ---------------------------------------------------------------------------
(68,021) 128,143
Provision for federal income taxes.................. 23,693 (44,850)
- ---------------------------------------------------------------------------
$(44,328) $ 83,293
===========================================================================
MORTGAGE LOANS--In general, mortgage loans are secured by first liens on income-
producing real estate. The loans are expected to be repaid from the cash flows
or proceeds from the sale of real estate. American National generally allows a
maximum loan-to-collateral-value ratio of 75% to 90% on newly funded mortgage
loans. As of December 31, 1999, mortgage loans have both fixed rates from 5.75%
to 12.25% and variable rates from 6.39% to 10.25%. The majority of the mortgage
loan contracts require periodic payments of both principal and interest, and
have amortization periods of 5 to 33 years.
American National has investments in first lien mortgage loans on real estate
with carried values of $1,033,330,000 and $1,025,683,000 at December 31, 1999
and 1998, respectively. Problem loans, on which valuation allowances were
established, totaled $41,446,000 and $43,049,000 at December 31, 1999 and 1998,
respectively.
POLICY LOANS--All of the Company's policy loans carried interest rates ranging
from 5% to 8% at December 31, 1999.
86
<PAGE>
Investment income and realized gains (losses)--Investment income and realized
gains (losses) from disposals of investments, before federal income taxes, for
the years ended December 31 are summarized as follows (in thousands):
<TABLE>
<CAPTION>
GAINS (LOSSES) FROM
INVESTMENT INCOME DISPOSALS OF INVESTMENTS
- --------------------------------------------------------------------------------------------------
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Bonds......................................... $318,898 $317,481 $ (5,327) $ 2,614
Preferred stocks.............................. 2,599 2,584 (1,212) 1
Common stocks................................. 16,284 16,774 149,946 33,092
Mortgage loans................................ 98,111 97,871 1,206 1,248
Real estate................................... 65,027 80,138 6,417 1,338
Other invested assets......................... 36,819 29,123 2,793 (564)
Investment in unconsolidated affiliates....... -- -- -- 29
- ------------------------------------------------------------------------------------------------
537,738 543,971 153,823 37,758
Investment expenses........................... (63,789) (68,729) -- --
Decrease (increase) in valuation allowances... -- -- (4,762) 12,010
- ------------------------------------------------------------------------------------------------
$473,949 $475,242 $ 149,061 $49,768
</TABLE>
(4) OFF-BALANCE SHEET RISK AND CONCENTRATIONS OF CREDIT RISK ON INVESTMENTS
To ensure a well-diversified investment portfolio, American National employs a
strategy to invest funds at the highest possible rate of return commensurate
with sound and prudent underwriting practices.
BONDS:
American National's bond portfolio is of high investment quality and is
diversified. The bond portfolio distributed by quality rating at December 31 is
summarized as follows:
1999 1998
--------------------------------
AAA............. 8% 9%
AA.............. 14% 14%
A............... 57% 55%
BBB and below... 21% 22%
--------------------------------
100% 100%
================================
COMMON STOCK:
American National's stock portfolio by market sector distribution at December 31
is summarized as follows:
1999 1998
----------------------------------
Basic materials... 4% 4%
Capital goods..... 7% 7%
Consumer goods.... 20% 18%
Energy............ 7% 5%
Finance........... 10% 11%
Technology........ 24% 16%
Health care....... 10% 24%
Miscellaneous..... 12% 10%
Mutual funds...... 6% 5%
----------------------------------
100% 100%
==================================
87
<PAGE>
MORTGAGE LOANS AND INVESTMENT REAL ESTATE:
American National invests primarily in the commercial sector in areas that offer
the potential for property value appreciation. Generally, mortgage loans are
secured by first liens on income-producing real estate.
Mortgage loans and investment real estate by property type distribution at
December 31 are summarized as follows:
MORTGAGE INVESTMENT
LOANS REAL ESTATE
-------------------------------------------------------
1999 1998 1999 1998
-------------------------------------------------------
Office buildings... 17% 21% 15% 19%
Shopping centers... 52% 56% 42% 41%
Commercial......... 4% 3% 5% 7%
Apartments......... 1% 1% 3% 3%
Hotels/motels...... 6% 3% 13% 16%
Industrial......... 16% 13% 21% 13%
Other.............. 4% 3% 1% 1%
-------------------------------------------------------
100% 100% 100% 100%
=======================================================
American National has a diversified portfolio of mortgage loans and real estate
properties. Mortgage loans and real estate investments by geographic
distribution at December 31 are as follows:
MORTGAGE INVESTMENT
LOANS REAL ESTATE
------------------------------------------------------
1999 1998 1999 1998
------------------------------------------------------
New England.......... 9% 9% -- --
Middle Atlantic...... 16% 13% -- --
East North Central... 10% 12% 18% 11%
West North Central... 3% 3% 17% 9%
South Atlantic....... 19% 19% 7% 8%
East South Central... 1% 1% 13% 15%
West South Central... 25% 21% 36% 42%
Mountain............. 7% 9% 3% 7%
Pacific.............. 10% 13% 6% 8%
------------------------------------------------------
100% 100% 100% 100%
======================================================
For discussion of other off-balance sheet risks, see Note 5.
(5) FAIR VALUE OF FINANCIAL INSTRUMENTS
Estimated market values of financial instruments have been determined using
available market information and appropriate valuation methodologies. However,
considerable judgment is required in developing the estimates of fair value.
Accordingly, these estimates are not necessarily indicative of the amounts that
could be realized in a current market exchange, or the amounts that may
ultimately be realized. The use of different market assumptions or estimating
methodologies could have a material effect on the estimated market values.
DEBT SECURITIES:
The estimated market values for bonds represent quoted market values from
published sources or bid prices obtained from securities dealers.
88
<PAGE>
MARKETABLE EQUITY SECURITIES:
Market values for preferred and common stocks represent quoted market prices
obtained from independent pricing services.
MORTGAGE LOANS:
The market value for mortgage loans is estimated using discounted cash flow
analyses based on interest rates currently being offered for comparable loans.
Loans with similar characteristics are aggregated for purposes of the analyses.
POLICY LOANS:
The carrying amount for policy loans approximates their market value.
SHORT-TERM INVESTMENTS:
The carrying amount for short-term investments approximates their market value.
INVESTMENT CONTRACTS:
The market value of investment contract liabilities is estimated using a
discounted cash flow model, assuming the companies' current interest rates on
new products. The carrying value for these contracts approximates their market
value.
INVESTMENT COMMITMENTS:
American National's investment commitments are all short-term in duration, and
the market value was not significant at December 31, 1999 or 1998.
VALUES:
The carrying amounts and estimated market values of financial instruments at
December 31 are as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998
- ---------------------------------------------------------------------------------------------
ESTIMATED ESTIMATED
CARRYING MARKET CARRYING MARKET
AMOUNT VALUE AMOUNT VALUE
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial assets:
Bonds:
Held-to-maturity.............. $3,636,786 $3,552,123 $3,565,974 $3,795,813
Available-for-sale............ 838,161 838,161 720,818 720,818
Preferred stock................. 39,752 39,752 41,664 41,664
Common stock.................... 963,337 963,337 1,051,926 1,051,926
Mortgage loans on real estate... 1,033,330 1,044,146 1,025,683 1,158,033
Policy loans.................... 293,287 293,287 296,109 296,109
Short-term investments.......... 95,352 95,352 90,368 90,368
Financial liabilities:
Investment contracts............ 1,639,348 1,639,348 1,736,223 1,736,223
- --------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
(6) DEFERRED POLICY ACQUISITION COSTS
Deferred policy acquisition costs and premiums for the years ended December 31,
1999 and 1998, are summarized as follows (in thousands):
<TABLE>
<CAPTION>
LIFE ACCIDENT PROPERTY &
& ANNUITY & HEALTH CASUALTY TOTAL
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1997.............. $633,339 $105,174 $ 9,828 $ 748,341
- --------------------------------------------------------------------------------------------
Additions.............................. 87,660 25,897 25,764 139,321
Amortization........................... (98,017) (26,940) (24,159) (149,116)
Effect of change in unrealized gains
on available-for-sale securities..... (8,229) -- -- (8,229)
- --------------------------------------------------------------------------------------------
Net change............................... (18,586) (1,043) 1,605 (18,024)
Acquisitions............................. 782 604 -- 1,386
- --------------------------------------------------------------------------------------------
Balance at December 31, 1998.............. 615,535 104,735 11,433 731,703
- --------------------------------------------------------------------------------------------
Additions.............................. 82,708 25,315 29,550 137,573
Amortization........................... (87,701) (21,263) (26,421) (135,385)
Effect of change in unrealized gains
on available-for-sale securities..... 21,028 -- -- 21,028
- --------------------------------------------------------------------------------------------
Net change............................... 16,035 4,052 3,129 23,216
Acquisitions............................. 3,652 225 -- 3,877
- --------------------------------------------------------------------------------------------
Balance at December 31, 1999.............. $635,222 $109,012 $ 14,562 $ 758,796
============================================================================================
1999 premiums $342,030 $396,072 $392,576 $1,130,678
============================================================================================
1998 premiums $340,286 $393,602 $354,820 $1,088,708
============================================================================================
</TABLE>
Commissions comprise the majority of the additions to deferred policy
acquisition costs for each year.
Acquisitions relate to the purchase of various insurance portfolios under
assumption reinsurance agreements.
90
<PAGE>
(7) FUTURE POLICY BENEFITS AND POLICY ACCOUNT BALANCES
LIFE INSURANCE:
Assumptions used in the calculation of future policy benefits or policy account
balances for individual life policies are as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF
FUTURE POLICY
POLICY ISSUE INTEREST BENEFITS
YEAR RATE SO VALUED
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ORDINARY--
1996-1999 7.5% for years 1 through 5, graded to 5.5% at the end of year 25, and level thereafter 3%
1981-1995 8% for years 1 through 5, graded to 6% at the end of year 25, and level thereafter 18%
1976-1981 7% for years 1 through 5, graded to 5% at the end of year 25, and level thereafter 15%
1972-1975 6% for years 1 through 5, graded to 4% at the end of year 25, and level thereafter 6%
1969-1971 6% for years 1 through 5, graded to 3.5% at the end of year 30, and level thereafter 5%
1962-1968 4.5% for years 1 through 5, graded to 3.5% at the end of year 15, and level thereafter 9%
1948-1961 4% for years 1 through 5,graded to 3.5% at the end of year 10, and level thereafter 9%
1947 and prior Statutory rates of 3% or 3.5% 1%
INDUSTRIAL--
1948-1967 4% for years 1 through 5, graded to 3.5% at the end of year 10, and level thereafter 4%
1947 and prior Statutory rates of 3% 4%
UNIVERSAL LIFE Future policy benefits for universal life are equal to the current account value 26%
- -----------------------------------------------------------------------------------------------------------------------
100%
=======================================================================================================================
</TABLE>
Future policy benefits for group life policies have been calculated using a
level interest rate of 4%. Mortality and withdrawal assumptions are based on
American National's experience.
ANNUITIES:
Fixed annuities included in future policy benefits are calculated using a level
interest rate of 6%. Policy account balances for interest-sensitive annuities
are equal to the current gross account balance. Mortality and withdrawal
assumptions are based on American National's experience.
HEALTH INSURANCE:
Interest assumptions used for future policy benefits on health policies are
calculated using a level interest rate of 6%. Morbidity and termination
assumptions are based on American National's experience.
91
<PAGE>
(8) LIABILITY FOR UNPAID CLAIMS AND CLAIM ADJUSTMENT EXPENSES
Activity in the liability for accident and health, and property and casualty
unpaid claims and claim adjustment expenses is summarized as follows (in
thousands):
1999 1998
- -----------------------------------------------------------
Balance at January 1.............. $266,832 $247,564
Less reinsurance recoverables... 11 2,567
- -----------------------------------------------------------
Net balance at January 1.......... 266,821 244,997
- -----------------------------------------------------------
Incurred related to:
Current year.................... 654,222 598,379
Prior years..................... (16,322) (6,324)
- -----------------------------------------------------------
Total incurred.................... 637,900 592,055
- -----------------------------------------------------------
Paid related to:
Current year.................... 457,279 411,352
Prior years..................... 169,292 158,879
- -----------------------------------------------------------
Total paid........................ 626,571 570,231
- -----------------------------------------------------------
Net balance at December 31........ 278,150 266,821
Plus reinsurance recoverables... 3,988 11
- -----------------------------------------------------------
Balance at December 31............ $282,138 $266,832
===========================================================
The balances at December 31 are included in policy and contract claims on the
consolidated statements of financial position.
(9) REINSURANCE
As is customary in the insurance industry, the companies reinsure portions of
certain insurance policies they write, thereby providing a greater
diversification of risk and managing exposure on larger risks. The maximum
amount that would be retained by one company (American National) would be
$700,000 individual life, $250,000 individual accidental death, $100,000 group
life and $125,000 credit life (total $1,175,000). If individual, group and
credit were in force in all companies at the same time, the maximum risk on any
one life could be $1,875,000.
The companies remain contingently liable with respect to any reinsurance ceded,
and would become actually liable if the assuming companies were unable to meet
their obligations under any reinsurance treaties.
To minimize its exposure to significant losses from reinsurer insolvencies, the
company evaluates the financial condition of its reinsurers and monitors
concentrations of credit risk arising from similar geographic regions,
activities, or economic characteristics of the reinsurers. At December 31, 1999,
amounts recoverable from reinsurers with a carrying value of $90,399,000 were
associated with various auto dealer credit insurance program reinsurers
domiciled in the Caribbean islands of Nevis or the Turks and Caicos Islands. The
company holds collateral related to these credit reinsurers totaling
$70,918,000. This collateral is in the form of custodial accounts controlled by
the company, which can be drawn on for amounts that remain unpaid for more than
120 days. American National believes that the failure of any single reinsurer to
meet its obligations would not have a significant effect on its financial
position or results of operations.
92
<PAGE>
Premiums, premium-related reinsurance amounts and reinsurance recoveries for the
years ended December 31 are summarized as follows (in thousands):
1999 1998
- ------------------------------------------------------------------------------
Direct premiums..................................... $1,268,129 $ 1,201,189
Reinsurance premiums assumed from other companies... 110,180 42,403
Reinsurance premiums ceded to other companies....... (247,631) (154,884)
- -----------------------------------------------------------------------------
Net premiums........................................ $1,130,678 $ 1,088,708
- -----------------------------------------------------------------------------
Reinsurance recoveries $ 162,863 $ 88,240
=============================================================================
Life insurance in force and related reinsurance amounts at December 31 are
summarized as follows (in thousands):
1999 1998
- -----------------------------------------------------------------------------
Direct life insurance in force................... $46,156,190 $44,134,974
Reinsurance risks assumed from other companies... 797,059 713,200
- -----------------------------------------------------------------------------
Total life insurance in force.................... 46,953,249 44,848,174
Reinsurance risks ceded to other companies....... (9,629,707) (7,965,042)
- -----------------------------------------------------------------------------
Net life insurance in force...................... $37,323,542 $36,883,132
=============================================================================
(10) FEDERAL INCOME TAXES
The federal income tax provisions vary from the amounts computed when applying
the statutory federal income tax rate. A reconciliation of the effective tax
rate of the companies to the statutory federal income tax rate follows (in
thousands, except percentages):
<TABLE>
<CAPTION>
1999 1998
- ---------------------------------------------------------------------------------------
AMOUNT RATE AMOUNT RATE
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Income tax on pre-tax income........ $136,038 35.00% $95,861 35.00%
Tax-exempt investment income........ (1,691) (0.44) (971) (0.35)
Dividend exclusion.................. (3,414) (0.88) (5,044) (1.84)
Exempted losses on sale of assets... (4,470) (1.15) (9,856) (3.60)
Miscellaneous tax credits, net...... (1,467) (0.38) (1,467) (0.54)
Other items, net.................... (2,928) (0.75) (2,032) (0.74)
- ---------------------------------------------------------------------------------------
$122,068 31.40% $76,491 27.93%
=======================================================================================
</TABLE>
93
<PAGE>
The tax effects of temporary differences that gave rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 31, 1999 and
December 31, 1998 are as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
DEFERRED TAX ASSETS:
Investment in bonds, real estate and other invested assets,
principally due to investment valuation allowances............. $ 17,750 $ 10,656
Policyowner funds, principally due to policy reserve discount.... 87,650 78,279
Policyowner funds, principally due to unearned premium reserve... 11,219 10,020
Other assets..................................................... 4,689 2,649
- ------------------------------------------------------------------------------------------------
Total gross deferred tax assets.................................... 121,308 101,604
Less valuation allowance......................................... (3,000) (3,000)
- ------------------------------------------------------------------------------------------------
Net deferred tax assets............................................ $ 118,308 $ 98,604
- ------------------------------------------------------------------------------------------------
DEFERRED TAX LIABILITIES:
Marketable equity securities, principally due to
net unrealized gains on stock.................................. $(131,347) $(151,396)
Investment in bonds, principally due to
accrual of discount on bonds................................... (20,941) (17,390)
Deferred policy acquisition costs, due to
difference between GAAP and tax................................ (184,217) (177,057)
Property, plant and equipment, principally due to
difference between GAAP and tax depreciation methods........... (3,144) (12,004)
- ------------------------------------------------------------------------------------------------
Net deferred tax liabilities....................................... (339,649) (357,847)
- ------------------------------------------------------------------------------------------------
Total deferred tax.................................................. $(221,341) $(259,243)
================================================================================================
</TABLE>
Management believes that a sufficient level of taxable income will be achieved
to utilize the net deferred tax assets.
Through 1983, under the provision of the Life Insurance Company Income Tax Act
of 1959, life insurance companies were permitted to defer from taxation a
portion of their income (within certain limitations) until and unless it is
distributed to stockholders, at which time it was taxed at regular corporate tax
rates. No provision for deferred federal income taxes applicable to such untaxed
income has been made, because management is of the opinion that no distributions
of such untaxed income (designated by federal law as "policyholders' surplus")
will be made in the foreseeable future. There was no change in the
"policyholders' surplus" between December 31, 1998 and December 31, 1999, and
the cumulative balance was approximately $63,000,000 at both dates.
Federal income taxes totaling approximately $108,060,000 and $111,465,000 were
paid to the Internal Revenue Service in 1999 and 1998, respectively. The statute
of limitations for the examination of federal income tax returns through 1995
for American National and its subsidiaries by the Internal Revenue Service has
expired. All prior year deficiencies have been paid or provided for, and
American National has filed appropriate claims for refunds through 1995. In the
opinion of management, adequate provision has been made for any tax deficiencies
that may be sustained.
94
<PAGE>
(11) COMPONENTS OF COMPREHENSIVE INCOME
The items included in comprehensive income, other than net income, are
unrealized gains on available-for-sale securities, unrealized gains on deferred
acquisition costs and foreign exchange adjustments.
The details on the unrealized gains included in comprehensive income, and the
related tax effects thereon are as follows:
<TABLE>
<CAPTION>
BEFORE FEDERAL NET OF
FEDERAL INCOME TAX FEDERAL
INCOME EXPENSE INCOME
TAX (BENEFIT) TAX
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
DECEMBER 31, 1999
Unrealized gains........................ $ 80,700 $ 28,359 $ 52,341
Less: reclassification adjustment for
gains realized in net income........... (148,721) (52,052) (96,669)
- -----------------------------------------------------------------------------------
Net unrealized loss component of
comprehensive income................... $ (68,021) $(23,693) $(44,328)
===================================================================================
DECEMBER 31, 1998
Unrealized gains........................ $ 163,103 $ 57,086 $106,017
Less: reclassification adjustment for
gains realized in net income........... (34,960) (12,236) (22,724)
- -----------------------------------------------------------------------------------
Net unrealized gains component of
comprehensive income................... $ 128,143 $ 44,850 $ 83,293
===================================================================================
</TABLE>
(12) COMMON STOCK AND EARNINGS PER SHARE
American National has only one class of common stock and no preferred stock. At
December 31, 1999 and 1998, American National had 50,000,000 authorized shares
of $1.00 par value common stock with 30,832,449 shares issued. At December 31,
1999, treasury shares were 4,274,284, restricted shares were 79,000 and
unrestricted shares outstanding were 26,479,165. At December 31, 1998 there were
no restricted shares, treasury shares were 4,353,284; and total outstanding
shares were 26,479,165.
STOCK-BASED COMPENSATION--During 1999, American National's stockholders approved
the "1999 Stock and Incentive Plan." Under this plan, American National can
grant Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock
Awards, Performance Rewards, Incentive Awards and any combination of these. The
number of shares available for grants under the plan cannot exceed 900,000
shares, and no more than 50,000 shares may be granted to any one individual in
any calendar year. Subsequent to the close of 1999, the plan was amended to
adjust the grant price of awards made during 1999.
On August 1, 1999, American National granted Stock Appreciation Rights (SAR) on
81,500 shares to selected officers. These SARs were granted at a stated price of
$70.50 per share (subsequently amended in 2000 to $57 per share), vest at a rate
of 20% per year for 5 years and expire 5 years after the vesting period. None of
these SARs were exercisable during 1999, none of them terminated, and all were
outstanding at the end of the year.
Also, on August 1, 1999, American National granted Restricted Stock Awards to
directors and consultants. A total of 79,000 shares were granted, with 19,000
granted at an exercise price of $70.50 per share (subsequently amended in 2000
to $57 per share), and 60,000 granted at an exercise price of zero. The
restrictions on these awards lapse after 10 years, and feature a graded
95
<PAGE>
vesting schedule in the case of the retirement of an award holder. All of the
Restricted Stock was outstanding at the end of the year.
American National uses a Black-Scholes option pricing model to calculate the
fair value and compensation expense for SARs and Restricted Stock Awards, in
accordance with FAS No. 123 "Accounting for Stock-Based Compensation." The fair
value per share of the SARs and the Restricted Stock Awards that were originally
granted at $70.50 per share was zero at December 31, 1999. The fair value of the
Restricted Stock Awards granted at a price of zero was $70.50 per share at
December 31, 1999. The following assumptions were used in these computations for
1999: dividend yield of 4.5%; expected volatility of 32%; risk-free interest
rate of 6.79%; and expected lives of 5 years for the SARs and 10 years for the
Restricted Stock Awards. Compensation expense calculated for 1999 on these
awards was not material.
The plan amendment made in February, 2000 will increase compensation expense in
the future, but the effect is not material on American National's financial
position or results from operations in 1999.
EARNINGS PER SHARE--Earnings per share for 1999 and 1998 were calculated using a
weighted average number of shares outstanding of 26,479,165. There were no
potentially dilutive items outstanding in 1998. In 1999, the average market
price, since the grant date of the SARs and Restricted Stock Awards, was less
than the exercise price. As a result, diluted earnings per share is equal to the
basic earnings per share.
DIVIDENDS--American National's payment of dividends to stockholders is
restricted by statutory regulations. Generally, the restrictions require life
insurance companies to maintain minimum amounts of capital and surplus, and, in
the absence of special approval, limit the payment of dividends to statutory net
gain from operations on an annual, noncumulative basis. Additionally, insurance
companies are not permitted to distribute the excess of stockholders' equity, as
determined on a GAAP basis over that determined on a statutory basis.
Generally, the same restrictions on amounts that can transfer in the form of
dividends, loans, or advances to the parent company apply to American National's
insurance subsidiaries.
At December 31, 1999, approximately $606,699,000 of American National's
consolidated stockholders' equity represents net assets of its insurance
subsidiaries. Any transfer of these net assets to American National would be
subject to statutory restrictions and approval.
(13) SEGMENT INFORMATION
American National and its subsidiaries are engaged principally in the insurance
business. Management organizes the business around its marketing distribution
channels. Separate management of each segment is required because each business
unit is subject to different marketing strategies. There are eight operating
segments based on the company's marketing distribution channels.
The operating segments are as follows:
MULTIPLE LINE MARKETING -- This segment derives its revenues from the sale of
individual life, annuity, accident and health, and property and casualty
products marketed through American National, ANTEX, ANPAC, ANGIC and ANPAC
Lloyds.
HOME SERVICE DIVISION -- This segment derives its revenues from the sale of
individual life, annuity and accident and health insurance. In this segment, the
agent collects the premiums. This segment includes business in the United States
and Mexico.
INDEPENDENT MARKETING -- This segment derives its revenues mainly from the sale
of life and annuity lines marketed through independent marketing organizations.
96
<PAGE>
HEALTH DIVISION -- This segment derives its revenues primarily from the sale of
accident and health insurance plus group life insurance marketed through group
brokers and third party marketing organizations.
SENIOR AGE MARKETING -- This segment derives its revenues primarily from the
sale of Medicare supplement plans, individual life, annuities, and accident and
health insurance marketed through Standard Life and Accident Insurance Company.
DIRECT MARKETING -- This segment derives its revenues principally from the sale
of individual life insurance, marketed through Garden State Life Insurance
Company, using direct selling methods.
CREDIT INSURANCE DIVISION -- This segment derives its revenues principally from
the sale of credit life and credit accident and health insurance.
CAPITAL AND SURPLUS -- This segment derives its revenues principally from
investment instruments.
ALL OTHER -- This category comprises segments which are too small to show
individually. This category includes non-insurance, reinsurance assumed, and
retirement benefits.
All income and expense amounts specifically attributable to policy transactions
are recorded directly to the appropriate line of business within each segment.
Income and expenses not specifically attributable to policy transactions are
allocated to the lines within each segment as follows:
. Net investment income from fixed income assets (bonds and mortgage loans on
real estate) is allocated based on the funds generated by each line at the
average yield available from these fixed income assets at the time such funds
become available.
. Net investment income from all other assets is allocated to capital and
surplus to arrive at an underwriting gain from operations. A portion of the
income allocated to capital and surplus is then re-allocated to the other
segments in accordance with the amount of equity invested in each segment.
. Expenses are allocated to the lines based upon various factors, including
premium and commission ratios within the respective operating segments.
. Gain or loss on the sale of investments is allocated to capital and surplus.
. Equity in earnings of unconsolidated affiliates is allocated to the segment
that provided the funds to invest in the affiliate.
. Federal income taxes have been applied to the net earnings of each segment
based on a fixed tax rate. Any difference between the amount allocated to the
segments and the total federal income tax amount is allocated to capital and
surplus.
97
<PAGE>
The following tables summarize net income and various components of net income
by operating segment for the years ended December 31, 1999 and 1998 (in
thousands):
<TABLE>
<CAPTION>
GAIN FROM
PREMIUMS NET OPERATIONS FEDERAL
AND INVESTMENT EQUITY BEFORE INCOME
OTHER INCOME EXPENSES IN FEDERAL TAX
POLICY AND AND UNCONSOLIDATED INCOME EXPENSE NET
REVENUE REALIZED GAINS BENEFITS AFFILIATES TAXES (BENEFIT) INCOME
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1999
Multiple Line Marketing $ 489,263 $ 95,821 $ 530,321 $ -- $ 54,763 $ 18,072 $ 36,691
Home Service Division 209,033 118,978 263,945 -- 64,066 21,142 42,924
Independent Marketing 60,574 118,960 162,052 -- 17,482 5,769 11,713
Health Division 237,446 7,406 256,390 -- (11,538) (3,808) (7,730)
Credit Insurance Division 63,262 16,094 65,903 -- 13,453 4,439 9,014
Senior Age Marketing 148,368 18,013 162,209 -- 4,172 1,377 2,795
Direct Marketing 26,857 3,734 24,823 -- 5,768 1,903 3,865
Capital and Surplus 1,087 211,453 256 12,249 224,533 67,900 156,633
All other 30,714 32,551 54,976 7,693 15,982 5,274 10,708
- ---------------------------------------------------------------------------------------------------------------------------------
$1,266,604 $623,010 $1,520,875 $19,942 $388,681 $122,068 $266,613
=================================================================================================================================
1998
Multiple Line Marketing $ 452,146 $ 95,063 $ 488,842 $ -- $ 58,367 $ 19,261 $ 39,106
Home Service Division 203,976 122,188 252,446 -- 73,718 24,327 49,391
Independent Marketing 69,714 122,279 184,655 -- 7,338 2,422 4,916
Health Division 211,249 7,850 240,195 -- (21,096) (6,962) (14,134)
Credit Insurance Division 57,727 15,215 61,181 -- 11,761 3,881 7,880
Senior Age Marketing 162,161 17,760 169,929 -- 9,992 3,297 6,695
Direct Marketing 26,619 3,588 24,034 -- 6,173 2,037 4,136
Capital and Surplus 982 107,737 761 8,048 116,006 24,390 91,616
All other 35,081 33,330 56,781 -- 11,630 3,838 7,792
- ---------------------------------------------------------------------------------------------------------------------------------
$1,219,655 $525,010 $1,478,824 $ 8,048 $273,889 $ 76,491 $197,398
=================================================================================================================================
</TABLE>
There were no significant non-cash items to report. Almost all of the
consolidated revenues were derived in the U.S.
98
<PAGE>
Most of the operating segments provide essentially the same types of products.
The following table provides revenues within each segment by line of business
for the years ended December 31, 1999 and 1998 (in thousands):
TOTAL REVENUES
<TABLE>
<CAPTION>
ACCIDENT & PROPERTY & TOTAL
LIFE ANNUITY HEALTH CASUALTY CREDIT ALL OTHER REVENUES
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1999
Multiple Line Marketing $121,753 $ 17,637 $ 19,736 $403,029 $ -- $ -- $ 562,155
Home Service Division 283,566 4,576 8,778 -- -- -- 296,920
Independent Marketing 8,938 157,569 -- -- -- -- 166,507
Health Division 3,920 -- 236,559 -- -- -- 240,479
Credit Insurance Division -- -- -- -- 69,007 -- 69,007
Senior Age Marketing 31,577 1,692 125,609 -- -- -- 158,878
Direct Marketing 29,501 146 427 -- -- -- 30,074
Capital and Surplus -- -- -- -- -- 306,797 306,797
All other 30,120 1,878 1,709 -- -- 25,090 58,797
- --------------------------------------------------------------------------------------------------------------------
$509,375 $183,498 $392,818 $403,029 $69,007 $331,887 $1,889,614
====================================================================================================================
1998
Multiple Line Marketing $121,829 $ 16,826 $ 20,232 $365,369 $ -- $ -- $ 524,256
Home Service Division 279,531 4,410 8,793 -- -- -- 292,734
Independent Marketing 5,328 173,990 -- -- -- -- 179,318
Health Division 3,802 -- 210,622 -- -- -- 214,424
Credit Insurance Division -- -- -- -- 63,470 -- 63,470
Senior Age Marketing 32,821 1,583 137,889 -- -- -- 172,293
Direct Marketing 29,042 165 462 -- -- -- 29,669
Capital and Surplus -- -- -- -- -- 204,991 204,991
All other 31,996 18,962 1,977 -- -- 10,575 63,510
- --------------------------------------------------------------------------------------------------------------------
$504,349 $215,936 $379,975 $365,369 $63,470 $215,566 $1,744,665
====================================================================================================================
</TABLE>
The operating segments are supported by the fixed income assets and policy
loans. Equity type assets, such as stocks, real estate and other invested
assets, are investments of the Capital and Surplus segment. Assets of the non-
insurance companies are specifically associated with those companies in the "All
other" segment. Any assets not used in support of the operating segments are
assigned to Capital and Surplus.
The following table summarizes assets by operating segment for the years ended
December 31, 1999 and 1998 (in thousands):
1999 1998
-------------------------------------------------------
Multiple Line Marketing..... $1,598,043 $1,513,396
Home Service Division....... 1,789,073 1,760,415
Independent Marketing....... 1,719,508 1,761,832
Health Division............. 193,018 170,301
Credit Insurance Division... 387,669 372,787
Senior Age Marketing........ 326,163 330,631
Direct Marketing............ 82,799 83,759
Capital and Surplus......... 2,400,368 2,232,612
All other................... 593,885 589,919
-------------------------------------------------------
$9,090,526 $8,815,652
========================================================
The net assets of the Capital and Surplus segment include investments in
unconsolidated affiliates. Almost all of American National's assets are located
in the U.S.
99
<PAGE>
The amount of each segment item reported is the measure reported to the chief
operating decision-maker for purposes of making decisions about allocating
resources to the segment and assessing its performance. Adjustments and
eliminations are made when preparing the financial statements, and allocations
of revenues, expenses and gains or losses have been included when determining
reported segment profit or loss.
The reported measures are determined in accordance with the measurement
principles most consistent with those used in measuring the corresponding
amounts in the consolidated financial statements.
The results of the operating segments of the business are affected by economic
conditions and customer demands. A portion of American National's insurance
business is written through one third-party marketing organization. During 1999,
approximately 8% of the total premium revenues and policy account deposits were
written through that organization, which is included in the Independent
Marketing operating segment. This compares with 11% in 1998. Of the total
business written by this one organization, the majority was annuities.
100
<PAGE>
(14) RECONCILIATION TO STATUTORY ACCOUNTING
American National and its insurance subsidiaries are required to file statutory
financial statements with state insurance regulatory authorities. Accounting
principles used to prepare these statutory financial statements differ from
those used to prepare financial statements on the basis of Generally Accepted
Accounting Principles.
Reconciliations of statutory net income and capital and surplus, as determined
using statutory accounting principles, to the amounts included in the
accompanying consolidated financial statements, as of and for the years ended
December 31, are as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998
- -----------------------------------------------------------------------------------
<S> <C> <C>
Statutory net income of insurance companies............ $ 159,375 $ 155,368
Net gain of non-insurance companies.................... 97,782 15,240
- -----------------------------------------------------------------------------------
Combined net income.................................... 257,157 170,608
Increases (decreases):
Deferred policy acquisition costs..................... 2,188 (9,795)
Policyholder funds.................................... 4,288 18,702
Deferred federal income tax benefit................... 10,060 1,216
Premiums deferred and other receivables............... (2,315) (84)
Gain from sale of investments......................... 416 (292)
Change in interest maintenance reserve................ (1,033) 2,773
Asset valuation allowances............................ (4,762) 12,010
Other adjustments, net................................. 948 2,336
Consolidating eliminations and adjustments............. (334) (76)
- -----------------------------------------------------------------------------------
Net income reported herein............................. $ 266,613 $ 197,398
===================================================================================
1999 1998
- -----------------------------------------------------------------------------------
Statutory capital and surplus of insurance companies... $2,377,589 $2,163,593
Stockholders equity of non-insurance companies......... 523,550 524,630
- -----------------------------------------------------------------------------------
Combined capital and surplus........................... 2,901,139 2,688,223
Increases (decreases):
Deferred policy acquisition costs..................... 758,796 731,703
Policyholder funds.................................... 159,394 154,445
Deferred federal income taxes......................... (221,341) (259,243)
Premiums deferred and other receivables............... (80,453) (78,139)
Reinsurance in "unauthorized companies"............... 37,376 38,748
Statutory asset valuation reserve..................... 370,191 344,926
Statutory interest maintenance reserve................ 9,729 10,762
Asset valuation allowances............................ (38,285) (28,489)
Investment market value adjustments................... (9,556) 48,656
Non-admitted assets and other adjustments, net......... 158,876 173,877
Consolidating eliminations and adjustments............. (982,720) (910,857)
- -----------------------------------------------------------------------------------
Stockholders' equity reported herein................... $3,063,146 $2,914,612
===================================================================================
</TABLE>
In accordance with various government and state regulations, American National
and its insurance subsidiaries had bonds with an amortized value of $74,543,000
on deposit with appropriate regulatory authorities.
(15) RETIREMENT BENEFITS
American National and its subsidiaries have one tax-qualified pension plan,
which has three separate programs. One of the programs is contributory and
covers home service agents and managers. The other two programs are
noncontributory, with one covering salaried and management employees and the
other covering home office clerical employees subject to a collective bargaining
agreement. The program covering salaried and management employees
101
<PAGE>
provides pension benefits that are based on years of service and the employee's
compensation during the five years before retirement. The programs covering
hourly employees and agents generally provide benefits that are based on the
employee's career average earnings and years of service.
American National also sponsors for key executives two non-tax-qualified pension
plans that restore benefits that would otherwise be curtailed by statutory
limits on qualified plan benefits.
The companies' funding policy for the pension plans is to make annual
contributions in accordance with the minimum funding standards of the Employee
Retirement Income Security Act of 1974. The unfunded plans will be funded out of
general corporate assets when necessary.
Actuarial computations of pension expense (before income taxes) produced a
pension debit of $3,954,000 for 1999 and $3,051,000 for 1998.
The pension debit is made up of the following (in thousands):
1999 1998
- ---------------------------------------------------------------------
Service cost--benefits earned during period..... $ 5,833 $ 5,629
Interest cost on projected benefit obligation... 8,175 7,661
Expected return on plan assets.................. (8,946) (8,887)
Amortization of past service cost............... 534 473
Amortization of transition asset................ (2,619) (2,619)
Amortization of actuarial loss.................. 977 794
- ---------------------------------------------------------------------
Total pension debit....................... $ 3,954 $ 3,051
=====================================================================
102
<PAGE>
The following table sets forth the funded status and amounts recognized in the
consolidated statements of financial position at December 31 for the companies'
pension plans.
Actuarial present value of benefit obligation:
<TABLE>
<CAPTION>
1999 1998
ASSETS ACCUMULATED ASSETS ACCUMULATED
EXCEED BENEFITS EXCEED BENEFITS
ACCUMULATED EXCEED ACCUMULATED EXCEED
BENEFITS ASSETS BENEFITS ASSETS
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Vested benefit obligation............................... $(72,591) $(24,781) $(76,916) $(19,136)
=========================================================================================================
Accumulated benefit obligation.......................... $(75,578) $(24,781) $(79,405) $(19,136)
=========================================================================================================
Projected benefit obligation............................ $(91,897) $(27,189) $(96,812) $(26,340)
=========================================================================================================
Plan assets at fair value (long-term securities)........ 130,363 -- 137,543 --
=========================================================================================================
Funded status:
Plan assets in excess of projected
benefit obligation................................... 38,466 (27,189) 40,731 (26,340)
Unrecognized net loss.................................. 1,981 1,554 2,341 3,729
Prior service cost not yet recognized
in periodic pension cost............................. -- 497 -- 1,028
Unrecognized net transition asset at
January 1 being recognized over 15 years............. (5,239) -- (7,858) --
- ---------------------------------------------------------------------------------------------------------
Accrued pension cost included in
other assets or other liabilities...................... $ 35,208 $(25,138) $ 35,214 $(21,583)
=========================================================================================================
</TABLE>
ASSUMPTIONS USED AT DECEMBER 31: 1999 1998
--------------------------------------------------------------------------
Weighted-average discount rate on benefit obligation... 7.30% 6.50%
Rate of increase in compensation levels................ 4.80% 4.80%
Expected long-term rate of return on plan assets....... 7.00% 7.00%
OTHER BENEFITS
Under American National and its subsidiaries' various group benefit plans for
active employees, a $2,500 paid-up life insurance certificate is provided upon
retirement for eligible participants who meet certain age and length of service
requirements.
American National has one retiree health benefit plan for retirees of all
companies in the consolidated group, with the exception of Standard Life and
Accident Insurance Company (Standard). The retirees of Standard are covered
under a separate health plan. Participation in either of these plans is limited
to current retirees and their dependents and those employees and their
dependents who met certain age and length of service requirements as of December
31, 1993. No new participants will be added to these plans in the future.
The retiree health benefit plans provide major medical benefits for participants
under the age of 65 and Medicare supplemental benefits for those over 65.
Prescription drug benefits are provided to both age groups. The plans are
contributory, with the company's contribution limited to $80 per month for
retirees and spouses under the age of 65 and $40 per month for retirees and
spouses over the age of 65. All additional contributions necessary, over the
amount to be contributed by the companies, are to be contributed by the
retirees.
The accrued post-retirement benefit obligation, included in other liabilities,
was $13,221,000 and $12,989,000 at December 31, 1999 and 1998, respectively.
These amounts were approximately equal to the unfunded accumulated post-
retirement benefit obligation. Since the companies' contributions to the cost of
the retiree benefit plans are fixed, the health care cost trend rate will have
no effect on the future expense or the accumulated post-retirement benefit
obligation.
103
<PAGE>
(16) COMMITMENTS AND CONTINGENCIES
COMMITMENTS--American National and its subsidiaries lease insurance sales office
space in various cities. The long-term lease commitments at December 31, 1999
were approximately $6,356,000.
In the ordinary course of their operations, the companies also had commitments
outstanding at December 31, 1999 to purchase, expand or improve real estate, and
to fund mortgage loans aggregating $96,000,000, all of which are expected to be
funded in 2000. As of December 31, 1999, all of the mortgage loan commitments
have interest rates that are fixed.
CONTINGENCIES--The companies are defendants in various lawsuits concerning
alleged failure to honor certain loan commitments, alleged breach of certain
agency and real estate contracts, various employment matters, allegedly
deceptive insurance sales and marketing practices, and other litigation arising
in the ordinary course of operations. Certain of these lawsuits include claims
for compensatory and punitive damages. After reviewing these matters with legal
counsel, management is of the opinion that the ultimate resultant liability, if
any, would not have a material adverse effect on the companies' consolidated
financial position or results of operations. However, these lawsuits are in
various stages of development, and future facts and circumstances could result
in management changing its conclusions.
104
<PAGE>
APPENDIX
Illustrations of Death Benefits, Accumulation Values and Surrender Values
The tables on pages 107 through 110 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 hypothetical annual rate
of 0.80% 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 0.83%).
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 107 and 109 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 108 and 110 are based on the assumption that the maximum
allowable Monthly Deductions are made throughout the life of the Policy.
105
<PAGE>
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 0.90% 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 -1.67%, 4.33% and 10.33%.
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 Tax Matters," page 38.)
If a Policy Loan is made, both Surrender Value and Death Benefit 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.
106
<PAGE>
AMERICAN NATIONAL INSURANCE COMPANY
ONE MOODY PLAZA
GALVESTON, TEXAS 77550-7999
VARIABLE UNIVERSAL LIFE INSURANCE
DEATH BENEFIT OPTION A; SPECIFIED AMOUNT - $100,000
PREFERRED MALE ISSUE AGE 45
TOBACCO NON-USER
CURRENT SCHEDULE OF CHARGES
PLANNED PERIODIC PREMIUM OF $1,842 PAID AT THE BEGINNING OF EACH POLICY YEAR
<TABLE>
<CAPTION>
VALUES BASED ON ASSUMED HYPOTHETICAL GROSS
ANNUAL INVESTMENT RATES OF RETURN OF
- ---------------------------------------------------------------------------------------------------------------------------------
0% 6% 12%
- ---------------------------------------------------------------------------------------------------------------------------------
END OF PREMIUMS
POLICY ACCUMULATED ACCUMULATION SURRENDER DEATH ACCUMULATION SURRENDER DEATH ACCUMULATION SURRENDER DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,934 969 498 100,000 1,050 579 100,000 1,132 661 100,000
2 3,965 2,284 1,721 100,000 2,520 1,957 100,000 2,766 2,203 100,000
3 6,097 3,558 2,902 100,000 4,034 3,379 100,000 4,551 3,896 100,000
4 8,336 4,788 4,041 100,000 5,593 4,846 100,000 6,500 5,753 100,000
5 10,687 5,972 5,133 100,000 7,194 6,355 100,000 8,627 7,787 100,000
6 13,156 7,103 6,171 100,000 8,833 7,901 100,000 10,944 10,013 100,000
7 15,747 8,175 7,152 100,000 10,506 9,482 100,000 13,468 12,444 100,000
8 18,469 9,190 8,075 100,000 12,215 11,099 100,000 16,222 15,107 100,000
9 21,326 10,148 8,940 100,000 13,962 12,754 100,000 19,234 18,026 100,000
10 24,327 11,046 9,765 100,000 15,749 14,468 100,000 22,532 21,251 100,000
15 41,735 14,665 14,665 100,000 25,382 25,382 100,000 44,701 44,701 100,000
20 63,953 16,625 16,625 100,000 36,381 36,381 100,000 81,624 81,624 100,000
25 92,309 16,132 16,132 100,000 48,970 48,970 100,000 142,743 142,743 165,581
30 128,499 8,989 8,989 100,000 62,214 62,214 100,000 240,726 240,726 257,577
AGE 65 63,953 16,625 16,625 100,000 36,381 36,381 100,000 81,624 81,624 100,000
</TABLE>
* GUARANTEED COVERAGE PREMIUM $1,273.00
SURRENDER PREMIUM $1,803.96
Premium Tax Charges will vary by state of residence. This illustration assumes
1.6.%
American National agrees to keep the policy in force during the first 2 policy
years and provide a Guaranteed Coverage Benefit so long as the Guaranteed
Coverage Premium is paid even though, in certain instances, the minimum payments
allowed by the contract will not, after the payment of monthly insurance and
administrative charges, generate positive surrender values during such period.
Values would be different if premiums are paid with a different frequency or if
of different amounts.
Assumes that no policy loans have been made. Excessive loans or partial
surrenders may cause this policy to lapse because of insufficient cash value.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING INTEREST RATES AND RATES OF
INFLATION. NO REPRESENTATIONS CAN BE MADE BY AMERICAN NATIONAL THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME. ALTHOUGH THE ACTUAL RATES OF RETURN MAY AVERAGE 0%, 6%, or
12% OVER A PERIOD OF YEARS, IF THEY HAVE FLUCTUATED ABOVE OR BELOW THOSE
AVERAGES FOR INDIVIDUAL CONTRACT YEARS THE DEATH BENEFIT AND CASH VALUE WOULD BE
DIFFERENT FROM THOSE SHOWN ABOVE.
107
<PAGE>
AMERICAN NATIONAL INSURANCE COMPANY
ONE MOODY PLAZA
GALVESTON, TEXAS 77550-7999
VARIABLE UNIVERSAL LIFE INSURANCE
DEATH BENEFIT OPTION A; SPECIFIED AMOUNT - $100,000
PREFERRED MALE ISSUE AGE 45
TOBACCO NON-USER
GUARANTEED SCHEDULE OF CHARGES
PLANNED PERIODIC PREMIUM OF $1,842 PAID AT THE BEGINNING OF EACH POLICY YEAR
<TABLE>
<CAPTION>
VALUES BASED ON ASSUMED HYPOTHETICAL GROSS
ANNUAL INVESTMENT RATES OF RETURN OF
- --------------------------------------------------------------------------------------------------------------------------------
0% 6% 12%
- --------------------------------------------------------------------------------------------------------------------------------
END OF PREMIUMS
POLICY ACCUMULATED ACCUMULATION SURRENDER DEATH ACCUMULATION SURRENDER DEATH ACCUMULATION SURRENDER DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,934 959 488 100,000 1,040 569 100,000 1,121 650 100,000
2 3,965 2,260 1,697 100,000 2,494 1,931 100,000 2,739 2,176 100,000
3 6,097 3,514 2,859 100,000 3,987 3,332 100,000 4,501 3,846 100,000
4 8,336 4,722 3,974 100,000 5,520 4,772 100,000 6,419 5,672 100,000
5 10,687 5,880 5,041 100,000 7,090 6,251 100,000 8,510 7,671 100,000
6 13,156 6,987 6,056 100,000 8,699 7,767 100,000 10,789 9,857 100,000
7 15,747 8,038 7,014 100,000 10,342 9,318 100,000 13,272 12,249 100,000
8 18,469 9,028 7,913 100,000 12,017 10,901 100,000 15,979 14,864 100,000
9 21,326 9,952 8,745 100,000 13,720 12,512 100,000 18,930 17,723 100,000
10 24,327 10,806 9,525 100,000 15,448 14,167 100,000 22,150 20,870 100,000
15 41,735 13,848 13,848 100,000 24,389 24,389 100,000 43,476 43,476 100,000
20 63,953 14,064 14,064 100,000 33,429 33,429 100,000 78,454 78,454 100,000
25 92,309 9,410 9,410 100,000 41,601 41,601 100,000 136,487 136,487 158,325
30 128,499 0 0 0 47,133 47,133 100,000 229,104 229,104 245,142
AGE 65 63,953 14,064 14,064 100,000 33,429 33,429 100,000 78,454 78,454 100,000
</TABLE>
* GUARANTEED COVERAGE PREMIUM $1,273.00
SURRENDER PREMIUM $1,803.96
Premium Tax Charges will vary by state of residence. This illustration assumes
1.6%
American National agrees to keep the policy in force during the first 2 policy
years and provide a Guaranteed Coverage Benefit so long as the Guaranteed
Coverage Premium is paid even though, in certain instances, the minimum payments
allowed by the contract will not, after the payment of monthly insurance and
administrative charges, generate positive surrender values during such period.
Values would be different if premiums are paid with a different frequency or if
of different amounts.
Assumes that no policy loans have been made. Excessive loans or partial
surrenders may cause this policy to lapse because of insufficient cash value.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING INTEREST RATES AND RATES OF
INFLATION. NO REPRESENTATIONS CAN BE MADE BY AMERICAN NATIONAL THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME. ALTHOUGH THE ACTUAL RATES OF RETURN MAY AVERAGE 0%, 6%, or
12% OVER A PERIOD OF YEARS, IF THEY HAVE FLUCTUATED ABOVE OR BELOW THOSE
AVERAGES FOR INDIVIDUAL CONTRACT YEARS THE DEATH BENEFIT AND CASH VALUE WOULD BE
DIFFERENT FROM THOSE SHOWN ABOVE.
108
<PAGE>
AMERICAN NATIONAL INSURANCE COMPANY
ONE MOODY PLAZA
GALVESTON, TEXAS 77550-7999
VARIABLE UNIVERSAL LIFE INSURANCE
DEATH BENEFIT OPTION B; SPECIFIED AMOUNT - $100,000
PREFERRED MALE ISSUE AGE 45
TOBACCO NON-USER
CURRENT SCHEDULE OF CHARGES
PLANNED PERIODIC PREMIUM OF $1,842 PAID AT THE BEGINNING OF EACH POLICY YEAR
<TABLE>
<CAPTION>
VALUES BASED ON ASSUMED HYPOTHETICAL GROSS
ANNUAL INVESTMENT RATES OF RETURN OF
- --------------------------------------------------------------------------------------------------------------------------------
0% 6% 12%
- --------------------------------------------------------------------------------------------------------------------------------
END OF PREMIUMS
POLICY ACCUMULATED ACCUMULATION SURRENDER DEATH ACCUMULATION SURRENDER DEATH ACCUMULATION SURRENDER DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,934 965 494 100,965 1,045 574 101,045 1,127 656 101,127
2 3,965 2,270 1,707 102,270 2,505 1,942 102,505 2,750 2,187 102,750
3 6,097 3,530 2,875 103,530 4,002 3,347 104,002 4,515 3,860 104,515
4 8,336 4,740 3,993 104,740 5,536 4,788 105,536 6,432 5,685 106,432
5 10,687 5,897 5,058 105,897 7,101 6,262 107,101 8,512 7,673 108,512
6 13,156 6,993 6,062 106,993 8,691 7,760 108,691 10,763 9,831 110,763
7 15,747 8,022 6,999 108,022 10,300 9,277 110,300 13,194 12,171 113,194
8 18,469 8,984 7,869 108,984 11,927 10,812 111,927 15,824 14,708 115,824
9 21,326 9,878 8,670 109,878 13,570 12,363 113,570 18,669 17,461 118,669
10 24,327 10,702 9,421 110,702 15,229 13,948 115,229 21,750 20,469 121,750
15 41,735 13,761 13,761 113,761 23,702 23,702 123,702 41,659 41,659 141,569
20 63,953 14,792 14,792 114,792 32,117 32,117 132,117 71,597 71,597 171,597
25 92,309 12,895 12,895 112,895 39,267 39,267 139,267 116,972 116,972 216,972
30 128,499 3,753 3,753 103,753 39,652 39,652 139,652 181,502 181,502 281,502
AGE 65 63,953 14,792 14,792 114,792 32,117 32,117 132,117 71,597 70,136 171,597
</TABLE>
* GUARANTEED COVERAGE PREMIUM $1,273.00
SURRENDER PREMIUM $1,803.96
Premium Tax Charges will vary by state of residence. This illustration assumes
1.6%
American National agrees to keep the policy in force during the first 2 policy
years and provide a Guaranteed Coverage Benefit so long as the Guaranteed
Coverage Premium is paid even though, in certain instances, the minimum payments
allowed by the contract will not, after the payment of monthly insurance and
administrative charges, generate positive surrender values during such period.
Values would be different if premiums are paid with a different frequency or if
of different amounts.
Assumes that no policy loans have been made. Excessive loans or partial
surrenders may cause this policy to lapse because of insufficient cash value.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING INTEREST RATES AND RATES OF
INFLATION. NO REPRESENTATIONS CAN BE MADE BY AMERICAN NATIONAL THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME. ALTHOUGH THE ACTUAL RATES OF RETURN MAY AVERAGE 0%, 6%, or
12% OVER A PERIOD OF YEARS, IF THEY HAVE FLUCTUATED ABOVE OR BELOW THOSE
AVERAGES FOR INDIVIDUAL CONTRACT YEARS THE DEATH BENEFIT AND CASH VALUE WOULD BE
DIFFERENT FROM THOSE SHOWN ABOVE.
109
<PAGE>
AMERICAN NATIONAL INSURANCE COMPANY
ONE MOODY PLAZA
GALVESTON, TEXAS 77550-7999
VARIABLE UNIVERSAL LIFE INSURANCE
DEATH BENEFIT OPTION B; SPECIFIED AMOUNT - $100,000
PREFERRED MALE ISSUE AGE 45
TOBACCO NON-USER
GUARANTEED SCHEDULE OF CHARGES
PLANNED PERIODIC PREMIUM OF $1,842 PAID AT THE BEGINNING OF EACH POLICY YEAR
<TABLE>
<CAPTION>
VALUES BASED ON ASSUMED HYPOTHETICAL GROSS
ANNUAL INVESTMENT RATES OF RETURN OF
- --------------------------------------------------------------------------------------------------------------------------------
0% 6% 12%
- --------------------------------------------------------------------------------------------------------------------------------
END OF PREMIUMS
POLICY ACCUMULATED ACCUMULATION SURRENDER DEATH ACCUMULATION SURRENDER DEATH ACCUMULATION SURRENDER DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,934 955 484 100,955 1,035 564 101,035 1,116 645 101,116
2 3,965 2,246 1,683 102,246 2,479 1,916 102,479 2,722 2,159 102,722
3 6,097 3,485 2,830 103,485 3,954 3,299 103,954 4,463 3,808 104,463
4 8,336 4,671 3,924 104,671 5,460 4,713 105,460 6,348 5,601 106,348
5 10,687 5,802 4,963 105,802 6,993 6,154 106,993 8,390 7,551 108,390
6 13,156 6,873 5,941 106,873 8,551 7,620 108,551 10,600 9,668 110,600
7 15,747 7,879 6,855 107,879 10,128 9,104 110,128 12,987 11,964 112,987
8 18,469 8,814 7,698 108,814 11,718 10,602 111,718 15,565 14,449 115,565
9 21,326 9,672 8,464 109,672 13,312 12,104 113,312 18,342 17,134 118,342
10 24,327 10,446 9,166 110,446 14,904 13,624 114,904 21,333 20,052 121,333
15 41,735 12,859 12,859 112,859 22,546 22,546 122,546 40,035 40,035 140,035
20 63,953 11,940 11,940 111,940 28,390 28,390 128,390 66,749 66,749 166,479
25 92,309 5,717 5,717 105,717 29,420 29,420 129,420 102,585 102,585 202,585
30 128,499 0 0 0 20,251 20,251 120,251 149,644 149,644 249,644
AGE 65 63,953 11,940 11,940 111,940 28,390 28,390 128,390 66,749 66,749 166,479
</TABLE>
* GUARANTEED COVERAGE PREMIUM $1,273.00
SURRENDER PREMIUM $1,803.96
Premium Tax Charges will vary by state of residence. This illustration assumes
1.6%
American National agrees to keep the policy in force during the first 2 policy
years and provide a Guaranteed Coverage Benefit so long as the Guaranteed
Coverage Premium is paid even though, in certain instances, the minimum payments
allowed by the contract will not, after the payment of monthly insurance and
administrative charges, generate positive surrender values during such period.
Values would be different if premiums are paid with a different frequency or if
of different amounts.
Assumes that no policy loans have been made. Excessive loans or partial
surrenders may cause this policy to lapse because of insufficient cash value.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING INTEREST RATES AND RATES OF
INFLATION. NO REPRESENTATIONS CAN BE MADE BY AMERICAN NATIONAL THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME. ALTHOUGH THE ACTUAL RATES OF RETURN MAY AVERAGE 0%, 6%, or
12% OVER A PERIOD OF YEARS, IF THEY HAVE FLUCTUATED ABOVE OR BELOW THOSE
AVERAGES FOR INDIVIDUAL CONTRACT YEARS THE DEATH BENEFIT AND CASH VALUE WOULD BE
DIFFERENT FROM THOSE SHOWN ABOVE.
110
<PAGE>
THIS PAGE LEFT BLANK INTENTIONALLY FOR PURPOSES OF PRINT PAGINATION.
111
<PAGE>
THIS PAGE LEFT BLANK INTENTIONALLY FOR PURPOSES OF PRINT PAGINATION.
112
<PAGE>
[AMERICAN NATIONAL LOGO] Purchaser Suitability Form
<TABLE>
<S> <C>
This form must accompany all applications for American National Variable Universal Life and Variable Annuity products.
1. NEW PURCHASER INFORMATION
Name ------------------------------------------------- Date ---------------
ADDRESS ____________________________________________________________________
SOCIAL SECURITY OR TAX I.D. NUMBER _________________________________________
If Purchaser is a corporation, partnership or other legal entity, names of any persons authorized to transact business on behalf
of entity: _____________________________________________________________________________________________________________________
2. PURCHASER'S OCCUPATION
Name and Address of Employer --------------------------------------------
Business Phone -------------------------------
3. IS THE PURCHASER EMPLOYED BY OR ASSOCIATED WITH A MEMBER OF THE NASD OR NYSE?
[ ] Yes [ ] No If yes, provide the name, address and phone number of the firm: _____________________________________________
_____________________________________________________________________________________________________________
4. TAX STATUS
[ ] Single [ ] Head of Household [ ] Married filing separate returns
[ ] Married filing joint return or qualifying widow(er) with dependent child [ ] Corporation [ ] Other ______________________
5. MARITAL STATUS
[ ] Married [ ] Single [ ] Widowed
6. DEPENDENTS
[ ] Spouse [ ] Children: Ages ------------------- [ ] Other -----------------------
INVESTOR SUITABILITY INFORMATION (the information requested applies to the Applicant/Policy Owner if different from the Proposed
Insured)
To be completed by Purchaser or Registered Representative.
NASD rules require Registered Representatives to have reasonable grounds for believing the recommended purchase is suitable for the
customer. Therefore, representatives are required to make inquiries concerning the financial condition of a proposed purchaser of
any of American National's Variable products. You are urged to supply such information so that the representative can make an
informed judgment as to the suitability of your investment selection(s). However, you are not required to divulge such information.
If you choose not to do so, you must sign at the section provided below indicating refusal and acknowledging that the representative
did request the suitability information.
1. SOURCES OF FUNDS FOR INVESTMENT
A. [ ] Current Earnings C. [ ] Gift or Inheritance E. [ ] Insurance Benefit
B. [ ] Savings D. [ ] Sale of Assets F. [ ] Maturity Proceeds G. [ ] __________________
2. PRIMARY PURPOSE OF INVESTMENT
A. [ ] Education C. [ ] Savings E. [ ] Retirement G. [ ] Estate Planning
B. [ ] Tax Shelter D. [ ] Business Purposes F. [ ] Current Income H. [ ] __________________
3. INVESTMENT PROFILE
(a) What is your current investment preference?
[ ] Aggressive Growth [ ] Growth [ ] Growth & Current Income
[ ] Current Income [ ] Maximum safety, even if modest return
(b) What is your risk comfort level?
[ ] High [ ] High/Moderate [ ] Moderate [ ] Moderate/Limited [ ] Low
(c) What is your financial goal time horizon?
[ ] 1-5 years [ ] 5-10 years [ ] 10 years and beyond
(d) What is your age range?
[ ] 21-40 [ ] 41-59 [ ] 60 +
(e) What is your tax bracket?
[ ] 15% [ ] 28% [ ] 28% +
(f) What is your estimated annual family income?
[ ] less than $15,000 [ ] $15,000-$30,000 [ ] $30,000-$50,000
[ ] $50,000-$100,000 [ ] Over $100,000
(g) What is your estimated net worth (exclude home, furnishings and automobiles)?
[ ] less than $25,000 [ ] $25,000 - $50,000 [ ] $50,000 - $100,000 [ ] Over $100,000
(h) Are you responsible for the financial welfare of anyone other than your immediate family (i.e. alimony, child or parental
support,etc.)? [ ] Yes [ ] No
(i) Do you own other securities? [ ] Yes [ ]
Types: [ ] Stocks [ ] Bonds [ ] Mutual Funds [ ] Variable Products [ ] Other
I (WE) FURNISHED THE ABOVE SUITABILITY INFORMATION AND IT HAS BEEN ACCURATELY RECORDED.
- ----------------------------------------------- --------------------------------------
Purchaser Signature Joint Owner Signature
</TABLE>
continued on reverse side
113
<PAGE>
STATEMENT OF REFUSAL TO PROVIDE FINANCIAL INFORMATION
I (we) fully understand that the Registered Representative, acting on behalf of
American National Insurance Company and Securities Management & Research, Inc.,
has requested the above suitability information to determine whether my (our)
purchase of American National's Variable products is an appropriate investment
considering my (our) financial situation. I (we) refuse to provide the requested
information and acknowledge that such refusal prevents an evaluation of the
suitability of the variable product for my financial needs.
---------------------- -----------------------
Purchaser Signature Joint Owner Signature
REGISTERED REPRESENTATIVE NOTICE - Should the Purchaser sign the above Statement
of Refusal to Provide Financial Information, it is still an NASD requirement
that you have reasonable grounds to recommend the purchase of this investment as
suitable. Therefore, you must complete the suitability information to the best
of your knowledge and certify that you have done so when signing the Registered
Representative's Statement below.
REGISTERED REPRESENTATIVE STATEMENT & SIGNATURE
Check appropriate boxes.
[ ] Application attached.
[ ] Suitability Information was provided by the Purchaser(s) and the
Purchaser(s) signed recorded. acknowledgment that information was
accurately
or,
[ ] Refusal to Provide Financial Information Statement signed by
Purchaser(s). I provided the suitability information to the best of my
knowledge and have reasonable grounds to recommend the purchase of this
investment as suitable for the Investor.
- ------------------------------------- ---------------------------------------
Registered Representative Signature Registered Representative Personal Code
- ------------------------------------- ---------- --------------- ------
Registered Representative Name (print) Date Branch Office # PSO#
Home Office Approval:
Date Received:
Form 7986 *7986* Rev. 3-99
114
<PAGE>
This page left blank intentionally for purposes of print pagination.
115
<PAGE>
[AMERICAN NATIONAL LOGO]
Form 5427 *5427* Rev. 5-00
<PAGE>
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
The following exhibits, corresponding to those required by the instructions
as to exhibits in Form N-8B-2:
1
<PAGE>
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)
Exhibit 8(4) ..... Form of T. Rowe Price Fund Participation Agreement
(previously filed in post-effective amendment no. 12 on
April 30, 1999)
Exhibit 9 ........ Not Applicable
Exhibit 10 ....... Application Form (previously filed in post-effective
amendment no. 8 on April 26, 1996)
2
<PAGE>
Exhibit 11 ....... Independent Auditors' Consent
Exhibit 12 ....... Opinion of Counsel
Exhibit 13 ....... Consent of Counsel
Exhibit 14 ....... Actuarial Opinion
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
3
<PAGE>
As required by the Securities Act of 1933, the Registrant certifies that it
meets all of the requirements of Securities Act Rule 485(b) for effectiveness of
this Post-Effective Amendment and has caused this amended registration statement
to be signed on its behalf, in the City of Galveston, and the State of Texas on
the 28th day of April, 2000.
AMERICAN NATIONAL VARIABLE LIFE SEPARATE ACCOUNT
(Registrant)
By: American National Insurance Company
By: /s/ Robert L. Moody
---------------------------------
Robert L. Moody,
Chairman of the Board, President
and Chief Executive Officer
AMERICAN NATIONAL INSURANCE COMPANY
(Depositor)
By: /s/ Robert L. Moody
--------------------------------------
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 - April 28, 2000
- --------------------------- Investments (Principal Financial
Michael W. McCroskey Officer)
/s/ Stephen E. Pavlicek Senior Vice President and April 28, 2000
- --------------------------- Controller
Stephen E. Pavlicek (Principal Accounting Officer)
4
<PAGE>
Signature Title Date
- --------- ----- ----
/s/ Robert L. Moody Chairman of the Board, April 28, 2000
- ------------------------------ Director, President and Chief
Robert L. Moody Executive Officer
/s/ G. Richard Ferdinandtsen Director April 28, 2000
- ------------------------------
G. Richard Ferdinandtsen
/s/ Irwin M. Herz, Jr. Director April 28, 2000
- ------------------------------
Irwin M. Herz, Jr.
/s/ R. Eugene Lucas Director April 28, 2000
- ------------------------------
R. Eugene Lucas
/s/ E. Douglas McLeod Director April 28, 2000
- ------------------------------
E. Douglas McLeod
- --------------------------- Director
Frances Anne Moody
- --------------------------- Director
Russell S. Moody
- --------------------------- Director
W. L. Moody, IV
- --------------------------- Director
Joe Max Taylor
5
<PAGE>
Exhibit 99.B11
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
(and to all references to our Firm) included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
/s/ ARTHUR ANDERSEN LLP
___________________________
Houston, Texas
April 28, 2000
<PAGE>
Exhibit 99.B12
Law Offices
Greer, Herz & Adams, L.L.P.
a registered limited liability partnership
including professional corporations
One Moody Plaza
Galveston, Texas 77550
Galveston (409) 765-5525
Houston (713) 480-5278
Telecopier (409) 766-6424
April 28, 2000
Securities and Exchange Commission
450 Fifth Street, N.W.
Judicial Plaza
Washington, D.C. 20549
RE: American National Variable Life Separate Account ("Separate Account")
Post-Effective Amendment No. 13 to Form S-6; File No. 33-36525;
Opinion and Consent of Counsel
Gentlemen:
We are counsel to American National Insurance Company ("ANICO"), the
depositor of the Separate Account. As such, we participated in the formation of
the Separate Account and the registration of such separate account with the
Securities and Exchange Commission ("Commission"). Accordingly, we are familiar
with the corporate records, certificates, and consents of officers of ANICO as
we have deemed necessary or appropriate for the purpose of this opinion.
Based upon the foregoing, and our consideration of such other matters of
fact and questions of law as we have deemed necessary and proper in the
circumstances, we are of the opinion that:
1. ANICO is a duly organized and existing corporation under the laws of
the State of Texas and that its principal business is to be an insurer.
2. The Separate Account is a duly organized and existing separate account
of ANICO under the laws of the State of Texas and is registered as a unit
investment trust under the Investment Company Act of 1940.
<PAGE>
3. The Variable Life Insurance Contracts registered by this Registration
Statement under the Securities Act of 1933 (File No. 33-36525) will, upon
issuance thereof, be validly authorized and issued.
We hereby consent to the use of our opinion of counsel in the Post-
Effective Amendment No. 13 to Form S-6 Registration Statement (File No. 33-
36525) filed on behalf of the Separate Account. We further consent to the
statements made regarding us and to the use of our name under the caption "Legal
Matters" in the prospectus constituting a part of such Post-Effective Amendment
No. 13 to such Registration Statement.
Yours very truly,
GREER, HERZ & ADAMS, L.L.P.
/s/ Jerry L. Adams
---------------------------------
Jerry L. Adams
<PAGE>
Exhibit 99.B14
REX D. HEMME, FSA, MAAA
Vice President and Actuary
Life Product Development
April 28, 2000
Securities and Exchange Commission
450 Fifth Street, N W
Washington, D.C. 20549
Re: American National Variable Life Separate Account; Post-Effective
Amendment Number 13 to Form S-6 Registration Statement; Registration
Number 33-36525
Dear Sir:
This opinion is furnished in connection with the Post-Effective Amendment Number
13 to Form S-6 Registration Statement under the Securities Act of 1933, as
amended ("Securities Act"), of a certain Variable Life insurance policy (the
"Policy") that will be offered and sold by American National Insurance Company
and certain units of interest to be issued in connection with the Policy.
The hypothetical illustrations of the Policy used in the Post-Effective
Amendment Number 13 to Form S-6 Registration Statement accurately reflect
reasonable estimate of projected performance of the Policy under the stipulated
rates of investment return, the contractual expense deductions and guaranteed
cost-of-insurance rates, and utilizing a reasonable estimation for expected fund
operating expenses.
I hereby consent to the use of this opinion as an exhibit to the Post-Effective
Amendment Number 13 to Form S-6 Registration Statement and to the reference to
my name under the heading "Experts" in the Prospectus included as a part of such
Form S-6 Registration Statement.
Very truly yours,
/s/ Rex D. Hemme
- -----------------------------------------
Rex D. Hemme, FSA, MAAA
Vice President and Actuary Life Product Development
American National Insurance Company
One Moody Plaza
Galveston, Texas 77550
(409) 766-6627
(409) 766-6933 Fax
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AMERICAN
NATIONAL VARIABLE LIFE SEPARATE ACCOUNT AD IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<INVESTMENTS-AT-COST> 40,959
<INVESTMENTS-AT-VALUE> 56,683
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 56,683
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 56,683
<DIVIDEND-INCOME> 475
<INTEREST-INCOME> 0
<OTHER-INCOME> 1,326
<EXPENSES-NET> 304
<NET-INVESTMENT-INCOME> 1,497
<REALIZED-GAINS-CURRENT> 699
<APPREC-INCREASE-CURRENT> 5,048
<NET-CHANGE-FROM-OPS> 7,244
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 10,581
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
</TABLE>
