Registration Nos. 33-43390
811-2441
As filed with the Commission on April 30, 1996
--------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 7 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 52 [X]
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT D
(Exact Name of Registrant)
AMERICAN GENERAL LIFE INSURANCE COMPANY
(Name of Depositor)
2727-A Allen Parkway
Houston, Texas 77019-2191
(Address of Depositor's Principal Executive Officers) (Zip Code)
(713) 831-3632
(Depositor's Telephone Number, including Area Code)
Steven A. Glover, Esq.
Associate General Counsel and Assistant Secretary
American General Life Insurance Company
2727-A Allen Parkway, Houston, Texas 77019
(Name and Address of Agent for Service)
Copies of all communications to Freedman, Levy, Kroll & Simonds
1050 Connecticut Avenue, N.W., Suite 825
Washington, D.C. 20036
Attention: Gary O. Cohen, Esq.
Approximate Date of Proposed Public Offering: Continuous
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, 1996 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
If appropriate, check the following:
|_| This post-effective amendment designates a new effective date for a
previously filed post-effective amendment
Pursuant to the provisions of Rule 24f-2 under the Investment Company Act of
1940, Registrant has elected to register an indefinite number or amount of its
securities under the Securities Act of 1933. That election was previously
filed in Registrant's Form N-4 registration statement (File No. 2-49805).
Registrant filed a Rule 24f-2 Notice on February 21, 1996, for its most recent
fiscal year ended December 31, 1995.
<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT D
FORM N-4
Cross Reference Sheet
Pursuant to Rule 495(a)
Under the Securities Act of 1933
PART A
<TABLE>
<CAPTION>
Form N-4
Item No. Prospectus Caption
<S> <C>
1. Cover Page. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cover Page.
2. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Glossary
3. Synopsis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Synopsis of Contract Provisions
4. Condensed Financial Information . . . . . . . . . . . . . . . . . . . Synopsis of Contract Provisions -
Financial and Performance
Information; Cover Page; Selected
Accumulation Unit Data
5. General Description of Registrant,
Depositor and Portfolio Companies . . . . . . . . . . . . . . . . . . AG Life; Separate Account D; The
Portfolios; Cover Page
6. Deductions and Expenses . . . . . . . . . . . . . . . . . . . . . . . Charges Under the Contracts;
Long-Term Care and Terminal
Illness
7. General Description of Variable
Annuity Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . Synopsis of Contract Provisions -
Communications to Us; Owner
Account Value; Transfer,
Surrender and Partial Withdrawal
of Owner Account Value; Owners,
Annuitants and Beneficiaries;
Assignments; Rights Reserved by
Us
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<PAGE>
PART A
Form N-4
Item No. Prospectus Caption
8. Annuity Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . Annuity Period and Annuity
Payment Options
9. Death Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . Death Proceeds
10. Purchases and Contract Value. . . . . . . . . . . . . . . . . . . . . Contract Issuance and Purchase
Payments; Variable Account Value;
Distribution Arrangements;
One-Time Reinstatement Privilege
11. Redemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Transfer, Surrender and Partial
Withdrawal of Owner Account
Value; Annuity Payment Options;
Contract Issuance and Purchase
Payments; Synopsis of Contract
Provisions - Surrenders,
Withdrawals and Cancellations;
Payment and Deferment
12. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Federal Income Tax Matters;
Synopsis of Contract Provisions
-Limitations Imposed by
Retirement Plans and Employers
13. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
14. Table of Contents of Statement
of Additional Information . . . . . . . . . . . . . . . . . . . . . . Contents of Statement of
Additional Information
ii
<PAGE>
PART B
Caption in
Form N-4 Statement of
Item No. Additional Information
15. Cover Page. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cover Page
16. Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . Cover Page
17. General Information and
History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . General Information; Regulation
and Reserves
18. Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Independent Auditors; Services
19. Purchase of Securities
Being Offered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable*
20. Underwriters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Principal Underwriters
21. Calculation of Performance
Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Performance Data for the
Divisions
22. Annuity Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable*
23. Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . Financial Statements
</TABLE>
PART C
Information required to be set forth in Part C is set forth under the
appropriate item, so numbered, in Part C of the Registration Statement.
- --------------------
* All required information is included in Prospectus.
iii
<PAGE>
COMBINATION FIXED AND VARIABLE ANNUITY CONTRACTS
OFFERED BY
AMERICAN GENERAL LIFE INSURANCE COMPANY
ANNUITY ADMINISTRATION DEPARTMENT
P.O. BOX 1401, HOUSTON, TEXAS 77251-1401
1-800-247-6584 713/831-3505
American General Life Insurance Company ("AG Life") is offering flexible
payment deferred individual annuity contracts (the "Contracts").
You may use AG Life's Separate Account D for a variable investment return
under the Contracts based on one or more of the following mutual fund
portfolios: the Money Market, Domestic Income, Enterprise, Government and
Asset Allocation Funds of the Van Kampen American Capital Life Investment
Trust; the Balanced and Partners Portfolios of the Neuberger & Berman Advisers
Management Trust; the Overseas Portfolio of the Variable Insurance Products
Fund; and the Asset Manager and Index 500 Portfolios of the Variable Insurance
Products Fund II.
You may also use AG Life's guaranteed interest accumulation option. This
option has three different guarantee periods, each with its own guaranteed
interest rate.
This Prospectus is designed to provide information about the Contracts that
you should know before investing. Please read it carefully and keep it for
future reference. Information about certain aspects of the Contracts, in
addition to that found in this Prospectus, has been filed with the Securities
and Exchange Commission in the Statement of Additional Information (the
"Statement"). The Statement, dated May 1, 1996, is incorporated by reference
into this Prospectus. The "Table of Contents" of the Statement appears at page
40 of this Prospectus. You may obtain a free copy of the Statement upon
written or oral request to AG Life's Annuity Administration Department in our
Home Office, which is located at 2727-A Allen Parkway, Houston, Texas
77019-2191. The mailing address and telephone numbers are set forth above.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND THE RELATED
STATEMENT (OR ANY SALES LITERATURE APPROVED BY AG LIFE) IN CONNECTION WITH THE
OFFER CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THE
CONTRACTS ARE NOT AVAILABLE IN ALL STATES AND THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER IN ANY JURISDICTION TO ANY PERSON TO WHOM SUCH OFFER WOULD
BE UNLAWFUL THEREIN.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTA TION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY A CURRENT PROSPEC TUS OF THE
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST, THE NEUBERGER & BERMAN
ADVISERS MANAGEMENT TRUST, THE VARIABLE INSURANCE PRODUCTS FUND, OR THE
VARIABLE INSURANCE PRODUCTS FUND II. PLEASE REMEMBER THAT NOT ALL OF THE
MUTUAL FUND PORTFOLIOS DESCRIBED IN THOSE PROSPECTUSES ARE AVAILABLE UNDER THE
CONTRACTS.
Prospectus dated May 1, 1996
1
<PAGE>
CONTENTS
Glossary............................................................... 4
Fee Table.............................................................. 7
Synopsis of Contract Provisions........................................ 10
Selected Accumulation Unit Data........................................ 14
AG Life................................................................ 15
Separate Account D..................................................... 15
The Portfolios......................................................... 16
The Fixed Account...................................................... 18
Contract Issuance and Purchase Payments................................ 19
Owner Account Value.................................................... 20
Variable Account Value............................................... 20
Fixed Account Value.................................................. 21
Transfer, Surrender and Partial Withdrawal of Owner
Account Value........................................................ 21
Transfers............................................................ 21
Surrenders and Partial Withdrawals................................... 23
Annuity Period and Annuity Payment Options............................. 23
Annuity Commencement Date............................................ 23
Application of Owner Account Value................................... 23
Fixed and Variable Annuity Payments.................................. 24
Annuity Payment Options.............................................. 24
Transfers............................................................ 27
Death Proceeds......................................................... 27
Death Proceeds Prior to the Annuity Commencement Date................ 27
Death Proceeds After the Annuity Commencement Date................... 28
Proof of Death....................................................... 28
Charges Under the Contracts............................................ 28
Premium Taxes........................................................ 28
Surrender Charge..................................................... 29
Transfer Charges..................................................... 30
Annual Maintenance Charge............................................ 30
Charge to Separate Account D......................................... 31
Miscellaneous........................................................ 31
One-Time Reinstatement Privilege..................................... 31
Reduction in Surrender Charges or Administrative Charges............ 32
Long-Term Care and Terminal Illness.................................... 32
Long-Term Care....................................................... 32
Terminal Illness..................................................... 32
Other Aspects of the Contracts......................................... 32
Owners, Annuitants and Beneficiaries; Assignments.................... 32
Reports.............................................................. 33
Rights Reserved by Us................................................ 33
Payment and Deferment................................................ 33
2
<PAGE>
Federal Income Tax Matters............................................. 34
General.............................................................. 34
Non-Qualified Contracts.............................................. 34
Individual Retirement Annuities ("IRAs")............................. 36
Simplified Employee Pension Plans.................................... 37
Other Qualified Plans................................................ 37
Private Employer Unfunded Deferred Compensation Plans................ 38
Excess Distributions - 15% Tax....................................... 38
Federal Income Tax Withholding and Reporting......................... 39
Taxes Payable by AG Life and Separate Account D...................... 39
Distribution Arrangements.............................................. 39
Legal Matters.......................................................... 39
Other Information on File.............................................. 40
Contents of Statement of Additional Information........................ 40
3
<PAGE>
GLOSSARY
WE, OUR AND US - American General Life Insurance Company ("AG Life").
YOU AND YOUR - a reader of this Prospectus who is contemplating making
purchase payments or taking any other action in connection with a Contract.
This would generally be the Owner.
ACCOUNT VALUE - the sum of your Fixed Account Value and Variable Account
Value.
ACCUMULATION UNIT - a measuring unit used in calculating your interest in a
Division of Separate Account D prior to the Annuity Commencement Date.
ANNUITANT - the person named as such in the application for a Contract and on
whose life annuity payments may be based.
ANNUITY COMMENCEMENT DATE - the date on which we begin making payments under
an Annuity Payment Option, unless a lump-sum distribution is elected instead.
ANNUITY PAYMENT OPTION - one of the several forms in which you can request us
to make annuity payments.
ANNUITY PERIOD - the period during which we make annuity payments under an
Annuity Payment Option.
ANNUITY UNIT - a measuring unit used in calculating the amount of Variable
Annuity Payments.
BENEFICIARY - the person that you designate to receive any proceeds due under
a Contract following the death of an Owner or an Annuitant.
CODE - the Internal Revenue Code of 1986, as amended.
CONTRACT - an individual annuity Contract offered by this Prospectus.
CONTRACT ANNIVERSARY - each anniversary of the date of issue of the Contract.
CONTRACT YEAR - each year beginning with the date of issue of the Contract.
DIVISION - one of the several different investment options into which Separate
Account D is divided.
FIXED ACCOUNT - the name of the investment alternative under which purchase
payments are allocated to AG Life's General Account.
FIXED ACCOUNT VALUE - the amount of your Account Value which is in the Fixed
Account.
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<PAGE>
FIXED ANNUITY PAYMENTS - annuity payments that are fixed in amount and do not
vary with the investment experience of any Division of Separate Account D.
GENERAL ACCOUNT - all assets of AG Life other than those in Separate Account D
or any other legally- segregated separate account established by AG Life.
GUARANTEED INTEREST RATE - the rate of interest we credit during any Guarantee
Period, on an effective annual basis.
GUARANTEE PERIOD - the period for which a Guaranteed Interest Rate is
credited.
HOME OFFICE - our office at the following addresses and phone numbers:
American General Life Insurance Company, Annuity Administration Department,
2727-A Allen Parkway, Houston, Texas 77019-2191; mailing address - P.O. Box
1401, Houston, Texas 77251-1401; 1-800-247-6584 or 713- 831-3505.
INVESTMENT COMPANY ACT OF 1940 ("1940 ACT") - a federal law governing the
operations of investment companies such as the Portfolios and Separate Account
D.
NON-QUALIFIED - not eligible for the special federal income tax treatment
applicable in connection with retirement plans pursuant to Sections 401, 403,
or 408 of the Code.
OWNER - the holder of record of a Contract, except that the employer or
trustee may be the Owner of the Contract in connection with a retirement plan.
PORTFOLIO - an individual investment fund or portfolio available for
investment under the Contracts. Currently, each Portfolio is a part of the Van
Kampen American Capital Life Investment Trust, the Advisers Management Trust,
the Variable Insurance Products Fund, or the Variable Insurance Products Fund
II.
QUALIFIED - eligible for the special federal income tax treatment applicable
in connection with retirement plans pursuant to sections 401, 403, or 408 of
the Code.
SEPARATE ACCOUNT D - the segregated asset account referred to as American
General Life Insurance Company Separate Account D established to receive and
invest purchase payments under the Contracts.
SURRENDER CHARGE - a charge for sales expenses that may be assessed upon
surrenders of and payments of certain other amounts from a Contract.
VALUATION DATE - all days on which we are open for business except, with
respect to any Division, days on which the related Portfolio does not value
its shares.
5
<PAGE>
VALUATION PERIOD - the period that starts at the close of regular trading on
the New York Stock Exchange on a Valuation Date and ends at the close of
regular trading on the exchange on the next succeeding Valuation Date.
VARIABLE ANNUITY PAYMENTS - annuity payments that vary in amount based on the
investment experience of one or more of the Divisions of Separate Account D.
VARIABLE ACCOUNT VALUE - the amount of your Account Value that is in Separate
Account D.
WRITTEN - signed, dated, in form and substance satisfactory to us and received
at our Home Office. See "Synopsis of Contract Provisions - Communications to
Us." You must use special forms provided by us or your sales representative to
authorize telephone transfers, elect an Annuity Option or exercise your
one-time reinstatement privilege.
6
<PAGE>
FEE TABLE
The purpose of this Fee Table is to assist you in understanding the
various costs and expenses that you will bear directly or indirectly pursuant
to a Contract and in connection with the Portfolios. The table reflects
expenses of the Separate Account as well as the Portfolios. Amounts for state
premium taxes or similar assessments may also be deducted, where applicable.
<TABLE>
PARTICIPANT TRANSACTION CHARGES
<S> <C>
Front-End Sales Charge Imposed on Purchases..............................0%
Maximum Surrender Charge (1).............................................7%
(computed as a percentage of purchase payments)
Transfer Fee...........................................................$ 0 (2)
</TABLE>
ANNUAL MAINTENANCE CHARGE (3).............................................$36
<TABLE>
SEPARATE ACCOUNT D ANNUAL EXPENSES (as a percentage of average daily net asset
value)
<S> <C>
Mortality and Expense Risk Charge.....................................1.25%
Administrative Expense Charge......................................... .30%
Total Separate Account D Annual Expenses..............................1.55%
</TABLE>
- --------
(1) This charge does not apply or is reduced under certain circumstances. See
"Surrender Charge."
(2) This charge is $25 after the twelfth transfer during each Contract Year
prior to the Annuity Commencement Date.
(3) This charge is not imposed during the Annuity Period.
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<PAGE>
THE PORTFOLIOS' ANNUAL EXPENSES (1) (as a percentage of average net assets)
<TABLE>
<CAPTION>
Management Fees Other Expenses
After Expense After Expense Total Portfolio
Reimbursement Reimbursement Operating Expenses
--------------- -------------- -------------------
<S> <C> <C> <C>
Money Market 0.17% 0.43% 0.60%
Domestic Income 0.17% 0.43% 0.60%
Enterprise 0.42% 0.18% 0.60%
Government 0.38% 0.22% 0.60%
Asset Allocation 0.36% 0.24% 0.60%
Balanced (2) 0.85% 0.19% 1.04%
Partners (2) 0.85% 0.30% 1.15%
Overseas 0.76% 0.15% 0.91%
Asset Manager 0.71% 0.08% 0.79%
Index 500 0.09% 0.19% 0.28%
</TABLE>
Example If you surrender your Contract at the end of the applicable time
period, a $1,000 investment would be subject to the following
expenses, assuming a 5% annual return on assets:
<TABLE>
<CAPTION>
If all amounts are invested 1 year 3 years 5 years 10 years
------ ------- ------- --------
in one of the following
Portfolios:
- -----------------------
<S> <C> <C> <C> <C>
Money Market $ 93 $ 115 $ 147 $ 256
Domestic Income 93 115 147 256
Enterprise 93 115 147 256
Government 93 115 147 256
Asset Allocation 93 115 147 256
Balanced 97 128 169 300
Partners 98 131 174 311
Overseas 96 124 162 287
Asset Manager 95 121 156 275
Index 500 89 105 130 223
<FN>
(1) If certain voluntary expense reimbursements from the investment advisers
were terminated, management fees and other expenses would have been:
</FN>
</TABLE>
<TABLE>
<CAPTION>
Management Other Total
Fees Expenses Expenses
---------- -------- --------
<S> <C> <C> <C>
Money Market 0.50% 0.43% 0.93%
Domestic Income 0.50% 0.43% 0.93%
Enterprise 0.50% 0.18% 0.68%
Government 0.50% 0.22% 0.72%
Asset Allocation 0.50% 0.24% 0.74%
Balanced 0.85% 0.19% 1.04%
Partners 0.85% 0.30% 1.15%
Overseas 0.76% 0.15% 0.91%
Asset Manager 0.71% 0.10% 0.81%
Index 500 0.28% 0.19% 0.47%
<FN>
(2) The figures reported under "Management Fees" include the aggregate of the
administration fees paid by the Portfolio and the management fees paid by
the Series of Advisers Managers Trust in which that Portfolio invests.
Similarly "Other Expenses" includes all other expenses of the Portfolio
and the related Series in which the Portfolio invests. (See "Expenses" in
Neuberger & Berman Advisers Management Trust's Prospectus). "Management
Fees" have been restated to reflect current expenses.
</FN>
</TABLE>
8
<PAGE>
Example If you commence a life Annuity Payment Option following the end of
the applicable time period, a $1,000 investment would be subject to
the following expenses, assum ing a 5% annual return on assets:
<TABLE>
<CAPTION>
If all amounts are invested 1 year 3 years (1,2) 5 years (3) 10 years
------ ------- ------- --------
in one of the following
Portfolios:
<S> <C> <C> <C> <C>
Money Market $ 77 $ 70 $ 120 $ 256
Domestic Income 77 70 120 256
Enterprise 77 70 120 256
Government 77 70 120 256
Asset Allocation 77 70 120 256
Balanced 81 83 142 300
Partners 82 86 147 311
Overseas 80 79 135 287
Asset Manager 79 76 129 275
Index 500 73 60 103 223
</TABLE>
Example If you do not surrender your Contract or commence an Annuity Payment
Option, a $1,000 investment would be subject to the following expenses,
assuming a 5% annual return on assets:
<TABLE>
<CAPTION>
If all amounts are invested 1 year 3 years 5 years 10 years
------ ------- ------- --------
iin one of the following
Portfolios:
<S> <C> <C> <C> <C>
Money Market $ 23 $ 70 $ 120 $ 256
Domestic Income 23 70 120 256
Enterprise 23 70 120 256
Government 23 70 120 256
Asset Allocation 23 70 120 256
Balanced 27 83 142 300
Partners 28 86 147 311
Overseas 26 79 135 287
Asset Manager 25 76 129 275
Index 500 19 60 103 223
<FN>
(1) If the Annuity Commencement Date under a life or non-life Annuity Payment
Option were the last day of the third Contract Year, the figures in this
column would be the same as those in the same column of the preceding
example.
(2) If the Annuity Payment Option exercised following the third Contract Year
is not a life annuity, the figures in this column would be $9 less than
those in the same column of the preceding example due to the decrease in
the surrender charges from Contract Year 3 to Contract Year 4.
(3) If the Annuity Payment Option exercised following the fifth Contract Year
is not a life annuity, the figures in this column would be $9 less than
those in the same column of the preceding example due to the decrease in
the surrender charges from Contract Year 5 to Contract Year 6. If said
non-life annuity option had its Annuity Commencement Date on the last day
of the fifth Contract Year, the figures in this column would be the same
as those in the same column of the preceding example.
</FN>
</TABLE>
9
<PAGE>
THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. Actual expenses may be greater or less than those shown. Similarly,
the assumed 5% annual rate of return is not an estimate or a guarantee of
future investment performance.
The examples and other fee information set forth above are based on actual
Portfolio expense experience for the fiscal year ended December 31, 1995. The
examples with respect to all of the Portfolios are based on the Average
Account Value of $40,591 for the fiscal year ended December 31, 1995.
SYNOPSIS OF CONTRACT PROVISIONS
This synopsis should be read together with the other information set
forth in this Prospectus. Variations due to requirements particular to your
state are described in supplements which are attached to this Prospectus, or
in endorsements to your Contract, as appropriate.
The Contracts are designed to provide retirement benefits through the
accumulation of purchase payments on a fixed or variable basis, and by the
application of such accumulations to provide Fixed or Variable Annuity
Payments.
MINIMUM INVESTMENT REQUIREMENTS
Your initial purchase payment must be at least $5,000 ($2,000 in the case
of an Individual Retirement Annuity ("IRA") or $250 in the case of a Spousal
IRA acquired together with an IRA). The amount of any subsequent purchase
payment that you make must be at least $100 ($50 for an IRA). If your Account
Value falls below $500, we may cancel your interest in the Contract and treat
it as a full surrender. See "Contract Issuance and Purchase Payments."
PURCHASE PAYMENT ACCUMULATION
Purchase payments will be accumulated on a variable or fixed basis until
the Annuity Commence ment Date. For variable accumulation, you may allocate
part or all of your Account Value to one or more of the ten available
Divisions of Separate Account D. Each such Division invests solely in shares
of one of ten corresponding mutual fund Portfolios. See "The Portfolios." As
the value of the investments in a Portfolio's shares increases or decreases,
the value of accumulated purchase payments allocated to the corresponding
Division increases or decreases, subject to applicable charges and deductions.
See "Variable Account Value."
For fixed accumulation, you may allocate part or all of your Account
Value to one or more of the three Guarantee Periods currently available in our
Fixed Account. Each Guarantee Period is for a different period of time and has
a different Guaranteed Interest Rate. While allocated to a Guarantee Period,
the value of accumulated purchase payments increases at the Guaranteed
Interest Rate applicable to that Guarantee Period. See "The Fixed Account."
FIXED AND VARIABLE ANNUITY PAYMENTS
You may elect to receive Fixed or Variable Annuity Payments, or a
combination thereof, commencing on the Annuity Commencement Date. Fixed
Annuity Payments are periodic payments from AG Life, the amount of which is
fixed and guaranteed by AG Life. The amount of the payments
10
<PAGE>
will depend on the Annuity Payment Option chosen, the age and, in some cases,
sex of the Annuitant, and the total amount of Account Value applied to the
fixed Annuity Payment Option.
Variable Annuity Payments are similar to Fixed Annuity Payments, except
that the amount of each periodic payment from AG Life will vary reflecting the
net investment return of the Division or Divisions chosen in connection with a
variable Annuity Payment Option. If the net investment return for a given
month exceeds the assumed interest rate used in the Contract's annuity tables,
the monthly payment will be greater than the previous payment. If the net
investment return for a month is less than the assumed interest rate, the
monthly payment will be less than the previous payment. The assumed interest
rate used in the Contract's annuity tables is 3.5%. AG Life may in the future
offer other forms of Contract with a lower assumed interest rate, and reserves
the right to discontinue the offering of the higher interest rate form of
Contract. See "Annuity Period and Annuity Payment Options."
CHANGES IN ALLOCATIONS AMONG DIVISIONS AND GUARANTEE PERIODS
Prior to the Annuity Commencement Date, you may modify your election with
respect to the allocation of future purchase payments to each of the various
Divisions and Guarantee Periods, without charge.
In addition, you may reallocate your Account Value among the Divisions
and Guarantee Periods prior to the Annuity Commencement Date. Transfers out of
a Guarantee Period, however, are subject to limitations as to amount. For
these and other terms and conditions of transfer, see "Transfer, Surrender and
Partial Withdrawal of Owner Account Value - Transfers."
After the Annuity Commencement Date, you may make transfers among the
Divisions or to a fixed Annuity Payment Option, but you may not make transfers
from a fixed Annuity Payment Option. See "Annuity Period and Annuity Payment
Options - Transfers."
SURRENDERS, WITHDRAWALS AND CANCELLATIONS
You may make a total surrender of or partial withdrawal from your
Contract at any time prior to the Annuity Commencement Date, by Written
request to us. A Surrender Charge may be assessed and some surrenders and
withdrawals may subject you to tax penalties. See "Surrenders and Partial
Withdrawals."
You may cancel your Contract by delivering it or mailing it with a
Written cancellation request to our Home Office or to the sales representative
through whom it was purchased, before the close of business on the tenth day
after you receive the Contract. (In some cases, the Contract may provide for a
20 or 30-day, rather than a ten-day period.) If the foregoing items are sent
by mail, properly addressed and postage prepaid, they will be deemed to be
received by us on the date actually received.
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<PAGE>
We will refund to you the Owner Account Value plus any premium taxes and
annual maintenance charge that have been deducted. In states where the law so
requires, however, we will refund the greater of that amount or the amount of
your purchase payments, or, if the law permits, the amount of your purchase
payments.
DEATH PROCEEDS
In the event that the Annuitant or Owner dies prior to the Annuity
Commencement Date, a benefit is payable to the Beneficiary. See "Death
Proceeds Prior to the Annuity Commencement Date."
LIMITATIONS IMPOSED BY RETIREMENT PLANS AND EMPLOYERS
Certain rights you would otherwise have under a Contract may be limited
by the terms of any applicable employee benefit plan. These limitations may
restrict such things as total and partial surrenders, the amount or timing of
purchase payments that may be made, when annuity payments must start and the
type of annuity options that may be selected. Accordingly, you should
familiarize yourself with these and all other aspects of any retirement plan
in connection with which a Contract is used. We are not responsible for
monitoring or assuring compliance with the provisions of any retirement plan.
COMMUNICATIONS TO US
All communications to us should include your Contract number, your name
and, if different, the Annuitant's name. Communications may be directed to the
addresses and phone numbers on the cover of this Prospectus.
Except as otherwise specified in this Prospectus, purchase payments or
other communications are deemed received at our Home Office on the actual date
of receipt there in proper form unless received (1) after the close of regular
trading on The New York Stock Exchange or (2) on a date that is not a
Valuation Date. In either of these two cases, the date of receipt will be
deemed to be the next Valuation Date.
FINANCIAL AND PERFORMANCE INFORMATION
Financial statements of AG Life and Separate Account D, including
financial information about the Divisions which invest in the Portfolios of
the Van Kampen American Capital Life Investment Trust, the Neuberger & Berman
Advisers Management Trust, the Variable Insurance Products Fund and the
Variable Insurance Products Fund II, are included in the Statement of
Additional Information. See "Contents of Statement of Additional Information."
From time to time, Separate Account D may include in advertisements and
other sales materials several types of performance information for the
Divisions, including "average annual total return," "total return," and
"cumulative total return." The Domestic Income Division, the Government
Division, and the Asset Allocation Division may also advertise "yield." The
Money Market Division may advertise "yield" and "effective yield."
12
<PAGE>
Each of these figures is based upon historical information and is not
necessarily representative of the future performance of a Division. Moreover,
these performance figures do not represent the actual experience of amounts
invested by a particular Owner. The investment experience for each Division
reflects the investment performance of the separate investment Portfolio
currently funding such Division for the periods stated, except that for
periods prior to the time when the Contract became available, the results were
calculated by applying all applicable charges and fees at the Separate Account
level for the Contract, as noted below, to the historical Portfolio
performance results for such periods.
Average annual total return, total return, and cumulative total return
calculations measure the net income of a Division plus the effect of any
realized or unrealized appreciation or depreciation of the underlying
investments in the Division for the period in question. Average annual total
return figures are annualized and, therefore, represent the average annual
percentage change in the value of an investment in a Division over the
applicable period. Total return figures are also annualized, but do not, as
described below, include the effect of any applicable Surrender Charge or
Annual Maintenance Charge. Cumulative total return figures represent the
cumulative change in value of an investment in a Division for various periods.
Yield is a measure of the net dividend and interest income earned over a
specific one month or 30-day period (seven-day period for the Money Market
Division) expressed as a percentage of the value of the Division's
Accumulation Units. Yield is an annualized figure, which means that it is
assumed that the Division generates the same level of net income over a one
year period which is compounded on a semi-annual basis. The effective yield
for the Money Market Division is calculated similarly but includes the effect
of assumed compounding. The Money Market Division's effective yield will be
slightly higher than its yield due to this compounding effect.
Average annual total return figures include the deduction of all
recurring charges and fees applicable under the Contract to all Owner
accounts, including the Mortality and Expense Risk Charge, the Administrative
Expense Charge, the applicable Surrender Charge that may be imposed at the end
of the period in question, and a pro-rated portion of the Annual Maintenance
Charge. Yield, effective yield, total return, and cumulative total return
figures do not include the effect of any Surrender Charge that may be imposed
upon the redemption of Accumulation Units, and thus may be higher than if such
charge were deducted. Total return and cumulative total return figures also do
not include the effect of the Annual Maintenance Charge. We may waive or
reimburse certain fees or charges applicable to the Contract and such waivers
or reimbursements will affect each Division's performance results. Additional
information concerning a Division's performance appears in the Statement of
Additional Information.
AG Life may also advertise its ratings by independent financial rating
services, such as A.M. Best Company, Standard & Poor's, and Duff & Phelps.
Best's Insurance Reports, Life-Health Edition, 1995 reconfirmed AG Life's
rating of A++ (Superior) as of June, 1995 for financial position and operating
performance. AG Life has received the highest rating of AAA (Superior) from
Standard & Poor's Corporation, reconfirmed as of November, 1995 and the
highest rating of AAA from Duff
13
<PAGE>
& Phelps Credit Rating Co., reconfirmed as of July, 1995. The ratings from
these three nationally recognized rating organizations reflect the claims
paying ability and financial strength of AG Life and are not a rating of
investment performance that purchasers of insurance products have experienced
or are likely to experience in the future.
In addition, AG Life may include in certain advertisements endorsements
in the form of a list of organizations, individuals or other parties that
recommend the Company or the Contracts. AG Life may occasionally include in
advertisements comparisons of currently taxable and tax-deferred investment
programs, based on selected tax brackets, or discussions of alternative
investment vehicles and general economic conditions.
SELECTED ACCUMULATION UNIT DATA (unaudited)
The following table shows the Accumulation Unit value for each available
Division of Separate Account D on the date purchase payments were first
allocated to the Division, as well as the Accumulation Unit value and number
of Accumulation Units outstanding for each indicated date thereafter.
<TABLE>
<CAPTION>
Money Domestic Govern- Asset
Market Income Enterprise ment Allocation
Division Division Division Division Division
-------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C>
Accumulation
Unit Values
(Beginning $1.366507 $1.230775 $1.437937 $1.436536 $1.456695
of Period)*
Accumulation
Unit Values
at 12/31/92 $1.377641 $1.288105 $1.555069 $1.494233 $1.573259
Accumulation
Unit Values
at 12/31/93 $1.392810 $1.475480 $1.668840 $1.587278 $1.668589
Accumulation
Unit Values
at 12/31/94 $1.422570 $1.390051 $1.587803 $1.491029 $1.583079
Accumulation
Unit Values
at 12/31/95 $1.477475 $1.661247 $2.141736 $1.720968 $2.047678
Accumulation
Units Out-
standing at
12/31/92 152,927.80 1 25,104.316 329,747.989 97,546.137 85,401.066
Accumulation
Units Out-
standing at
12/31/93 470,416.365 514,099.213 1,585,990.094 562,146.987 1,235,477.125
Accumulation
Units Out-
standing at
12/31/94 172,772.518 752,632.015 2,129,473.068 745,153.812 1,653,659.302
Accumulation
Units Out-
standing at
12/31/95 31,023.098 643,469.587 2,193,267.495 648,110.420 1,387,133.759
<FN>
* The dates on which each Division first received a purchase payment are as
follows: Money Market, June 10, 1992; Domestic Income, June 29, 1992;
Enterprise, June 1, 1992; Government, June 1, 1992; Asset Allocation, May
12, 1992.
</FN>
</TABLE>
14
<PAGE>
SELECTED ACCUMULATION UNIT DATA (cont.)
<TABLE>
<CAPTION>
Asset Index
Balanced Partners Overseas Manager 500
Division Division Division Division Division
-------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Accumulation
Unit Values
(Beginning
of Period)* $1.096573 $0.934620 $1.545803 $1.620851 $1.348608
Accumulation
Unit Values
at 12/31/94 $1.326154 $0.965260 $1.514590 $1.590509 $1.134860
Accumulation
Unit Values
at 12/31/95 $1.616129 $1.297141 $1.635732 $1.831737 $1.533115
Accumulation
Units Out -
standing at
12/31/94 90,936.949 268,546.384 93,593.434 325,839.561 50,474.334
Accumulation
Units Out -
standing at
12/31/95 126,436.941 573,999.606 150,156.224 368,506.813 255,919.568
<FN>
* The dates on which each Division first received a purchase payment are as
follows: Balanced, July 6, 1994; Partners, July 7, 1994; Overseas, June
30, 1994; Asset Manager, June 22, 1994; Index 500, June 10, 1994.
</FN>
</TABLE>
AG LIFE
AG Life is a stock life insurance company organized under the laws of the
State of Texas, which is a successor in interest to a company originally
organized under the laws of the State of Delaware in 1917. AG Life is an
indirect, wholly-owned subsidiary of American General Corporation (formerly
American General Insurance Company), a diversified financial services holding
company engaged primarily in the insurance business. The commitments under the
Contracts are AG Life's, and American General Corporation has no legal
obligation to back those commitments.
SEPARATE ACCOUNT D
Separate Account D was originally established on November 19, 1973 and
consists of twenty-six Divisions, ten of which are available under the
Contracts offered by this Prospectus. Separate Account D is registered with
the Securities and Exchange Commission as a unit investment trust under the
1940 Act.
Each Division of Separate Account D is part of AG Life's general business
and the assets of Separate Account D belong to AG Life. Under Texas law and
the terms of the Contracts, the assets of Separate Account D will not be
chargeable with liabilities arising out of any other business which AG Life
may conduct, but will be held exclusively to meet AG Life's obligations under
variable annuity contracts. Furthermore, the income, gains, and losses,
whether or not realized, from assets allocated to Separate Account D, are, in
accordance with the Contracts, credited to or charged against the Separate
Account without regard to other income, gains, or losses of AG Life.
15
<PAGE>
THE PORTFOLIOS
The variable benefits under the Contracts are funded by ten Divisions of
the Separate Account. These Divisions invest in shares of ten separate
investment Portfolios of four mutual funds that are sold, without sales
charges, exclusively to insurance company separate accounts and that are not
sold directly to the public. Each of these mutual funds also offers its shares
to variable annuity and variable life insurance separate accounts of insurers
that are not affiliated with AG Life. We do not see any conflict between
Owners of Contracts and owners of variable life insurance policies or variable
annuity contracts issued by insurance companies not affiliated with AG Life.
Nevertheless, the Boards of Trustees of each of these mutual funds will
monitor to identify any material irrecon cilable conflicts that may develop
and determine what, if any, action should be taken in response. If it becomes
necessary for any separate account to replace shares of any Portfolio with
another invest ment, the Portfolio may have to liquidate securities on a
disadvantageous basis.
Any dividends or capital gain distributions attributable to Contracts are
automatically reinvested in shares of the Portfolio from which they are
received at the Portfolio's net asset value on the date payable. Such
dividends and distributions will have the effect of reducing the net asset
value of each share of the corresponding Portfolio and increasing, by an
equivalent value, the number of shares outstanding of the Portfolio. However,
the value of your interest in the corresponding Division will not change as a
result of any such dividends and distributions.
The names of the Portfolios in which each available Division invests, as
well as their respective investment advisers, are as follows:
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST (advised by Van Kampen
American Capital Asset Management, Inc.)
Money Market Fund
Domestic Income Fund
Enterprise Fund
Government Fund
Asset Allocation Fund
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST (advised by Neuberger &
Berman Management Incorporated)
Balanced Portfolio
Partners Portfolio
VARIABLE INSURANCE PRODUCTS FUND (advised by Fidelity Management &
Research Company)
Overseas Portfolio
VARIABLE INSURANCE PRODUCTS FUND II (advised by Fidelity Management &
Research Company)
Asset Manager Portfolio
Index 500 Portfolio
16
<PAGE>
On March 6, 1996 the names of the Domestic Strategic Income, Common
Stock, and Multiple Strategy Funds of the Van Kampen American Capital Life
Investment Trust were changed to the Domestic Income, Enterprise, and Asset
Allocation Funds, respectively. These name changes resulted in the names of
the Domestic Strategic Income, Common Stock, and Multiple Strategy Divisions
changing at the same time to the Domestic Income, Enterprise, and Asset
Allocation Divisions, respectively.
The Balanced and Partners Portfolios of the Neuberger & Berman Advisers
Management Trust invest solely in shares of a corresponding mutual fund, the
Advisers Managers Trust, pursuant to a "master-feeder" arrangement. Through
such arrangement, the Portfolios each invest their assets in a corresponding
series of the Advisers Managers Trust; those series invest in accordance with
investment objectives, policies and limitations identical to those of the
corresponding Portfolio.
Before selecting any Division, you should carefully read the prospectus
that includes more complete information about the Portfolio in which that
Division invests, including investment objectives and policies, charges and
expenses. You may obtain additional copies of such a prospectus by contacting
AG Life's Annuity Administration Department at the addresses and phone number
set forth on the cover page of this Prospectus. When making your request,
please specify the Portfolio or Portfolios in which you are interested. Please
note that the prospectuses and the statement of additional information
pertaining to the Overseas, Asset Manager and Index 500 Portfolios also
contain information concerning several other Portfolios that are not available
under the Contracts.
High yielding fixed-income securities such as those in which the Domestic
Income Portfolio invests are subject to greater market fluctuations and risk
of loss of income and principal than investments in lower yielding
fixed-income securities. Potential investors in this Division should carefully
read the prospectus and related statement of additional information that
pertains to said Portfolio and consider their ability to assume the risks of
making an investment in this Division.
VOTING PRIVILEGES
The Owner prior to the Annuity Commencement Date and the Annuitant or
other payee during the Annuity Period will be entitled to give us instructions
as to how Portfolio shares held in the Divisions of Separate Account D
attributable to their Contract should be voted at meetings of shareholders of
the Portfolio. Those persons entitled to give voting instructions and the
number of votes for which they may give directions will be determined as of
the record date for a meeting. Separate Account D will vote all shares of each
Portfolio that it holds of record in accordance with instructions received
with respect to all AG Life annuity contracts participating in that Portfolio.
Separate Account D will also vote all shares of each Portfolio for which
no instructions have been received for or against any proposition in the same
proportion as the shares for which voting instructions were received.
Prior to the Annuity Commencement Date, the number of votes each Owner is
entitled to direct with respect to a particular Portfolio is equal to (a) the
Owner's Variable Account Value attributable to that Portfolio divided by (b)
the net asset value of one share of that Portfolio. In determining the number
of votes, fractional votes will be recognized. While a variable Annuity
Payment Option is in effect, the number of votes an Annuitant or payee is
entitled to direct with respect to a particular Portfolio will be computed in
a comparable manner, based on our liability for future Variable Annuity
17
<PAGE>
Payments with respect to that Annuitant or payee as of the record date. Such
liability for future payments will be calculated on the basis of the mortality
assumptions and the assumed interest rate used in determining the number of
Annuity Units under a Contract and the applicable value of an Annuity Unit on
the record date.
Portfolio shares held by insurance company separate accounts other than
Separate Account D will generally be voted in accordance with instructions of
participants in such other separate accounts.
Each of the Balanced and Partners Portfolios invests solely in a
corresponding Series of Advisers Managers Trust pursuant to a "master-feeder"
fund arrangement. The investment manager of the Balanced and Partners
Portfolios has advised AG Life that, as to most issues requiring the vote of a
Series, those Portfolios will vote their interests in the corresponding Series
of Advisers Managers Trust in proportion to instructions received from the
insurance companies that own such Portfolios' shares. In giving such
instructions, AG Life will be governed by the instructions of Contract Owners,
annuitants and payees in the same manner as described above with respect to
votes of the Portfolio's shares. Other insurance companies investing in the
Balanced and Partners Portfolios or in the Balanced or Partners Series are
generally expected to follow a similar procedure. However, investments in
these Portfolios and Series also may be made by certain tax-qualified plans
not involving an insurance company separate account that do not vote their
interests in accordance with instructions from plan participants.
We believe that AG Life's voting instruction procedures comply with
current federal securities law requirements and interpretations thereof.
However, AG Life reserves the right to modify these procedures in any manner
consistent with applicable legal requirements and interpretations as in effect
from time to time.
THE FIXED ACCOUNT
AMOUNTS IN THE FIXED ACCOUNT OR SUPPORTING FIXED ANNUITY PAYMENTS BECOME
PART OF OUR GENERAL ACCOUNT. BECAUSE OF EXEMPTIVE AND EXCLUSIONARY PROVISIONS,
INTERESTS IN THE GENERAL ACCOUNT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, NOR IS THE GENERAL ACCOUNT REGISTERED AS AN INVESTMENT COMPANY
UNDER THE 1940 ACT. WE HAVE BEEN ADVISED THAT THE STAFF OF THE SECURITIES AND
EXCHANGE COMMISSION HAS NOT REVIEWED THE DISCLOSURES IN THIS PROSPECTUS THAT
RELATE TO THE FIXED ACCOUNT OR FIXED ANNUITY PAYMENTS. DISCLOSURES REGARDING
THESE MATTERS, HOWEVER, MAY BE SUBJECT TO CERTAIN GENERALLY-APPLICABLE
PROVISIONS OF THE FEDERAL SECURITIES LAWS RELATING TO THE ACCURACY AND
COMPLETENESS OF STATEMENTS IN PROSPECTUSES.
Our obligations with respect to the Fixed Account are legal obligations
of AG Life and are supported by our General Account assets, which also support
obligations incurred by us under other insurance and annuity contracts.
Investments purchased with amounts allocated to the Fixed Account are the
property of AG Life, and Owners have no legal rights in such investments.
Account Value that is allocated by the Owner to the Fixed Account earns a
Guaranteed Interest Rate commencing with the date of such allocation. This
Guaranteed Interest Rate continues for a number of years selected by the Owner
from among the Guarantee Periods that we then offer. At the end of a Guarantee
Period, the Owner's Account Value in that Guarantee Period, including interest
accrued thereon, will be allocated to a new Guarantee Period of the same
length unless AG Life has received a Written request from the Owner to
allocate this amount to a different Guarantee Period or periods or to one or
more of the Divisions of Separate Account D. We must receive this Written
request at least three business days prior to the end of the Guarantee Period.
The first day of the new Guarantee Period (or other reallocation) will be the
day after the end of the prior Guarantee Period.
18
<PAGE>
We will notify the Owner at least 30 days and not more than 60 days prior to
the end of any Guarantee Period. If the Owner's Account Value in a Guarantee
Period is less than $500, we will, without charge, automatically transfer the
balance to the Money Market Division at the end of that Guarantee Period,
unless we have received in good order Written instructions to transfer such
balance to a different Division.
We declare the Guaranteed Interest Rates from time to time as market
conditions dictate. We advise an Owner of the Guaranteed Interest Rate for a
chosen Guarantee Period at the time a pur chase payment is received, a
transfer is effectuated or a Guarantee Period is renewed. A different rate of
interest may be credited to one Guarantee Period than to another Guarantee
Period that is the same length but that began on a different date. The minimum
Guaranteed Interest Rate is an effective annual rate of 3.5%. However if the
Contract was issued prior to October 8, 1993, the rate is 4.5%.
Currently we make available Guarantee Periods of one, three and five
years. Each Guarantee Period has its own Guaranteed Interest Rate, which may
differ from those for other Guarantee Peri ods. From time to time we will, at
our discretion, change the Guaranteed Interest Rate for future Guarantee
Periods of various lengths. These changes will not affect the Guaranteed
Interest Rates being paid on Guarantee Periods that have already commenced.
Each allocation or transfer of an amount to a Guarantee Period commences the
running of a new Guarantee Period with respect to that amount, which will earn
a Guaranteed Interest Rate that will continue unchanged until the end of that
period. The Guaranteed Interest Rate will never be less than the minimum
Guaranteed Interest Rate stated in your Contract. We reserve the right to
change the Guarantee Periods that we are making available at any time.
AG LIFE'S MANAGEMENT MAKES THE FINAL DETERMINATION OF THE GUARANTEED
INTEREST RATES TO BE DECLARED. AG LIFE CANNOT PREDICT OR ASSURE THE LEVEL OF
ANY FUTURE GUARANTEED INTEREST RATES IN EXCESS OF THE MINIMUM GUARANTEED
INTEREST RATE STATED IN YOUR CONTRACT.
Information concerning the Guaranteed Interest Rates applicable to the
various Guarantee Periods at any time may be obtained from your sales
representative or from the addresses or phone numbers set forth on the cover
page of this Prospectus.
CONTRACT ISSUANCE AND PURCHASE PAYMENTS
The minimum initial purchase payment is $5,000 ($2000 in the case of an
IRA or $250 in the case of a Spousal IRA acquired together with an IRA). The
amount of the first purchase payment or transfer that is allocated to any
Division or Guarantee Period must be at least $500 ($250 in the case of a
Spousal IRA acquired together with an IRA). The amount of any subsequent
purchase payment allocated to any Division or Guarantee Period must be at
least $100 ($50 in the case of an IRA). We reserve the right to modify these
minimums, in our discretion.
When a purchase payment accompanies an application to purchase a Contract
and the application is properly completed, we will either process the
application, credit the purchase payment, and issue the Contract or reject the
application and return the purchase payment within two Valuation Dates after
receipt of the application at our Home Office.
If the application is not complete or is incorrectly completed, we will
request additional documents or information within five Valuation Dates after
receipt of the application at our Home Office. If a
19
<PAGE>
correctly-completed application is not received within five days after receipt
of the purchase payment at our Home Office, we will return the purchase
payment immediately unless the prospective purchaser specifically consents to
our retaining the purchase payment until the application is made complete, in
which case the initial purchase payment is credited as of the end of the
Valuation Period in which we receive at our Home Office the last information
required to process the application. Subsequent purchase payments are credited
as of the end of the Valuation Period in which they and any required Written
identifying information, are received at our Home Office. We reserve the right
to reject any application or purchase payment for any reason.
If the Owner's Account Value in any Division falls below $500, we reserve
the right to transfer, without charge, the remaining balance to the Money
Market Division. If the Owner's total Account Value falls below $500, we may
cancel the Contract. Such a cancellation would be considered a full surrender
of the Contract. We will provide you with 60 days' advance notice of any such
cancellation.
So long as the Account Value does not fall below $500, you need make no
further purchase payments. You may, however, elect to make subsequent purchase
payments at any time prior to the Annuity Commencement Date and while the
Owner and Annuitant are still living. Checks for subsequent purchase payments
should be made payable to American General Life Insurance Company and
forwarded directly to our Home Office. We also accept purchase payments by
wire or by exchange from another insurance company. You may obtain further
information about how to make purchase payments by either of these methods
from your sales representative or from us at the addresses and telephone
numbers on the cover page of this Prospectus. Purchase payments pursuant to
salary reduction plans may be made only with our agreement.
Your purchase payments begin to earn a return in the Divisions of
Separate Account D or the Guarantee Periods of the Fixed Account as of the
date we credit the purchase payments to your Contract. In your application
form, you select (in whole percentages) the amount of each purchase payment
that is to be allocated to each Division and each Guarantee Period. You can
change these allocation percentages at any time by Written notice to us.
OWNER ACCOUNT VALUE
Prior to the Annuity Commencement Date, your Account Value under a
Contract is the sum of your Variable Account Value and Fixed Account Value, as
discussed below.
VARIABLE ACCOUNT VALUE
Your Variable Account Value as of any Valuation Date prior to the Annuity
Commencement Date is the sum of your Variable Account Values in each Division
of Separate Account D as of that date. Your Variable Account Value in any such
Division is the product of the number of your Accumula tion Units in that
Division multiplied by the value of one such Accumulation Unit as of that
Valuation Date. There is no guaranteed minimum Variable Account Value. To the
extent that your Account Value is allocated to Separate Account D, you bear
the entire risk of investment losses.
Accumulation Units in a Division are credited to you when you allocate
purchase payments or transferred amounts to that Division. Similarly, such
Accumulation Units are cancelled to the extent you transfer or withdraw
amounts from a Division or to the extent necessary to pay certain charges
20
<PAGE>
under the Contract. The crediting or cancellation of Accumulation Units is
based on the value of such Accumulation Units at the end of the Valuation Date
as of which the related amounts are being credited to or charged against your
Variable Account Value, as the case may be.
The value of an Accumulation Unit for a Division on any Valuation Date is
equal to the previous value of that Division's Accumulation Unit multiplied by
that Division's net investment factor for the Valuation Period ending on that
Valuation Date.
The net investment factor for a Division is determined by dividing (1)
the net asset value per share of the Portfolio shares held by the Division,
determined at the end of the current Valuation Period, plus the per share
amount of any dividend or capital gains distribution made with respect to the
Portfolio shares held by the Division during the current Valuation Period, by
(2) the net asset value per share of the Portfolio shares held in the Division
as determined at the end of the previous Valuation Period, and subtracting
from that result a factor representing the mortality risk, expense risk and
administrative expense charge.
FIXED ACCOUNT VALUE
Your Fixed Account Value as of any Valuation Date prior to the Annuity
Commencement Date is the sum of your Fixed Account Value in each Guarantee
Period as of that date. Your Fixed Account Value in any Guarantee Period is
equal to the following amounts, in each case increased by accrued interest at
the applicable Guaranteed Interest Rate: (1) the amount of purchase payments,
renewals and transferred amounts allocated to the Guarantee Period less (2)
the amount of any transfers or withdrawals out of the Guarantee Period,
including withdrawals to pay applicable charges.
Fixed Account Value is guaranteed by AG Life. Therefore, AG Life bears
the investment risk with respect to amounts allocated to the Fixed Account,
except to the extent that AG Life may vary the Guaranteed Interest Rate for
future Guarantee Periods (subject to the minimum Guaranteed Interest Rate
stated in your Contract).
TRANSFER, SURRENDER AND PARTIAL WITHDRAWAL
OF OWNER ACCOUNT VALUE
TRANSFERS
Commencing 30 days after the Contract's date of issue and prior to the
Annuity Commencement Date, you may transfer your Account Value at any time
among the available Divisions of Separate Account D and Guarantee Periods,
subject to the conditions described below. Such transfers will be effective at
the end of the Valuation Period in which we receive your Written or telephone
transfer request.
Each request to transfer from a Division or Guarantee Period must be at
least $500 or, if less, all of your Account Value in that Division or
Guarantee Period. If a transfer would cause your Account Value in any Division
or Guarantee Period to fall below $500, then the remaining balance in that
Division or Guarantee Period will also be transferred in the same proportions
as the transfer request.
21
<PAGE>
Prior to the Annuity Commencement Date and after the first 30 days
following the date the Contract was issued, you may make up to twelve
transfers each Contact Year without charge, but additional transfers will be
subject to a $25 charge. Also, no more than 25% of the Account Value you
allocated to a Guarantee Period at its inception may be transferred during any
Contract Year. This 25% limitation does not apply to transfers within 15 days
before or after the end of the Guarantee Period in which the transferred
amounts were being held.
Subject to the above general rules concerning transfers, including
transfer charges, you may establish an automatic transfer plan, whereby
amounts are automatically transferred by us from the Money Market Division or
the Government Division to one or more other Divisions or Guarantee Periods on
a monthly, quarterly, semi-annual or annual basis. You may obtain additional
information about how to establish an automatic transfer program from your
sales representative or from us at the telephone numbers and addresses on the
front cover of this Prospectus.
If the person or persons that are entitled to make transfers have
properly completed and signed a Telephone Transfer Authorization Form that is
on file with us, transfers may be made pursuant to telephone instructions,
subject to the above terms and the terms of the Telephone Transfer
Authorization Form. We will honor telephone transfer instructions from any
person who provides the correct information, so there is a risk of possible
loss to you if unauthorized persons use this service in your name. Currently
we attempt to limit the availability of telephone transfer instructions only
to the Owner of the Contract for which instruction is received. The Telephone
Transfer Authorization Form provides that we are not liable for any acts or
omissions based upon instructions that we reasonably believe to be genuine,
including losses arising from errors in the communication of transfer
instructions. We have established procedures for accepting telephone transfer
instructions, which include verification of the Contract number, the identity
of the caller, both the annuitant's and Owner's names, and a form of personal
identification from the caller. We will send written notice to the Owner that
a telephone transfer has been made and will subsequently mail to the Owner a
written confirmation of the transaction. If several persons seek to effect
telephone transfers at or about the same time, or if our recording equipment
malfunctions, it may be impossible for you to make a telephone transfer at the
time you wish. If this occurs, you should submit a Written transfer request.
Also, if, due to malfunction or other circumstances, the recording of your
telephone request is incom plete or not fully comprehensible, we will not
process the transaction. The phone number for telephone exchanges is
1-800-247-6584.
The Contracts are not designed for professional market timing
organizations or other entities utilizing programmed and frequent transfers.
We reserve the right at any time and without prior notice to any party to
terminate, suspend, or modify our policy regarding transfers.
SURRENDERS AND PARTIAL WITHDRAWALS
At any time prior to the Annuity Commencement Date and while the
Annuitant is still living, the Owner may make a full surrender of or partial
withdrawal from his or her Contract.
The amount payable to the Owner upon full surrender is the Owner's
Account Value at the end of the Valuation Period in which we receive a Written
surrender request in good order, minus any applicable Surrender Charge, minus
the amount of any uncollected annual maintenance charge (see
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"Annual Maintenance Charge") and minus any applicable premium tax. Our current
practice is to require that you return the Contract with any request for a
full surrender. After a full surrender, or if the Owner's Account Value falls
to zero, all rights of the Owner, Annuitant or any other person with respect
to the Contract will terminate. All collateral assignees of record must
consent to any full surrender or partial withdrawal.
Your Written request for a partial withdrawal should specify the
Divisions of Separate Account D, or the Guarantee Periods of the Fixed
Account, from which you wish the partial withdrawal to be made. If you do not
specify, or if the withdrawal cannot be made in accordance with your
specification, the withdrawal will be taken pro-rata from the Divisions and
Guarantee Periods, based on your Account Value in each. Partial withdrawal
requests from any Division or Guarantee Period must be for at least $500 or,
if less, all of your Account Value in that Division or Guarantee Period. If
your remaining Account Value in the Division or Guarantee Period would be less
than $500, we will automatically transfer, without charge, the remaining
balance to the Money Market Division. Unless you request otherwise, upon a
partial withdrawal, your Accumulation Units and Fixed Account interests that
are cancelled will have a total value equal to the amount of the withdrawal
request, and the amount payable to you will be the amount of the withdrawal
request less any Surrender Charge payable upon the partial withdrawal.
We also make available a systematic withdrawal plan under which you may
make automatic partial withdrawals at periodic intervals in a specified
amount, subject to the terms and conditions applicable to other partial
withdrawals. Additional information about how to establish such a systematic
withdrawal program may be obtained from your sales representative or from us
at the addresses and phone numbers set forth on the cover page of this
Prospectus. We reserve the right to modify or terminate our procedures for
systematic withdrawals at any time.
The Code provides that a penalty tax will be imposed on certain premature
surrenders or withdrawals. For a discussion of this and other tax implications
of total surrenders and systematic and other partial withdrawals, including
withholding requirements, see "Federal Income Tax Matters."
ANNUITY PERIOD AND ANNUITY PAYMENT OPTIONS
ANNUITY COMMENCEMENT DATE
The Owner selects the Annuity Commencement Date on the Owner's
application form and may change a previously-selected date at any time prior
to the beginning of an Annuity Payment Option by submitting a written request,
subject to Company approval. The Annuity Commencement Date specified in the
application may be the first day of any month, but not later than the
Annuitant's 85th birthday or, if later, the tenth Contract Anniversary. See
"Federal Income Tax Matters" for a description of the penalties that may
attach to distributions prior to the Annuitant's attaining age 59 1/2 under
any Contract or after April 1 of the year following the calendar year in which
the Annuitant attains age 70 1/2 under Qualified Contracts.
APPLICATION OF OWNER ACCOUNT VALUE
We will automatically apply your Variable Account Value in any Division
to provide Variable Annuity Payments based on that Division and your Fixed
Account Value to provide Fixed Annuity
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Payments. However, if you give us other Written instructions at least thirty
days prior to the Annuity Commencement Date, we will apply your Account Value
in different proportions.
We deduct any applicable state and local premium taxes from the amount of
Account Value being applied to an Annuity Payment Option. In some cases, we
may deduct a Surrender Charge from the amount being applied. See "Surrender
Charge." Subject to any such adjustments, your Variable and Fixed Account
Value are applied to an Annuity Payment Option, as discussed below, as of the
end of the Valuation Period that contains the tenth day prior to the Annuity
Commencement Date.
FIXED AND VARIABLE ANNUITY PAYMENTS
The amount of the first monthly Fixed or Variable Annuity Payment will be
at least as favorable as that produced by the annuity tables set forth in the
Contract, based on the amount of your Account Value that is applied to provide
the Fixed or Variable Annuity Payments. Thereafter, the amount of each monthly
Fixed Annuity Payment is fixed and specified by the terms of the Annuity
Payment Option selected.
Account Value that is applied to provide Variable Annuity Payments is
converted to a number of Annuity Units by dividing the amount of the first
Variable Annuity Payment by the value of an Annuity Unit of the relevant
Division as of the end of the Valuation Period that includes the tenth day
prior to the Annuity Commencement Date. This number of Annuity Units
thereafter remains constant with respect to any Annuitant, and the amount of
each subsequent Variable Annuity Payment is determined by multiplying this
number by the value of an Annuity Unit as of the end of the Valuation Period
that contains the tenth day prior to the date of each payment. If the Variable
Annuity Payments are based on more than one Division, these calculations are
performed separately for each Division. The value of an Annuity Unit at the
end of a Valuation Period is the value of the Annuity Unit at the end of the
previous Valuation Period, multiplied by the net investment factor (see
"Variable Account Value") for the Valuation Period, with an offset for the
3.5% assumed interest rate used in the Contract's annuity tables.
As a result of the foregoing computations, if the net investment return
for a Division for any month is at an annual rate of more than the assumed
interest rate used in the Contract's annuity tables, any Variable Annuity
Payment based on that Division will be greater than the Variable Annuity
Payment based on that Division for the previous month. If the net investment
return for a Division for any month is at an annual rate of less than the
assumed interest rate used in the Contract's annuity tables, any variable
annuity payment based on that Division will be less than the Variable Annuity
Payment based on that Division for the previous month.
ANNUITY PAYMENT OPTIONS
If the Owner does not specify otherwise at least ten days prior to the
Annuity Commencement Date, annuity payments are made in accordance with the
second option described below, with payments being guaranteed for a ten-year
period, or, to the extent the Code requires in the case of a Qualified
Contract, the third option described below. Among other things, the Code also
imposes minimum distribution requirements that have a bearing on the Annuity
Payment Option that should be chosen in connection with Qualified Contracts.
See "Federal Income Tax Matters." We are not
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responsible for monitoring or advising Owners as to whether the minimum
distribution requirements are being met, unless we have received a specific
written request to do so.
No election of any Annuity Payment Option may be made unless an initial
annuity payment of at least $100 would be provided, where only a Fixed or only
Variable Annuity Payments are elected, and $50 on each basis when a
combination of Variable and Fixed Annuity Payments is elected. If these
minimums are not met, we will first reduce the frequency of annuity payments,
and if the minimums are still not met, we will make a lump-sum payment to the
Annuitant or other properly-designated payee in the amount of the Owner's
Account Value, less any applicable Surrender Charge, any uncollected annual
maintenance charge, and any applicable premium tax.
The Owner, or if the Owner has not done so, the Beneficiary may, within
60 days after the death of the Owner or Annuitant, elect that any amount due
to the Beneficiary be applied under any option described below, subject to
certain tax law requirements. See "Death Proceeds." Thereafter, the
Beneficiary will have all the remaining rights and powers under the Contract
and be subject to all the terms and conditions thereof. The first annuity
payment will be made at the beginning of the second month following the month
in which we approve the settlement request. Annuity Units will be credited
based on Annuity Unit Values at the end of the Valuation Period that contains
the tenth day prior to the beginning of said second month.
When an Annuity Payment Option becomes effective, the Contract must be
delivered to our Home Office, in exchange for a payment contract providing for
the option elected.
Information about the relationship between the Annuitant's sex and the
amount of annuity payments, including requirements for gender-neutral annuity
rates in certain states and in connection with certain employee benefit plans
is set forth under "Gender of Annuitant" in the Statement of Additional
Information. See "Contents of Statement of Additional Information."
OPTION 1 - LIFE ANNUITY - Annuity payments monthly during the lifetime of the
Annuitant, ceasing with the last payment due prior to the death of the
Annuitant. It would be possible under this arrangement for the Annuitant or
other payee to receive only one annuity payment if the Annuitant died prior to
the second annuity payment, since no minimum number of payments is guaranteed.
OPTION 2 - LIFE ANNUITY WITH 120, 180, OR 240 MONTHLY PAYMENTS CERTAIN -
Annuity payments are payable monthly during the lifetime of an Annuitant;
provided, that if the Annuitant dies during the period certain, the
Beneficiary is entitled to receive monthly payments for the remainder of the
period certain.
OPTION 3 - JOINT AND LAST SURVIVOR LIFE ANNUITY - Annuity payments are payable
during the lifetime of the Annuitant and another payee and continue during the
lifetime of the survivor, ceasing with the last payment prior to the death of
the survivor. It is possible under this option for the Annuitant or other
payee to receive only one annuity payment if both die before the second
annuity payment, since no minimum number of payments is guaranteed. If one of
these persons dies before the Annuity Commencement Date, the election of this
option is revoked, the survivor becomes the sole Annuitant, and no death
proceeds are payable by virtue of the death of the other Annuitant.
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OPTION 4 - PAYMENTS FOR DESIGNATED PERIOD - Annuity payments are paid to an
Annuitant or other properly-designated payee, or at his or her death, the
Beneficiary, monthly for a selected number of years ranging from five to
forty. If this option is selected on a variable basis, the designated period
may not exceed the life expectancy of such Annuitant or other
properly-designated payee.
OPTION 5 - PAYMENTS OF A SPECIFIC DOLLAR AMOUNT - The amount due is paid in
equal monthly installments of a designated dollar amount (not less than $125
nor more than $200 per annum per $1,000 of the original amount due) until the
remaining balance is less than the amount of one installment. If the person
receiving these payments dies, the remaining payments continue to be made to
the Beneficiary. Payments under this option are available on a fixed basis
only. To determine the remaining balance at the end of any month, such balance
at the end of the previous month is decreased by the amount of any installment
paid during the month and the result will be accumulated at an interest rate
not less than 4% compounded annually. If the remaining balance at any time is
less than the amount of one installment, such balance will be paid and will be
the final payment under the option.
Under the fourth option there is no mortality guarantee by us, even
though Variable Annuity Payments will be reduced as a result of a charge to
Separate Account D which is partially for mortality risks. See "Charge to
Separate Account D."
A payee receiving Variable (but not Fixed) Annuity Payments under the
fourth option can elect at any time to commute (terminate) such option and
receive the current value of the annuity, which would be based on the values
next determined after the Written request for payment is received by us. The
current value of the annuity under the fourth option is the value of all
remaining annuity payments, assumed to be level, discounted to present value
at an annual rate of 3.5%. Other than by election of such a lump-sum payment
under the fourth option, an Annuity Payment Option may not be terminated once
annuity payments have commenced.
Under federal tax regulations, the election of the fourth or fifth
options may be treated in the same manner as a surrender of the total account.
For tax consequences of such treatment, see "Federal Income Tax Matters."
Also, in such a case, tax-deferred treatment of subsequent earnings may not be
available.
ALTERNATIVE AMOUNT UNDER FIXED LIFE ANNUITY OPTIONS - Each Contract
provides that when Fixed Annuity Payments are to be made under one of the
first three Annuity Payment Options described above, the Owner (or if the
Owner has not elected a payment option, the Beneficiary) may elect monthly
payments to the Annuitant or other properly-designated payee equal to the
monthly payment available under similar circumstances based on single payment
immediate fixed annuity rates then in use by us. The purpose of this provision
is to assure the Annuitant that, at retirement, if the fixed annuity purchase
rate then offered by us for new single payment immediate annuity contracts is
more favorable than the annuity rates guaranteed by the Contract, the
Annuitant or other properly-designated payee will be given the benefit of the
new annuity rates.
In lieu of monthly payments, payments may be elected on a quarterly,
semi-annual or annual basis, in which case the amount of each annuity payment
will be determined on a basis consistent with that described above for monthly
payments.
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TRANSFERS
After the Annuity Commencement Date, the Annuitant or other
properly-designated payee may make one transfer every 180 days among the
available Divisions of Separate Account D or from the Divisions to a fixed
Annuity Payment Option. No charge will be assessed for such transfer. No
transfers from a fixed to a variable Annuity Payment Option are permitted. The
value transferred must be at least $500 or the payee's total value
attributable to a Division, if less. If a transfer would cause the value that
is attributable to a Contract in any Division to fall below $500, the
remaining balance in that Division also will be transferred in the same
proportion as the transfer request. Transfers will be effected at the end of
the Valuation Period in which we receive the Written transfer request at our
Home Office. We reserve the right to terminate or restrict transfers at any
time.
DEATH PROCEEDS
DEATH PROCEEDS PRIOR TO THE ANNUITY COMMENCEMENT DATE
If the Annuitant dies prior to the Annuity Commencement Date, we will pay
the death proceeds to the Beneficiary. If the Annuitant had not reached age
75, the death proceeds, prior to deduction of any applicable premium taxes,
will equal the greatest of (1) the sum of all purchase payments made (less any
previously-deducted premium taxes and all prior partial withdrawals), (2) the
Owner's Account Value as of the end of the Valuation Period in which we
receive, at our Home Office, proof of death and the Written request as to the
manner of payment, or (3) the Owner's Account Value as of the most recent
five-year Contract Anniversary, less the amount of any subsequent partial
withdrawals. The amount specified in (3) above is not an available option in
all states, and you should therefore consult your sales representative or our
Home Office as to whether it will apply to you. In those states where (3) is
not available, the death proceeds will equal the greater of (1) or (2) above.
If the Annuitant had attained age 75, the death proceeds will be the amount
specified in (2) above, less any applicable Surrender Charge, any uncollected
annual maintenance charge, and any applicable premium taxes.
If an Owner (including the first to die in the case of joint owners)
under a Non-Qualified Contract dies before the Annuitant and prior to the
Annuity Commencement Date, we will pay to the Beneficiary the amount that
would have been payable upon a full surrender of the Owner's Contract as of
the end of the Valuation Period in which we receive proof of the Owner's death
and a Written request from the Beneficiary as to the manner of payment.
If the Owner has not already done so, the Beneficiary may, within sixty
days after the date of death, elect to receive the death proceeds as a lump
sum or in the form of one of the Annuity Payment Options provided in the
Contract. See "Annuity Payment Options." If we receive no request as to the
manner of payment, we will make a lump-sum payment, based on values determined
at that time.
If the Owner under a Non-Qualified Contract dies prior to the Annuity
Commencement Date, the Code requires that all amounts payable under the
Contract be distributed (a) within five years of the
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date of death or (b) as annuity payments beginning within one year of the date
of death and continuing over a period not extending beyond the life expectancy
of the Beneficiary. If the Beneficiary is the Owner's surviving spouse, the
spouse may elect to continue the Contract as the new Owner and, if the
original Owner was the Annuitant, as the new Annuitant. If the Owner is not a
natural person, these requirements apply upon the death of the primary
Annuitant within the meaning of the Code. Failure to satisfy these Code
distribution requirements may result in serious adverse tax consequences.
Under a parallel section of the Code, similar requirements apply to retirement
plans in connection with which Qualified Contracts are issued.
DEATH PROCEEDS AFTER THE ANNUITY COMMENCEMENT DATE
If the Annuitant dies following the Annuity Commencement Date, the only
amounts payable to the Beneficiary or other properly-designated payee are any
continuing payments provided for under the Annuity Payment Option selected.
See "Annuity Payment Options." In such a case, the payee will have all the
remaining rights and powers under a Contract and be subject to all the terms
and conditions thereof.
If the payee under a Non-Qualified Contract dies after the Annuity
Commencement Date, any remaining amounts payable under the terms of the
Annuity Payment Option must be distributed at least as rapidly as under the
method of distribution then in effect. If the payee is not a natural person,
this requirement applies upon the death of the primary Annuitant within the
meaning of the Code. Failure to satisfy these requirements of the Code may
result in serious adverse tax consequences. Under a parallel section of the
Code, similar requirements apply to the retirement plans in connection with
which Qualified Contracts are issued.
PROOF OF DEATH
We accept the following as proof of any person's death: a copy of a
certified death certificate; a copy of a certified decree of a court of
competent jurisdiction as to the finding of death; a written statement by a
medical doctor who attended the deceased at the time of death; or any other
proof satisfactory to us.
Once we have paid the death proceeds, the Contract terminates and we have
no further obligations thereunder.
CHARGES UNDER THE CONTRACTS
PREMIUM TAXES
When applicable, we will deduct an amount to cover premium taxes. Such
deduction will be made:
(1) from purchase payment(s) when received; or
(2) from the Owner's Account Value at the time annuity payments begin; or
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(3) from the amount of any partial withdrawal; or
(4) from proceeds payable upon termination of the Contract for any other
reason, including death of the Annuitant or Owner, or surrender of the
Contract.
If premium tax is paid, AG Life may reimburse itself for such tax when
deduction is being made under paragraphs 2, 3, or 4 above calculated by
multiplying the sum of Purchase Payments being withdrawn by the applicable
premium tax percentage.
Applicable premium tax rates depend upon the Owner's then-current place
of residence. Applicable rates currently range from 0% to 3.5% and are subject
to change by legislation, administrative interpretations or judicial acts. We
will not make a profit on this charge.
SURRENDER CHARGE
The Surrender Charge reimburses us for part of our expenses related to
distributing the Contracts. We believe, however, that the amount of such
expenses will exceed the amount of revenues generated by the Surrender Charge.
We will pay such excess out of our general surplus, which might include
profits from the charge for the assumption of mortality and expense risks.
Unless a withdrawal is exempt from the Surrender Charge (as discussed
below), the Surrender Charge is a percentage of the amount of each purchase
payment that is withdrawn during the first seven years after it was received.
The percentage declines depending on how many years have passed since the
withdrawn purchase payment was originally credited to your Account Value, as
follows:
<TABLE>
<CAPTION>
Surrender Charge as a
Year of Purchase Percentage of Purchase
Payment Withdrawal Payment Withdrawn
<S> <C>
1st 7%
2nd 6%
3rd 5%
4th 4%
5th 3%
6th 2%
7th 1%
Thereafter 0%
</TABLE>
Only for the purpose of computing the Surrender Charge, the earliest
purchase payments are deemed to be withdrawn first, and before any amounts in
excess of purchase payments are withdrawn from your Account Value. The
following transactions will be considered as withdrawals, for purposes of
assessing the Surrender Charge: total surrender, partial withdrawal, death of
the Annuitant after attaining age 75 and prior to the Annuity Commencement
date, commencement of an Annuity Payment Option, and termination due to
insufficient Account Value.
Nevertheless, the Surrender Charge will not apply
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o To the amount of withdrawals that exceeds the cumulative amount of
your purchase pay ments;
o If the Annuitant has been confined to a long-term care facility or is
subject to a terminal illness (to the extent that the rider for these
matters is available in your state), as set forth under "Long-Term
Care and Terminal Illness"; or
o Upon selection of an Annuity Payment Option that is based on life
contingencies, if the Annuity Commencement Date does not fall within
the first three Contract Years.
In the State of Washington, beginning after the Annuitant has attained
age 63, surrender charges which would otherwise be assessed against any
withdrawal may be reduced.
The Surrender Charge also does NOT apply to the surrender of a Contract,
or to the withdrawal of Contract Value of a Contract, issued to: (1) employees
and registered representatives of any broker-dealer authorized to sell the
Contracts, and their spouses and minor children, or (2) officers, directors,
or bona-fide full-time employees of AG Life or American General Securities
Incorporated, the principal underwriter of the Contracts, or their affiliated
companies. These waivers of Surrender Charge are based upon the Contract
Owner's status at the time the Contract was purchased.
In addition, the Surrender Charge does not apply to the portion of your
first withdrawal or total surrender in any Contract Year that does not exceed
10% of the amount of your purchase payments that (a) have not previously been
withdrawn and (b) have been credited to the Contract for at least one year.
Unused portions of this 10% free withdrawal amount are carried forward during
the year ONLY in connection with automatic withdrawal arrangements established
with us by Owners who are at least age 59 1/2. Once such an automatic
withdrawal has been made during any Contract Year in reliance on the 10% free
withdrawal privilege, no non-automatic withdrawal may rely on that privilege
during the balance of that Contract Year.
A free withdrawal pursuant to any of the foregoing Surrender Charge
exceptions is not deemed to be a withdrawal of purchase payments, except for
purposes of computing the 10% free withdrawal described in the preceding
paragraph. See "Penalty Tax on Premature Distributions."
TRANSFER CHARGES
The charges to defray the expense of effecting transfers are described
under "Transfer, Surrender and Partial Withdrawal of Owner Account Value -
Transfers" and "Annuity Period and Annuity Payment Options - Transfers." These
charges are designed not to yield a profit to us.
ANNUAL MAINTENANCE CHARGE
An annual maintenance charge of $36 will be deducted from each Owner's
Account Value at the end of each Contract Year prior to the Annuity
Commencement Date. This charge is for administrative expenses (which do not
include expenses of distributing the Contracts), and we do not
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expect that the revenues we will derive from this charge will exceed such
expenses. Unless paid directly, the charge will be allocated among the
Guarantee Periods and Divisions in proportion to your Account Value in each.
The entire charge for the year will be deducted from the proceeds of any full
surrender.
CHARGE TO SEPARATE ACCOUNT D
To cover other administrative expenses not covered by the annual
maintenance charge discussed above, and to compensate us for assuming
mortality and expense risks under the Contracts, Separate Account D will incur
a daily charge at an annualized rate of 1.55% of the average daily net asset
value of Separate Account D attributable to the Contracts. Of this amount,
.30% is for administrative expenses and 1.25% is for the assumption of
mortality and expense risks. We do not expect to earn a profit on that portion
of the charge which is for administrative expenses, but we do expect to derive
a profit from the portion which is for the assumption of mortality and expense
risks. There is no necessary relationship between the amount of administrative
charges imposed on a given Contract and the amount of expenses actually
attributable to that Contract.
In assuming the mortality risk, we are subject to the risk that our
actuarial estimate of mortality rates may prove erroneous and that Annuitants
will live longer than expected, or that more Owners or Annuitants than
expected will die at a time when the death benefit guaranteed by us is higher
than the net surrender value of their interests in the Contracts. In assuming
the expense risk, we are subject to the risk that the revenues from the
expense charges under the Contracts (which charges are guaranteed not to be
increased) will not cover our expense of administering the Contracts.
MISCELLANEOUS
Charges and expenses are paid out of the assets of each Portfolio, as
described in the prospectus relating to that Portfolio. We reserve the right
to impose charges or establish reserves for any federal or local taxes
incurred or that may be incurred by us, and that may be deemed attributable to
the Con tracts.
ONE-TIME REINSTATEMENT PRIVILEGE
If you have made a full surrender of your Account Value, you may
reinstate the Contract, if we receive the Written reinstatement request,
together with a return to us of the net proceeds of such surrender, not more
than 30 days after the date as of which the surrender was made. In such a
case, your Account Value will be restored to what it was at the time of the
surrender (less any annual maintenance charge that has since become payable);
and any subsequent Surrender Charge will be computed as if the Contract had
been issued at the date of reinstatement in consideration of a Purchase
Payment in the amount of such net surrender proceeds. Unless you request
otherwise, the reinstated Account Value will be allocated among the Divisions
and Guarantee Periods in the same proportions as the prior surrender. You may
use this privilege only once.
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REDUCTION IN SURRENDER CHARGES OR ADMINISTRATIVE CHARGES
We may reduce the surrender charges or administrative charges imposed
under certain Qualified Contracts in connection with employer-sponsored plans.
Any such reductions will reflect differences in costs or services (due to such
factors as reduced sales expenses or administrative efficiencies relating to
serving a large number of employees of a single employer and functions assumed
by the employer that we otherwise would have to perform) and will not be
unfairly discriminatory as to any person.
LONG-TERM CARE AND TERMINAL ILLNESS
THE RIDER DESCRIBED BELOW IS NOT AVAILABLE IN ALL STATES, AND YOU SHOULD
THEREFORE CONSULT YOUR SALES REPRESENTATIVE OR OUR HOME OFFICE AS TO WHETHER
IT WILL APPLY TO YOU. THERE IS NO SEPARATE CHARGE FOR THIS RIDER.
LONG-TERM CARE
Pursuant to a special Contract rider, no Surrender Charge will apply
during any period of time that the Annuitant is confined for 30 days or more
in a hospital or state-licensed in-patient nursing facility. We must receive
Written proof of such confinement that is satisfactory to us.
TERMINAL ILLNESS
The rider also provides that no Surrender Charge will apply if we have
received a physician's Written certification that the Annuitant is terminally
ill and not expected to live more than twelve months and have waived or
exercised our right to a second physician's opinion.
OTHER ASPECTS OF THE CONTRACTS
Only an officer of AG Life can agree to change or waive the provisions of
any Contract. The Contracts are non-participating and are not entitled to
share in any dividends, profits or surplus of AG Life.
OWNERS, ANNUITANTS, AND BENEFICIARIES; ASSIGNMENTS
The Owner of a Contract will be the same as the Annuitant, unless the
application therefor designates a different Owner. In the case of joint
ownership, both Owners must join in the exercise of any rights or privileges
under the Contract. The Annuitant is designated in the application for a
Contract and may not thereafter be changed.
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The Beneficiary and any successor Beneficiary are designated in the
application for a Contract. A Beneficiary may be changed by the Owner prior to
the Annuity Commencement Date, while the Annuitant is still alive, and by the
payee following the Annuity Commencement Date. Any designation of a new
Beneficiary is effective as of the date it is signed but will not affect any
payments we make or action we take before receiving the Written request. We
also need the Written consent of any irrevocably-named Beneficiary before
making a change. Under certain retirement programs, spousal consent may be
required to name or change a Beneficiary, and the right to name a Beneficiary
other than the spouse may be subject to applicable tax laws and regulations.
We are not responsible for the validity of any designation of a Beneficiary.
If no named Beneficiary is living at the time any payment is to be made,
the Owner will be the Beneficiary, or if the Owner is not then living, the
Owner's estate will be the Beneficiary.
Rights under a Qualified Contract may be assigned only in certain narrow
circumstances referred to therein. Owners and other payees may assign their
rights under Non-Qualified Contracts, including their ownership rights. We
take no responsibility for the validity of any assignment. A change in
ownership rights must be made in Writing and a copy must be sent to our Home
Office. The change will be effective on the date it was made, although we are
not bound by a change until the date we record it. The rights under a Contract
are subject to any assignment of record at our Home Office. An assignment or
pledge of a Contract may have adverse tax consequences. See "Federal Income
Tax Matters."
REPORTS
We will mail to Owners (or persons receiving payments following the
Annuity Commencement Date), at their last known address of record, any reports
and communications required by applicable law or regulation. You should
therefore give us prompt written notice of any address change.
RIGHTS RESERVED BY US
Upon notice to the Owner, a Contract may be modified by us, to the extent
necessary in order to (1) operate Separate Account D in any form permitted
under the 1940 Act or in any other form permitted by law; (2) transfer any
assets in any Division to another Division, or to one or more separate
accounts, or the Fixed Account; (3) add, combine or remove Divisions in
Separate Account D; (4) substitute, for the shares held in any Division, the
shares of another Portfolio or the shares of another investment company or any
other investment permitted by law; (5) make any changes required by the Code
or by any other applicable law, regulation or interpretation in order to
continue treatment of the Contract as an annuity; or (6) make any changes
required to comply with the rules of any Portfolio. When required by law, we
will obtain your approval of changes and the approval of any appropriate
regulatory authority.
PAYMENT AND DEFERMENT
Amounts surrendered or withdrawn from a Contract will normally be paid
within seven calendar days after the end of the Valuation Period in which we
receive the written surrender or withdrawal
33
<PAGE>
request in good order. If we do not receive a request as to the method of
payment within 60 days after the death of the Owner or Annuitant, any death
benefit proceeds will be paid as a lump sum, normally within seven calendar
days after the end of the Valuation Period that contains the last day of said
60 day period. We reserve the right, however, to defer payment or transfers of
amounts out of the Fixed Account for up to six months. Also, we reserve the
right to defer payment of that portion of your Account Value that is
attributable to a purchase payment made by check for a reasonable period of
time (not to exceed 15 days) to allow the check to clear the banking system.
FEDERAL INCOME TAX MATTERS
GENERAL
It is not possible to comment on all of the federal income tax
consequences associated with the Contracts. Federal income tax law is complex
and its application to a particular person may vary according to facts
peculiar to such person. Consequently, this discussion is not intended as tax
advice, and you should consult with a competent tax adviser before purchasing
a Contract.
The discussion is based on the law, regulations and interpretations
existing on the date of this Prospectus. These authorities, however, are
subject to change by Congress, the Treasury Department and judicial decisions.
The discussion does not address state or local tax or estate and gift tax
consequences associated with the Contracts.
NON-QUALIFIED CONTRACTS
PURCHASE PAYMENTS. Purchasers of a Contract that does not qualify for
special tax treatment and is therefore "Non-Qualified" may not deduct from
their gross income the amount of purchase payments made.
TAX DEFERRAL PRIOR TO ANNUITY COMMENCEMENT DATE. Owners who are natural
persons are not taxed currently on increases in their Account Value resulting
from interest earned in the Fixed Account or, if certain diversification
requirements are met, the investment experience of Separate Account D. This
treatment applies to Separate Account D only if it invests in Portfolios that
are "adequately diversified" in accordance with Treasury Department
regulations. Although we do not control the Portfolios, the investment
advisers to the Portfolios or to the Series in which the Partners and Balanced
Portfolios invest have undertaken to use their best efforts to operate the
Portfolios in compliance with these diversification requirements. A Contract
investing in a Portfolio that failed to meet the diversification requirements
would subject Owners to current taxation of income in the Contract that has
not previously been taxed. Income means the excess of the Account Value over
the Owner's investment in the Contract (discussed below).
Current regulations do not provide guidance as to any circumstances in
which control over allocation of values among different investment
alternatives may cause Owners or persons receiving annuity payments to be
treated as the owners of Separate Account D assets for tax purposes. We
reserve the right to amend the Contracts in any way necessary to avoid any
such result. The Treasury
34
<PAGE>
Department has stated that it may establish standards in this regard through
regulations or rulings. Such standards may apply only prospectively, although
retroactive application is possible if such standards are considered not to
embody a new position.
Owners that are not natural persons -- that is, Owners such as
corporations -- are taxable currently on annual increases in their Account
Value unless an exception applies. Exceptions exist for, among other things,
Owners that are not natural persons but that hold the Contract as an agent for
a natural person.
TAXATION OF ANNUITY PAYMENTS. Each annuity payment received after the
Annuity Commencement Date is excludible from gross income in part. In the case
of Fixed Annuity Payments, the excludible portion is determined by multiplying
the amount paid by the ratio of the investment in the Contract (discussed
below) to the expected return under the fixed Annuity Payment Option. In the
case of Variable Annuity Payments, the amount paid is multiplied by the ratio
of the investment in the Contract to the number of expected payments. In both
cases, the remaining portion of each annuity payment, and all payments made
after the investment in the Contract has been reduced to zero, are included in
the payee's income. Should annuity payments cease on account of the death of
the Annuitant before the investment in the Contract has been fully recovered,
the payee is allowed a deduction for the unrecovered amount. If the payee is
the Annuitant, the deduction is taken on the final tax return. If the payee is
a Beneficiary, that Beneficiary may recover the balance of the total
investment as payments are made or on the Beneficiary's final tax return. An
Owner's "investment in the Contract" is the amount equal to the portions of
purchase payments made by or on behalf of the Owner that have not been
excluded or deducted from the individual's gross income, less amounts
previously received under the Contract that were not included in income.
TAXATION OF PARTIAL WITHDRAWALS AND TOTAL SURRENDERS. Partial withdrawals
from a Contract are includible in income to the extent that the Owner's
Account Value exceeds the investment in the Contract. In the event a Contract
is surrendered in its entirety, any amount received in excess of the
investment in the Contract is includible in income, and any remaining amount
received is excludible from income. All annuity contracts (or certificates
thereunder) issued by us to the same Owner during any calendar year are to be
aggregated for purposes of determining the amount of any distri bution that is
includible in gross income.
PENALTY TAX ON PREMATURE DISTRIBUTIONS. A penalty tax is imposed on
distributions under a Contract equal to 10% of the amount includible in
income. The penalty tax will not apply, however, to (1) distributions made
after the recipient attains age 59 1/2, (2) distributions on account of the
recipient's becoming disabled, (3) distributions that are made after the death
of the Owner prior to the Annuity Commencement Date or the payee after the
Annuity Commencement Date (or if such person is not a natural person, that are
made after the death of the primary Annuitant, as defined in the Code), and
(4) distributions that are part of a series of substantially equal periodic
payments made over the life (or life expectancy) of the Annuitant or the joint
life (or joint life expectancies) of the Annuitant and the Beneficiary.
Premature distributions may result, for example, from an early Annuity
Commencement Date, an early surrender, partial withdrawal from or assignment
of a Contract, or the early death of an Annuitant, unless clause (3) above
applies.
35
<PAGE>
PAYMENT OF DEATH PROCEEDS. Special rules apply to the distribution of any
death proceeds payable under the Contract. See "Death Proceeds."
ASSIGNMENTS AND LOANS. An assignment, loan, or pledge with respect to a
Non-Qualified Contract is taxed in the same manner as a partial withdrawal, as
described above. Repayment of a loan or release of an assignment or pledge is
treated as a new purchase payment.
INDIVIDUAL RETIREMENT ANNUITIES ("IRAS")
PURCHASE PAYMENTS. Individuals who are not active participants in a
tax-qualified retirement plan may, in any year, deduct from their taxable
income purchase payments for an IRA equal to the lesser of $2,000 or 100% of
the individual's earned income, plus $250 for the benefit of a noncompensated
spouse. No more than $2,000 may be contributed to either spouse's IRA for any
year. Single persons who participate in a tax-qualified retirement plan and
who have adjusted gross income not in excess of $25,000 may fully deduct their
IRA purchase payments. Those who have adjusted gross income in excess of
$35,000 will not be able to deduct purchase payments, and for those with
adjusted gross income between $25,000 and $35,000 the deduction is phased out
based on the amount of income. Similarly, the otherwise deductible portion of
an IRA purchase payment will be phased out, in the case of married individuals
filing joint tax returns, with adjusted gross income between $40,000 and
$50,000, and in the case of married individuals filing separately, with
adjusted gross income between $0 and $10,000. Individuals who are precluded
from deducting all or a portion of their purchase payments because of
participation in a tax-qualified retirement plan may still make non-deductible
contributions on which earnings will be tax deferred. The total of deductible
and non-deductible contributions may not exceed the lesser of $2,000 or 100%
of earned income, plus $250 for the benefit of a noncompensated spouse.
DISTRIBUTIONS FROM AN IRA. Amounts received under an IRA as annuity
payments, upon partial withdrawal or total surrender, or on the death of the
Annuitant, are included in the Annuitant's or other recipient's income. If
nondeductible purchase payments have been made, a pro rata portion of such
distributions may not be included in income. A 10% penalty tax is imposed on
the amount includible in gross income from distributions that occur before the
Annuitant attains age 59 1/2 and that are not made on account of death or
disability, with certain exceptions. These exceptions include distributions
that are part of a series of substantially equal periodic payments made over
the life (or life expectancy) of the Annuitant or the joint lives (or joint
life expectancies) of the Annuitant and the Beneficiary. Distributions of
minimum amounts specified by the Code must commence by April 1 of the calendar
year following the calendar year in which the Annuitant attains age 70 1/2.
Additional distribution rules apply after the death of the Annuitant. These
rules are similar to those governing distributions on the death of an Owner
(or other payee during the Annuity Period) under a Non-Qualified Contract. See
"Death Proceeds." Failure to comply with the minimum distribution rules will
result in the imposition of a penalty tax of 50% of the amount by which the
minimum distribution required exceeds the actual distribution.
TAX FREE ROLLOVERS. Amounts may be transferred in a tax-free rollover
from a tax-qualified plan to an IRA (and from one IRA to another IRA) if
certain conditions are met. All taxable distributions ("eligible rollover
distributions") from tax qualified plans are eligible to be rolled over with
the
36
<PAGE>
exception of (1) annuities paid over a life or life expectancy, (2)
installments for a period of ten years or more, and (3) required minimum
distributions under section 401(a)(9) of the Code.
Rollovers may be accomplished in two ways. First, an eligible rollover
distribution may be paid directly to an IRA (a "direct rollover"). Second, the
distribution may be paid directly to the Annuitant and then, within 60 days of
receipt, the amount may be rolled over to an IRA. However, any amount that was
not distributed as a direct rollover will be subject to 20% income tax
withholding.
SIRAs. Spousal individual retirement annuities ("SIRAs") are subject to
the same federal income tax treatment and rules that are discussed above with
respect to IRAs generally.
SIMPLIFIED EMPLOYEE PENSION PLANS
Employees and employers may establish an IRA plan known as a simplified
employee pension plan ("SEP"), if certain requirements are met. An employee
may make contributions to a SEP in accordance with the rules applicable to
IRAs discussed above. Employer contributions to an employee's SEP are
deductible by the employer and are not currently includible in the taxable
income of the employee. However, total employer contributions are limited to
15% of an employee's compensation or $30,000, whichever is less.
OTHER QUALIFIED PLANS
Purchase Payments. Purchase payments made by an employer under a pension,
profit-sharing, or annuity plan qualified under section 401 or 403(a) of the
Code, not in excess of certain limits, are deductible by the employer. Such
purchase payments are also excluded from the current income of the employee.
DISTRIBUTIONS PRIOR TO THE ANNUITY COMMENCEMENT DATE. To the extent that
purchase payments are includible in an employee's taxable income, they (less
any amounts previously received that were not includible in the employee's
taxable income) represent his or her "investment in the Contract." Amounts
received prior to the Annuity Commencement Date under a Contract in connection
with a section 401 or 403(a) plan are generally allocated on a pro-rata basis
between the employee's investment in the Contract and other amounts. With
respect to the taxable portion of a lump-sum distribution (as defined in the
Code), an averaging rule may be applicable that allows computation of tax as
if the amount were received over a period of five years. A lump-sum
distribution will not be includible in income in the year of distribution if
the employee transfers, within 60 days of receipt, all amounts received, less
the employee's investment in the Contract), to another tax-qualified plan or
to an individual retirement account or an IRA in accordance with the rollover
rules under the Code. However, any amount that is not distributed as a direct
rollover will be subject to 20% income tax withholding. See "Tax Free
Rollovers." Special tax treatment may be available in the case of certain
lump-sum distributions that are not rolled over to another plan or IRA.
A 10% penalty tax is imposed on the amount includible in gross income
from distributions that occur before the employee's attaining age 59 1/2 and
that are not made on account of death or dis ability, with certain exceptions.
These exceptions include distributions that are (1) part of a series
37
<PAGE>
of substantially equal periodic payments beginning after the employee
separates from service and made over the life (or life expectancy) of the
employee or the joint lives (or joint life expectancies) of the employee and
the Beneficiary, (2) made after the employee's separation from service on
account of early retirement after age 55, or (3) made to an alternate payee
pursuant to a qualified domestic relations order.
ANNUITY PAYMENTS. A portion of annuity payments received under Contracts
in connection with section 401 and 403(a) plans after the Annuity Commencement
Date may be excludible from the employee's income, in the manner discussed
above under "Non-Qualified Contracts - Taxation of Annuity Payments."
Distributions of minimum amounts specified by the Code generally must commence
by April 1 of the calendar year following the calendar year in which the
employee attains age 70 1/2. Failure to comply with the minimum distribution
rules will result in the imposition of a penalty tax of 50% of the amount by
which the minimum distribution required exceeds the actual distribution.
SELF-EMPLOYED INDIVIDUALS. Various special rules apply to tax-qualified
plans established by self-employed individuals.
PRIVATE EMPLOYER UNFUNDED DEFERRED COMPENSATION PLANS
PURCHASE PAYMENTS. Private taxable employers may establish unfunded,
Non-Qualified deferred compensation plans for a select group of management or
highly compensated employees and/or for independent contractors.
These types of programs allow individuals to defer receipt of up to 100%
of compensation that would otherwise be includible in income and therefore to
defer the payment of federal income taxes on such amounts, as well as earnings
thereon. Purchase payments made by the employer, however, are not immediately
deductible by the employer, and the employer is currently taxed on any
increase in Account Value.
Deferred compensation plans represent a contractual promise on the part
of the employer to pay current compensation at some future time. The Contract
is owned by the employer and is subject to the claims of the employer's
creditors. The individual has no right or interest in the Contract and is
entitled only to payment from the employer's general assets in accordance with
plan provisions.
TAXATION OF DISTRIBUTIONS. Amounts received by an individual from a
private employer deferred compensation plan are includible in gross income for
the taxable year in which such amounts are paid or otherwise made available.
EXCESS DISTRIBUTIONS - 15% TAX
Certain persons, particularly those who participate in more than one
tax-qualified retirement plan, may be subject to an additional tax of 15% on
certain excess aggregate distributions from those plans. In general, excess
distributions are taxable distributions for all tax qualified plans in excess
of a specified annual limit for payments made in the form of an annuity
(currently $150,000) or five times the annual limit for lump-sum
distributions.
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<PAGE>
FEDERAL INCOME TAX WITHHOLDING AND REPORTING
Amounts distributed from a Contract, to the extent includible in taxable
income, are subject to federal income tax withholding. The payee may, however,
elect to have no income tax withheld by submitting a withholding exemption
certificate to us.
In some cases, if you own more than one Qualified annuity contract, such
contracts may be aggregated for purposes of determining whether the federal
tax law requirement for minimum distributions after age 70 1/2 has been
satisfied. If, under this aggregation procedure, you are relying on
distributions pursuant to another annuity contract to satisfy the minimum
distribution requirement under a Qualified Contract issued by us, you must
sign a waiver releasing us from any liability to you for not calculating and
reporting the amount of taxes and penalties payable for failure to make
required minimum distributions under the Contract.
TAXES PAYABLE BY AG LIFE AND SEPARATE ACCOUNT D
AG Life is taxed as a life insurance company under the Code. The
operations of Separate Account D are part of the total operations of AG Life
and are not taxed separately. Under existing federal income tax laws, AG Life
is not taxed on investment income derived by Separate Account D (including
realized and unrealized capital gains) with respect to the Contracts. AG Life
reserves the right to allocate to the Contracts any federal, state or other
tax liability that may result in the future from maintenance of Separate
Account D or the Contracts.
Certain Portfolios may elect to pass through to AG Life any taxes
withheld by foreign taxing jurisdictions on foreign source income. Such an
election will result in additional taxable income and income tax to AG Life.
The amount of additional income tax, however, may be more than offset by
credits for the foreign taxes withheld which are also passed through. These
credits may provide a benefit to AG Life.
DISTRIBUTION ARRANGEMENTS
The Contracts will be sold by individuals who, in addition to being
licensed by state insurance authorities to sell the Contracts of AG Life, are
also registered representatives of American General Securities Incorporated
("AGSI"), the principal underwriter of the Contracts, or registered
representatives of other broker-dealer firms or representatives of other firms
that are exempt from broker-dealer regulation. AGSI and any such other
broker-dealer firms are registered with the Securities and Exchange Commission
under the Securities Exchange Act of 1934 as broker-dealers and are members of
the National Association of Securities Dealers, Inc. AGSI is a wholly-owned
subsidiary of AG Life. AGSI's principal business address is the same as that
of our Home Office. The interests under the Contracts are offered on a
continuous basis.
LEGAL MATTERS
The legality of the Contracts described in this Prospectus has been
passed upon by Steven A. Glover, Esquire, with the law department of AG Life.
Freedman, Levy, Kroll & Simonds, Washing ton, D.C., has advised AG Life on
certain federal securities law matters.
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<PAGE>
OTHER INFORMATION ON FILE
A Registration Statement has been filed with the Securities and Exchange
Commission under the Securities Act of 1933 with respect to the Contracts
discussed in this Prospectus. Not all of the information set forth in the
Registration Statement and exhibits thereto has been included in this
Prospectus. Statements contained in this Prospectus concerning the Contracts
and other legal instruments are intended to be summaries. For a complete
statement of the terms of these documents, reference should be made to the
instruments filed with the Securities and Exchange Commission.
A Statement of Additional Information is available from us on request.
Its contents are as follows:
CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<S> <C>
General Information................................................... 2
Regulation and Reserves............................................... 2
Independent Auditors.................................................. 3
Services.............................................................. 3
Underwriters.......................................................... 3
Annuity Payments...................................................... 3
A. Gender of Annuitant............................................. 3
B. Misstatement of Age or Sex and Other Errors..................... 4
Change of Investment Adviser or Investment Policy..................... 4
Terms of Exemptive Relief in Connection with Mortality
and Expense Risk Charge............................................. 4
Performance Data for the Divisions.................................... 4
Financial Statements.................................................. 9
Index to Financial Statements.........................................10
</TABLE>
40
<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT D
SUPPLEMENT DATED MAY 1, 1996
TO THE
PROSPECTUS DATED MAY 1, 1996
As set forth herein, this Supplement modifies certain information contained in
the May 1, 1996 prospectus of American General Life Insurance Company Separate
Account D (the "Prospectus") relating to your variable annuity Contract and,
to the extent inconsistent, supersedes it. You should retain this Supplement
with your Prospectus for future reference. (You may obtain an additional copy
of the Prospectus, free of charge, if you write to the Annuity Administration
Department, American General Life Insurance Company, P.O. Box 1401, Houston,
Texas 77251-1401, or call 1-800-247-6584 or (713) 831-3102.)
Terms capitalized in this Supplement have the same meaning as defined in the
Prospectus.
This Supplement is necessary because your Contract makes available three
investment options that are not available under Contracts applied for after
April 30, 1994 and that are not, therefore, described in the Prospectus.
The additional investment options that are available to you under your
Contract are the Stock Index, Social Awareness, and International Equities
Divisions of our Separate Account D. These Divisions invest exclusively in
shares of the following mutual fund portfolios, respectively: the Stock Index,
Social Awareness, and International Equities Funds of the American General
Series Portfolio Company.
Therefore, whenever the Prospectus refers to Divisions or Portfolios that are
available under your Contract, you should understand such references also
refer to the three additional Divisions and Portfolios that are described in
the Supplement. Similarly, when the Prospectus refers to the mutual funds in
which the available Divisions invest, you should understand those references
to include the American General Series Portfolio Company.
The following additional modifications to the Prospectus are necessary because
of the additional Divisions and Portfolios that are available under your
Contract:
S-1
<PAGE>
1. ADD THE FOLLOWING INFORMATION TO THE TABLE ON PAGE 8 OF THE PROSPECTUS:
<TABLE>
THE PORTFOLIO'S ANNUAL EXPENSES (as a percentage of average net assets)
<CAPTION>
Management Fees Other Expenses Total Portfolio
After Expense After Expense Operating
Reimbursement Reimbursement Expenses
<S> <C> <C> <C>
Stock Index 0.29% 0.09% 0.38%
Social Awareness 0.50% 0.08% 0.58%
International Equities 0.35% 0.10% 0.45%
</TABLE>
2. ADD THE FOLLOWING INFORMATION TO THE EXAMPLES ON PAGES 8 AND 9 OF THE
PROSPECTUS:
Example If you surrender your Contract at the end of the applicable time
period, a $1,000 investment would be subject to the following
expenses, assuming a 5% annual return on assets:
<TABLE>
<CAPTION>
If all amounts are 1 year 3 years 5 years 10 years
------ ------- ------- --------
invested in one of the
following Portfolios:
<S> <C> <C> <C> <C>
Stock Index $90 $108 $135 $233
Social Awareness $92 $114 $146 $254
International Equities $91 $110 $139 $241
</TABLE>
Example If you commence a life Annuity Payment Option following the end of
the applicable time period, a $1,000 investment would be subject to
the following expenses, assuming a 5% annual return on assets:
<TABLE>
<CAPTION>
If all amounts are 1 year 3 years (1,2) 5 years (3) 10 years
------ ------- ------- --------
invested in one of the
following Portfolios:
<S> <C> <C> <C> <C>
Stock Index $74 $63 $108 $233
Social Awareness $76 $69 $119 $254
International Equities $75 $65 $112 $241
</TABLE>
S-2
<PAGE>
Example If you do not surrender your Contract or commence an Annuity Payment
Option, a $1,000 investment would be subject to the following
expenses, assuming a 5% annual return on assets.
<TABLE>
<CAPTION>
If all amounts are 1 year 3 years 5 years 10 years
------ ------- ------- --------
invested in one of the
following Portfolios:
<S> <C> <C> <C> <C>
Stock Index $20 $63 $108 $233
Social Awareness $22 $69 $119 $254
International Equities $21 $65 $112 $241
The examples and other Portfolio expense information set forth in this
Supplement are based on the actual expense experience of the Stock Index,
Social Awareness, and International Equities Portfolios for their fiscal year
ended May 31, 1995 .
<FN>
(1) If the Annuity Commencement Date under a life or non-life Annuity Payment
Option were the last day of the third Contract Year, the figures in this
column would be the same as those in the same column of the preceding
example.
(2) If the Annuity Payment Option exercised following the third Contract year
is not a life annuity, the figures in this column would be $9 less than
those in the same column of the preceding example due to the decrease in
the surrender charges from Contract Year 3 to Contract Year 4.
(3) If the Annuity Payment Option exercised following the fifth Contract year
is not a life annuity, the figures in this column would be $9 less than
those in the same column of the preceding example due to the decrease in
the surrender charges from Contract Year 5 to Contract Year 6. If said
non-life annuity option had its Annuity Commencement Date on the last day
of the fifth Contract Year, the figures in this column would be the same
as those in the same column of the preceding example.
</FN>
</TABLE>
S-3
<PAGE>
3. Add the following information to the table on pages 14 and 15 of the
Prospectus:
<TABLE>
<CAPTION>
Stock Social International
Index Awareness Equities
Division Division Division
<S> <C> <C> <C>
Accumulation Unit
Values (Beginning of
Period)* $1.434352 $1.182907 $0.794022
Accumulation Unit
Values at 12/31/92 $1.539500 $1.259814 $0.751419
Accumulation Unit
Values at 12/31/93 $1.665672 $1.338721 $0.960998
Accumulation Unit
Values at 12/31/94 $1.651802 $1.299353 $1.021863
Accumulation Unit
Values at 12/31/95 $2.233330 $1.777926 $1.114674
Accumulation Units
Outstanding at 12/31/92 184,854.711 1,439.581 68,288.743
Accumulation Units
Outstanding at 12/31/93 515,549.476 28,357.707 402,977.973
Accumulation Units
Outstanding at 12/31/94 673,760.206 41,120.891 680,590.894
Accumulation Units
Outstanding at 12/31/95 648,212.914 41,609.618 478,545.500
<FN>
* The dates on which each Division first received a purchase payment are as
follows: Stock Index, June 16, 1992; Social Awareness, August 13, 1992;
and International Equities, June 16, 1992.
</FN>
</TABLE>
S-4
<PAGE>
INDIVIDUAL RETIREMENT ANNUITY DISCLOSURE STATEMENT
INTRODUCTION
THIS DISCLOSURE STATEMENT IS DESIGNED FOR PRESENT OWNERS OF IRAS ISSUED BY
AMERICAN GENERAL LIFE INSURANCE COMPANY.
This Disclosure Statement is not part of your contract but contains general
and standardized information which must be furnished to each person who is
issued an Individual Retirement Annuity. You must refer to your policy to
determine your specific rights and obligations thereunder.
REVOCATION
If you are purchasing a new or rollover IRA, then if for any reason you, as a
recipient of this Disclosure Statement, decide within 20 days from the date
your policy is delivered that you do not desire to retain your IRA, written
notification to the Company must be mailed, together with your policy, within
that period. If such notice is mailed within 20 days, all contributions,
without adjustments for any applicable sales commissions or administrative
expenses, will be refunded.
MAIL NOTIFICATION OF REVOCATION AND YOUR POLICY TO:
American General Life Insurance Company
Annuity Administration Department
P. O. Box 1401
Houston, Texas 77251-1401
(Phone No. (800) 247-6584).
ELIGIBILITY
Under Internal Revenue Code ("Code") Section 219, if neither you, nor your
spouse, is an active participant (see A. below), you may make a contribution
of up to the lesser of $2,000 (or $2,250 in the case of a Spousal IRA) or 100%
of compensation and take a deduction for the entire amount contributed. If you
are an active participant, but have an adjusted gross income (AGI) below a
certain level (see B. below), you may still make a deductible contribution.
If, however, you or your spouse is an active participant and your combined AGI
is above the specified level, the amount of the deductible contribution you
may make to an IRA will be phased down and eventually eliminated.
A. ACTIVE PARTICIPANT
You are an "active participant" for a year if you are covered by a retirement
plan. You are covered by a "retirement plan" for a year if your employer or
union has a retirement plan under which money is added to your account or you
are eligible to earn retirement credits. For example, if you are covered under
a profit-sharing plan, certain government plans, a salary reduction
arrangement (such as a tax sheltered annuity arrangement or a 401(k) plan), a
Simplified Employee Pension program
Page 1
<PAGE>
(SEP) or a plan which promises you a retirement benefit which is based upon
the number of years of service you have with the employer, you are likely to
be an active participant. Your Form W-2 for the year should indicate your
participation status.
You are an active participant for a year even if you are not yet vested in
your retirement benefit. Also, if you make required contributions or voluntary
employee contributions to a retirement plan, you are an active participant. In
certain plans, you may be an active participant even if you were only with the
employer for part of the year.
You are not considered an active participant if you are covered in a plan only
because of your service as 1) an Armed Forces Reservist for less than 90 days
of active service, or 2) a volunteer firefighter covered for firefighting
service by a government plan. Of course, if you are covered in any other plan,
these exceptions do not apply.
If you are married, filed a separate tax return, and did not live with your
spouse at any time during the year, your spouse's active participation will
not affect your ability to make deductible contributions.
B. ADJUSTED GROSS INCOME (AGI)
If you are an active participant, you must look at your Adjusted Gross Income
for the year (if you and your spouse file a joint tax return, you use your
combined AGI) to determine whether you can make a deductible IRA contribution.
Your tax return will show you how to calculate your AGI for this purpose. If
you are at or below a certain AGI level, called the Threshold Level, you are
treated as if you were not an active participant and can make a deductible
contribution under the same rules as a person who is not an active
participant.
If you are single, your Threshold AGI Level is $25,000. The Threshold Level if
you are married and file a joint tax return is $40,000, and if you are married
but file a separate tax return, the Threshold Level is $0.
If your AGI is less than $10,000 above your Threshold Level, you will still be
able to make a deductible contribution, but it will be limited in amount. The
amount by which your AGI exceeds your Threshold Level (AGI - Threshold Level)
is called your Excess AGI. The Maximum Allowable Deduction is $2,000 (or
$2,250 for a Spousal IRA). You can estimate your Deduction Limit as follows:
(Your Deduction Limit may be slightly higher if you use this formula rather
than the table provided by the IRS.)
$10,000 - Excess AGI
-------------------- x Maximum Allowable Deduction = Deduction Limit
$10,000
You must round up the result to the next highest $10 level (the next highest
number which ends in zero). For example, if the result is $1,525, you must
round it up to $1,530. If the final result is below $200 but above zero, your
Deduction Limit is $200. Your Deduction Limit cannot, in any event, exceed
100% of your compensation.
Page 2
<PAGE>
Example 1: Ms. Smith, a single person, is an active participant and has an
AGI of $31,619. She calculates her deductible IRA contribution
as follows:
Her AGI is $31,619
Her Excess AGI is (AGI - Threshold Level) or ($31,619-$25,000) = $6,619
Her Maximum Allowable Deduction is $2,000
So, her IRA deduction limit is:
$10,000 - $6,619
---------------- x $2,000 = $676 (rounded to $680)
$10,000
Example 2: Mr. and Mrs. Young file a joint tax return. Each spouse earns
more than $2,000 and one is an active participant. They have a
combined AGI of $44,255. They may each contribute to an IRA and
calculate their deductible contributions to each IRA as follows:
Their AGI is $44,255
Their Threshold Level is $40,000
Their Excess AGI is (AGI - Threshold Level) or ($44,255 - $40,000) = $4,255
The Maximum Allowable Deduction for each spouse is $2,000
So, each spouse may compute his or her IRA deduction limit as follows:
$10,000 - 4,255
--------------- x $2,000 = $1,149 (rounded to $1,150)
$10,000
Example 3: If, in Example 2, Mr. Young did not earn any compensation, or
elected to be treated as earning no compensation, Mrs. Young
could establish a Spousal IRA (consisting of an account for
herself and one for her husband). The amount of deductible
contributions which could be made to the two IRAs is calculated
using a Maximum Allowable Deduction of $2,250 rather than
$2,000.
$10,000 - $4,255
---------------- x $2,250 = $1,293 (rounded to $1,300)
$10,000
The $1,300 can be divided between the two accounts, but neither IRA may
receive a deductible contribution of more than $1,150.
Example 4: Mr. Jones, a married person, files a separate tax return and is
an active participant. He has $1,500 of compensation and wishes
to make a deductible contribution to an IRA.
His AGI is $1,500
His Threshold Level is $0
His Excess AGI is (AGI - Threshold Level) or $1,500-$0) = $1,500
His Maximum Allowable Deduction is $2,000
So, his IRA deduction limit is:
$10,000 - $1,500
---------------- x $2,000 = $1,700
$10,000
Even though his IRA deduction limit under the formula is $1,700, Mr. Jones
may not deduct an amount in excess of his compensation, so, his actual
deduction is limited to $1,500.
Page 3
<PAGE>
SPOUSAL IRAs
As noted in Example 3 above, under the Act you may contribute to a Spousal IRA
even if your spouse has earned some compensation during the year. Provided
your spouse does not make a contribution to an IRA, you may set up a Spousal
IRA consisting of an annuity for your spouse as well as an annuity for
yourself. The maximum deductible amount to your IRA and a Spousal IRA is the
lesser of $2,250 or 100% of compensation.
NON-DEDUCTIBLE CONTRIBUTIONS TO IRAs
Even if you are above the Threshold Level and thus may not make a deductible
contribution of $2,000 ($2,250 if a spousal IRA is involved), you may still
contribute up to the lesser of 100% of compensation or $2,000 to an IRA
($2,250 for a Spousal IRA). The amount of your contribution which is not
deductible will be a non-deductible contribution to the IRA. You may also
choose to make a contribution non-deductible even if you could have deducted
part or all of the contribution. Interest or other earnings on your IRA
contribution, whether from deductible or non-deductible contributions, will
not be taxed until taken out of your IRA and distributed to you.
If you make a non-deductible contribution to an IRA, you must report the
amount of the non-deductible contribution to the IRS on Form 8606 as a part of
your tax return for the year.
You may make a $2,000 contribution at any time during the year, if your
compensation for the year will be at least $2,000, without having to know how
much will be deductible. When you fill out your return, you may then figure
out how much is deductible.
You may withdraw an IRA contribution made for a year any time before April 15
of the following year. If you do so, you must also withdraw the earnings
attributable to that portion and report the earnings as income for the year
for which the contribution was made. If some portion of your contribution is
not deductible, you may decide either to withdraw the non-deductible amount,
or to leave it in the IRA and designate that portion as a non-deductible
contribution on your tax return.
IRA DISTRIBUTIONS
Generally, IRA distributions which are not rolled over (see "Rollover IRA
Rules", below) are included in your gross income in the year they are
received. Non-deductible IRA contributions, however, are made using income
which has already been taxed (that is, they are not deductible contributions).
Thus, the portion of the IRA distributions consisting of non-deductible
contributions will not be taxed again when received by you. If you make any
non-deductible IRA contributions, each distribution from your IRA(s) will
consist of a non-taxable portion (return of deductible contributions, if any,
and account earnings).
Thus, you may not take a distribution which is entirely tax-free. The
following formula is used to determine the non-taxable portion of your
distributions for a taxable year:
Remaining
Non-Deductible Contributions
---------------------------- x Total Distributions = Nontaxable Distributions
Year-End Total IRA Balances (for the year) (for the year)
Page 4
<PAGE>
To figure the year-end total IRA balance, you treat all of your IRAs as a
single IRA. This includes all regular IRAs (whether accounts or annuities), as
well as Simplified Employee Pension (SEP) IRAs, and Rollover IRAs. You also
add back the distributions taken during the year.
Example: An individual makes the following contributions to his or her IRA(s).
<TABLE>
<CAPTION>
Year Deductible Non-Deductible
<S> <C> <C>
1986 $ 2,000
1987 1,800
1990 1,000 $ 1,000
1992 600 1,400
--------- --------
$ 5,400 $ 2,400
</TABLE>
<TABLE>
<S> <C>
Deductible Contributions: $ 5,400
Non-Deductible Contributions: 2,400
Earnings on IRAs: 1,200
--------
Total Account Balance of IRA(s) as of 12/31/95: $ 9,000
(including distributions in 1995).
</TABLE>
In 1995, the individual takes a distribution of $3,000. The total account
balance in the IRAs on 12/31/95 plus 1995 distributions is $9,000. The
non-taxable portion of the distributions for 1995 is figured as follows:
Total non-deductible contributions $2,400
------ x $3,000 = $800
Total account balance in the IRAs, plus distributions $9,000
Thus, $800 of the $3,000 distribution in 1995 will not be included in the
individual's taxable income. The remaining $2,200 will be taxable for 1995.
ROLLOVER IRA RULES
1. IRA TO IRA
You may withdraw, tax-free, all or part of the assets from an IRA and reinvest
them in one or more IRAs. The reinvestment must be completed within 60 days of
the withdrawal. No IRA deduction is allowed for the reinvestment. Amounts
required to be distributed because the individual has reached age 70 1/2 may
not be rolled over.
2. EMPLOYER PLAN DISTRIBUTIONS TO IRA
All taxable distributions (known as "eligible rollover distributions") from
qualified pension, profit-sharing, stock bonus and tax sheltered annuity plans
may be rolled over to an IRA, with the exception of (1) annuities paid over a
life or life expectancy, (2) installments for a period of ten years or more,
and (3) required minimum distributions under Section 401(a)(9).
Rollovers may be accomplished in two ways. First, you may elect to have an
eligible rollover distribution paid directly to an IRA (a"direct rollover").
Second, you may receive the distribution directly and then, within 60 days of
receipt, roll the amount over to an IRA. Under the Act, however, any amount
that you elect not to have distributed as a direct rollover will be subject to
20
Page 5
<PAGE>
percent income tax withholding, and, if you are younger than age 59 1/2, may
result in a 10% excise tax on any amount of the distribution that is included
in income. Questions regarding distribution options under the Act should be
directed to your Plan Trustee or Plan Administrator, or may be answered by
consulting IRS Temporary Regulations Section 1.401(a)(31)-1T, Section
1.402(c)-2T and Section 31.3405(c)-1T.
PENALTIES FOR PREMATURE DISTRIBUTIONS
If you receive a distribution from your IRA before you reach age 59 1/2, an
additional tax of 10 percent will be imposed under Code Section 72(t), unless
the distribution (a) occurs because of your death or disability, (b) is
received as a part of a series of substantially equal payments over your life
or life expectancy, (c) is received as a part of a series of substantially
equal payments over the lives or life expectancy of you and your beneficiary,
or (d) the distribution is contributed to a rollover IRA.
MINIMUM DISTRIBUTIONS
Under the rules set forth in Code Section 408(b)(3) and Section 401(a)(9), you
may not leave the funds in your contract indefinitely. Certain minimum
distributions are required. These required distributions may be taken in one
of two ways: (a) by withdrawing the balance of your contract by a "required
beginning date," usually April 1 of the year following the date at which you
reach age 70 1/2; or (b) by withdrawing periodic distributions of the balance
in your contract by the required beginning date. These periodic distributions
may be taken over (a) your life; (b) the lives of you and your named
beneficiary; (c) a period not extending beyond your life expectancy; or (d) a
period not extending beyond the joint life expectancy of you and your named
beneficiary.
If you do not satisfy the minimum distribution requirements, then, pursuant to
Code Section 4974, you may have to pay a 50% excise tax on the amount not
distributed as required that year.
The foregoing minimum distribution rules are discussed in detail in IRS
Publication 590, "Individual Retirement Arrangements."
REPORTING
You are required to report penalty taxes due on excess contributions, excess
accumulations, premature distributions, and prohibited transactions.
Currently, IRS Form 5329 is used to report such information to the Internal
Revenue Service.
PROHIBITED TRANSACTIONS
Neither you nor your beneficiary may engage in a prohibited transaction, as
that term is defined in Code Section 4975.
Borrowing any money from this IRA would, under Code Section 408(e)(3), cause
the contract to cease to be an Individual Retirement Annuity and would result
in the value of the annuity being included in the owner's gross income in the
taxable year in which such loan is made.
Use of this contract as security for a loan from the Company, if such loan
were otherwise permitted, would, under Code Section 408(e)(4), cause the
portion so used to be treated as a taxable distribution.
Page 6
<PAGE>
EXCESS CONTRIBUTIONS
Tax Code Section 4973 imposes a 6 percent excise tax as a penalty for an
excess contribution to an IRA. An excess contribution is the excess of the
deductible and nondeductible amounts contributed by the Owner to an IRA for
that year over the lesser of his or her taxable compensation or $2,000.
(Different limits apply in the case of a spousal IRA arrangement.) If the
excess contribution is not withdrawn by the due date of your tax return
(including extensions) you will be subject to the penalty.
IRS APPROVAL
Your contract and IRA endorsement have been approved by the Internal Revenue
Service as a tax qualified Individual Retirement Annuity. Such approval by the
Internal Revenue Service is a determination only as to the form of the annuity
and does not represent a determination of the merits of such annuity.
This disclosure statement is intended to provide an overview of the applicable
tax laws relating to Individual Retirement Arrangements. It is not intended to
constitute a comprehensive explanation as to the tax consequences of your IRA.
As with all significant transactions such as the establishment or maintenance
of, or withdrawal from an IRA, appropriate tax and legal counsel should be
consulted. Further information may also be acquired by contacting your IRS
District Office or consulting IRS Publication 590.
FINANCIAL DISCLOSURE
(VAriety Plus Variable Annuity)
This Financial Disclosure is applicable to IRAs using the VAriety Plus
Variable Annuity purchased from American General Life Insurance Company on or
after May 1,1996.
Earnings under variable annuities are not guaranteed, and depend on the
performance of the investment option(s) selected. As such, earnings cannot be
projected. Set forth below are the charges associated with such annuities.
CHARGES:
(a) Annual contract maintenance charges of $36 deducted at the end of
each contract year.
(b) A maximum charge of $25 for each transfer, in excess of 12 free
transfers annually, of contract value between divisions of the
Separate Account.
(c) To compensate for mortality and expense risks assumed under the
contract, variable divisions only will incur a daily charge at an
annualized rate of 1.25% of the average Separate Account Value of the
contract during both the Accumulation and the Payout Phase.
(d) Premium taxes, if applicable, may be charged against Accumulation
Value at time of annuitization, a full or partial surrender or upon
the death of the Annuitant. If a jurisdiction imposes premium taxes
at the time purchase payments are made, the Company may deduct a
charge at that time.
Page 7
<PAGE>
(e) If the contract is surrendered, or if a withdrawal is made, there may
be a Surrender Charge. The Surrender Charge equals the sum of the
following:
7% of purchase payments for surrenders and withdrawals made
during the first contract year following receipt of the purchase
payments surrendered;
6% of purchase payments for surrenders and withdrawals made
during the second contract year following receipt of the
purchase payments surrendered;
5% of purchase payments for surrenders and withdrawals made
during the third contract year following receipt of the purchase
payments surrendered;
4% of purchase payments for surrenders and withdrawals made
during the fourth contract year following receipt of the
purchase payments surrendered;
3% of purchase payments for surrenders and withdrawals made
during the fifth contract year following receipt of the purchase
payments surrendered;
2% of purchase payments for surrenders and withdrawals made
during the sixth contract year following receipt of the purchase
payments surrendered;
1% of purchase payments for surrenders and withdrawals made
during the seventh contract year following receipt of the
purchase payments surrendered.
There will be no charge imposed for surrenders and withdrawals
made after the seventh contract year following receipt of the
purchase payments surrendered.
Under certain circumstances described in the contract, portions
of a partial withdrawal may be exempt from the Surrender Charge.
(f) To compensate for administrative expenses, a daily charge will be
incurred at an annualized rate of .30% of the average Separate
Account Value of the contract during the Accumulation and the Payout
Phase.
(g) Each variable division will be charged a fee for asset management and
other expenses deducted directly from the underlying fund during the
Accumulation and Payout Phase. For funds managed by Van Kampen
American Capital, total fees will be 0.60%. For funds managed by
Fidelity Management & Research Company, the fee will range between
0.28% and 0.91%. For funds managed by Neuberger & Berman Management
Incorporated, the fee will range between 1.04% and 1.15%. For funds
managed by the Variable Annuity Life Insurance Company, the fee will
range between 0.38% and 0.58%.
Page 8
<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT D
COMBINATION FIXED AND VARIABLE ANNUITY CONTRACTS
OFFERED BY
AMERICAN GENERAL LIFE INSURANCE COMPANY
ANNUITY ADMINISTRATION DEPARTMENT
P.O. BOX 1401, HOUSTON, TEXAS 77251-1401
1-800-247-6584 713-831-3102 (IN TEXAS)
STATEMENT OF ADDITIONAL INFORMATION
Dated May 1, 1996
This Statement of Additional Information is not a prospectus. It should
be read with the Prospectus for American General Life Insurance Company
Separate Account D ("Separate Account D") concerning flexible payment deferred
individual annuity Contracts investing in certain mutual fund portfolios of
the Van Kampen American Capital Life Investment Trust, the Neuberger & Berman
Advisers Management Trust, The Variable Insurance Products Fund and the
Variable Insurance Products Fund II, dated May 1, 1996 and, if your Contract
was applied for prior to May 1, 1994, the related prospectus supplement dated
May 1, 1996. You can obtain a copy of the Prospectus for the Contracts, and
any supplements thereto, by contacting American General Life Insurance Company
("AG Life") at the address or telephone numbers given above. You have the
option of receiving benefits on a fixed basis through AG Life's Fixed Account
or through AG Life's Separate Account D. Terms used in this Statement of
Additional Information have the same meanings as are defined in the Prospectus
under the heading "Glossary."
TABLE OF CONTENTS
General Information...................................................... 2
Regulation and Reserves ................................................. 2
Independent Auditors..................................................... 3
Services................................................................. 3
Underwriters............................................................. 3
Annuity Payments......................................................... 3
A. Gender of Annuitant................................................. 3
B. Misstatement of Age or Sex and Other Errors......................... 4
Change of Investment Advisor or Investment Policy........................ 4
Terms of Exemptive Relief in Connection With Mortality
and Expense Risk Charge................................................. 4
Performance Data for the Divisions....................................... 4
Financial Statements..................................................... 9
Index to Financial Statements............................................10
1
<PAGE>
GENERAL INFORMATION
AG Life (formerly American General Life Insurance Company of Delaware) is a
successor in interest to a company previously organized as a Delaware
corporation in 1917. Effective December 31, 1991, AG Life redomesticated as a
Texas insurer and changed its name to American General Life Insurance Company.
AG Life is a wholly-owned subsidiary of AGC Life Insurance Company, a Missouri
corporation ("AG Missouri") engaged primarily in the life insurance business
and annuity business. AG Missouri, in turn, is a wholly-owned subsidiary of
American General Corporation, a Texas holding corporation engaged primarily in
the insurance business.
REGULATION AND RESERVES
AG Life is subject to regulation and supervision by the insurance departments
of the states in which it is licensed to do business. This regulation covers a
variety of areas, including benefit reserve requirements, adequacy of
insurance company capital and surplus, various operational standards, and
accounting and financial reporting procedures. AG Life's operations and
accounts are subject to periodic examination by insurance regulatory
authorities.
Under insurance guaranty fund laws in most states, insurers doing business
therein can be assessed up to prescribed limits for insurance contract losses,
if covered, incurred by insolvent companies. The amount of any future
assessments of AG Life under these laws cannot be reasonably estimated. Most
of these laws do provide, however, that an assessment may be excused or
deferred if it would threaten an insurer's own financial strength.
Although the federal government generally has not directly regulated the
business of insurance, federal initiatives often have an impact on the
business in a variety of ways. Federal measures that may adversely affect the
insurance business include employee benefit regulation, tax law changes
affecting the taxation of insurance companies or of insurance products,
changes in the relative desirability of various personal investment vehicles,
and removal of impediments on the entry of banking institutions into the
business of insurance. Also, both the executive and legislative branches of
the federal government have under consideration various insurance regulatory
matters, which could ultimately result in direct federal regulation of some
aspects of the insurance business. It is not possible to predict whether this
will occur or, if so, what the effect on AG Life would be.
Pursuant to state insurance laws and regulations, AG Life is obligated to
carry on its books, as liabilities, reserves to meet its obligations under
outstanding insurance contracts. These reserves are based on assumptions
about, among other things, future claims experience and investment returns.
Neither the reserve requirements nor the other aspects of state insurance
regulation provide absolute protection to holders of insurance contracts,
including the Contracts, if AG Life were to incur claims or expenses at rates
significantly higher than expected, for example, due to acquired immune
deficiency syndrome or other infectious diseases or catastrophes, or
significant unexpected losses on its investments.
2
<PAGE>
INDEPENDENT AUDITORS
The consolidated financial statements of AG Life and the financial statements
of Separate Account D included in this Statement of Additional Information
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their respective reports thereon appearing elsewhere herein. Such financial
statements have been included in this Statement of Additional Information in
reliance upon such reports of Ernst & Young LLP given upon the authority of
such firm as experts in accounting and auditing. Ernst & Young LLP is located
at One Houston Center, 1221 McKinney, Suite 2400, Houston, TX 77010-2007.
SERVICES
A Service Agreement exists between AG Life and Continuum Computer Systems,
Inc. ("Continuum") to provide certain services in connection with Separate
Account D. Continuum has developed a computerized data processing record
keeping system for annuity accounting and has the necessary data processing
equipment and personnel to provide and support remote terminal access to its
system for the maintenance of annuity records, processing information, and the
generation of output with respect to the records and information. AG Life has
contracted with Continuum for the right to use Continuum's system. For these
services AG Life paid Continuum $28,080 in 1995, $78,840 in 1994, and $62,691
in 1993.
PRINCIPAL UNDERWRITER
American General Securities Incorporated ("AGSI") is the principal underwriter
with respect to the Contracts. AGSI also serves as principal underwriter to
American General Life Insurance Company of New York Separate Account E and AG
Life's Separate Account A, both of which are unit investment trusts registered
under the Investment Company Act of 1940. AGSI, a Texas corporation, is a
wholly owned subsidiary of AG Life and a member of the National Association of
Securities Dealers, Inc.
As principal underwriter, with respect to Separate Account D, AGSI received
from AG Life less than $1,000 of compensation for each of the last three
fiscal years.
The securities offered pursuant to the Contracts are offered on a continuous
basis.
ANNUITY PAYMENTS
A. GENDER OF ANNUITANT
When annuity payments are based on life expectancy, the amount of each annuity
payment ordinarily will be higher if the Annuitant or other measuring life is
a male, as compared with a female under an otherwise identical Contract. This
is because, statistically, females tend to have longer life expectancies than
males.
However, there will be no differences between males and females in any
jurisdiction, including Montana, where such differences are not permitted. We
will also make available Contracts with no such differences in connection with
certain employer-sponsored benefit plans. Employers should be aware that,
under most such plans, Contracts that make distinctions based on gender are
prohibited by law.
3
<PAGE>
B. MISSTATEMENT OF AGE OR SEX AND OTHER ERRORS
If the age or sex of an Annuitant has been misstated to us, any amount payable
will be that which the purchase payments paid would have purchased at the
correct age and sex. If we made any overpayments because of incorrect
information about age or sex, or any error or miscalculation, we will deduct
the overpayment from the next payment or payments due. We will add any
underpayments to the next payment. The amount of any adjustment will be
credited or charged with interest at the assumed interest rate used in the
Contract's annuity tables.
CHANGE OF INVESTMENT ADVISER OR INVESTMENT POLICY
Unless otherwise required by law or regulation, neither the investment adviser
to any Portfolio nor any investment policy may be changed without the consent
of AG Life. If required, approval of or change of any investment objective
will be filed with the insurance department of each state where a Contract has
been delivered. The Owner (or, after annuity payments start, the payee) will
be notified of any material investment policy change that has been approved.
You will be notified of any investment policy change prior to its
implementation by Separate Account D if your comment or vote is required for
such change.
TERMS OF EXEMPTIVE RELIEF IN CONNECTION WITH MORTALITY
AND EXPENSE RISK CHARGE
AG Life and AGSI have obtained exemptive relief from the Securities and
Exchange Commission ("SEC") in connection with deducting the mortality and
expense risk charge pursuant to the Contracts. In the application for the
exemption, AG Life and AGSI have represented and undertaken, among other
things, that:
o The level of the mortality and expense risk charge is within the
range of industry practice for comparable annuity contracts;
o This conclusion is based upon a review that AG Life and AGSI have
conducted of publicly-available information regarding annuity
contracts of other companies which they will maintain at their Home
Office, and make available on request to the Commission or its staff,
a memorandum setting forth the variable annuity products analyzed and
the methodology and results of the comparative review;
o There is a reasonable likelihood that the proposed distribution
financing arrangements with respect to the Contracts will benefit
Separate Account D and investors in the Contracts, and the basis for
this conclusion is set forth in a memorandum which will be maintained
by AG Life at its Home Office and will be available to the Commission
or its staff on request.
PERFORMANCE DATA FOR THE DIVISIONS
The tables below provide investment results for each of the available
Divisions of Separate Account D through December 31, 1995. The results shown
in this section are not an estimate or guarantee of future investment
performance, and do not represent the actual experience of amounts invested by
a particular Owner. The investment experience for each Division reflects the
investment performance of the separate investment Portfolio currently funding
such Division for the periods
4
<PAGE>
stated, except that for periods prior to the time when the Divisions became
available under the Contracts (January 1, 1992 for the Money Market, Domestic
Income, Enterprise, Government, Asset Allocation, Stock Index, Social
Awareness, and International Equities Divisions and May 1, 1994 for the
remaining Divisions), such results were calculated by applying all applicable
charges and fees at the Separate Account level for the Contract, as listed
below, to the historical Portfolio performance results for such prior periods.
AVERAGE ANNUAL TOTAL RETURN CALCULATIONS
Each Division's average annual total return quotation is computed in
accordance with a standard method prescribed by the SEC. The average annual
total return for a Division for a specific period is found by first taking a
hypothetical $1,000 investment in the Division's Accumulation Units on the
first day of the period at the maximum offering price, which is the
Accumulation Unit value per unit ("initial investment"), and computing the
ending redeemable value ("redeemable value") of that investment at the end of
the period. The redeemable value reflects the effect of the applicable
Surrender Charge that may be imposed at the end of the period as well as all
other recurring charges and fees applicable under the Contract to all Owner
accounts. Such other charges and fees include the Mortality and Expense Risk
Charge, the Administrative Expense Charge, and a portion of the Annual
Maintenance Charge based on the $40,591 Average Account Value under the
Contracts for 1995. Any premium taxes are not reflected. The redeemable value
is then divided by the initial investment and this quotient is taken to the
Nth root (N represents the number of years in the period) and 1 is subtracted
from the result, which is then expressed as a percentage. Average annual total
return quotations for the indicated periods ended December 31, 1995 are set
forth in the table below.
<TABLE>
AVERAGE ANNUAL TOTAL RETURNS
<CAPTION>
Since
Portfolio
Investment Division One Year Five Years Inception*
<S> <C> <C> <C>
Money Market -3.23% 1.96% 4.01%
Domestic Income 12.40% 10.84 6.34
Enterprise 27.77% 13.97 8.08
Government 8.32% 6.02 5.66
Asset Allocation 22.23% 11.01 8.72
Stock Index 28.09% 13.72 9.61
Social Awareness 29.71% 12.17 9.48
International Equities 1.99% 6.15 1.54
Balanced 14.76% 6.75 7.10
Partners 27.26% N/A 12.90
Overseas 0.90% 5.96 5.60
Asset Manager 8.06% 11.26 9.88
Index 500 27.97% N/A 12.73
</TABLE>
Total Return Calculations (without Surrender Charge)
Each Division may also advertise its non-standardized total return, which
is calculated in the same manner and for the same time periods as the
standardized average annual total returns described immediately above, except
that the redeemable value does not reflect the deduction of any applicable
Surrender Charge that may be imposed at the end of the period, since it is
assumed that the Contract will continue through the end of each period, or the
deduction of the Annual Maintenance Charge. If reflected, these charges would
reduce the performance results presented.
5
<PAGE>
<TABLE>
Total Returns
<CAPTION>
Since
Portfolio
Investment Division One Year Five Years Inception*
<S> <C> <C> <C>
Money Market 3.86% 2.55% 4.09%
Domestic Income 19.51 11.26 6.42
Enterprise 34.89 14.36 8.14
Government 15.42 6.53 5.74
Asset Allocation 29.35 11.44 8.79
Stock Index 35.21 14.12 9.68
Social Awareness 36.83 12.59 9.65
International Equities 9.08 6.65 1.75
Balanced 21.87 7.24 7.27
Partners 34.38 N/A 15.74
Overseas 8.00 6.47 5.67
Asset Manager 15.17 11.69 10.06
Index 500 35.09 N/A 13.64
</TABLE>
Cumulative Total Return Calculations
No standardized formula has been prescribed by the SEC for calculating
cumulative total return performance. Cumulative total return performance is
the compound rate of return on a hypothetical initial investment of $1,000 in
each Division's Accumulation Units on the first day of the period at the
maximum offering price, which is the Accumulation Unit value per unit
("initial investment"). Cumulative total return figures (and the related
"Growth of a $1,000 Investment" figures set forth below) do not include the
effect of any premium taxes or any applicable Surrender Charge or the Annual
Maintenance Charge. Cumulative total return quotations reflect changes in
Accumulation Unit value and are calculated by finding the cumulative rates of
return of the hypothetical initial investment over various periods, according
to the following formula, and then expressing that as a percentage:
C = (ERV/P) - 1
Where:
C = cumulative total return
P = a hypothetical initial investment of $1,000
ERV = ending redeemable value is the value at the end of the
applicable period of a hypothetical $1,000 investment made
at the beginning of the applicable period.
Cumulative total return quotations for the indicated periods ended
December 31, 1995 are set forth in the tables below.
<TABLE>
<CAPTION>
Since
Portfolio
Investment Division One Year Five Years Inception*
<S> <C> <C> <C>
Money Market 3.86% 13.39% 47.75%
Domestic Income 19.51 70.45 66.12
Enterprise 34.89 95.56 114.17
Government 15.42 37.18 72.10
Asset Allocation 29.35 71.86 104.77
Stock Index 35.21 93.57 123.33
Social Awareness 36.83 80.91 77.79
International Equities 9.08 37.98 11.47
Balanced 21.87 41.85 61.61
Partners 34.38 N/A 29.71
Overseas 8.00 36.80 63.57
Asset Manager 15.17 73.76 83.17
Index 500 35.09 N/A 53.31
</TABLE>
6
<PAGE>
<TABLE>
Growth of a $1,000 Investment in the Divisions
<CAPTION>
Since
Portfolio
Investment Division One Year Five Years Inception*
<S> <C> <C> <C>
Money Market $ 1,038.60 $ 1,133.89 $ 1,477.48
Domestic Income 1,195.10 1,704.52 1,661.25
Enterprise 1,348.87 1,955.55 2,141.74
Government 1,154.21 1,371.81 1,720.97
Asset Allocation 1,293.48 1,718.56 2,047.68
Stock Index 1,352.06 1,935.66 2,233.33
Social Awareness 1,368.32 1,809.05 1,777.93
International Equities 1,090.83 1,379.83 1,114.67
Balanced 1,218.66 1,418.45 1,616.13
Partners 1,343.83 N/A 1,297.14
Overseas 1,079.98 1,367.99 1,635.73
Asset Manager 1,151.67 1,737.62 1,831.74
Index 500 1,350.93 N/A 1,553.12
<FN>
* The inception dates for each Portfolio funding the Divisions are: April
7, 1986 for the Money Market, Enterprise, and Government Divisions; April
20, 1987 for the Stock Index Division; June 30, 1987 for the Asset
Allocation Division; November 4, 1987 for the Domestic Income Division;
October 2, 1989 for the Social Awareness and International Equities
Divisions; and February 28, 1989 for the Balanced Division; February 10,
1988 for the Overseas Division; October 4, 1989 for the Asset Manager
Division; September 1, 1992 for the Index 500 Division; and March 22,
1994 for the Partners Division.
</FN>
</TABLE>
YIELD CALCULATIONS
The yields for the Domestic Income Division, the Government Division, and the
Asset Allocation Division are each computed in accordance with a standard
method prescribed by the SEC. The yields for the Domestic Income Division, the
Government Division, and the Asset Allocation Division, based upon the one
month period ended December 31, 1995, were 6.35%, 4.97%, and 9.83%,
respectively. The yield quotation is computed by dividing the net investment
income per Accumulation Unit earned during the specified one month or 30-day
period by the Accumulation Unit values on the last day of the period,
according to the following formula that assumes a semi-annual reinvestment of
income:
a - b
YIELD = 2[(------- +1)6 - 1]
cd
a = net dividends and interest earned during the period by the Portfolio
attributable to the Division
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of Accumulation Units outstanding during the
period
d = the Accumulation Unit value per unit on the last day of the period
7
<PAGE>
The yield of each Division reflects the deduction of all recurring fees and
charges applicable to each Division, such as the Mortality and Expense Risk
Charge, the Administrative Expense Charge, and a portion of the Annual
Maintenance Charge based upon the $40,591 average Account Value under the
Contracts for 1995, but does not reflect the deduction of Surrender Charges or
premium taxes.
MONEY MARKET DIVISION YIELD AND EFFECTIVE YIELD CALCULATIONS
The Money Market Division's yield is computed in accordance with a
standard method prescribed by the SEC. Under that method, the current yield
quotation is based on a seven-day period and computed as follows: the net
change in the Accumulation Unit value during the period is divided by the
Accumulation Unit value at the beginning of the period to obtain the base
period return; the base period return is then multiplied by the fraction 365/7
to obtain the current yield figure, which is carried to the nearest
one-hundredth of one percent. Realized capital gains or losses and unrealized
appreciation or depreciation of the Division's Portfolio are not included in
the calculation. The Money Market Division's yield for the seven-day period
ended December 31, 1995 was 3.52%.
The Money Market Division's effective yield is determined by taking the
base period return (computed as described above) and calculating the effect of
assumed compounding. The formula for the effective yield is: (base period
return +1)365/7-1. The Money Market Division's effective yield for the seven
day period ended December 31, 1995 was 3.58%.
Yield and effective yield do not reflect the deduction of Surrender Charges or
premium taxes that may be imposed upon the redemption of Accumulation Units.
PERFORMANCE COMPARISONS
The performance of each or all of the available Divisions of Separate
Account D may be compared in advertisements and sales literature to the
performance of other variable annuity issuers in general or to the performance
of particular types of variable annuities investing in mutual funds, or series
of mutual funds, with investment objectives similar to each of the Divisions
of Separate Account D. Lipper Analytical Services, Inc. ("Lipper") and the
Variable Annuity Research and Data Service ("VARDS(R)") are independent
services which monitor and rank the performance of variable annuity issuers in
each of the major categories of investment objectives on an industry-wide
basis. Lipper's rankings include variable life issuers as well as variable
annuity issuers. VARDS(R) rankings compare only variable annuity issuers. The
performance analyses prepared by Lipper and VARDS(R) rank such issuers on the
basis of total return, assuming reinvestment of dividends and distributions,
but do not take sales charges, redemption fees or certain expense deductions
at the separate account level into consideration. In addition, VARDS(R)
prepares risk adjusted rankings, which consider the effects of market risk on
total return performance.
In addition, each Division's performance may be compared in
advertisements and sales literature to the following benchmarks: (1) the
Standard & Poor's 500 Composite Stock Price Index, an unmanaged weighted index
of 500 leading domestic companies that represents approximately 80% of the
market capitalization of the United States equity market; (2) the Dow Jones
Industrial Average, an unmanaged unweighted average of thirty blue chip
industrial corporations listed on the New York Stock Exchange and generally
considered representative of the United States stock market; (3) the Consumer
Price Index, published by the U.S. Bureau of Labor Statistics, a statistical
measure of change, over time, in the prices of goods and services in major
expenditure groups and generally is
8
<PAGE>
considered to be a measure of inflation; (4) the Lehman Brothers Government
and Domestic Income Index, the Salomon Brothers High Grade Domestic Income
Index, and the Merrill Lynch Government/Corporate Master Index, unmanaged
indices that are generally considered to represent the performance of
intermediate and long term bonds during various market cycles; and (5) the
Morgan Stanley Capital International Europe Australia Far East Index, an
unmanaged index that is considered to be generally representative of major
non-United States stock markets.
FINANCIAL STATEMENTS
The financial statements for Separate Account D that are included herein
relate to all 26 of its Divisions. Three of these Divisions (Stock Index,
Social Awareness, and International Equities) are available only under
Contracts applied for prior to May 1, 1994. Ten of these Divisions (Money
Market, Domestic Income, Enterprise, Government, Asset Allocation, Balanced,
Partners, Overseas, Asset Manager, and Index 500), are available under the
Contracts regardless of when applied for. The remaining nineteen Separate
Account D Divisions for which financial statements have been included herein
are available only pursuant to contracts other than the Contracts that are the
subject of this Statement of Additional Information.
The financial statements of AG Life that are included in this Statement of
Additional Information should be considered primarily as bearing on the
ability of AG Life to meet its obligations under the Contracts.
9
<PAGE>
INDEX TO
FINANCIAL STATEMENTS
Page No.
I. SEPARATE ACCOUNT D FINANCIAL STATEMENTS
Report of Ernst & Young LLP, Independent Auditors.................... 11
Statement of Net Assets ............................................. 12
Statement of Operations.............................................. 12
Statements of Changes in Net Assets.................................. 13
Notes to Financial Statements........................................ 14
II. AG LIFE CONSOLIDATED FINANCIAL STATEMENTS
Report of Ernst & Young LLP, Independent Auditors.................... 26
Consolidated Balance Sheets.......................................... 27
Consolidated Statements of Income.................................... 29
Consolidated Statements of Shareholders' Equity...................... 30
Consolidated Statements of Cash Flows................................ 31
Notes to Consolidated Financial Statements........................... 32
10
<PAGE>
[GRAPHIC OMITTED]
ERNST & YOUNG LLP One Houston Center Phone: 713-750-1500
Suite 2400 Fax: 713-750-1501
1221 McKinney Street
Houston, Texas 77010-2007
Report of Independent Auditors
Board of Directors of
American General Life Insurance Company
and Contract Owners of
American General Life Insurance Company
Separate Account D
We have audited the accompanying statement of net assets of American
General Life Insurance Company (the "Company") Separate Account D as of
December 31, 1995, the related statement of operations for the year then ended
and the statement of changes in net assets for each of the two years in the
period then ended. These financial statements are the responsibility of the
Company'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 31,1995,
by correspondence with the transfer agents. 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 American General
Life Insurance Company Separate Account D at December 31, 1995, the results of
its operations for the year then ended and the changes in its net assets for
each of the two years in the period then ended, in conformity with generally
accepted accounting principles.
/s/ERNST & YOUNG LLP
Houston, Texas
January 31, 1996
11
<PAGE>
American General Life Insurance Company
SEPARATE ACCOUNT D
<TABLE>
STATEMENT OF NET ASSETS
December 31, 1995
<CAPTION>
TOTAL Sierra VAriety All
ALL Advantage Plus Other
DIVISIONS Divisions Divisions Divisions
<S> <C> <C> <C> <C>
ASSETS:
Investment securities - at market (cost $413,244,463)....... $464,987,803 $407,547,576 $ 14,084,919 $ 43,355,308
Due from (to) American General Life Insurance Company....... (30) (19) (6) (55)
------------- ------------- ------------- -------------
NET ASSETS............................................... $464,987,773 $407,547,595 $ 14,084,925 $ 43,355,253
============= ============= ============= =============
CONTRACT OWNER RESERVES:
Reserves for redeemable annuity contracts.................. $462,233,496 $407,499,242 $ 14,084,925 $ 40,649,329
Reserves for annuity contracts on benefit.................. 2,754,277 48,353 0 2,705,924
------------- ------------- ------------- -------------
TOTAL CONTRACT OWNER RESERVES............................ $464,987,773 $407,547,595 $ 14,084,925 $ 43,355,253
============= ============= ============= =============
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
Year Ended December 31, 1995
<CAPTION>
TOTAL Sierra VAriety All
ALL Advantage Plus Other
DIVISIONS Divisions Divisions Divisions
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds................................ $ 12,516,480 $ 9,681,081 $ 414,631 $ 2,420,768
EXPENSES:
Expense and mortality fee.................................. 5,735,875 5,136,366 197,690 401,819
------------- ------------- ------------- -------------
NET INVESTMENT INCOME.................................... 6,780,605 4,544,715 216,941 2,018,949
------------- ------------- ------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments.................... (623,550) (348,580) 6,817 (281,787)
Capital gain distributions from mutual funds............... 3,557,290 721,066 800,809 2,035,415
Net unrealized gain on investments......................... 65,361,002 59,082,619 2,006,733 4,271,650
------------- ------------- ------------- -------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS.......... 68,294,742 59,455,105 2,814,359 6,025,278
------------- ------------- ------------- -------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........ $ 75,075,347 $ 63,999,820 $ 3,031,300 $ 8,044,227
============= ============= ============= =============
See accompanying notes.
</TABLE>
12
<PAGE>
American General Life Insurance Company
SEPARATE ACCOUNT D
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
Year Ended December 31, 1995
<CAPTION>
TOTAL Sierra VAriety All
ALL Advantage Plus Other
DIVISIONS Divisions Divisions Divisions
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income...................................... $ 6,780,605 $ 4,544,715 $ 216,941 $ 2,018,949
Net realized gain (loss) on investments.................... (623,550) (348,580) 6,817 (281,787)
Capital gain distributions from mutual funds............... 3,557,290 721,066 800,809 2,035,415
Net unrealized gain on investments......................... 65,361,002 59,082,619 2,006,733 4,271,650
------------- ------------- ------------- -------------
Increase in net assets resulting from operations......... 75,075,347 63,999,820 3,031,300 8,044,227
------------- ------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Contract purchase payments, less sales and
administrative expenses and premium taxes................. 67,939,767 66,850,917 1,000,953 87,897
Payments to contract owners:
Annuity benefits........................................... (8,505,642) (7,148,527) (47,580) (1,309,535)
Terminations and withdrawals............................... (25,014,962) (20,016,039) (1,260,750) (3,738,173)
------------- ------------- ------------- -------------
Increase (Decrease) in net assets resulting from
principal transactions.................................. 34,419,163 39,686,351 (307,377) (4,959,811)
------------- ------------- ------------- -------------
TOTAL INCREASE IN NET ASSETS............................ 109,494,510 103,686,171 2,723,923 3,084,416
NET ASSETS:
Beginning of year.......................................... 355,493,263 303,861,424 11,361,002 40,270,837
------------- ------------- ------------- -------------
End of year................................................ $464,987,773 $407,547,595 $ 14,084,925 $ 43,355,253
============= ============= ============= =============
</TABLE>
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
Year Ended December 31, 1994
<CAPTION>
TOTAL Sierra VAriety All
ALL Advantage Plus Other
DIVISIONS Divisions Divisions Divisions
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income...................................... $ 4,574,508 $ 2,394,711 $ 233,762 $ 1,946,035
Net realized loss on investments........................... (995,826) (669,265) (635) (325,926)
Capital gain distributions from mutual funds............... 2,976,546 556,737 565,769 1,854,040
Net unrealized loss on investments......................... (16,409,622) (10,298,339) (1,232,273) (4,879,010)
------------- ------------- ------------- -------------
Decrease in net assets resulting from operations......... (9,854,394) (8,016,156) (433,377) (1,404,861)
------------- ------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Contract purchase payments, less sales and
administrative expenses and premium taxes................. 216,407,388 212,537,864 3,790,446 79,078
Payments to contract owners:
Annuity benefits......................................... (3,248,875) (1,307,677) 0 (1,941,198)
Terminations and withdrawals............................. (12,906,311) (7,255,982) (294,322) (5,356,007)
------------- ------------- ------------- -------------
Increase (Decrease) in net assets resulting from
principal transactions................................... 200,252,202 203,974,205 3,496,124 (7,218,127)
------------- ------------- ------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS.................. 190,397,808 195,958,049 3,062,747 (8,622,988)
NET ASSETS:
Beginning of year......................................... 165,095,455 107,903,375 8,298,255 48,893,825
------------- ------------- ------------- -------------
End of year............................................... $355,493,263 $303,861,424 $ 11,361,002 $ 40,270,837
============= ============= ============= =============
See accompanying notes.
</TABLE>
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note A - Organization
Separate Account D (the "Separate Account"), established by American
General Life Insurance Company (the "Company") on November 19, 1973, is
registered under the Investment Company Act of 1940 as a unit investment
trust. The Separate Account now consists of twenty-six Divisions which are
available to investors through four different American General annuity
contracts. The divisions available in each contract are as follows:
NOTES TO FINANCIAL STATEMENTS
Note A - Organization
Separate Account D (the "Separate Account"), established by American
General Life Insurance Company (the "Company") on November 19, 1973, is
registered under the Investment Company Act of 1940 as a unit investment
trust. The Separate Account now consists of twenty-six Divisions which are
available to investors through four different American General annuity
contracts. The divisions available in each contract are as follows:
<TABLE>
<S> <C>
SIERRA ADVANTAGE: VARIETY PLUS (CONTINUED)
Sierra Variable Trust ("Sierra") International Growth Fund Neuberger & Berman Advisors Management Trust ("AMT")
Sierra Short Term Global Government Fund Balanced Portfolio
Sierra Growth Fund Neuberger & Berman AMT Partners Portfolio
Sierra Global Money Fund American General Series Portfolio Company ("AGSPC")
Sierra US. Government Fund Stock Index Fund
Sierra Growth & Income Fund AGSPC Social Awareness Fund
Sierra Corporate Income Fund AGSPC International Equities Fund
Sierra Short Term High Quality Bond Fund
Sierra Emerging Growth Fund SEPARATE ACCOUNT D (DEFERRED LOAD):
Van Kampen LIT Money Market Fund*
Van Kampen LIT Domestic Strategic Income Fund*
VAriety Plus: Van Kampen LIT Common Stock Fund*
Van Kampen American Capital ("Van Kampen")
Life Investment Trust ("LIT") Money Market Fund* All Other Separate Account D Contracts:
Van Kampen LIT Domestic Strategic Income Fund* (Issued prior to January 1, 1982)
Van Kampen LIT Common Stock Fund* Van Kampen Comstock Fund*
Van Kampen LIT Government Fund* Van Kampen Corporate Bond Fund*
Van Kampen LIT Multiple Strategy Fund* Van Kampen Reserve Fund*
Fidelity Variable Insurance Product ("VIP") Van Kampen High Income Corporate Bond Fund*
Asset Manager Portfolio (formerly, American Capital High Yield Investments, Inc.)
Fidelity VIP Overseas Portfolio Van Kampen LIT Money Market Fund*
Fidelity VIP Index 500 Portfolio Van Kampen LIT Domestic Strategic Income Fund*
Van Kampen LIT Common Stock Fund*
<FN>
* Resulting from the December 20, 1994 merger, the former American Capital
portfolios were renamed Van Kampen American Capital funds as of September
18, 1995.
</FN>
</TABLE>
Note B - Summary of Significant Accounting Policies & Basis of Presentation
The accompanying financial statements of the Divisions of the Separate
Account have been prepared on the basis of generally accepted accounting
principles ("GAAP"). The accounting principles followed by the Divisions and
the methods of applying those principles are presented below or in the
footnotes which follow:
Security Valuation - The investment in shares of Van Kampen, AGSPC,
Fidelity, Neuberger & Berman and Sierra mutual funds are valued at the closing
net asset value (market) per share as determined by the fund on the day of
measurement.
Security transactions and related investment income - Security
transactions are accounted for on the date the order to buy or sell is
executed (trade date). Dividend income and distributions of capital gains are
recorded on the ex-dividend date and reinvested upon receipt. Realized gains
and losses from security transactions are determined on the basis of
identified cost.
Administrative expenses and mortality and expense risk charge -
Deductions for administrative expenses and mortality and expense risks assumed
by the Company are calculated daily, at an annual rate, on the average daily
net asset value of the Separate Account and are paid to the Company.
An annual maintenance charge may be imposed on the last day of each
contract year during the accumulation period for administrative expenses with
respect to each contract. A surrender charge is applicable to certain
withdrawal amounts and is payable to the Company. The deductions are as
follows for the period ended December 31, 1995:
<TABLE>
<CAPTION>
Administrative
Expenses, Annual
Mortality & Annual Maintenance Surrender
Expense Risk Maintenance Charges Charges
Contracts Annual Rate Charge Collected Collected
- ---------------------------------------------------------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
Sierra Advantage.......................... 1.50% N/A N/A $865,057
VAriety Plus.............................. 1.55% $36 $ 11,844 $ 36,988
Separate Account D (deferred load)........ 1.25% $30 $ 19,530 4,407
Separate Account D (Issued prior to
January 1, 1982)......................... 0.75% N/A N/A N/A
</TABLE>
14
<PAGE>
Note B - Summary of Significant Accounting Policies & Basis of Presentation -
Continued
Administrative expenses - continued - Sales and other administrative
charges are applicable to certain transaction amounts on contracts, excluding
Sierra Advantage and VAriety Plus contracts, and are payable to the Company.
The total sales and administrative charges collected for the period ended
December 31, 1995 were $ 1,376.
The funds pay their investment advisors, Van Kampen American Capital
Asset Management, Inc., The Variable Annuity Life Insurance Company ("VALIC"),
Fidelity Management & Research Company, Neuberger & Berman Management
Incorporated and Sierra Investment Advisors Corporation, a monthly fee based
on the fund's average net asset value.
Annuity Reserves - Sierra Advantage and VAriety Plus annuity reserves are
computed for currently payable contracts according to the 1983a Individual
Annuity Mortality Table projected under Scale G factors at an assumed interest
rate of 3.5%. The other contracts annuity reserves are computed for currently
payable contracts according to the Progressive Annuity Mortality Table at an
assumed interest rate of 3%. Charges to annuity reserves for mortality and
expense risks experience are reimbursed to the Company if the reserves
required are less than originally estimated. If additional reserves are
required, the Company reimburses the separate account.
Note C - Investments
Fund shares are purchased at net asset value with net contract payments
(contract purchase payments less surrenders and amounts payable to the Company
for administrative and surrender charges) and reinvestment of distributions
made by the funds. The following is a summary of fund shares owned as of
December 31, 1995.
<TABLE>
<CAPTION>
Net Value of Cost of Unrealized
Asset Shares at Shares Appreciation
Fund Shares Value Market Held (Depreciation)
<S> <C> <C> <C> <C> <C>
Van Kampen Comstock Fund...................... 397,871.441 14.54 5,785,051 6,114,190 (329,139)
Van Kampen Corporate Bond Fund................ 83,309.022 7.19 598,992 574,664 24,328
Van Kampen Reserve Fund....................... 1,449,960.896 1.00 1,449,961 1,449,961 0
Van Kampen High Income Corporate Bond Fund.... 2,072,807.504 6.22 12,892,862 12,454,029 438,833
Van Kampen LIT Money Market Fund............. 5,256,319.660 1.00 5,256,320 5,256,320 0
Van Kampen LIT Domestic Strategic Income Fund. 845,560.773 8.21 6,942,054 6,871,698 70,356
Van Kampen LIT Common Stock Fund.............. 1,105,667.807 14.69 16,242,260 14,810,352 1,431,908
Van Kampen LIT Government Fund................ 123,110.077 9.06 1,115,377 1,101,202 14,175
Van Kampen LIT Multiple Strategic Fund........ 244,020.900 11.64 2,840,403 2,867,267 (26,864)
Fidelity VIP Asset Manager Portfolio.......... 42,749.054 15.79 675,008 605,159 69,849
Fidelity VIP Overseas Portfolio............... 14,405.591 17.05 245,615 230,068 15,547
Fidelity VIP Index 500 Portfolio.............. 5,182.323 75.71 392,354 341,153 51,201
Neuberger & Berman AMT Balanced Portfolio..... 11,663.151 17.52 204,338 179,486 24,852
Neuberger & Berman AMT Partners Portfolio..... 56,277.979 13.23 744,558 616,777 127,781
AGSPC Stock Index Fund........................ 76,073.219 19.03 1447,673 1,125,215 322,458
AGSPC Social Awareness Fund................... 5,228.185 14.15 73,979 64,249 9,730
AGSPC International Equities Fund............. 49,899.180 10.69 533,422 503,870 29,552
Sierra International Growth Fund.............. 3,790,502.626 12.11 45,902,987 44,613,770 1,289,217
Sierra Short Term Global Government Fund...... 9,536,788.388 2.50 23,841,971 23,405,442 436,529
Sierra Growth Fund............................ 6,342,411.894 15.72 99,702,715 74,205,625 25,497,090
Sierra Global Money Fund...................... 20,369,542.760 1.00 20,369,543 20,369,543 0
Sierra US. Government Fund.................... 5,229,507.917 10.00 52,295,079 51,443,597 851,482
Sierra Growth and Income Fund................. 3,612,541.492 12.83 46,348,907 38,181,110 8,167,797
Sierra Corporate Income Fund.................. 5,792,000.280 10.48 60,700,163 57,157,534 3,542,629
Sierra Short Term High Quality Bond Fund...... 4,957,331.689 2.49 12,343,756 12,186,237 157,519
Sierra Emerging Growth Fund................... 3,350,979.240 13.74 46,042,455 36,515,945 9,526,510
------------- ------------- -------------
$464,987,803 $413,244,463 $ 51,743,340
============= ============= =============
</TABLE>
The aggregate cost of purchases and proceeds from sales of investments
for the period ended December 31, 1995 were $113,813,641 and $69,055,852,
respectively. The cost of total investments owned at December 31, 1995 was the
same for both financial reporting and federal income tax purposes. Gross
unrealized appreciation and gross unrealized depreciation for the year ended
December 31,1995 are $52,099,343 and $356,003, respectively.
15
<PAGE>
Note D - Federal Income Taxes
The Company is taxed as a life insurance company under the Internal
Revenue Code and includes the operations of the Separate Account in
determining its federal income tax liability. Under existing federal income
tax law, the investment income and capital gains from sale of investments
realized by the Separate Account are not taxable. Therefore, no federal income
tax provision has been made.
Note E - Summary of Changes in Units
<TABLE>
Changes in Units for the Year Ended December 31, 1995
<CAPTION>
SIERRA ADVANTAGE Short Term
Global U. S.
International Government Global Government
ACCUMULATION PERIOD Growth Fund Fund Growth Fund Money Fund Fund
<S> <C> <C> <C> <C> <C>
Outstanding at beginning of period... 41,411,804.816 31,104,117.951 55,968,698.496 5,990,768.122 45,519,220.818
Purchase payments.................... 6,282,094.793 1,812,247.957 10,358,765.174 6,190,469.801 5,994,381.877
Surrenders........................... (2,694,405.713) (2,698,365.189) (3,773,253.685) (998,774.884) (4,016,271.339)
Transfers to annuity................. 0.000 (23,165.130) (5,463.976) 0.000 0.000
Transfers between funds.............. (6,117,358.452) (6,818,339.186) 3,183,924.345 7,887,964.142 (56579.761)
--------------- --------------- --------------- --------------- ---------------
Outstanding at end of period......... 38,882,135.444 23,376,496.403 65,732,670.354 19,070,427.181 47,440,751.595
=============== =============== =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
Short Term
High
Growth and Corporate Quality Emerging
Income Fund Income Fund Bond Fund Growth Fund
<S> <C> <C> <C> <C>
Outstanding at beginning of period... 25,711,520.731 57,776,195.507 16,054,361.321 19,161,715.815
Purchase payments.................... 10,091,361.789 7,002,703.784 1,828,154.900 8,135,229.721
Surrenders........................... (1,677,052.520) (4,392,921.746) (1,168,254.384) (1,459,588.916)
Transfers to annuity................. 0.000 (26,597.560) 0.000 0.000
Transfers between funds.............. 2,549,195.766 (8,345,279.937) (4,891,533.560) 8,541,930.500
--------------- --------------- --------------- ---------------
Outstanding at end of period......... 36,675,025.766 52,014,100.048 11,822,728.277 34,379,287.120
=============== =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
VAriety Plus
Van Kampen Van Kampen
LIT LIT Domestic Van Kampen Van Kampen
Money Strategic Van Kampen LIT LIT
Market Income LIT Common Government Multiple
ACCUMULATION PERIOD Fund Fund Stock Fund Fund Strategy
<S> <C> <C> <C> <C> <C>
Non-Qualified Contracts:
Outstanding at beginning of period... 172,772.518 752,632.015 2,129,473.068 745,153.812 1,653,659.302
Purchase payments.................... 7,565.950 29,682.191 53,334.914 51,285.660 10,871.291
Surrenders........................... (29,257.425) (58,883.265) (61,649.058) (68,410.031) (193,168.817)
Transfers to annuity................. 0.000 0.000 0.000 0.000 0.000
Transfers between funds.............. (120,057.945) (79,961.354) 72,108.571 (79,919.021) (84,228.017)
--------------- --------------- --------------- --------------- ---------------
Outstanding at end of period......... 31,023.098 643,469.587 2,193,267.495 648,110.420 1,387,133.759
=============== =============== =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
Fidelity VIP Neuberger & Neuberger &
Asset Fidelity VIP Fidelity VIP Berman AMT Berman AMT
Manager Overseas Index 500 Balanced Partners
Portfolio Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C> <C>
Outstanding at beginning of period... 325,839.561 93,593.434 50,474.334 90,936.949 268,546.384
Purchase payments.................... 42,938.182 60,103.179 149,398.976 36,135.056 169,410.794
Surrenders........................... (9,767.561) (93.893) (805.962) (4,199.243) (4,954.470)
Transfers to annuity................. 0.000 0.000 0.000 0.000 0.000
Transfers between funds.............. 9,496.631 (3,446.496) (56,852.220) 3,564.179 140,996.898
--------------- --------------- --------------- --------------- ---------------
Outstanding at end of period......... 368,506.813 150,156.224 255,919.568 126,436.941 573,999.606
=============== =============== =============== =============== ===============
</TABLE>
16
<PAGE>
Note E - Summary of Changes in Units - Continued
Changes in Units for the Year Ended December 31, 1995
<TABLE>
<CAPTION>
VAriety Plus - Continued
AGSPC Stock
AGSPC Social AGSPC
Stock Awareness International
Accumulation PERIOD Index Fund Fund Equities Fund
<S> <C> <C> <C>
Non-Qualified Contracts:
Outstanding at beginning of period... 673,760.206 41,120.891 680,590.894
Purchase payments.................... 29,287.805 10,732.299 33,337.090
Surrenders........................... (49,857.945) (8,661.175) (45,933.686)
Transfers to annuity................. 0.000 0.000 0.000
Transfers between funds.............. (4,977.152) (1,582.397) (189,448.798)
--------------- --------------- ---------------
Outstanding at end of period......... 648,212.914 41,609.618 478,545.500
=============== =============== ===============
</TABLE>
<TABLE>
OTHER CONTRACTS
<CAPTION>
Van Kampen
Van Kampen High Income Van Kampen
Van Kampen Corporate Van Kampen Corporate LIT Money
ACCUMULATION PERIOD Comstock Fund Bond Fund Reserve Fund Bond Fund Market Fund
<S> <C> <C> <C> <C> <C>
Non-Qualified Contracts:
Outstanding at beginning of period... 371,579.671 169,794.267 411,195.680 3,265,868.129 827,101.817
Purchase payments.................... 0.000 0.000 0.000 0.000 0.000
Surrenders........................... (11,922.632) (32,929.866) (53,584.102) (287,888.359) (53,606.690)
Transfers to annuity................. (1,422.004) 0.000 0.000 0.000 0.000
Transfers between funds.............. (2,771.286) 503.426 (28,908.394) 15,499.924 (71,071.960)
--------------- --------------- --------------- --------------- ---------------
Outstanding at end of period......... 355,463.749 137,367.827 328,703.184 299,3479.694 702,423.167
=============== =============== =============== =============== ===============
Qualified Contracts:
Outstanding at beginning of period... 164,204.905 0.000 78,075.084 73,443.858 30,159.958
Purchase payments.................... 536.521 0.000 199.421 1,358.750 0.000
Surrenders........................... (13,592.794) 0.000 (30,158.692) 0.000 (7,733.785)
Transfers to annuity................. 0.000 0.000 0.000 0.000 0.000
Transfers between funds.............. 0.000 0.000 0.000 0.000 0.000
--------------- --------------- --------------- --------------- ---------------
Outstanding at end of period......... 151,148.632 0.000 48,115.813 74,802.608 22,426.173
=============== =============== =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
Van Kampen
Van Kampen Van Kampen LIT Domestic Van Kampen
LIT Money LIT Domestic Strategic Van Kampen LIT Common
Market Fund Strategic Income Fund LIT Common Stock Fund
(Deferred Load) Income Fund (Deferred Load) Stock Fund (Deferred Load)
<S> <C> <C> <C> <C> <C>
Non-Qualified Contracts:
Outstanding at beginning of period... 1,223,781.737 575,240.379 1,069,872.228 291,228.921 1,786,702.024
Purchase payments.................... 586.468 0.000 0.000 0.000 0.000
Surrenders........................... (197,634.925) (18,257.613) (94,843.512) (20,092.499) (303,559.749)
Transfers to annuity................. 0.000 0.000 (11,088.000) 0.000 (8,357.577)
Transfers between funds.............. (177,782.776) 27700.701 (12,558.495) 17,174.197 121,298.758
--------------- --------------- --------------- --------------- ---------------
Outstanding at end of period......... 848,950.504 584,683.467 951,382.221 288,310.619 1,596,083.456
=============== =============== =============== =============== ===============
Qualified Contracts:
Outstanding at beginning of period... 426,837.882 58,279.672 271,027.407 4,202.245 818,076.293
Purchase payments.................... 14,302.609 0.000 388.105 0.000 12,584.870
Surrenders........................... (47,564.306) (17,162.626) (40,747.940) 0.000 (70,354.102)
Transfers to annuity................. 0.000 0.000 0.000 0.000 0.000
Transfers between funds.............. (22,209.354) 0.000 7,992.516 0.000 6,308.737
--------------- --------------- --------------- --------------- ---------------
Outstanding at end of period......... 371,366.831 41,117.046 238,660.088 4,202.245 766,615.798
=============== =============== =============== =============== ===============
</TABLE>
17
Note E - Summary of Changes in Units - Continued
Changes in Units for the Year Ended December 31, 1995
<TABLE>
<CAPTION>
SIERRA ADVANTAGE Short
Term
Global Corporate
Government Growth Income
Fund Fund Fund
ANNUITY PERIOD
<S> <C> <C> <C>
Outstanding at beginning of period... 0.000 0.000 0.000
Transfers from accumulation.......... 23,165.130 5,463.976 26,597.560
Annuity payments..................... (5,363.864) (1,265.214) (6,158.617)
--------------- --------------- ---------------
Outstanding at end of period......... 17,801.266 4,198.762 20,438.943
=============== =============== ===============
</TABLE>
<TABLE>
OTHER CONTRACTS
<CAPTION>
Van Kampen
Van Kampen High Income Van Kampen
Van Kampen Corporate Van Kampen Corporate LIT Money
ANNUITY PERIOD Comstock Fund Bond Fund Reserve Fund Bond Fund Market Fund
<S> <C> <C> <C> <C> <C>
Non-Qualified Contracts:
Outstanding at beginning of period... 27,397.375 0.000 71,670.134 103,542.880 23,060.131
Transfers from accumulation.......... 1,422.004 0.000 0.000 0.000 0.000
Annuity payments..................... (2,786.345) 0.000 (12,467.155) (15,445.732) (4,208.289)
Transfers between funds.............. (1,230.549) 0.000 0.000 0.000 0.000
--------------- --------------- --------------- --------------- ---------------
Outstanding at end of period......... 24,802.485 0.000 59,202.979 88,097.148 18,851.842
=============== =============== =============== =============== ===============
Qualified Contracts:
Outstanding at beginning of period... 0.000 0.000 0.000 5,688.339 0.000
Transfers from accumulation.......... 0.000 0.000 0.000 0.000 0.000
Annuity payments..................... 0.000 0.000 0.000 (787.991) 0.000
Transfers between funds.............. 0.000 0.000 0.000 0.000 0.000
--------------- --------------- --------------- --------------- ---------------
Outstanding at end of period......... 0.000 0.000 0.000 4,900.348 0.000
=============== =============== =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
Van Kampen
Van Kampen Van Kampen LIT Domestic Van Kampen
LIT Money LIT Domestic Strategic Van Kampen LIT Common
Market Fund Strategic Income Fund LIT Common Stock Fund
(Deferred Load) Income Fund (Deferred Load) Stock Fund (Deferred Load)
<S> <C> <C> <C> <C> <C>
Non-Qualified Contracts:
Outstanding at beginning of period... 594,477.542 14,952.887 116,752.801 2,820.817 156,484.254
Transfers from accumulation.......... 0.000 0.000 11,088.000 0.000 8,357.577
Annuity payments..................... (154,892.897) (5,700.288) (34,337.425) (636.058) (40,684.171)
Transfers between funds.............. 0.000 0.000 0.000 0.000 0.000
--------------- --------------- --------------- --------------- ---------------
Outstanding at end of period......... 439,584.645 9,252.599 93,503.376 2,184.759 124,157.660
=============== =============== =============== =============== ===============
Qualified Contracts:
Outstanding at beginning of period... 11,363.088 89.380 22,429.259 0.000 7,273.025
Transfers from accumulation.......... 0.000 0.000 0.000 0.000 0.000
Annuity payments..................... (6,546.927) 0.000 (5,119.590) 0.000 (3,174.485)
Transfers between funds.............. 0.000 0.000 0.000 0.000 0.000
--------------- --------------- --------------- --------------- ---------------
Outstanding at end of period......... 4,816.161 89.380 17,309.669 0.000 4,098.540
=============== =============== =============== =============== ===============
</TABLE>
18
<PAGE>
Note E - Summary of Changes in Units - Continued
Changes in Units for the Year Ended December 31, 1994
<TABLE>
<CAPTION>
SIERRA ADVANTAGE Short Term
Global U. S.
International Government Global Government
ACCUMULATION PERIOD Growth Fund Fund Growth Fund Money Fund Fund
<S> <C> <C> <C> <C> <C>
Outstanding at beginning of period... 9,502,246.682 19,320,639.816 20,576,053.109 1,479,140.661 24,761,033.965
Purchase payments.................... 30,488,798.822 16,302,480.036 37,607,137.094 4,545,287.776 28,567,151.722
Surrenders........................... (901,652.705) (1,043,267.503) (1,549,373.517) (491,141.154) (1,505,658.408)
Transfers to annuity................. 0.000 0.000 0.000 0.000 0.000
Transfers between funds.............. 2,322,412.017 (3,475,734.398) (665,118.190) 457,480.839 (6,303,306.461)
--------------- --------------- --------------- --------------- ---------------
Outstanding at end of period......... 41,411,804.816 31,104,117.951 55,968,698.496 5,990,768.122 45,519,220.818
=============== =============== =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
Short Term
High
Growth and Corporate Quality Emerging
Income Fund Income Fund Bond Fund Growth Fund
<S> <C> <C> <C> <C>
Outstanding at beginning of period... 0.000 27,478,746.085 0.000 0.000
Purchase payments.................... 20,284,289.617 40,062,344.908 12,264,554.507 16,997,627.089
Surrenders........................... (357,973.182) (2,056,737.876) (216,083.075) (317,716.395)
Transfers to annuity................. 0.000 0.000 0.000 0.000
Transfers between funds.............. 5,785,204.296 (7,708,157.610) 4,005,889.889 2,481,805.121
--------------- --------------- --------------- ---------------
Outstanding at end of period......... 25,711,520.731 57,776,195.507 16,054,361.321 19,161,715.815
=============== =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
Van Kampen Van Kampen
LIT LIT Domestic Van Kampen Van Kampen
Money Strategic Van Kampen LIT LIT
Market Income LIT Common Government Multiple
ACCUMULATION PERIOD Fund Fund Stock Fund Fund Strategy
<S> <C> <C> <C> <C> <C>
Non-Qualified Contracts:
Outstanding at beginning of period... 470,416.365 514,099.213 1,585,990.094 562,146.987 1,235,477.125
Purchase payments.................... 95,956.177 243,505.408 601,165.155 145,633.331 465,519.757
Surrenders........................... (53,016.211) (6,302.835) (9,704.707) (15,779.419) (41,420.840)
Transfers to annuity................. 0.000 0.000 0.000 0.000 0.000
Transfers between funds.............. (340,583.813) 1,330.229 (47,977.474) 53,152.913 (5,916.740)
--------------- --------------- --------------- --------------- ---------------
Outstanding at end of period 172,772.518 752,632.015 2,129,473.068 745,153.812 1,653,659.302
=============== =============== =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
Fidelity VIP Neuberger & Neuberger &
Asset Fidelity VIP Fidelity VIP Berman AMT Berman AMT
Manager Overseas Index 500 Balanced Partners
Portfolio Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C> <C>
Outstanding at beginning of period... 0.000 0.000 0.000 0.000 0.000
Purchase payments.................... 244,179.110 53,306.655 31,235.853 69,990.072 139,667.643
Surrenders........................... (2,994.287) (1.934) 0.000 (2.822) 0.000
Transfers to annuity................. 0.000 0.000 0.000 0.000 0.000
Transfers between funds.............. 84,654.738 40,288.713 19,238.481 20,949.699 128,878.741
--------------- --------------- --------------- --------------- ---------------
Outstanding at end of period......... 325,839.561 93,593.434 50,474.334 90,936.949 268,546.384
=============== =============== =============== =============== ===============
</TABLE>
19
<PAGE>
Note E - Summary of Changes in Units - Continued
Changes in Units for the Year Ended December 31, 1994 - Continued
<TABLE>
<CAPTION>
VAriety Plus - Continued
AGSPC Stock
AGSPC Social AGSPC
Stock Awareness International
ACCUMULATION PERIOD Index Fund Fund Equities Fund
<S> <C> <C> <C>
Non-Qualified Contracts:
Outstanding at beginning of period... 515,549.476 28,357.707 402,977.973
Purchase payments.................... 193,079.043 21,480.143 278,710.049
Surrenders........................... (3,0373.387) (16,487.492) (28,312.083)
Transfers to annuity................. 0.000 0.000 0.000
Transfers between funds.............. (4,494.926) 7,770.533 27,214.955
--------------- --------------- ---------------
Outstanding at end of period......... 673,760.206 41,120.891 680,590.894
=============== =============== ===============
</TABLE>
<TABLE>
OTHER CONTRACTS
<CAPTION>
Van Kampen
Van Kampen High Income Van Kampen
Van Kampen Corporate Van Kampen Corporate LIT Money
ACCUMULATION PERIOD Comstock Fund Bond Fund Reserve Fund Bond Fund Market Fund
<S> <C> <C> <C> <C> <C>
Non-Qualified Contracts:
Outstanding at beginning of period... 365,095.021 226,722.085 536,073.195 3,691,686.193 906,934.270
Purchase payments.................... 0.000 0.000 0.000 0.000 0.000
Surrenders........................... (33,689.933) (31,013.499) (98,822.017) (305,617.624) (276,250.648)
Transfers to annuity................. (6,132.477) 0.000 0.000 0.000 0.000
Transfers between funds.............. 46,307.060 (25,914.319) (26,055.498) (120,200.440) 196,418.195
--------------- --------------- --------------- --------------- ---------------
Outstanding at end of period......... 371,579.671 169,794.267 411,195.680 3,265,868.129 827,101.817
=============== =============== =============== =============== ===============
Qualified Contracts:
Outstanding at beginning of period... 200,055.262 0.000 80,922.264 71,668.595 30,159.958
Purchase payments.................... 549.904 0.000 437.330 954.472 0.000
Surrenders........................... (36,168.880) 0.000 (2,138.454) 0.000 0.000
Transfers to annuity................. 0.000 0.000 0.000 0.000 0.000
Transfers between funds.............. (231.381) 0.000 (1,146.056) 820.791 0.000
--------------- --------------- --------------- --------------- ---------------
Outstanding at end of period......... 164,204.905 0.000 78,075.084 73,443.858 30,159.958
=============== =============== =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
Van Kampen
Van Kampen Van Kampen LIT Domestic Van Kampen
LIT Money LIT Domestic Strategic Van Kampen LIT Common
Market Fund Strategic Income Fund LIT Common Stock Fund
(Deferred Load) Income Fund (Deferred Load) Stock Fund (Deferred Load)
<S> <C> <C> <C> <C> <C>
Non-Qualified Contracts:
Outstanding at beginning of period... 1,664,269.126 764,147.026 1,337,610.914 409,558.477 2,038,605.732
Purchase payments.................... 0.000 0.000 0.000 83.257 0.000
Surrenders........................... (449,670.189) (90,138.390) (279,842.492) (118,412.813) (216,864.376)
Transfers to annuity................. (3,821.260) 0.000 (7,531.261) 0.000 (15,133.587)
Transfers between funds.............. 13,004.060 (98,768.257) 19,635.067 0.000 (19,905.745)
--------------- --------------- --------------- --------------- ---------------
Outstanding at end of period......... 1,223,781.737 575,240.379 1,069,872.228 291,228.921 1,786,702.024
=============== =============== =============== =============== ===============
Qualified Contracts:
Outstanding at beginning of period... 479,512.428 58,279.672 350,133.062 4,202.245 917,581.645
Purchase payments.................... 11,786.955 0.000 394.276 0.000 14,118.689
Surrenders........................... (43,484.664) 0.000 (79,540.515) 0.000 (126,859.194)
Transfers to annuity................. 0.000 0.000 0.000 0.000 0.000
Transfers between funds.............. (20,976.837) 0.000 40.584 0.000 13,235.153
--------------- --------------- --------------- --------------- ---------------
Outstanding at end of period......... 426,837.882 58,279.672 271,027.407 4,202.245 818,076.293
=============== =============== =============== =============== ===============
</TABLE>
20
<PAGE>
Note E - Summary of Changes in Units - Continued
Changes in Units for the Year Ended December 31, 1994
<TABLE>
OTHER CONTRACTS
<CAPTION>
Van Kampen
Van Kampen High Income Van Kampen
Van Kampen Corporate Van Kampen Corporate LIT Money
ANNUITY PERIOD Comstock Fund Bond Fund Reserve Fund Bond Fund Market Fund
<S> <C> <C> <C> <C> <C>
Non-Qualified Contracts:
Outstanding at beginning of period... 24,882.973 0.000 84,510.759 135,437.248 26,186.518
Annuity payments..................... (3,618.075) 0.000 (12,840.625) (31,894.368) (3,126.387)
Transfers from accumulation.......... 6,132.477 0.000 0.000 0.000 0.000
Transfers between funds.............. 0.000 0.000 0.000 0.000 0.000
--------------- --------------- --------------- --------------- ---------------
Outstanding at end of period......... 27,397.375 0.000 71,670.134 103,542.880 23,060.131
=============== =============== =============== =============== ===============
Qualified Contracts:
Outstanding at beginning of period 0.000 0.000 0.000 6,517.949 0.000
Annuity payments 0.000 0.000 0.000 (829.610) 0.000
Transfers from accumulation 0.000 0.000 0.000 0.000 0.000
Transfers between funds 0.000 0.000 0.000 0.000 0.000
--------------- --------------- --------------- --------------- ---------------
Outstanding at end of period 0.000 0.000 0.000 5688.339 0.000
=============== =============== =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
Van Kampen
Van Kampen Van Kampen LIT Domestic Van Kampen
LIT Money LIT Domestic Strategic Van Kampen LIT Common
Market Fund Strategic Income Fund LIT Common Stock Fund
(Deferred Load) Income Fund (Deferred Load) Stock Fund (Deferred Load)
<S> <C> <C> <C> <C> <C>
Non-Qualified Contracts:
Outstanding at beginning of period... 759,226.707 20,824.113 215,354.665 3,545.037 136,132.883
Annuity payments..................... (168,570.425) (5,871.226) (58,040.628) (724.220) (32,003.242)
Transfers from accumulation.......... 3,821.260 0.000 7,531.261 0.000 15,133.587
Transfers between funds.............. 0.000 0.000 (48092.497) 0.000 37,221.026
--------------- --------------- --------------- --------------- ---------------
Outstanding at end of period......... 594,477.542 14,952.887 116,752.801 2,820.817 156,484.254
=============== =============== =============== =============== ===============
Qualified Contracts:
Outstanding at beginning of period... 18,146.507 136.068 27,923.470 0.000 10,542.691
Annuity payments..................... (6,783.419) (46.688) (5,494.211) 0.000 (3,269.666)
Transfers from accumulation.......... 0.000 0.000 0.000 0.000 0.000
Transfers between funds.............. 0.000 0.000 0.000 0.000 0.000
--------------- --------------- --------------- --------------- ---------------
Outstanding at end of period......... 11,363.088 89.380 22,429.259 0.000 7,273.025
=============== =============== =============== =============== ===============
</TABLE>
21
<PAGE>
Note F - Assets Represented By:
<TABLE>
<CAPTION>
December 31,1995
ACCUMULATION PERIOD:
Units Unit Value Amount
<S> <C> <C> <C>
SIERRA ADVANTAGE:
International Growth Fund...................... 38,882,135.444 $ 1.180567 $ 45,902,966
Short Term Global Government Fund.............. 23,376,496.403 1.019136 23,823,829
Growth Fund.................................... 65,732,670.354 1.516694 99,696,347
Global Money Fund.............................. 19,070,427.181 1.068122 20,369,543
US. Government Fund............................ 47,440,751.595 1.102324 52,295,079
Growth and Income Fund......................... 36,675,025.766 1.263773 46,348,907
Corporate Income Fund.......................... 52,014,100.048 1.166536 60,676,320
Short Term High Quality Bond Fund.............. 11,822,728.277 1.044070 12,343,756
Emerging Growth Fund........................... 34,379,287.120 1.339251 46,042,495
-------------
407,499,242
-------------
VAriety Plus:
Van Kampen LIT Money Market Fund............... 31,023.098 1.477475 45,836
Van Kampen LIT Domestic Strategic Income Fund.. 643,469.587 1.661247 1,068,962
Van Kampen LIT Common Stock Fund............... 2,193,267.495 2.141736 4,697,400
Van Kampen LIT Government Fund................. 648,110.420 1.720968 1,115,377
Van Kampen LIT Multiple Strategy Fund.......... 1,387,133.759 2.047678 2,840,403
Fidelity VIP Asset Manager Portfolio........... 368,506.813 1.831737 675,008
Fidelity VIP Overseas Portfolio................ 150,156.224 1.635732 245,615
Fidelity VIP Index 500 Portfolio............... 255,919.568 1.533115 392,354
Neuberger and Berman AMT Balanced Portfolio.... 126,436.941 1.616129 204,338
Neuberger and Berman AMT Partners Portfolio.... 573,999.606 1.297141 744,558
AGSPC Stock Index Fund......................... 648,212.914 2.233330 1,447,673
AGSPC Social Awareness Fund.................... 41,609.618 1.777926 73,979
AGSPC International Equities Fund.............. 478,545.500 1.114674 533,422
-------------
14,084,925
-------------
OTHER CONTRACTS:
Non Qualified:
Van Kampen Comstock Fund....................... 355,463.749 10.114739 3,595,423
Van Kampen Corporate Bond Fund................. 137,367.827 4.360496 598,992
Van Kampen Reserve Fund........................ 328,703.184 3.325272 1,093,027
Van Kampen High Income Corporate Bond Fund..... 2,993,479.694 4.077748 12,206,656
Van Kampen LIT Money Market Fund............... 702,423.167 2.263550 1,589,970
Van Kampen LIT Money Market Fund (deferred load) 848,950.504 2.118700 1,798,671
Van Kampen LIT Domestic Strategic Income Fund.. 584,683.467 3.185024 1,862,231
Van Kampen LIT Domestic Strategic Income Fund
(deferred load).............................. 951,382.221 2.920774 2,778,772
Van Kampen LIT Common Stock Fund............... 288,310.619 4.395486 1,267,265
Van Kampen LIT Common Stock Fund (deferred load) 1,596,083.456 4.123383 6,581,263
Qualified:
Van Kampen Comstock Fund....................... 151,148.632 12.826825 1,938,757
Van Kampen Reserve Fund........................ 48,115.813 3.326430 160,054
Van Kampen High Income Corporate Bond Fund..... 74,802.608 4.102343 306,866
Van Kampen LIT Money Market Fund............... 22,426.173 2.263550 50,763
Van Kampen LIT Money Market Fund (deferred load) 371,366.831 2.118700 786,815
Van Kampen LIT Domestic Strategic Income Fund.. 41,117.046 3.393373 139,525
Van Kampen LIT Domestic Strategic Income Fund
(deferred load).............................. 238,660.088 3.085083 736,286
Van Kampen LIT Common Stock Fund............... 4,202.245 4.058526 17,055
Van Kampen LIT Common Stock Fund (deferred load) 766,615.798 4.097147 3,140,938
-------------
40,649,329
-------------
Total Accumulation Period....................................................... 462,233,496
-------------
</TABLE>
22
<PAGE>
Note F - Assets Represented By: - Continued
<TABLE>
<CAPTION>
December 31,1995
ANNUITY PERIOD:
Units Unit Value Amount
<S> <C> <C> <C>
SIERRA ADVANTAGE:
Short Term Global Government Fund.............. 17,801.266 $ 1.019136 $ 18,142
Growth Fund.................................... 4,198.762 1.516694 6,368
Corporate Income Fund.......................... 20,438.943 1.166536 23,843
-------------
48,353
-------------
OTHER CONTRACTS:
Non Qualified:
Van Kampen Comstock Fund....................... 24,802.485 10.114739 250,871
Van Kampen Corporate Bond Fund................. 0.000 4.360496 0
Van Kampen Reserve Fund........................ 59,202.979 3.325272 196,866
Van Kampen High Income Corporate Bond Fund..... 88,097.148 4.077748 359,238
Van Kampen LIT Money Market Fund............... 18,851.842 2.263550 42,672
Van Kampen LIT Money Market Fund (deferred load) 439,584.645 2.118700 931,348
Van Kampen LIT Domestic Strategic Income Fund.. 9,252.599 3.185024 29,470
Van Kampen LIT Domestic Strategic Income Fund
(deferred load).............................. 93,503.376 2.920774 273,102
Van Kampen LIT Common Stock Fund............... 2,184.759 4.395486 9,603
Van Kampen LIT Common Stock Fund (deferred load) 124,157.660 4.123383 511,950
Qualified:
Van Kampen Comstock Fund....................... 0.000 12.826825 0
Van Kampen Corporate Bond Fund................. 0.000 4.379575 0
Van Kampen Reserve Fund........................ 0.000 3.326430 0
Van Kampen High Income Corporate Bond Fund..... 4,900.348 4.102343 20,103
Van Kampen LIT Money Market Fund............... 0.000 2.263550 0
Van Kampen LIT Money Market Fund (deferred load) 4,816.161 2.118700 10,204
Van Kampen LIT Domestic Strategic Income Fund.. 89.380 3.393373 303
Van Kampen LIT Domestic Strategic Income Fund
(deferred load).............................. 17,309.669 3.085083 53,402
Van Kampen LIT Common Stock Fund............... 0.000 4.058526 0
Van Kampen LIT Common Stock Fund (deferred load) 4,098.540 4.097147 16,792
-------------
2,705,924
-------------
Total Annuity Period............................................................ 2,754,277
-------------
Total Contract Owner Reserves................................................... $464,987,773
=============
</TABLE>
23
<PAGE>
Note F - Assets Represented By: - Continued
<TABLE>
<CAPTION>
December 31,1994
ACCUMULATION PERIOD:
Units Unit Value Amount
<S> <C> <C> <C>
SIERRA ADVANTAGE:
International Growth Fund...................... 41,411,804.816 $ 1.124150 $ 46,553,080
Short Term Global Government Fund.............. 31,104,117.951 0.957146 29,771,182
Growth Fund.................................... 55,968,698.496 1.121034 62,742,814
Global Money Fund.............................. 5,990,768.122 1.028063 6,15,8887
US. Government Fund............................ 45,519,220.818 0.957302 43,575,641
Growth and Income Fund......................... 25,711,520.731 0.968879 24,911,352
Corporate Income Fund.......................... 57,776,195.507 0.946638 54,693,142
Short Term High Quality Bond Fund.............. 16,054,361.321 0.969705 15,567,994
Emerging Growth Fund........................... 19,161,715.815 1.037868 19,887,332
-------------
303,861,424
-------------
VAriety Plus:
Van Kampen LIT Money Market Fund.............. 172,772.518 1.422570 245,781
Van Kampen LIT Domestic Strategic Income Fund. 752,632.015 1.390051 1,046,197
Van Kampen LIT Common Stock Fund.............. 2,129,473.068 1.587803 3,381,184
Van Kampen LIT Government Fund................ 745,153.812 1.491029 1,111,046
Van Kampen LIT Multiple Strategy Fund......... 1,653,659.302 1.583079 2,617,873
Fidelity VIP Asset Manager Portfolio.......... 325,839.561 1.590509 518,251
Fidelity VIP Overseas Portfolio............... 93,593.434 1.514590 141,756
Fidelity VIP Index 500 Portfolio.............. 50,474.334 1.134860 57,281
Neuberger and Berman AMT Balanced Portfolio... 90,936.949 1.326154 120,596
Neuberger and Berman AMT Partners Portfolio... 268,546.384 0.965260 259,217
AGSPC Stock Index Fund........................ 673,760.206 1.651802 1,112,918
AGSPC Social Awareness Fund................... 41,120.891 1.299353 53,431
AGSPC International Equities Fund............. 680,590.894 1.021863 695,471
-------------
11,361,002
-------------
OTHER CONTRACTS:
Non Qualified:
Van Kampen Comstock Fund...................... 371,579.671 7.486244 2,781,736
Van Kampen Corporate Bond Fund................ 169,794.267 3.623990 615,333
Van Kampen Reserve Fund....................... 411,195.680 3.191319 1,312,257
Van Kampen High Income Corporate Bond Fund.... 3,265,868.129 3.499106 11,427,619
Van Kampen LIT Money Market Fund.............. 827,101.817 2.162877 1,788,919
Van Kampen LIT Money Market Fund (deferred load) 1,223,781.737 2.034116 2,489,314
Van Kampen LIT Domestic Strategic Income Fund. 575,240.379 2.644527 1,521,239
Van Kampen LIT Domestic Strategic Income Fund
(deferred load).............................. 1,069,872.228 2.436668 2,606,923
Van Kampen LIT Common Stock Fund............... 291,228.921 3.233513 941,693
Van Kampen LIT Common Stock Fund (deferred load) 1,786,702.024 3.047783 5,445,480
Qualified:
Van Kampen Comstock Fund...................... 164,204.905 9.493541 1,558,886
Van Kampen Reserve Fund....................... 78,075.084 3.192430 249,249
Van Kampen High Income Corporate Bond Fund.... 73,443.858 3.520222 258,539
Van Kampen LIT Money Market Fund.............. 30,159.958 2.162877 65,232
Van Kampen LIT Money Market Fund (deferred load) 426,837.882 2.034116 868,238
Van Kampen LIT Domestic Strategic Income Fund. 58,279.672 2.817521 164,204
Van Kampen LIT Domestic Strategic Income Fund
(deferred load)............................. 271,027.407 2.573757 697,559
Van Kampen LIT Common Stock Fund.............. 4,202.245 2.985622 12,546
Van Kampen LIT Common Stock Fund (deferred load) 818,076.293 3.028400 2,477,462
-------------
37,282,428
-------------
Total Accumulation Period....................................................... 352,504,854
-------------
</TABLE>
24
<PAGE>
Note F - Assets Represented By: - Continued
<TABLE>
<CAPTION>
December 31,1994
ANNUITY PERIOD:
Units Unit Value Amount
<S> <C> <C> <C>
OTHER CONTRACTS:
Non Qualified:
Van Kampen Comstock Fund 27,397.375 $ 7.486244 205,103
Van Kampen Corporate Bond Fund 0.000 3.623990 0
Van Kampen Reserve Fund 71,670.134 3.191319 228,722
Van Kampen High Income Corporate Bond Fund 103,542.880 3.499106 362,308
Van Kampen LIT Money Market Fund 23,060.131 2.162877 49,876
Van Kampen LIT Money Market Fund (deferred load) 594,477.542 2.034116 1,209,236
Van Kampen LIT Domestic Strategic Income Fund 14,952.887 2.644527 39,543
Van Kampen LIT Domestic Strategic Income Fund
(deferred load) 116,752.801 2.436668 284,488
Van Kampen LIT Common Stock Fund 2,820.817 3.233513 9,121
Van Kampen LIT Common Stock Fund (deferred load) 156,464.254 3.047783 476,869
Qualified:
Van Kampen Comstock Fund 0.000 9.493541 0
Van Kampen Corporate Bond Fund 0.000 3.639851 0
Van Kampen Reserve Fund 0.000 3.192430 0
Van Kampen High Income Corporate Bond Fund 5,688.339 3.520222 20,024
Van Kampen LIT Money Market Fund 0.000 2.162877 0
Van Kampen LIT Money Market Fund (deferred load) 11,363.088 2.034116 23,114
Van Kampen LIT Domestic Strategic Income Fund 89.380 2.817521 252
Van Kampen LIT Domestic Strategic Income Fund
(deferred load) 22,429.059 2.573757 57,727
Van Kampen LIT Common Stock Fund 0.000 2.985622 0
Van Kampen LIT Common Stock Fund (deferred load) 7,273.025 3.028400 22,026
-------------
Total Annuity Period 2,988,409
-------------
Total Contract Owner Reserves $355,493,263
=============
</TABLE>
25
<PAGE>
[GRAPHIC OMITTED]
ERNST & YOUNG LLP One Houston Center Phone: 713-750-1500
Suite 2400 Fax: 713-750-1501
1221 McKinney Street
Houston, Texas 77010-2007
Report of Independent Auditors
Board of Directors
American General Life Insurance Company
We have audited the accompanying consolidated balance sheets of American
General Life Insurance Company (a wholly owned subsidiary of American General
Corporation) and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of income, shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Company'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. 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 consolidated financial position of American General
Life Insurance Company and subsidiaries at December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles.
As discussed in Note 1.2 to the financial statements, in 1993 the Company
changed certain of its accounting methods as a result of adopting new,
required accounting standards.
/s/Ernst & Young LLP
February 12, 1996
26
<PAGE>
American General Life Insurance Company
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31
1995 1994
---------------------------
(In Thousands)
<S> <C> <C>
ASSETS
Investments:
Fixed maturity securities - at fair value
(amortized cost - $23,349,517 in 1995 and
$21,125,289 in 1994) $ 24,769,751 $ 20,010,569
Equity securities - at fair value (cost -
$72,443 in 1995 and $101,663 in 1994) 92,318 106,455
Mortgage loans on real estate 1,790,110 1,895,561
Investment real estate 141,927 138,768
Policy loans 918,465 822,047
Other long-term investments 23,819 14,852
Short-term investments 65,262 186,945
------------- -------------
Total investments 27,801,652 23,175,197
Cash 43,944 12,862
Investment in parent company (cost - $8,597,000 in
1995 and 1994) 24,399 19,764
Indebtedness from affiliates 90,664 98,276
Accrued investment income 392,832 345,275
Accounts and notes receivable 174,303 155,649
Deferred policy acquisition costs 605,501 1,479,115
Property and equipment 38,275 36,952
Other assets 124,919 102,565
Assets held in separate accounts 5,051,112 2,900,366
------------- -------------
Total assets $ 34,347,601 $ 28,326,021
============= =============
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
December 31
1995 1994
---------------------------
(In Thousands)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Insurance and annuity liabilities $ 25,276,305 $ 23,198,143
Other policy claims and benefits payable 43,175 42,448
Other policyholders' funds 445,801 382,627
Federal income taxes 560,538 235,031
Indebtedness to affiliates 3,120 3,136
Other liabilities 284,328 189,703
Liabilities related to separate accounts 5,051,112 2,900,366
------------- -------------
Total liabilities 31,664,379 26,951,454
Shareholders' equity:
Common stock, $10 par value, 600,000 shares
authorized, issued, and outstanding 6,000 6,000
Preferred stock, $100 par value, 8,500 shares
authorized, issued and outstanding 850 -
Additional paid-in capital 858,075 850,358
Net unrealized investment gains (losses) 493,594 (730,900)
Retained earnings 1,324,703 1,249,109
------------- -------------
Total shareholders' equity 2,683,222 1,374,567
Total liabilities and shareholders' equity $ 34,347,601 $ 28,326,021
============= =============
</TABLE>
See accompanying notes.
28
<PAGE>
American General Life Insurance Company
Consolidated Statements of Income
<TABLE>
<CAPTION>
Year ended December 31
1995 1994 1993
---------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Revenues:
Premiums and other considerations $ 342,420 $ 324,521 $ 325,296
Net investment income 2,011,088 1,874,323 1,816,948
Realized investment gains (losses) (1,942) (61,268) 53,804
Other 27,172 30,841 31,207
------------ ------------ ------------
Total revenues 2,378,738 2,168,417 2,227,255
Benefits and expenses:
Benefits 1,641,206 1,514,544 1,529,084
Operating costs and expenses 309,110 297,498 280,011
Goodwill write-down - - 293,127
Interest expense, net 2,180 1,254 997
------------ ------------ ------------
Total benefits and expenses 1,952,496 1,813,296 2,103,219
------------ ------------ ------------
Income before income taxes and cumulative effect
of accounting changes 426,242 355,121 124,036
Income tax expense 143,947 128,188 154,380
------------ ------------ ------------
Income (loss) before cumulative effect of
accounting changes 282,295 226,933 (30,344)
Cumulative effect of accounting changes, net - - (24,463)
------------ ------------ ------------
Net income (loss) $ 282,295 $ 226,933 $ (54,807)
============ ============ ============
</TABLE>
See accompanying notes.
29
<PAGE>
American General Life Insurance Company
Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
Year ended December 31
1995 1994 1993
---------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Common stock:
Balance at beginning of year $ 6,000 $ 6,000 $ 6,000
Change during year - - -
------------ ------------ ------------
Balance at end of year 6,000 6,000 6,000
Preferred stock:
Balance at beginning of year - - -
Change during year 850 - -
------------ ------------ ------------
Balance at end of year 850 - -
Additional paid-in capital:
Balance at beginning of year 850,358 850,236 809,658
Change during year 7,717 122 40,578
------------ ------------ ------------
Balance at end of year 858,075 850,358 850,236
Net unrealized investment gains (losses):
Balance at beginning of year (730,900) 427,471 29,160
Change during year 1,224,494 (1,158,371) (12,972)
Effect of accounting change - - 411,283
------------ ------------ ------------
Balance at end of year 493,594 (730,900) 427,471
Retained earnings:
Balance at beginning of year 1,249,109 1,261,676 1,320,199
Net income (loss) 282,295 226,933 (54,807)
Dividends paid (206,701) (239,500) (3,716)
------------ ------------ ------------
Balance at end of year 1,324,703 1,249,109 1,261,676
------------ ------------ ------------
Total shareholders' equity $ 2,683,222 $ 1,374,567 $ 2,545,383
============ ============ ============
</TABLE>
See accompanying notes.
30
<PAGE>
American General Life Insurance Company
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended December 31
1995 1994 1993
---------------------------------------------
(In Thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 282,295 $ 226,933 $ (54,807)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Change in accounts and note receivable (18,654) (8,942) (59,368)
Change in insurance and annuity liabilities (70,383) 120,756 749,222
Amortization of policy acquisition costs 68,295 56,662 67,424
Policy acquisition costs deferred (203,607) (194,974) (198,210)
Change in other policyholders' funds 63,174 38,379 11,561
Provision for deferred income taxes (9,773) 24,043 (20,144)
Goodwill write-down - - 293,127
Depreciation and amortization (17,706) (41,268) (41,253)
Change in indebtedness to/from affiliates 7,596 (113,620) 7,514
Change in amounts payable to brokers 30,964 23,806 (51,801)
(Gain) loss on sale of investment 1,942 61,268 (53,804)
Other, net 46,863 (61,093) 40,641
------------ ------------ ------------
Net cash provided by operating activities 181,006 131,950 690,102
INVESTING ACTIVITIES
Purchases of investments and loans made (14,573,323) (15,723,196) (14,901,818)
Sales or maturities of investments and receipts
from repayment of loans 12,528,185 13,939,720 12,172,430
Sales and purchases of property and equipment, net (12,114) (5,529) (6,833)
------------ ------------ ------------
Net cash used in investing activities (2,057,252) (1,789,005) (2,736,221)
FINANCING ACTIVITIES
Policyholder account deposits 3,372,522 3,136,341 2,856,485
Policyholder account withdrawals (1,258,560) (1,227,046) (851,094)
Dividends paid (206,701) (239,500) -
Other 67 122 40,578
------------ ------------ ------------
Net cash provided by financing activities 1,907,328 1,669,917 2,045,969
------------ ------------ ------------
Increase (decrease) in cash 31,082 12,862 (150)
Cash at beginning of year 12,862 - 150
------------ ------------ ------------
Cash at end of year $ 43,944 $ 12,862 $ -
============ ============ ============
</TABLE>
Interest paid amounted to approximately $1,933,000, $1,207,000, and $1,359,000
in 1995, 1994, and 1993, respectively.
See accompanying notes.
31
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 1994
NATURE OF OPERATIONS
American General Life Insurance Company (the "Company") is a wholly owned
subsidiary of AGC Life Insurance Company, which is a wholly owned subsidiary
of American General Corporation (the "Parent Company"). The Company's wholly
owned life insurance subsidiaries are American General Life Insurance Company
of New York ("AGNY") and the Variable Annuity Life Insurance Company
("VALIC").
The Company offers a complete portfolio of the standard forms of universal
life, interest-sensitive whole life, term life, fixed and variable annuities
throughout the United States, and a variety of equity products through its
broker/dealer, American General Securities Incorporated. In addition, the
Company recently entered into the structured settlement arena. The Company
serves the estate planning needs of middle- and upper-income households and
the insurance needs of small- to medium-size businesses. AGNY offers a broad
array of traditional and interest-sensitive insurance, in addition to
individual annuity products. VALIC provides tax-deferred retirement annuities
and employer-sponsored retirement plans to employees of healthcare, education,
public sector, and other not-for-profit organizations throughout the United
States.
1. ACCOUNTING POLICIES
1.1 PREPARATION OF FINANCIAL STATEMENTS
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles ("GAAP"). These principles are
established primarily by the Financial Accounting Standards Board ("FASB") and
the American Institute of Certified Public Accountants.
The preparation of financial statements requires management to make estimates
and assumptions that affect (1) the reported amounts of assets and
liabilities, (2) disclosures of contingent assets and liabilities, and (3) the
reported amounts of revenues and expenses during the reporting periods.
Ultimate results could differ from those estimates.
The consolidated financial statements include the accounts of the Company and
its wholly owned life insurance subsidiaries, AGNY and VALIC. Transactions
with the Parent Company and other subsidiaries of the Parent Company are not
eliminated from the financial statements of the Company. All other material
intercompany transactions have been eliminated in consolidation.
32
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.2 ACCOUNTING CHANGES
During 1995, the Company adopted Statement of Financial Accounting Standards
("SFAS") 120, "Accounting and Reporting by Mutual Life Insurance Enterprises
and by Enterprises for Certain Long-Duration Participating Contracts," and
SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of." SFAS 120 establishes accounting for
certain participating life insurance contracts. SFAS 121 establishes
accounting standards for (1) the impairment of long-lived assets, certain
identifiable intangibles, and goodwill related to those assets to be held and
used in the business, and (2) long-lived assets and certain identifiable
intangibles to be disposed of. With the adoption of SFAS 121, the Company
measures impairment of certain investment real estate based on fair value,
rather than net realizable value as previously required. Adoption of these
standards did not have a material impact on the consolidated financial
statements.
During 1994, the Company adopted the following accounting standards:
SFAS 118, "Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosures." This standard requires disclosures about
the recorded investment in certain impaired loans and the recognition of
related interest income (see Note 2.4). This standard did not impact the
consolidated financial statements.
SFAS 119, "Disclosure About Derivative Financial Instruments and Fair
Value of Financial Instruments" requires additional disclosures about
derivative financial instruments and amends existing fair value
disclosure requirements (see Notes 6 and 7). This standard did not impact
the consolidated financial statements.
Effective January 1, 1993, the Company adopted the following accounting
standards:
SFAS 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions," resulted in a one-time reduction of net income of $4 million.
This standard requires accrual of a liability for postretirement benefits
other than pensions.
SFAS 109, "Accounting for Income Taxes," resulted in a one-time decrease
of net income of $19 million. This standard changes the way income tax
expense is determined for financial reporting purposes.
33
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.2 ACCOUNTING CHANGES (CONTINUED)
SFAS 112, "Employers' Accounting for Postemployment Benefits," resulted
in a one-time reduction of net income of $1 million. This standard
requires the accrual of benefits provided to employees after employment
but before retirement.
SFAS 113, "Accounting and Reporting for Reinsurance of Short-Duration and
Long-Duration Contracts," requires that reinsurance receivables and
prepaid reinsurance premiums be reported as assets, rather than netted
against the related insurance liabilities. This standard did not have a
material impact on the consolidated financial statements.
SFAS 114, "Accounting by Creditors for Impairment of a Loan," requires
that certain impaired loans be reported at either the present value of
expected future cash flows, the loan's observable market price, or the
fair value of underlying collateral. This standard did not have a
material impact on the consolidated financial statements.
At December 31, 1993, the Company adopted SFAS 115, "Accounting for
Certain Investments in Debt and Equity Securities." This statement
requires that debt and equity securities be carried at fair value unless
the company has the positive intent and ability to hold these investments
to maturity. Debt and equity securities must be classified into one of
three categories: (1) held-to-maturity, (2) available-for-sale, or (3)
trading securities. At December 31, 1993, the Company classified all debt
and equity securities as available-for-sale and recorded net unrealized
gains on fixed maturity securities (net of applicable deferred income
taxes) of $411 million to shareholders' equity.
34
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.3 STATUTORY ACCOUNTING
The Company and its wholly owned life insurance subsidiaries are required to
file financial statements with state regulatory authorities. State insurance
laws prescribe accounting practices for calculating statutory net income and
equity. In addition, state regulators may allow permitted statutory accounting
practices that differ from prescribed practices. The use of such permitted
practices by the Company and its wholly owned life insurance subsidiaries did
not have a material effect on the statutory equity at December 31, 1995.
Statutory financial statements differ from GAAP. Significant differences were
as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
---------------------------------------------
<S> <C> <C> <C>
Net income:
Statutory net income (1995 balance
is unaudited) $ 197,769 $ 281,344 $ 221,272
Deferred policy acquisition costs 135,312 138,312 130,786
Deferred income taxes 9,773 (24,043) 20,144
Tax rate-related adjustment - - (10,729)
Adjustments to policy reserves (77,591) (76,458) (116,297)
Goodwill write-down - - (293,127)
Goodwill amortization (2,195) (2,200) (12,115)
Cumulative effect of accounting changes - - (24,463)
Realized gain (loss) on investments 22,874 (19,654) 37,811
Gain on sale of subsidiary 661 (41,956) -
Other, net (4,308) (28,412) (8,089)
------------ ------------ ------------
GAAP net income (loss) $ 282,295 $ 226,933 $ (54,807)
============ ============ ============
Shareholders' equity:
Statutory capital and surplus (1995 balance
is unaudited) $ 1,298,323 $ 1,283,268 $ 1,262,381
Deferred policy acquisition costs 605,501 1,479,115 481,615
Deferred income taxes (549,663) (284,832) (505,315)
Adjustments to policy reserves (311,065) (208,913) (155,862)
Acquisition-related goodwill 57,795 59,990 62,190
Asset valuation reserve (AVR) 263,295 223,382 195,655
Interest maintenance reserve (IMR) 3,114 (272) 57,110
Investment valuation differences 1,417,775 (1,115,921) 1,160,682
Benefit plans (pretax) 6,023 4,421 4,290
Surplus from separate accounts (76,645) (51,704) (37,354)
Other, net (31,231) (13,967) 19,991
------------ ------------ ------------
Total GAAP shareholders' equity $ 2,683,222 $ 1,374,567 $ 2,545,383
============ ============ ============
</TABLE>
35
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.3 STATUTORY ACCOUNTING (CONTINUED)
The more significant differences between GAAP and statutory accounting
principles are that under GAAP: (a) acquisition costs related to acquiring new
business are deferred and amortized over the expected lives of the policies
rather than being charged to operations as incurred; (b) future policy
benefits are based on estimates of mortality, interest, and withdrawals
generally representing the companies' experience, which may differ from those
based on statutory mortality and interest requirements without consideration
of withdrawals; (c) deferred federal income taxes are provided for significant
timing differences between income reported for financial reporting purposes
and income reported for federal income tax purposes; (d) certain assets
(principally furniture and equipment, agents' debit balances, and certain
other receivables) are reported as assets rather than being charged to
retained earnings; (e) acquisitions are accounted for using the purchase
method of accounting rather than being accounted for as equity investments;
and (f) fixed maturity investments are carried at fair value rather than
amortized cost.
1.4 INSURANCE CONTRACTS
The insurance contracts accounted for in these financial statements include
primarily long-duration contracts. Long-duration contracts include traditional
whole life, endowment, guaranteed renewable term life, universal life, limited
payment, and investment contracts. Long-duration contracts generally require
the performance of various functions and services over a period of more than
one year. The contract provisions generally cannot be changed or canceled by
the insurer during the contract period. However, most new contracts written by
the Company allow the insurer to revise certain elements used in determining
premium rates or policy benefits subject to guarantees stated in the
contracts.
1.5 INVESTMENTS
FIXED MATURITY AND EQUITY SECURITIES
All fixed maturity and equity securities are currently classified as
available-for-sale and recorded at fair value. After adjusting related balance
sheet accounts as if the unrealized gains (losses) had been realized, the net
adjustment is recorded in net unrealized gains (losses) on securities within
shareholders' equity. If the fair value of a security classified
36
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.5 INVESTMENTS (CONTINUED)
as available-for-sale declines below its cost and this decline is considered
to be other than temporary, the security is reduced to its fair value, and the
reduction is recorded as a realized loss.
MORTGAGE LOANS
Mortgage loans are reported at amortized cost, net of an allowance for losses.
The allowance for losses covers all nonperforming loans, consisting of loans
restructured or delinquent 60 days or more. The allowance also covers loans
for which there is concern based on management's assessment of risk factors,
such as potential nonpayment or nonmonetary default. The allowance is based on
a loan-specific review and a formula that reflects past results and current
trends.
Impaired loans, those for which the Company determines that it is probable
that all amounts due under the contractual terms will not be collected, are
reported at the lower of amortized cost or fair value of the underlying
collateral, less estimated costs to sell.
POLICY LOANS
Policy loans are reported at unpaid principal balances adjusted periodically
for uncollectible amounts.
INVESTMENT REAL ESTATE
Investment real estate consists of income-producing real estate, foreclosed
real estate, and the American General Center, an office complex in Houston.
During 1995, the Company adopted SFAS 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." Under SFAS
121, investment real estate is classified as held for investment or available
for sale, depending on management's intent.
The Company classifies all investment real estate, except the American General
Center, as available for sale. Real estate available for sale is carried at
the lower of cost (less accumulated depreciation at December 31, 1994, prior
to adoption of SFAS 121) or fair value less cost to sell. Changes in estimates
of fair value less cost to sell are recognized as realized gains (losses)
through a valuation allowance.
37
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.5 INVESTMENTS (CONTINUED)
At December 31, 1995, real estate held for investment is carried at cost, less
accumulated depreciation and impairment reserves and write-downs, if
applicable. Impairment losses are recorded whenever circumstances indicate
that a property might be impaired and the estimated undiscounted cash flows to
be generated by the property are less than the carrying amount. In such event,
the property is written down to fair value, determined by observable market
prices, third-party appraisals, or expected future cash flows discounted at
market rates. Any write-down is recognized as a realized loss, and a new cost
basis is established.
Prior to 1995, real estate held for investment was carried at cost less
accumulated depreciation and an allowance for any impairment in value. When
the net realizable value was less than the carrying value, the deficiency was
recognized as a realized loss through a valuation allowance specifically
identified with the associated real estate asset.
INVESTMENT INCOME
Interest on fixed maturity securities and performing mortgage loans is
recorded as income when earned and is adjusted for any amortization of premium
or discount. Interest on restructured mortgage loans is recorded as income
when earned based on the new contractual rate. Interest on delinquent mortgage
loans is recorded as income on a cash basis. Dividends are recorded as income
on ex-dividend dates.
REALIZED INVESTMENT GAINS OR LOSSES
Realized investment gains or losses are recognized using the specific
identification method and include declines in fair value of investments below
cost that are considered to be other than temporary.
1.6 SEPARATE ACCOUNTS
Separate accounts are assets and liabilities associated with certain
contracts, principally annuities. The investment risk lies solely with the
holder of the contract rather than the Company. Consequently, the insurer's
liability for these accounts equals the value of the account assets.
Investment income, realized investment gains (losses), and policyholder
38
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.6 SEPARATE ACCOUNTS (CONTINUED)
account deposits and withdrawals related to Separate Accounts are excluded
from the consolidated statements of income and cash flows. Assets held in
Separate Accounts are primarily shares in mutual funds, which are carried at
fair value, based on the quoted net asset value per share.
1.7 DEFERRED POLICY ACQUISITION COSTS ("DPAC")
The costs of writing an insurance policy, including agents' commissions,
underwriting and marketing expenses, are deferred and included in the DPAC
asset.
DPAC associated with interest-sensitive life contracts, insurance investment
contracts, and participating life insurance contracts is charged to expense in
relation to the estimated gross profits of those contracts. DPAC associated
with all other insurance contracts is charged to expense over the
premium-paying period, or as the premiums are earned over the life of the
contracts.
Gross profits include realized investment gains (losses). In addition, DPAC is
adjusted for the impact on estimated future gross profits as if net unrealized
gains (losses) on securities had been realized at the balance sheet date. The
impact of this adjustment is included in the net unrealized gains (losses) on
securities within shareholders' equity.
The Company reviews the carrying value of DPAC on at least an annual basis. In
determining whether the carrying amount is appropriate, the Company considers
estimated future gross profits or future premiums, as applicable for the type
of contract. In all cases, the Company considers expected mortality, interest
earned and credited rates, persistency and expenses. The reported value and
the remaining life of DPAC are considered appropriate.
39
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.7 DEFERRED POLICY ACQUISITION COSTS ("DPAC") (CONTINUED)
The balance of DPAC at December 31 and the components of the change reported
in operating costs and expenses for the years then ended were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Balance at January 1 $ 1,479,115 $ 481,615 $ 909,925
Capitalization 203,607 194,974 198,210
Amortization (60,676) (56,662) (67,424)
Reclassification to net assets of life
insurance company held for sale - - (66,764)
Change in the effect of SFAS 115 (1,016,545) 859,188 -
Cumulative effect of accounting changes:
Fair value (SFAS 115) - - (502,108)
Income taxes (SFAS 109) - - 9,776
------------ ------------ ------------
Balance at December 31 $ 605,501 $ 1,479,115 $ 481,615
============ ============ ============
</TABLE>
1.8 PREMIUM RECOGNITION
Most receipts for annuities and interest-sensitive life insurance policies are
classified as deposits instead of revenue. Revenues for these contracts
consist of mortality, expense, and surrender charges assessed against the
account balance. Policy charges that are designed to compensate the Company
for future services are deferred and recognized in income over the period
earned using the same assumptions used to amortize DPAC (see Note 1.7).
For limited payment contracts, net premiums are recorded as revenue and the
difference between the gross premium received and the net premium is deferred
and recognized in income in a constant relationship to insurance in force. For
all other long-duration contracts, premiums are recognized when due. When the
revenue is recorded, an estimate of the cost of the related benefit is
recorded in the future policy benefits account on the consolidated balance
sheets. Also, this cost is recorded in the consolidated statements of income
as a benefit in the current year and in all future years during which the
policy is expected to be renewed.
40
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.9 SALE OF SUBSIDIARY
On November 29, 1993, the Parent Company announced its intent to offer the
Company's wholly owned life insurance subsidiary, American-Amicable Life
Insurance Company of Texas, for sale. On August 31, 1994, the Company
completed the sale of American-Amicable Life Insurance Company of Texas to
PennCorp Financial Group, Inc., resulting in a net loss of $19.5 million.
1.10 OTHER ASSETS
Other assets were comprised of the following:
<TABLE>
<CAPTION>
December 31
1995 1994
--------------------------------
(In Thousands)
<S> <C> <C>
Goodwill $ 57,795 $ 59,990
Other 67,124 42,575
--------------------------------
Other assets $124,919 $102,565
================================
</TABLE>
Acquisition-related goodwill is charged to expense in equal amounts over 40
years. The carrying value of goodwill is regularly reviewed for indicators of
impairment in value.
In 1993, the Company recorded a noncash charge of $293 million to reduce
acquisition-related goodwill. The write-down was the result of a strategic
review completed in 1993 of the Company's operations by management and outside
advisors, which indicated the book value of the Company exceeded fair value.
After this charge, the reported value and remaining life of
acquisition-related goodwill are considered appropriate.
This review also resulted in the decision to sell American-Amicable Life
Insurance Company of Texas and its subsidiaries (see Note 1.9).
41
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.11 DEPRECIATION
Provision for depreciation of American General Center, data processing
equipment, and furniture and fixtures is computed on the straight-line method
over the estimated useful lives of the assets.
1.12 Policy and Contract Claims Reserves
Substantially all of the Company's insurance and annuity liabilities relate to
long-duration contracts which generally require performance over a period of
more than one year. The contract provisions normally cannot be changed or
canceled by the Company during the contract period.
For interest-sensitive and investment contracts, reserves are equal to the sum
of the policy account balance and deferred revenue charges. In establishing
reserves for limited payment and other long-duration contracts, an estimate is
made of the cost of future policy benefits to be paid as a result of present
and future claims due to death, disability, surrender of a policy, and payment
of an endowment. Reserves for traditional insurance products are determined
using the net level premium method. Based on past experience, consideration is
given to the number of policyholder deaths that might be expected, policy
lapses, surrenders, and terminations. Consideration is also given to the
possibility that the Company's experience with policyholders will be worse
than expected. Interest assumptions used to compute reserves ranged from 2.5%
to 13.5% at December 31, 1995.
The claim reserves are determined using case-basis evaluation and statistical
analyses and represent estimates of the ultimate net cost of unpaid claims.
These estimates are reviewed and as adjustments become necessary, such
adjustments are reflected in current operations. Since these reserves are
based on estimates, the ultimate settlement of claims may vary from the
amounts included in the accompanying financial statements. Although it is not
possible to measure the degree of variability inherent in such estimates,
management believes claim reserves are reasonable.
42
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.13 REINSURANCE
The Company is routinely involved in reinsurance transactions. Ceded
reinsurance becomes a liability of the reinsurer that assumes the risk. The
Company diversifies its risk of exposure to reinsurance loss by using several
reinsurers and entering into reinsurance transactions with life reinsurers
that have strong claims-paying ability ratings. The maximum retention on one
life (in the case of individual life insurance) is $1.5 million. If the
reinsurer could not meet its obligations, the Company would reassume the
liability. The likelihood of a material reinsurance liability being reassumed
by the Company is considered to be remote.
Amounts paid or deemed to have been paid in connection with ceded reinsurance
contracts are recorded as reinsurance receivables. The cost of reinsurance
related to long-duration contracts is recognized over the life of the
underlying reinsured policies using assumptions consistent with those used to
account for the underlying policies.
1.14 PARTICIPATING POLICY CONTRACTS
Participating life insurance contracts contain dividend payment provisions
that entitle the policyholder to participate in the earnings of the contracts.
Participating life insurance accounted for 2.48% and 1.81% of life insurance
in force at December 31, 1995 and 1994, respectively. Such business is
accounted for in accordance with SFAS 120.
1.15 INCOME TAXES
The Company and its life insurance subsidiaries, together with certain other
life insurance subsidiaries of the Parent Company, are included in a
life/nonlife consolidated tax return with the Parent Company and its
noninsurance subsidiaries. The Company participates in a tax-sharing agreement
with other companies included in the consolidated tax return. Under this
agreement, tax payments are made to the Parent Company as if the companies
filed separate tax returns and companies incurring operating and/or capital
losses are reimbursed for the use of these losses by the consolidated return
group.
43
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.16 RECLASSIFICATION
Certain amounts in the 1994 and 1993 financial statements have been
reclassified to conform with the current year presentation.
2. INVESTMENTS
2.1 INVESTMENT INCOME
Investment income by type of investment was as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Investment income:
Fixed maturities $ 1,759,358 $ 1,611,355 $ 1,521,320
Equity securities 6,773 5,860 7,387
Mortgage loans on real estate 185,022 202,399 231,461
Investment real estate 16,397 15,049 21,408
Policy loans 52,939 48,973 45,292
Other long-term investments 1,996 1,389 4,820
Short-term investments 6,234 9,753 3,343
Investment income from affiliates 12,570 13,632 11,304
------------ ------------ ------------
Gross investment income 2,041,289 1,908,410 1,846,335
Investment expenses 30,201 34,087 29,387
------------ ------------ ------------
Net investment income $ 2,011,088 $ 1,874,323 $ 1,816,948
============ ============ ============
</TABLE>
The carrying value of investments that have produced no investment income
during 1995 totaled $142 million or 0.5% of total invested assets. The
ultimate disposition of these assets is not expected to have a material effect
on the Company's results of operations or financial position.
44
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.2 NET REALIZED INVESTMENT GAINS (LOSSES)
Realized gains (losses) by type of investment were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Fixed maturities:
Gross gains $ 38,657 $ 21,780 $ 126,756
Gross losses (41,022) (116,217) (46,531)
------------ ------------ ------------
Total fixed maturities (2,365) (94,437) 80,225
Equity securities 9,710 14,313 37,278
Other investments (9,287) 18,856 (63,699)
------------ ------------ ------------
Realized gains before tax (1,942) (61,268) 53,804
Income tax expense (benefit) 547 (13,996) 18,839
------------ ------------ ------------
Net realized gains (losses) $ (2,489) $ (47,272) $ 34,965
============ ============ ============
</TABLE>
2.3 FIXED MATURITY AND EQUITY SECURITIES
All fixed maturity and equity securities are classified as available-for-sale
and reported at fair value (see Note 1.5). Amortized cost and fair value at
December 31, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Cost Unrealized Gain Unrealized Loss Fair Value
-----------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C>
DECEMBER 31, 1995
Fixed maturity securities:
Corporate securities:
Investment grade $ 13,368,369 $ 929,067 $ 20,649 $ 14,276,787
Below investment grade* 939,223 41,325 5,215 975,333
Mortgage-backed securities** 8,459,110 412,700 5,182 8,866,628
U.S. government obligations 245,860 43,771 116 289,515
Foreign governments 294,619 22,854 - 317,473
State and political subdivisions 38,640 1,531 20 40,151
Redeemable preferred stocks 3,696 263 95 3,864
-----------------------------------------------------------------------------
Total fixed maturity securities $ 23,349,517 $ 1,451,511 $ 31,277 $ 24,769,751
=============================================================================
Equity securities $ 72,443 $ 19,915 $ 40 $ 92,318
=============================================================================
Investment in Parent Company $ 8,597 $ 15,802 $ - $ 24,399
=============================================================================
</TABLE>
45
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.3 FIXED MATURITY AND EQUITY SECURITIES (CONTINUED)
<TABLE>
<CAPTION>
Gross Gross
Amortized Cost Unrealized Gain Unrealized Loss Fair Value
-----------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C>
December 31, 1994
Fixed maturity securities:
Corporate securities:
Investment grade $ 11,075,980 $ 102,107 $ 554,011 $ 10,624,076
Below investment grade* 723,497 9,903 52,509 680,891
Mortgage-backed securities** 8,729,224 42,619 643,977 8,127,866
U.S. government obligations 217,610 4,257 3,728 218,139
Foreign governments 356,177 1,493 19,178 338,492
State and political subdivisions 20,166 15 1,683 18,498
Redeemable preferred stocks 2,635 38 66 2,607
-----------------------------------------------------------------------------
Total fixed maturity securities $ 21,125,289 $ 160,432 $ 1,275,152 $ 20,010,569
=============================================================================
Equity securities $ 101,663 $ 8,324 $ 3,532 $ 106,455
=============================================================================
Investment in Parent Company $ 8,597 $ 11,167 $ - $ 19,764
=============================================================================
<FN>
* No allowance for losses was held as of December 31, 1995 and 1994.
** Primarily includes pass-through securities guaranteed by and mortgage
obligations (CMOs) collateralized by the U.S. government and government
agencies.
</FN>
</TABLE>
Fair values of fixed maturity and equity securities were based on quoted
market prices, where available. For investments not actively traded, fair
values were estimated using values obtained from independent pricing services
or, in the case of private placements, by discounting expected future cash
flows using a current market rate applicable to yield, credit quality, and the
maturity of the investments. The reporting of fixed maturity securities at
fair value without a corresponding revaluation of related policyholder
liabilities can be misinterpreted, and care should be exercised in drawing
conclusions from such data.
46
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.3 FIXED MATURITY AND EQUITY SECURITIES (CONTINUED)
Net unrealized gains (losses) on securities included in shareholders' equity
at December 31 were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Gross unrealized gains $ 1,487,228 $ 179,922 $ 1,271,489
Gross unrealized losses (31,317) (1,278,684) (97,471)
DPAC and other fair value adjustments (687,773) 363,574 (516,368)
Deferred federal income taxes (274,544) 4,288 (230,179)
------------ ------------ ------------
Net unrealized gains (losses) on securities $ 493,594 $ (730,900) $ 427,471
============ ============ ============
</TABLE>
The contractual maturities of fixed maturity securities at December 31, 1995
were as follows:
<TABLE>
<CAPTION>
Amortized Cost Market Value
(In Thousands)
<S> <C> <C>
Fixed maturity securities, excluding
mortgage-backed securities:
Due in one year or less $ 113,285 $ 114,777
Due after one year through five years 3,043,199 3,197,577
Due after five years through ten years 9,128,405 9,727,292
Due after ten years 2,605,518 2,863,477
Mortgage-backed securities 8,459,110 8,866,628
------------ ------------
Total fixed maturity securities $23,349,517 $24,769,751
============ ============
</TABLE>
Actual maturities may differ from contractual maturities, since borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties. In addition, corporate requirements and investment
strategies may result in the sale of investments before maturity. Proceeds
from sales of fixed maturities were $7,344 million and $3,688 million during
1995 and 1994, respectively.
47
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.4 MORTGAGE LOANS ON REAL ESTATE
Diversification of the geographic location and type of property
collateralizing mortgage loans reduces the concentration of credit risk. For
new loans, the Company requires loan-to-value ratios of 75% or less, based on
management's credit assessment of the borrower. The mortgage loan portfolio
was distributed as follows at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
Outstanding Percent Percent
Amount of Total Nonperforming
------------ -------- -------------
(In millions)
<S> <C> <C> <C>
December 31, 1995
Geographic distribution:
South Atlantic $ 551 30.8% 7.8%
Pacific 491 27.4 8.9
West South Central 189 10.6 11.4
East South Central 112 6.3 0.0
East North Central 192 10.6 0.0
Mid-Atlantic 220 12.3 0.0
Mountain 81 4.5 5.3
West North Central 9 0.5 0.0
New England 9 0.5 0.0
Allowance for losses (64) (3.5) 0.0
--------- -------
Total $ 1,790 100.0% 6.1%
========= =======
Property type:
Retail $ 520 29.0% 3.2%
Office 591 33.0 2.1
Residential 56 3.1 6.9
Industrial 306 17.1 2.2
Apartments 315 17.6 12.4
Hotel/motel 21 1.2 0.0
Other 45 2.5 75.6
Allowance for losses (64) (3.5) 0.0
--------- -------
Total $ 1,790 100.0% 6.1%
========= =======
</TABLE>
48
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.4 MORTGAGE LOANS ON REAL ESTATE (CONTINUED)
<TABLE>
<CAPTION>
Outstanding Percent Percent
Amount of Total Nonperforming
------------ -------- -------------
(In millions)
<S> <C> <C> <C>
December 31, 1994
Geographic distribution:
South Atlantic $ 595 31.4% 5.1%
Pacific 535 28.2 7.1
West South Central 231 12.2 5.5
East South Central 63 3.3 0.6
East North Central 211 11.1 0.0
Mid-Atlantic 199 10.5 9.1
Mountain 102 5.4 23.8
West North Central 17 .9 0.0
New England 10 .5 0.0
Allowance for losses (67) (3.5) 0.0
--------- -------
Total $ 1,896 100.0% 6.3%
========= =======
Property type:
Retail $ 548 28.9% 6.0%
Office 634 33.4 4.0
Residential 70 3.7 4.2
Industrial 359 18.9 8.4
Apartments 273 14.4 9.4
Hotel/motel 26 1.4 0.9
Other 53 2.8 11.2
Allowance for losses (67) (3.5) 0.0
--------- -------
Total $ 1,896 100.0% 6.3%
========= =======
</TABLE>
49
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.4 MORTGAGE LOANS ON REAL ESTATE (CONTINUED)
Impaired mortgage loans on real estate and related interest income were as
follows:
<TABLE>
<CAPTION>
1995 1994
------------------------
(In Millions)
<S> <C> <C>
Impaired loans:
With allowance* $ 79 $ 117
Without allowance 4 3
------------------------
Total impaired loans $ 83 $ 120
========================
Average investment $ 102 $ 100
Interest income earned $ 8 $ 6
Interest income - cash basis $ 8 $ 3
<FN>
* Represents gross amounts before allowance for mortgage loan losses of $22
million and $30 million, respectively.
</FN>
</TABLE>
50
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.5 INVESTMENT SUMMARY
Investments of the Company were as follows:
<TABLE>
<CAPTION>
Amount at
Which Shown in
the Balance
Cost Value Sheet
---------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Fixed maturities:
Bonds:
United States government and government
agencies and authorities $ 245,860 $ 289,515 $ 289,515
States, municipalities, and political
subdivisions 38,640 40,151 40,151
Foreign governments 294,619 317,473 317,473
Public utilities 2,207,848 2,362,698 2,362,698
Mortgage-backed securities 8,459,110 8,866,628 8,866,628
All other corporate bonds 12,099,744 12,889,422 12,889,422
Redeemable preferred stocks 3,696 3,864 3,864
------------ ------------ ------------
Total fixed maturities 23,349,517 24,769,751 24,769,751
Equity securities:
Common stocks:
Banks, trust, and insurance companies - - -
Industrial, miscellaneous, and other 57,402 72,563 72,563
Nonredeemable preferred stocks 15,041 19,755 19,755
------------ ------------ ------------
Total equity securities 72,443 92,318 92,318
Mortgage loans on real estate* 1,790,110 xxxx 1,790,110
Investment real estate 141,927 xxxx 141,927
Policy loans 918,465 xxxx 918,465
Other long-term investments 23,819 xxxx 23,819
Short-term investments 65,262 xxxx 65,262
------------ ------------ ------------
Total investments $26,361,543 xxxx $27,801,652
============ ============ ============
<FN>
* Amount is net of a $63 million allowance for losses.
</FN>
</TABLE>
51
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
3. FEDERAL INCOME TAXES
3.1 ACCOUNTING POLICY
Income taxes are provided in accordance with SFAS 109 (see Note 1.2). Under
this standard, deferred tax assets and liabilities are calculated using the
differences between the financial reporting basis and the tax basis of assets
and liabilities, using the enacted tax rate. The effect of a tax rate change
is recognized in income in the period of enactment. Under SFAS 109, state
income taxes are included in income tax expense.
3.2 TAX LIABILITIES
Income tax liabilities were as follows:
<TABLE>
<CAPTION>
December 31
1995 1994
------------------------
(In Thousands)
<S> <C> <C>
Current tax liabilities (assets) $ 10,875 $ (49,801)
Deferred applicable to:
Net income 275,119 289,120
Net unrealized investment gains (losses) 274,544 (4,288)
---------- ----------
Deferred tax liabilities 549,663 284,832
---------- ----------
Income tax liabilities $ 560,538 $ 235,031
========== ==========
</TABLE>
52
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
3. FEDERAL INCOME TAXES (CONTINUED)
3.2 TAX LIABILITIES (CONTINUED)
Components of deferred tax liabilities and assets at December 31 were as
follows:
<TABLE>
<CAPTION>
1995 1994
--------------------------
(In Thousands)
<S> <C> <C>
Deferred tax liabilities applicable to:
Deferred policy acquisition costs $ 163,017 $ 471,268
Basis differential of investments 534,942 -
Other 117,436 109,278
----------- -----------
Total deferred tax liabilities 815,395 580,546
Deferred tax assets applicable to:
Basis differential of investments - (373,984)
Policy reserves (227,656) (170,168)
Other (38,076) (10,447)
----------- -----------
Total deferred tax assets before
valuation allowance (265,732) (554,599)
Valuation allowance - 258,885
----------- -----------
Total deferred tax assets, net of
valuation allowance (265,732) (295,714)
=========== ===========
Net deferred tax liabilities $ 549,663 $ 284,832
=========== ===========
</TABLE>
A portion of life insurance income earned prior to 1984 is not taxable unless
it exceeds certain statutory limitations or is distributed as dividends. Such
income, accumulated in policyholders' surplus accounts, totaled $93.6 million
at December 31, 1995. At current corporate rates, the maximum amount of tax on
such income is approximately $32.8 million. Deferred income taxes on these
accumulations are not required because no distributions are expected.
53
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
3. FEDERAL INCOME TAXES (CONTINUED)
3.3 TAX EXPENSE
Components of income tax expense were as follows:
<TABLE>
<CAPTION>
December 31
1995 1994 1993
---------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Current expense $ 153,720 $ 104,145 $ 163,795
Deferred expense (benefit):
Deferred policy acquisition cost 38,275 30,234 31,444
Policy reserves (49,177) (42,302) (60,350)
Insurance in force (SFAS 109 reclassification) - - 9,539
Basis differential of investments 3,710 23,482 (4,564)
Other, net (2,581) 12,629 14,516
---------- ---------- ----------
Total deferred (9,773) 24,043 (9,415)
---------- ---------- ----------
Income tax expense $ 143,947 $ 128,188 $ 154,380
========== ========== ==========
</TABLE>
A reconciliation between the income tax expense computed by applying the
federal income tax rate (35%) to income before taxes and the income tax
expense reported in the financial statement is presented below.
<TABLE>
<CAPTION>
1995 1994 1993
---------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Income tax at statutory percentage of GAAP
pretax income $ 149,185 $ 124,292 $ 43,413
Tax-exempt investment income (10,185) (9,725) (7,778)
Goodwill 768 770 106,835
Tax on sale of subsidiary (661) 10,722 -
Other 4,840 2,129 11,910
---------- ---------- ----------
Income tax expense $ 143,947 $ 128,188 $ 154,380
========== ========== ==========
</TABLE>
54
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
3. FEDERAL INCOME TAXES (CONTINUED)
3.4 TAXES PAID
Income taxes paid amounted to approximately $90 million, $181 million, and
$124 million in 1995, 1994, and 1993, respectively.
3.5 TAX RETURN EXAMINATIONS
The Company and its life insurance subsidiaries, together with certain other
life insurance subsidiaries of the Parent Company, file a consolidated federal
income tax return. The Internal Revenue Service (IRS) has completed
examinations of the Company's returns through 1988. The IRS is continuing to
dispute the Company's tax treatment of some items for the years 1977 through
1988. Some of these issues will require litigation to resolve, and any amounts
ultimately settled with the IRS would also include interest. Although the
final outcome is uncertain, the Company believes that the ultimate liability,
including interest, resulting from these issues will not exceed amounts
currently provided in the consolidated financial statements. The IRS is
currently examining the Company's tax returns for the years 1989 through 1992.
In April 1992, the IRS issued Notices of Deficiency for the 1977 - 1981 tax
years of certain insurance subsidiaries. The basis of the dispute was the tax
treatment of modified coinsurance agreements. The Company elected to pay all
related assessments plus associated interest. A claim for refund of tax and
interest was disallowed by the IRS in January 1993. On June 30, 1993, a suit
for refund was filed in the United States Court of Federal Claims. On February
7, 1996, the court ruled in favor of the Company on all legal issues related
to this contingency. The Company does not yet know whether the IRS will appeal
this decision; however, the Company intends to pursue a full refund of the
amounts paid. Accordingly, no provision has been made in the consolidated
financial statements related to this contingency.
55
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
4. OTHER AFFILIATE INFORMATION
A SCHEDULE OF AFFILIATED NOTES AND ACCOUNTS RECEIVABLE IS PRESENTED AS
FOLLOWS:
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
Par Value Book Value Par Value Book Value
-------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C>
American General Corporation,
9 3/8%, due 2008 $ 4,725 $ 3,197 $ 4,725 $ 3,159
American General Corporation,
8 1/4%, due 2004 22,018 22,018 24,465 24,465
American General Corporation
Restricted Subordinated Note,
13 1/2%, due 2002 35,608 35,608 37,664 37,664
-------------------------------------------------------------------
Total notes receivable from affiliates 62,351 60,823 66,854 65,288
Accounts receivable from affiliates - 29,841 - 32,988
-------------------------------------------------------------------
Indebtedness from affiliates $ 62,351 $ 90,664 $ 66,854 $ 98,276
===================================================================
</TABLE>
Various companies in the American General Group provide services to the
Company, principally mortgage servicing and investment advisory services. The
Company paid approximately $21,006,000, $21,161,000, and $20,204,000 for such
services in 1995, 1994, and 1993, respectively. Accounts payable for such
services at December 31, 1995 and 1994 were not material. In addition, the
Company rents facilities and provides services to various companies in the
American General Group. The Company received approximately $2,086,000,
$2,486,000, and $5,412,000 for such services and rent in 1995, 1994, and 1993,
respectively. Accounts receivable for rent and services at December 31, 1995
and 1994 were not material.
The Company has 8,500 shares of $100 par value cumulative preferred stock
authorized and outstanding, with an $80 dividend rate, redeemable at $1,000
per share after December 31, 2000. The holder of this stock, which is an
affiliated company, shall be entitled to one vote per share, voting together
with the holders of common stock.
56
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
5. BENEFIT PLANS
5.1 PENSION PLANS
The Company has a noncontributory, defined-benefit pension plan covering most
employees. The pension plan provides pension benefits that are based on the
participant's average monthly compensation and length of credited service
offset by an amount that complies with federal regulations. The Company's
funding policy for this plan is to contribute annually no more than the
maximum amount that can be deducted for federal income tax purposes. The
Company uses the projected unit credit method for computing pension expense.
The components of pension expense were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Service cost - benefits earned during period $ 1,346 $ 1,825 $ 1,586
Interest cost on projected benefit obligation 2,215 2,007 1,853
Actual return on plan assets (10,178) (523) (6,199)
Amortization of unrecognized net asset existing at
date of initial application of projected unit
credit method (888) (900) (994)
Amortization of unrecognized prior service cost 197 222 231
Deferral of net asset gain (loss) 5,724 (3,586) 2,158
Amortization of gain 38 102 -
--------- --------- ---------
Total pension income $ (1,546) $ (853) $ (1,365)
========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
1995 1994 1993
---------------------------------------------
<S> <C> <C> <C>
Assumptions:
Weighted-average discount rate on benefit
obligation 7.25% 8.50% 7.25%
Rate of increase in compensation levels 4.00% 4.00% 4.00%
Expected long-term rate of return on plan assets 10.00% 10.00% 10.00%
</TABLE>
57
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
5. BENEFIT PLANS (CONTINUED)
5.1 PENSION PLANS (CONTINUED)
The funded status of the plan and the prepaid pension expense asset included
in other assets at December 31 were as follows:
<TABLE>
<CAPTION>
1995 1994
--------------------------
(In Thousands)
<S> <C> <C>
Actuarial present value of benefit
obligation:
Vested $ 24,972 $ 20,061
Nonvested 3,933 493
Additional minimum liability 323 -
--------- ---------
Accumulated benefit obligation 29,228 20,554
Effect of increase in compensation levels 5,536 4,516
--------- ---------
Projected benefit obligation 34,764 25,070
Plan assets at fair value 56,598 46,876
--------- ---------
Plan assets in excess of projected benefit
obligation 21,834 21,806
Unrecognized net gain (9,715) (10,252)
Unrecognized prior service cost 473 670
Unrecognized transition asset (261) (1,147)
--------- ---------
Prepaid pension expense $ 12,331 $ 11,077
========= =========
</TABLE>
More than 98% of the plan assets were invested in fixed maturity and equity
securities at the plan's most recent balance sheet date.
5.2 POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company and its life insurance subsidiaries, together with certain other
insurance subsidiaries of the Parent Company, have life, supplemental major
medical, and dental plans for certain retired employees and agents. Most plans
are contributory, with retiree contributions adjusted annually to limit
employer contributions to predetermined amounts. For individuals retiring
after December 31, 1992, the cost of the supplemental major medical plan is
borne entirely by retirees. The Company has reserved the right to change or
eliminate these benefits at any time.
58
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
5. BENEFIT PLANS (CONTINUED)
5.2 POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (CONTINUED)
The life plans are fully insured. A portion of the retiree medical and dental
plans are funded through a voluntary employees' beneficiary association
("VEBA") established in 1994; the remainder is unfunded and self-insured. All
of the retiree medical and dental plans' assets held in the VEBA were invested
in readily marketable securities at the plans' most recent balance sheet date.
The plans' combined funded status and the accrued postretirement benefit cost
included in other liabilities were as follows:
<TABLE>
<CAPTION>
1995 1994
--------------------------
(In Thousands)
<S> <C> <C>
Actuarial present value of benefit
obligation:
Retirees $ 6,242 $ 4,057
Fully eligible active plan participants 143 686
Other active plan participants 2,580 1,539
--------- ---------
Accumulated postretirement benefit obligation 8,965 6,282
Plan assets at fair value 203 225
--------- ---------
Accumulated postretirement benefit obligation
in excess of plan assets at fair value 8,762 6,057
Unrecognized net loss (gain) (1,855) 505
--------- ---------
Accrued postretirement benefit cost $ 6,907 $ 6,562
========= =========
Weighted-average discount rate on postretirement
benefit obligation 7.25% 8.50%
</TABLE>
The components of postretirement benefit expense were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-----------------------------
(In Thousands)
<S> <C> <C> <C>
Service cost (benefits earned) $171 $208 $140
Interest cost on accumulated postretirement
benefit obligation 638 527 496
---- ---- ----
Postretirement benefit expense $809 $735 $636
==== ==== ====
</TABLE>
59
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
5. BENEFIT PLANS (CONTINUED)
5.2 POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (CONTINUED)
For measurement purposes, an 11.5% annual rate of increase in the per capita
cost of covered health care benefits was assumed in 1996; the rate was assumed
to decrease gradually to 6.0% in 2007 and remain at that level. A 1% increase
in the assumed annual rate of increase in per capita cost of health care
benefits results in a $545,584 increase in accumulated postretirement benefit
obligation and a $47,104 increase in postretirement benefit expense.
6. DERIVATIVE FINANCIAL INSTRUMENTS
6.1 USE OF DERIVATIVE FINANCIAL INSTRUMENTS
The Company's objectives for using interest rate swap agreements on its
investment securities are to effectively convert specific investment
securities from a floating to a fixed-rate basis, or vice versa, and to hedge
against the risk of rising prices on anticipated investment security
purchases.
The Company's objectives for using currency swap agreements are to effectively
convert cash flows from specific investment securities denominated in foreign
currencies into U.S. dollars at specified exchange rates and to hedge against
currency rate fluctuations on anticipated investment security purchases.
Derivative financial instruments related to investment securities, which were
not used prior to 1994, did not have a material effect on net investment
income in 1995 or 1994. The Company is neither a dealer nor a trader in
derivative financial instruments.
6.2 CREDIT AND MARKET RISK
The Company is exposed to credit risk in the event of nonperformance by
counterparties to swap agreements. The Company limits its exposure to credit
risk by entering into swap agreements with counterparties having high credit
ratings, basing the amount and term of agreements on these credit ratings, and
regularly monitoring the ratings.
60
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
6. DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
6.2 CREDIT AND MARKET RISK (CONTINUED)
The Company's credit exposure on swaps is limited to the fair value of swap
agreements that are favorable to the Company. The Company does not expect any
counterparty to fail to meet its obligation; however, nonperformance would not
have a material impact on the consolidated financial statements.
The Company's exposure to market risk is mitigated by the offsetting effects
of changes in the value of swap agreements and of the related investment
securities.
6.3 ACCOUNTING POLICIES
The difference between amounts paid and received on swap agreements is
recorded on an accrual basis as an adjustment to investment income, as
appropriate, over the periods covered by the agreements. The related amount
payable to or receivable from counterparties is included in other liabilities
or assets.
The fair values of the swap agreements are recognized in the consolidated
balance sheet if they hedge investment securities carried at fair value or
anticipated investment purchases. In this event, changes in the fair value of
a swap agreement are reported in net unrealized gains (losses) on securities
included in shareholders' equity, consistent with the treatment of the related
investment security.
For swap agreements hedging anticipated investment security purchases, the net
swap settlement amount or unrealized gain or loss is deferred and included in
the measurement of the anticipated transaction when it occurs.
Any gain or loss from early termination of swap agreements is recognized in
income if the related investment security is sold. Otherwise, the gain or loss
from early termination is deferred and amortized into income over the
remaining term of the related investment security.
61
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
6. DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
6.4 TERMS OF DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial instruments related to investment securities at December
31 were as follows:
<TABLE>
<CAPTION>
1995 1994
---------------------------------------
(Dollars In Millions)
<S> <C> <C>
Interest rate swap agreements to pay fixed rate:
Notional amount $ 45 $ -
Average receive rate 5.82% -
Average pay rate 6.41 -
Interest rate swap agreements to receive fixed rate:
Notional amount 24 9
Average receive rate 7.03% 6.92%
Average pay rate 6.82 6.96
Currency swap agreements (receive U.S. $/pay Canadian
dollar):
Notional amount (in U.S. $) 72 -
Average exchange rate 1.62 -
</TABLE>
Average floating rates may change significantly, thereby affecting future cash
flows. Swap agreements generally have terms of two to ten years.
At December 31, 1995, the Company had entered into forward interest rate swap
agreements with effective dates in 1996. These swaps, with a total notional
amount of $14.5 million, were entered into to hedge anticipated investment
purchases expected to occur in 1996 and to synthetically modify the yield on
specific fixed-rate securities.
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS 107, "Disclosures About Fair Value of Financial Instruments," requires
disclosure of the fair value of financial instruments. This standard excludes
certain financial instruments and all nonfinancial instruments, including
policyholder liabilities, from its disclosure requirements. Care should be
exercised in drawing conclusions based on fair
62
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
7. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
value, since (1) the fair values presented do not include the value associated
with all of the Company's assets and liabilities and (2) the reporting of
investments at fair value without a corresponding revaluation of related
policyholder liabilities can be misinterpreted.
Carrying amounts and fair values for those financial instruments covered by
SFAS 107 at December 31 are presented below:
<TABLE>
<CAPTION>
1995
-------------------------
Fair Carrying
Value Amount
-------------------------
(In Millions)
<S> <C> <C>
Assets:
Fixed maturity and equity securities * $ 24,862 $ 24,862
Mortgage loans on real estate 1,833 1,790
Policy loans 959 918
Investment in parent company 24 24
Liabilities:
Insurance investment contracts 22,047 22,362
<FN>
* Includes derivative financial instruments with negative fair value of $4
million and positive fair value of $1 million at December 31, 1995, and
with negative fair value of $1 million and positive fair value of $2
million at December 31, 1994.
</FN>
</TABLE>
The following methods and assumptions were used to estimate the fair values of
financial instruments:
FIXED MATURITY AND EQUITY SECURITIES
Fair values of fixed maturity and equity securities were based on quoted
market prices, where available. For investments not actively traded, fair
values were estimated using values obtained from independent pricing services
or, in the case of private placements, by discounting expected future cash
flows using a current market rate applicable to yield, credit quality, and
average life of investments.
63
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
7. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
MORTGAGE LOANS ON REAL ESTATE
Fair value of mortgage loans was estimated primarily using discounted cash
flows, based on contractual maturities and discount rates that were based on
U.S. Treasury rates for similar maturity ranges, adjusted for risk, based on
property type.
POLICY LOANS
Fair value of policy loans was estimated using discounted cash flows and
actuarially determined assumptions, incorporating market rates.
INSURANCE INVESTMENT CONTRACTS
Insurance investment contracts do not subject the Company to significant risks
arising from policyholder mortality or morbidity. The majority of the
Company's annuity products are considered insurance investment contracts. Fair
value of insurance investment contracts was estimated using cash flows
discounted at market interest rates. Care should be exercised in drawing
conclusions based on the estimated fair value, since the estimates are based
on assumptions regarding future economic activity.
8. DIVIDENDS PAID
American General Life Insurance Company paid $206.7 million, $239.5 million,
and $3.7 million in dividends during 1995, 1994, and 1993, respectively. The
1995 and 1993 dividends included $.7 million and $3.7 million, respectively,
in the form of furniture and equipment.
9. RESTRICTIONS, COMMITMENTS, AND CONTINGENCIES
The Company and its insurance subsidiaries are restricted by state insurance
laws as to the amounts they may pay as dividends without prior approval from
their respective state insurance departments. At December 31, 1995,
approximately $2.5 billion of consolidated shareholders' equity represents net
assets of the Company which cannot be transferred in the form of dividends,
loans, or advances to the Parent Company. Approximately $1.8 billion of
consolidated shareholders' equity is similarly restricted as to transfer from
its subsidiaries to the Company.
64
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
9. RESTRICTIONS, COMMITMENTS, AND CONTINGENCIES (CONTINUED)
Generally, the net assets of the Company's subsidiaries available for transfer
to the Parent are limited to the amounts that the subsidiaries' net assets, as
determined in accordance with statutory accounting practices, exceed minimum
statutory capital requirements. However, payments of such amounts as dividends
may be subject to approval by regulatory authorities and are generally limited
to the greater of 10% of policyholders' surplus or the previous year's
statutory net gain from operations.
The Company has various leases, substantially all of which are for office
space and facilities. Rentals under financing leases, contingent rentals, and
future minimum rental commitments and rental expense under operating leases
are not material.
The Company is a defendant in lawsuits which arose in the ordinary course of
business. The Company believes that it has a valid and substantial defense to
each of these actions and is defending them vigorously. Further, it is the
Company's opinion and the opinion of counsel for the Company that the outcome
of these actions will not have a materially adverse effect on the financial
position or results of operations of the Company.
The increase in the number of insurance companies that are under regulatory
supervision has resulted, and is expected to continue to result, in increased
assessments by state guaranty funds to cover losses to policyholders of
insolvent or rehabilitated insurance companies. Those mandatory assessments
may be partially recovered through a reduction in future premium taxes in
certain states. At December 31, 1995 and 1994, the Company has accrued $21.3
million and $10.4 million, respectively, for guaranty fund assessments, net of
$4.3 million and $2.9 million, respectively, of premium tax deductions. The
Company has recorded receivables of $7.4 million and $6.0 million at December
31, 1995 and 1994, respectively, for expected recoveries against the payment
of future premium taxes. Expenses incurred for guaranty fund assessments were
$22.4 million, $8.7 million, and $8.8 million in 1995, 1994, and 1993,
respectively.
65
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
10. REINSURANCE
Reinsurance transactions for the years ended December 31, 1995, 1994, and 1993
were as follows:
<TABLE>
<CAPTION>
Percentage
Ceded to Assumed of Amount
Gross Other From Other Assumed
Amount Companies Companies Net Amount to Net
---------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C> <C>
December 31, 1995
Life insurance in force $44,637,599 $7,189,493 $5,771 $37,453,877 0.02%
==============================================================
Premiums:
Life insurance and
annuities $ 103,780 $ 26,875 $ 171 $ 77,076 0.22%
Accident and health insurance 1,510 82 - 1,428 0.00%
--------------------------------------------------------------
Total premiums $ 105,290 $ 26,957 $ 171 $ 78,504 0.22%
==============================================================
December 31, 1994
Life insurance in force $41,360,465 $4,519,564 $6,813 $36,847,714 0.02%
==============================================================
Premiums:
Life insurance and
annuities $ 110,089 $ 26,390 $ 147 $ 83,846 0.18%
Accident and health insurance 1,723 146 - 1,577 0.00%
--------------------------------------------------------------
Total premiums $ 111,812 $ 26,536 $ 147 $ 85,423 0.17%
==============================================================
December 31, 1993
Life insurance in force $47,067,961 $4,109,758 $8,372 $42,966,575 0.02%
==============================================================
Premiums:
Life insurance and
annuities $ 136,581 $ 23,032 $ 191 $ 113,740 0.17%
Accident and health insurance 1,991 156 - 1,835 0.00%
--------------------------------------------------------------
Total premiums $ 138,572 $ 23,188 $ 191 $ 115,575 0.17%
==============================================================
</TABLE>
66
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
10. REINSURANCE (CONTINUED)
Reinsurance recoverable on paid losses was approximately $6,190,000 and
$3,671,000 at December 31, 1995 and 1994, respectively. Reinsurance
recoverable on unpaid losses was approximately $2,775,000 and $5,371,000 at
December 31, 1995 and 1994, respectively.
11. OTHER ITEMS
Effective July 31, 1993, the Company acquired the in-force business of the New
Jersey Life Insurance Company in Rehabilitation. The acquisition resulted in
the assumption of approximately 34,000 policies and life insurance in force of
$1.8 billion, with assets transferred of $208 million. No gain or loss was
recorded at acquisition.
Effective December 31, 1995, the Company purchased Franklin United Life
Insurance Company (FULIC), a subsidiary of Franklin Life Insurance Company
(FL) which is a wholly owned subsidiary of the Parent Company. This purchase
was effected through issuance of $8.5 million in preferred stock to FL. The
acquisition was accounted for using the purchase method of accounting and is
not material to the operations of the Company. Additionally, FULIC was
contributed and merged into AGNY at December 31, 1995.
67
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
PART A: None
PART B:
(1) Financial Statements of American General Life Insurance Company
Separate Account D (to be filed by amendment):
Report of Ernst & Young LLP, Independent Auditors
Statement of Net Assets as of December 31, 1995
Statement of Operations for the year ended December 31, 1995
Statements of Changes in Net Assets for the years ended
December 31, 1995 and 1994
Notes to Financial Statements
(2) Consolidated Financial Statements of American General Life
Insurance Company (to be filed by amendment):
Report of Ernst & Young LLP, Independent Auditors Consolidated
Balance Sheets as of December 31, 1995 and 1994 Consolidated
Statements of Income for the years ended December 31, 1995, 1994
and 1993 Consolidated Statements of Shareholder's Equity for the
years ended December 31, 1995, 1994 and 1993 Consolidated
Statements of Cash Flows for the years ended December 31, 1995,
1994 and 1993 Notes to Consolidated Financial Statements
PART C: None
(b) Exhibits
1(a) American General Life Insurance Company of Delaware Board of
Directors resolution authorizing the establishment of Separate
Account D. (1)
(b) Resolution of the Board of Directors of American General Life
Insurance Company of Delaware authorizing, among other things,
the redomestication of that company in Texas and the renaming of
that company as American General Life Insurance Company. (2)
(c) Resolution of the Board of Directors of American General Life
Insurance Company of Delaware providing, inter alia, for
Registered Separate Accounts' Standards of Conduct. (3)
2 None
C-1
<PAGE>
3(a)(i) Distribution Agreement dated October 3, 1991, between American
General Securities Incorporated and American General Life
Insurance Company. (2)
(ii) Master Marketing and Distribution Agreement by and among
American General Life Insurance Company, American General
Securities Incorporated, Van Kampen American Capital Marketing,
Inc., and Van Kampen American Capital Distributors, Inc. (to be
filed by amendment)
(b)(i) Form of Selling Group and General Agent Agreement utilizing
American Capital Marketing, Inc. as distributor. (4)
(ii) Form of Selling Group and General Agent Agreement utilizing
American General Securities Incorporated as distributor. (4)
(iii) Concession Schedule A, attached to and forming a part of each
form of Selling Group Agreement. (4)
(iv) Selling/Master General Agent Agreement by and among American
General Life Insurance Company, American General Securities
Incorporated, and Van Kampen American Capital Distributors, Inc.
(to be filed by amendment)
(c)(i)(A) Fund Participation Agreement, dated March 27, 1992, between
American General Life Insurance Company and American Capital
Life Investment Trust. (4)
(B) Participation Agreement by and among American General Life
Insurance Company, American General Securities Incorporated, Van
Kampen American Capital Life Insurance Trust, Van Kampen
American Capital Asset Management, Inc., and Van Kampen American
Capital Distributors, Inc. (to be filed by amendment)
(ii) Sales Agreement, dated July 7, 1994, among Neuberger & Berman
Advisers Management Trust, Neuberger & Berman Management
Incorporated, and American General Life Insurance Company. (6)
(iii) Participation Agreement, dated February 2, 1994, among Variable
Insurance Products Fund, Fidelity Distributors Corporation, and
American General Life Insurance Company. (5)
(iv) Participation Agreement, dated February 2, 1994, among Variable
Insurance Products Fund II, Fidelity Distributors Corporation,
and American General Life Insurance Company. (5)
(d) Form of Agreement between American General Life Insurance
Company and Dealer regarding exchange and allocation transaction
requests. (4)
4(a) Specimen form of Combination Fixed and Variable Annuity Contract
(Form No. 93010). (2)
(b) Form of Waiver of Surrender Charge Rider.(2)
(c) Form of Qualified Contract Endorsement. (2)
(d)(i) Revised pages to Specimen form of Combination Fixed and Variable
Annuity Contract. (3)
(ii) Revised Schedule Page to Specimen form of Combination Fixed and
Variable Annuity Contract. (4)
(e)(i)(A) Specimen form of Individual Retirement Annuity Disclosure
Statement available under Contract Form Nos. 93020 and 93021.
(8)
C-2
<PAGE>
(B) Specimen form of Individual Retirement Annuity Disclosure
Statement available under Contract Form Nos. 95020 and 95021.
(9)
(ii) Specimen form of Individual Retirement Annuity Endorsement. (6)
(iii) Specimen form of IRA Instruction Form. (4)
(f)(i) Specimen form of Combination Fixed and Variable Annuity Contract
(Form No. 93020). (7)
(ii) Specimen form of Combination Fixed and Variable Annuity Contract
(Form No. 93021). (7)
(iii) Specimen form of pages for Contract Forms 93020 and 93021, filed
in the following states: California, Minnesota, North Carolina,
North Dakota, Oklahoma. (7)
(g)(i) Specimen form of Combination Fixed and Variable Annuity Contract
(Form No. 95020). (7)
(ii) Specimen form of Combination Fixed and Variable Annuity contract
(Form No. 95021). (7)
(iii) Specimen form of pages for Contract Forms 95020 and 95021, filed
in the following states: California, Idaho, Kansas,
Massachusetts, Minnesota, North Carolina, North Dakota,
Oklahoma, Pennsylvania, South Carolina, Texas, Utah, and West
Virginia. (7)
(iv) Specimen form of Waiver of Surrender Charges Rider for Contract
Form Nos. 95020 and 95021. (7)
5(a)(i) Specimen form of Application for Contract Form Nos. 93020 and
93021. (4)
(ii) Specimen form of Application for Contract Form Nos. 95020 and
95021. (7)
(b)(i) Specimen form of Separate Account D Election of Annuity Payment
Option/Change Form. (4)
(ii) Specimen form of Absolute Assignment to Effect Section 1035(a)
Exchange and Rollover of a Life Insurance Policy or Annuity
Contract. (4)
(c)(i) Specimen form of VAriety Plus Service Request, including
telephone transfer authorization. (4)
(ii) Form of Authorization Limited to Execution of Transaction
Requests for VAriety Plus Variable Annuity. (4)
(iii) Form of Transaction Request Form. (4)
6(a) Amended and Restated Articles of Incorporation of American
General Life Insurance Company, effective December 31, 1991. (2)
(b) Bylaws of American General Life Insurance Company, adopted
January 22, 1992. (4)
7 None
8 None
9 Opinion and consent of Counsel. (4)
10 Consent of Independent Auditors.
11 None
C-3
<PAGE>
12 None
13(a)(i) Computations of standardized average annual total returns for
each Division available under Contract Form Nos. 93020 and 93021
for the one and five year periods ending December 31, 1994, and
since inception. (6)
(ii) Computations of non-standardized total returns for each Division
available under Contract Form Nos. 93020 and 93021 for the one
and five year periods ending December 31, 1994, and since
inception. (6)
(iii) Computations of non-standardized cumulative total returns for
each Division available under Contract Form Nos. 93020 and 93021
for the one and five year periods ending December 31, 1994, and
since inception. (6)
(iv) Computations of 30 day yield for the Domestic Income Division,
the Government Division, and the Multiple Strategy Division
available under Contract Form Nos. 93020 and 93021 for the one
month period ended December 31, 1993. (5)
(v) Computations of seven day yield and effective yield for the
Money Market Division available under Contract Form Nos. 93020
and 93021 for the seven day period ended December 31, 1993. (5)
(b)(i) Computations of hypothetical historical standardized average
annual total returns for the Emerging Growth, Enterprise, Global
Equity, Real Estate Securities, Asset Allocation, Domestic
Income, Government, and Money Market Divisions, available under
Contract Form Nos. 95020 and 95021 for the one and five year
periods ending December 31, 1995, and since inception (to be
filed by amendment).
(ii) Computations of hypothetical historical non-standardized total
returns for the Emerging Growth, Enterprise, Global Equity, Real
Estate Securities, Asset Allocation, Domestic Income,
Government, and Money Market Divisions, available under Contract
Form Nos. 95020 and 95021 for the one and five year periods
ending December 31, 1995, and since inception (to be filed by
amendment).
(iii) Computations of hypothetical historical non-standardized
cumulative total returns for the Emerging Growth, Enterprise,
Global Equity, Real Estate Securities, Asset Allocation,
Domestic Income, Government, and Money Market Divisions,
available under Contract Form Nos. 95020 and 95021 for the one
and five year periods ending December 31, 1995, and since
inception (to be filed by amendment).
(iv) Computations of hypothetical historical 30 day yield for the
Domestic Income Division, the Government Division, and the Asset
Allocation Division, available under Contract Form Nos. 95020
and 95021 for the one month period ended December 31, 1995 (to
be filed by amendment).
(v) Computations of hypothetical historical seven day yield and
effective yield for the Money Market Division, available under
Contract Form Nos. 95020 and 95021 for the seven day period
ended December 31, 1995 (to be filed by amendment).
C-4
<PAGE>
14 A Financial Data Schedule meeting the requirements of Rule
483(e) of the Securities Act of 1933 is filed as Exhibit 27
hereof.
15(a) Power of Attorney with respect to Registration Statements and
Amendments thereto signed by the following persons in their
capacities as directors and, where applicable, officers of
American General Life Insurance Company: Messrs. Devlin, Rashid,
Reddick and Luther. (2)
(b) Power of Attorney with respect to Registration Statements and
Amendments thereto signed by Robert S. Cauthen, Jr. in his
capacity as a director and officer of American General Life
Insurance Company. (4)
(c) Power of Attorney with respect to Registration Statements and
Amendments thereto signed by James R. Tuerff in his capacity as
a director or officer of American General Life Insurance
Company. (6)
(d) Power of Attorney with respect to Registration Statements and
Amendments thereto signed by Peter V. Tuters in his capacity as
a director or officer of American General Life Insurance
Company. (5)
(e) Power of Attorney with respect to Registration Statements and
Amendments thereto signed by the following persons in their
capacities as directors and, where applicable, officers of
American General Life Insurance Company: Messrs. Kelley,
Pulliam, and Young. (6)
(f) Power of Attorney with respect to Registration Statements and
Amendments thereto signed by George W. Bentham in his capacity
as a director or officer of American General Life Insurance
Company. (7)
(g) Power of Attorney with respect to Registration Statements and
Amendments thereto signed by the following persons in their
capacities as directors and, where applicable, officers of
American General Life Insurance Company : Messrs. Atnip and
Newton.
16 Statement of Exemptive Relief Relied Upon. (7)
27 Financial Data Schedule.
(1) Incorporated herein by reference to the initial filing of Registrant's
Form N-4 Registration Statement (File No. 2-49805) on December 6, 1973.
(2) Previously filed in the initial filing of this Registration Statement
(File No. 33-43390) on October 16, 1991.
(3) Previously filed in Pre-Effective Amendment No. 1 to this Registration
Statement (File No. 33-43390), filed on December 31, 1991.
(4) Previously filed in Post-Effective Amendment No. 1 to this Registration
Statement (File No. 33-43390), filed on April 30, 1992.
C-5
<PAGE>
(5) Previously filed in Post-Effective Amendment No. 3 to this Registration
Statement (File No. 33-43390), filed on March 2, 1994.
(6) Previously filed in Post-Effective Amendment No. 4 to this Registration
Statement (File No. 33-43390), filed on April 28, 1995.
(7) Previously filed in Post-Effective Amendment No. 5 to this Registration
Statement (File No. 33-43390), filed on December 27, 1995.
(8) Included in Part A of this Amendment.
(9) Included in Part A of Post-Effective Amendment No. 6 to this Registration
Statement (File No. 33-43390), filed on March 14, 1996.
C-6
<PAGE>
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
The directors, executive officers, and, to the extent responsible for
variable annuity operations, other officers of the depositor are listed
below.
<TABLE>
<CAPTION>
<S> <C>
Positions and Offices
Name and Principal with the
Business Address Depositor
Harold S. Hook Senior Chairman
2929 Allen Parkway
Houston, TX 77019
Robert M. Devlin Chairman
2929 Allen Parkway
Houston, TX 77019
Robert S. Cauthen, Jr. Director, President, &
2727-A Allen Parkway Chief Executive Officer
Houston, TX 77019
Michael G. Atnip Director
2929 Allen Parkway
Houston, TX 77019
George W. Bentham Director, Senior Vice President &
2727-A Allen Parkway Chief Marketing Officer
Houston, TX 77019
Bill B. Luther Director, Senior Vice President &
2727-A Allen Parkway Chief Systems Officer
Houston, TX 77019
Jon P. Newton Director
2929 Allen Parkway
Houston, TX 77019
Zafar Rashid Director, Senior Vice President,
2727-A Allen Parkway Chief Financial Officer & Treasurer
Houston, TX 77019
Peter V. Tuters Director, Vice President, &
2929 Allen Parkway Chief Investment Officer
Houston, TX 77019
Austin P. Young Director
2929 Allen Parkway
Houston, TX 77019
C-7
<PAGE>
Thomas B. Phillips Vice President, General
2727-A Allen Parkway Counsel & Secretary
Houston, TX 77019
Wayne A. Barnard Vice President & Actuary
2727-A Allen Parkway
Houston, Texas 77019
Robert F. Herbert Vice President, Controller, &
2727-A Allen Parkway Associate Tax Officer
Houston, TX 77019
Timothy W. Still Vice President
2727-A Allen Parkway
Houston, Texas 77019
Steven A. Glover Associate General Counsel &
2727-A Allen Parkway Assistant Secretary
Houston, TX 77019
Joyce R. Bilski Administrative Officer
2727-A Allen Parkway
Houston, TX 77019
Farideh Farrokhi Assistant Controller
2727-A Allen Parkway
Houston, TX 77019
</TABLE>
C-8
<PAGE>
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
SUBSIDIARIES OF AMERICAN GENERAL CORPORATION1
The following is a list of American General Corporation's subsidiaries as of
February 29, 1996. All subsidiaries listed are corporations, unless otherwise
indicated. Subsidiaries of subsidiaries are indicated by indentations and
unless otherwise indicated, all subsidiaries are wholly owned. Inactive
subsidiaries are denoted by an asterisk (*).
<TABLE>
<CAPTION>
Jurisdiction of
Name Incorporation
<S> <C>
AGC Life Insurance Company (2)................................................. Missouri
American Franklin Company .................................................. Delaware
The Franklin Life Insurance Company ..................................... Illinois
The American Franklin Life Insurance Company ......................... Illinois
Franklin Financial Services Corporation .............................. Delaware
American General Life and Accident Insurance Company ....................... Tennessee
American General Exchange, Inc. ......................................... Tennessee
American General Life Insurance Company .................................... Texas
American General Annuity Service Corporation ............................ Texas
American General Life Insurance Company of New York..................... New York
The Winchester Agency Ltd. ........................................... New York
American General Securities Incorporated (3)............................. Texas
American General Insurance Agency, Inc. .............................. Missouri
American General Insurance Agency of Hawaii, Inc. .................... Hawaii
American General Insurance Agency of
Massachusetts, Inc. .................................................. Mass.
The Variable Annuity Life Insurance Company ............................. Texas
The Variable Annuity Marketing Company ............................... Texas
Allen Property Company ........................................................ Delaware
Florida Westchase Corporation............................................... Delaware
Greatwood Development, Inc.................................................. Delaware
Greatwood Golf Club, Inc. .................................................. Texas
Highland Creek Golf Club, Inc. ............................................. No. Carolina
Hunter's Creek Communications Corporation .................................. Florida
Pebble Creek Corporation ................................................... Delaware
Pebble Creek Development Corporation ....................................... Florida
Westchase Development Corporation........................................... Delaware
Westchase Golf Corporation ................................................. Florida
American General Capital Services, Inc. ....................................... Delaware
American General Delaware Management Corporation1 ("AGDMC") ................... Delaware
American General Finance, Inc. ................................................ Indiana
AGF Investment Corp. ....................................................... Indiana
American General Auto Finance, Inc. . ...................................... Delaware
American General Finance Corporation (4).................................... Indiana
C-9
<PAGE>
American General Finance Group, Inc. .................................... Delaware
American General Financial Services, Inc. (5)......................... Delaware
The National Life and Accident Insurance Company.................. Texas
Merit Life Insurance Co. ................................................ Indiana
Yosemite Insurance Company .............................................. California
American General Finance, Inc............................................... Alabama
American General Financial Center .......................................... Utah
American General Financial Center, Inc.* ................................... Indiana
American General Financial Center, Incorporated* ........................... Indiana
American General Financial Center Thrift Company* .......................... California
Thrift, Incorporated* ...................................................... Indiana
American General Investment Corporation ....................................... Delaware
American General Mortgage Company........................................... Delaware
American General Realty Investment Corporation ............................. Texas
American Athletic Club, Inc. ............................................ Texas
Hope Valley Farms Recreation Association, Inc. .......................... No. Carolina
INFL Corporation ........................................................ Delaware
Ontario Vineyard Corporation ............................................ Delaware
Pebble Creek Country Club Corporation ................................... Florida
Pebble Creek Service Corporation ........................................ Florida
SR/HP/CM Corporation .................................................... Texas
American General Mortgage and Land Development, Inc............................ Delaware
American General Land Development, Inc. .................................... Delaware
American General Realty Advisors, Inc. ..................................... Delaware
American General Property Insurance Company ................................... Tennessee
Bayou Property Company......................................................... Delaware
AGLL Corporation (6) ("AGLL")............................................... Delaware
American General Land Holding Company ("AGLH").............................. Delaware
AG Land Associates, LLC (6).............................................. California
Hunter's Creek Realty, Inc.* ............................................ Florida
Summit Realty Company, Inc. ............................................. So. Carolina
Financial Life Assurance Company of Canada .................................... Canada
Florida GL Corporation ........................................................ Delaware
GPC Property Company .......................................................... Delaware
Cinco Ranch Development Corporation ........................................ Texas
Cinco Ranch East Development, Inc. ......................................... Delaware
Cinco Ranch West Development, Inc. ......................................... Delaware
The Colonies Development, Inc. ............................................. Delaware
Fieldstone Farms Development, Inc. ......................................... Delaware
Hickory Downs Development, Inc. ............................................ Delaware
Lake Houston Development, Inc. ............................................. Delaware
South Padre Development, Inc. .............................................. Delaware
Green Hills Corporation ....................................................... Delaware
Knickerbocker Corporation ..................................................... Texas
Lincoln American Corporation .................................................. Delaware
Pavilions Corporation.......................................................... Delaware
</TABLE>
American General Finance Foundation, Inc. is not included on this list. It is
a non-profit corporation.
C-10
<PAGE>
(1) The following limited liability companies were formed in the State of
Delaware on March 28, 1995. The limited liability interests of each are
jointly owned by American General Corporation and AGDMC and the business
and affairs of each are managed by AGDMC:
American General Capital, L.L.C.
American General Delaware, L.L.C.
(2) The following companies became approximately 40% owned by AGC Life
Insurance Company ("AGCL") on December 23, 1994:
Western National Corporation ("WNC")
WNL Holding Corporation
Western National Life Insurance Company
WesternSave (401K Plan)
Independent Advantage Financial & Insurance Services, Inc.
WNL Investment Advisory Services, Inc.
Conseco Annuity Guarantee Corp.
WNL Brokerage Services, Inc.
WNL Insurance Services, Inc.
Accordingly, these companies became AGCL affiliates under insurance
holding company laws. However the WNC stock is held for investment
purposes by AGCL and there are no plans for AGCL to direct the operations
of any of these companies.
(3) The following companies are controlled indirectly by American General
Securities Incorporated:
American General Insurance Agency of Ohio, Inc.
American General Insurance Agency of Texas, Inc.
American General Insurance Agency of Oklahoma, Inc.
(formerly American Capital Marketing Insurance Agency of Oklahoma, Inc.)
(4) American General Finance Corporation is the parent of an additional 41
subsidiaries incorporated in 26 states for the purpose of conducting its
consumer finance operations.
(5) American General Financial Services, Inc. is the parent of an additional
7 subsidiaries incorporated in 4 states and Puerto Rico for the purpose
of conducting its consumer finance operations.
(6) AG Land Associates, LLC is jointly owned by AGLH and AGLL. AGLH holds a
98.75% managing interest and AGLL owns a 1.25% managing interest.
All of the subsidiaries of AG Life are included in its consolidated financial
statements, which are filed in Part B of this Registration Statement.
Item 27. Number of Contract Owners
As of February 29, 1996, there were 350 owners of Contracts of the class
covered by this registration statement.
C-11
<PAGE>
ITEM 28. INDEMNIFICATION
Article VII, Section 1, of the Company's By-Laws provides, in part, that the
Company shall have power to indemnify any person who was or is a party or is
threatened to be made a party to any proceeding (other than an action by or in
the right of the Company) by reason of the fact that such person is or was
serving at the request of the Company, against expenses, judgments, fines,
settlements, and other amounts actually and reasonably incurred in connection
with such proceeding if such person acted in good faith and in a manner such
person reasonably believed to be in the best interest of the Company and, in
the case of a criminal proceeding, had no reasonable cause to believe the
conduct of such person was unlawful.
Article VII, Section 1 (in part), Section 2, and Section 3, provide that the
Company shall have power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action
by or in the right of the Company to procure a judgment in its favor by reason
of the fact that such person is or was acting in behalf of the Company,
against expenses actually and reasonably incurred by such person in connection
with the defense or settlement of such action if such person acted in good
faith, in a manner such person believed to be in the best interests of the
Company, and with such care, including reasonable inquiry, as an ordinarily
prudent person in a like position would use under similar circumstances. No
indemnification shall be made under Section 1: (a) in respect of any claim,
issue, or matter as to which such person shall have been adjudged to be liable
to the Company, unless and only to the extent that the court in which such
action was brought shall determine upon application that, in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for the expenses which such court shall determine; (b) of amounts
paid in settling or otherwise disposing of a threatened or pending action with
or without court approval; or (c) of expense incurred in defending a
threatened or pending action which is settled or otherwise disposed of without
court approval.
Article VII, Section 3, provides that, with certain exceptions, any
indemnification under Article VII shall be made by the Company only if
authorized in the specific case, upon a determination that indemnification of
the person is proper in the circumstances because the person has met the
applicable standard of conduct set forth in Section 1 of Article VII by (a) a
majority vote of a quorum consisting of directors who are not parties to such
proceeding; (b) approval of the shareholders, with the shares owned by the
person to be indemnified not being entitled to vote thereon; or (c) the court
in which such proceeding is or was pending upon application made by the
Company or the indemnified person or the attorney or other persons rendering
services in connection with the defense, whether or not such application by
the attorney or indemnified person is opposed by the Company.
Article VII, Section 7, provides that for purposes of Article VII, those
persons subject to indemnification include any person who is or was a
director, officer, or employee of the Company, or is or was serving at the
request of the Company as a director, officer, or employee of another foreign
or domestic corporation which was a predecessor corporation of the Company or
of another enterprise at the request of such predecessor corporation.
Insofar as indemnification for liability arising under the Securities Act of
1933 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
C-12
<PAGE>
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.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Registrant's principal underwriter, American General Securities
Incorporated, also acts as principal underwriter for American General
Life Insurance Company of New York Separate Account E and American
General Life Insurance Company Separate Account A.
(b) The directors and principal officers of the principal underwriter are:
<TABLE>
<CAPTION>
Position and Offices
with Underwriter,
Name and Principal American General
Business Address Securities Incorporated
<S> <C>
Robert S. Cauthen, Jr. Chairman
American General Life
2727-A Allen Parkway
Houston, TX 77019
F. Paul Kovach, Jr. Director & President
American General Securities
Incorporated
2727 Allen Parkway
Houston, TX 77019
George W. Bentham Director, Senior Vice President &
American General Life Chief Marketing Officer
2727-A Allen Parkway
Houston, TX 77019
Robert F. Herbert Director & Associate Tax Officer
American General Life
2727-A Allen Parkway
Houston, TX 77019
Bill B. Luther Director & Vice President
American General Life
2727-A Allen Parkway
Houston, TX 77019
Thomas B. Phillips Director & Secretary
American General Life
2727-A Allen Parkway
Houston, TX 77019
C-13
<PAGE>
Zafar Rashid Director, Vice President &
American General Life Treasurer
2727-A Allen Parkway
Houston, TX 77019
Fred G. Fram Vice President
American General Securities
Incorporated
2727 Allen Parkway
Houston, TX 77019
Steven A. Glover Assistant Secretary
American General Life
2727-A Allen Parkway
Houston, TX 77019
Carole D. Hlozek Administrative Officer
American General Securities
Incorporated
2727 Allen Parkway
Houston, TX 77019
J. Andrew Kalbaugh Administrative Officer
American General Securities
Incorporated
2727 Allen Parkway
Houston, TX 77019
</TABLE>
(c) Not Applicable.
ITEM 30. LOCATION OF RECORDS
All records referenced under Section 31(a) of the 1940 Act, and Rules 31a-1
through 31a-3 thereunder, are maintained and in the custody of American
General Life Insurance Company at its principal executive office located at
2727-A Allen Parkway, Houston, TX 77019.
ITEM 31. MANAGEMENT SERVICES
Not Applicable.
ITEM 32. UNDERTAKINGS
The Registrant undertakes: A) to file a post-effective amendment to this
registration as frequently as is necessary to ensure that the audited
financial statements in the Registration Statement are never more than 16
months old for so long as payments under the Contracts may be accepted; B) to
include either (1) as part of any application to purchase a Contract offered
by these prospectuses, a space that an applicant can check to request a
Statement of Additional Information, or (2) a toll-free number or a post card
or similar written communication affixed to or included in the applicable
prospectus that the applicant can remove to send for a Statement of Additional
Information; C) to deliver any Statement of Additional Information and any
financial statements required to be made available under this form promptly
upon written or oral request.
C-14
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act
of 1940, the Registrant, American General Life Insurance Company Separate
Account D, certifies that it meets the requirements of Securities Act Rule
485(b), for effectiveness of this Amendment to the Registration Statement and
has duly caused this Amendment to the Registration Statement to be signed on
its behalf, in the City of Houston, and State of Texas on this 30th day of
April, 1996.
AMERICAN GENERAL LIFE INSURANCE AMERICAN GENERAL LIFE INSURANCE
COMPANY SEPARATE ACCOUNT D COMPANY
(Registrant) (Depositor)
By: /s/ Zafar Rashid By: /s/ Zafar Rashid
------------------------ ---------------------
ZAFAR RASHID ZAFAR RASHID
Senior Vice President of Senior Vice President
American General Life
Insurance Company
As required by the Securities Act of 1933, this Amendment to the
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
ROBERT S. CAUTHEN* Principal Executive April 30, 1996
------------------ Officer
(Robert S. Cauthen)
ZAFAR RASHID* Principal Financial and April 30, 1996
(Zafar Rashid) Accounting Officer
Directors
BILL B. LUTHER*
------------------------ -----------------------
(Harold S. Hook) (Bill B. Luther)
ROBERT S. CAUTHEN, JR.* JON P. NEWTON
------------------------ -----------------------
(Robert S. Cauthen, Jr.) (Jon P. Newton)
MICHAEL G. ATNIP ZAFAR RASHID*
------------------------ -----------------------
(Michael G. Atnip) (Zafar Rashid)
ROBERT M. DEVLIN* PETER V. TUTERS*
------------------------ -----------------------
(Robert M. Devlin) (Peter V. Tuters)
GEORGE W. BENTHAM* AUSTIN P. YOUNG*
------------------------ -----------------------
(George W. Bentham) (Austin P. Young)
/s/ Steven A. Glover April 30, 1996
- --------------------------------------
*By Steven A. Glover, Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
10 Consent of Independent Auditors.
15(g) Power of Attorney with respect to Registration Statements and
Amendments thereto signed by the following persons in their
capacities as directors and, where applicable, officers of
American General Life Insurance Company : Messrs. Atnip and
Newton.
27 Financial Data Schedule.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000089031
<NAME> AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT D
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 413,244,463
<INVESTMENTS-AT-VALUE> 464,987,803
<RECEIVABLES> (30)
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 464,987,773
<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> 464,987,773
<DIVIDEND-INCOME> 12,516,480
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 5,735,875
<NET-INVESTMENT-INCOME> 6,780,605
<REALIZED-GAINS-CURRENT> 2,933,740
<APPREC-INCREASE-CURRENT> 65,361,002
<NET-CHANGE-FROM-OPS> 75,075,347
<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> 109,494,510
<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
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<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
[GRAPHIC OMITTED]
ERNST & YOUNG LLP
One Houston Center
Suite 2400
1221 McKinney Street
Houston, Texas 77010-2007
Phone: 713 750-1500
Fax: 713 750-1501
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference made to our firm under the caption "Independent
Auditors" and to the use of our reports dated January 31, 1996, as to American
General Life Insurance Company Separate Account D and February 12, 1996, as to
American General Life Insurance Company in Post-Effective Amendment No. 7 to
the Registration Statement (Form N-4 No. 33-43390) of American General Life
Insurance Company Separate Account D.
/s/ ERNST & YOUNG LLP
April 25, 1996
LIMITED POWER OF ATTORNEY
WHEREAS, American General Life Insurance Company, a Texas company (and
its successors, if applicable) ("Company"), intends from time to time to file
with the Securities and Exchange Commission ("Commission"), one or more Form
N-4 Registration Statement(s) under the Securities Act of 1933 and the
Investment Company Act of 1940, on behalf of the Company and the Separate
Account(s) maintained or to be maintained by the Company, with such amendments
thereto as may be necessary or appropriate, together with any and all exhibits
and other documents related thereto;
NOW, THEREFORE, each of the undersigned individuals, in his capacity as a
director or officer of the Company, hereby appoints Thomas B. Phillips and
Steven A. Glover, and each of them, either of whom may act without the joinder
of the other, his true and lawful attorney-in-fact and with full power of
substitution and resubstitution, to execute in his name, place, and stead, in
his capacity as a director or officer or both, as the case may be, of the
Company, any and all Form N-4 Registration Statements and any and all
amendments thereto as each said attorney-in-fact shall deem necessary or
appropriate, together with all instruments necessary or incidental in
connection therewith, and to file the same or cause the same to be filed with
the Commission. The above-named attorneys-in-fact shall each have full power
and authority to do and perform in the name and on behalf of the undersigned,
in any and all capacities, every act whatsoever necessary or desirable in
connection with any and all Form N-4 Registration Statements, and any and all
amendments thereto, as fully and for all intents and proposes as the
undersigned might or could do in person, the undersigned hereby ratifying and
approving the acts of each said attorney-in-fact.
EXECUTED this 12 day of March, 1996.
/s/ Michael G. Atnip /s/ Jon Newton
--------------------- -------------------
Michael G. Atnip Jon P. Newton
