Registration Nos. 33-43390
811-2441
As filed with the Commission on April 27, 1998
--------------------------------------
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. 16 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 69 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) 831-8471
(Depositor's Telephone Number, including Area Code)
Pauletta P. Cohn
Associate General Counsel
American General Independent Producer Division
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, 1998 pursuant to paragraph (b) of Rule 485
|_| 60 days after filing pursuant to paragraph (a)(1) of Rule 485
|_| On pursuant to paragraph (a)(1) of Rule 485
<PAGE>
If appropriate, check the following:
|_| This post-effective amendment designates a new effective date for a
previously filed post-effective amendment
Title of Securities Being Registered:
Units of interest in American General Life Insurance Company Separate
Account D under variable annuity contracts.
<PAGE>
This Registration Statement includes two successive versions of
contracts. The first version of contracts includes Contract Form No. 93011,
Contract Form No. 93020 and Contract Form No. 93021. The second version of
contracts includes contract Form No. 95020 Rev. 896 and Contract Form No.
95021 Rev. 896.
Registrant is amending this Registration Statement in connection with
the continuing offer of the second version of contracts. Registrant has ceased
offering the first version of contracts and, pursuant to positions taken by
the Securities and Exchange Commission staff, does not amend the Registration
Statement in connection with the first version of contracts (except as noted
below).
Under the foregoing circumstances, Registrant's exhibit list, in
response to Item 24(b), includes exhibits that are applicable to the first and
the second versions of contracts. Registrant's responses to Items 25 through
32 are amended, to the extent necessary or appropriate, in connection with the
second version of contracts, except for the "Representation Regarding the
Reasonableness of Aggregate Fees and Charges Deducted Under the Contracts
Pursuant to Section 26(e)(2)(A) of the Investment Company Act of 1940." set
out under Item 32 ("Representation"). Registrant's Representation, pursuant to
positions taken by the Securities and Exchange Commission staff, is applicable
to the first and the second versions of contracts. Certain information in the
Registration Statement regarding Registrant necessarily subsumes information
applicable to the first version of contracts (as well as other contracts
funded through Registrant and not included in this Registration Statement
under the Securities Act of 1933, but is included in this Registration
Statement under the Investment Company Act of 1940).
<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
Showing Location of Information in Prospectuses
<TABLE>
<CAPTION>
Form N-4
Item No. Prospectus Caption
-------- ------------------
<S> <C>
1. Cover Page..................................................... Cover Page
2. Definitions.................................................... Glossary
3 Synopsis of Highlights......................................... Synopsis of Contract Provisions
4. Condensed Financial Information................................ Synopsis of Contract Provisions -
Financial and Performance Information;
Cover Page; Selected Accumulation Unit
Data; Financial Information
5. General Description of Registrant,
Depositor and Portfolio Companies.............................. AGL; Separate Account D; The Series;
Services Agreement; 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, Automatic Rebalancing,
Surrender and Partial Withdrawal of
Owner Account Value; Owners, Annuitants
and Beneficiaries; Assignments; Rights
Reserved by Us
</TABLE>
i
<PAGE>
PART A
<TABLE>
<CAPTION>
Form N-4
Item No. Prospectus Caption
-------- ------------------
<S> <C>
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, Automatic Rebalancing,
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
</TABLE>
ii
<PAGE>
PART B
<TABLE>
Showing Location of Information in Statement of Additional Information
<CAPTION>
Caption in
Form N-4 Statement of
Item No. Additional Information
-------- ------------------
<S> <C>
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 Underwriter
21. Calculation of Performance
Data............................................................ Performance Data for the Divisions;
Effect of Tax-Deferred Accumulation
22. Annuity Payments................................................ Not Applicable*
23. Financial Statements............................................ Financial Statements
<FN>
* All required information is included in Prospectus.
</FN>
</TABLE>
iii
<PAGE>
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.
iv
<PAGE>
GENERATIONS(TM)
COMBINATION FIXED AND VARIABLE ANNUITY CONTRACTS
OFFERED BY
AMERICAN GENERAL LIFE INSURANCE COMPANY
ANNUITY ADMINISTRATION DEPARTMENT
P.O. BOX 1401, HOUSTON, TEXAS 77251-1401
1-800-200-3883 713/831-3505
American General Life Insurance Company ("AGL") is offering the flexible
payment deferred individual annuity contracts (the "Contracts") described in
this Prospectus.
You may use AGL's Separate Account D for a variable investment return under
the Contracts based on one or more of the following mutual fund series of the
Van Kampen American Capital Life Investment Trust ("Trust") - the Domestic
Income Portfolio, Emerging Growth Portfolio, the Enterprise Portfolio, the
Government Portfolio, the Growth and Income Portfolio, the Money Market
Portfolio, the Morgan Stanley Real Estate Securities Portfolio, and the
Strategic Stock Portfolio; and one or more of the following mutual fund series
of the Morgan Stanley Universal Funds, Inc. ("Fund") - the Asian Equity
Portfolio, the Emerging Markets Equity Portfolio, the Equity Growth Portfolio
(formerly the Growth Portfolio), the Global Equity Portfolio, the
International Magnum Portfolio, the Fixed Income Portfolio, the High Yield
Portfolio, the Mid Cap Value Portfolio, and the Value Portfolio.
You may also use AGL's guaranteed interest accumulation option. This option
currently has one guarantee period, with a guaranteed interest rate, although
AGL may offer other guarantee periods with different guaranteed interest
rates.
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, 1998, is incorporated by reference
into this Prospectus. The "Table of Contents" of the Statement appears at page
42 of this Prospectus. You may obtain a free copy of the Statement upon
written or oral request to AGL'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 AGL) 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 REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY CURRENT PROSPECTUSES OF THE
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST AND THE MORGAN STANLEY
UNIVERSAL FUNDS, INC.
PROSPECTUS DATED MAY 1, 1998
<PAGE>
<TABLE>
CONTENTS
<S> <C>
Glossary................................................................... 4
Fee Table.................................................................. 6
Synopsis of Contract Provisions............................................ 9
Minimum Investment Requirements........................................ 9
Purchase Payment Accumulation.......................................... 9
Fixed and Variable Annuity Payments.................................... 10
Changes in Allocations Among Divisions and Guarantee Periods........... 10
Surrenders, Withdrawals and Cancellations.............................. 10
Death Proceeds......................................................... 11
Limitations Imposed by Retirement Plans and Employers.................. 11
Communications to Us................................................... 11
Financial and Performance Information.................................. 11
Other Information...................................................... 13
Selected Accumulation Unit Data............................................ 13
Financial Information...................................................... 14
AGL........................................................................ 14
Separate Account D......................................................... 14
The Series ................................................................ 15
Voting Privileges...................................................... 17
The Fixed Account.......................................................... 17
Contract Issuance and Purchase Payments.................................... 19
Owner Account Value........................................................ 20
Variable Account Value................................................. 20
Fixed Account Value.................................................... 20
Transfer, Automatic Rebalancing, Surrender and Partial Withdrawal of Owner
Account Value............................................................. 21
Transfers.............................................................. 21
Automatic Rebalancing.................................................. 22
Surrenders and Partial Withdrawals..................................... 22
Annuity Period and Annuity Payment Options................................. 23
Annuity Commencement Date.............................................. 23
Application of Owner Account Value..................................... 24
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................................................ 29
Premium Taxes.......................................................... 29
Surrender Charge....................................................... 29
Transfer Charges....................................................... 31
Annual Contract Fee.................................................... 31
Charge to Separate Account D........................................... 31
Miscellaneous.......................................................... 32
Systematic Withdrawal Plan ............................................ 32
2
<PAGE>
One-Time Reinstatement Privilege....................................... 32
Reduction in Surrender Charges or Administrative Charges............... 32
Long-Term Care and Terminal Illness........................................ 32
Long-Term Care......................................................... 32
Terminal Illness....................................................... 33
Other Aspects of the Contracts............................................. 33
Owners, Annuitants and Beneficiaries; Assignments...................... 33
Reports................................................................ 33
Rights Reserved by Us.................................................. 34
Payment and Deferment.................................................. 34
Federal Income Tax Matters................................................. 34
General................................................................ 34
Non-Qualified Contracts................................................ 35
Individual Retirement Annuities ("IRAs")............................... 36
Roth IRAs ............................................................. 38
Simple Retirement Accounts............................................. 38
Other Qualified Plans.................................................. 38
Private Employer Unfunded Deferred Compensation Plans.................. 39
Federal Income Tax Withholding and Reporting........................... 40
Taxes Payable by AGL and Separate Account D............................ 40
Distribution Arrangements.................................................. 40
Services Agreement......................................................... 41
Legal Matters.............................................................. 41
Other Information on File.................................................. 41
Contents of Statement of Additional Information............................ 42
</TABLE>
3
<PAGE>
GLOSSARY
WE, OUR AND US - American General Life Insurance Company ("AGL").
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
after deduction of any fees.
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.
CONTINGENT ANNUITANT - a person that you designate under a Non-Qualified
Contract to become the Annuitant if the Annuitant dies before the Annuity
Commencement Date and the Contingent Annuitant survives the Annuitant.
CONTINGENT BENEFICIARY - a person that you designate to receive any proceeds
due under a Contract following the death of an Owner or an Annuitant, if the
Beneficiary has died but the Contingent Beneficiary survives at the time such
proceeds become payable.
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 AGL's General Account.
FIXED ACCOUNT VALUE - the amount of your Account Value which is in the Fixed
Account.
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.
4
<PAGE>
GENERAL ACCOUNT - all assets of AGL other than those in Separate Account D or
any other legally-segregated separate account established by AGL.
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; 1-800-200-3883 or 713-831-3505.
INVESTMENT COMPANY ACT OF 1940 ("1940 ACT") - a federal law governing the
operations of investment companies such as the Series 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,
408 or 408A 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.
QUALIFIED - eligible for the special federal income tax treatment applicable
in connection with retirement plans pursuant to sections 401, 403, 408 or 408A
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.
SERIES - an individual portfolio of a mutual fund available for investment
under the Contracts. Currently, the series available under the Contracts are
part of either the Van Kampen American Capital Life Investment Trust or the
Morgan Stanley Universal Funds, Inc.
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 Series does not value its
shares.
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.
5
<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 Series. The table reflects expenses
of the Separate Account as well as the Series. Amounts for state premium taxes
or similar assessments may also be deducted, where applicable.
<TABLE>
<S> <C>
PARTICIPANT TRANSACTION CHARGES
Front-End Sales Charge Imposed on Purchases........................ 0%
Maximum Surrender Charge (1)....................................... 6%
(computed as a percentage of purchase payments surrendered)
Transfer Fee....................................................... $ 0 (2)
ANNUAL CONTRACT FEE (3)................................................ $30
SEPARATE ACCOUNT D ANNUAL EXPENSES
(as a percentage of average daily net asset value)
Mortality and Expense Risk Charge.................................. 1.25%
Administrative Expense Charge...................................... 0.15%
Total Separate Account D Annual Expenses......................... 1.40%
-----------------------------
<FN>
(1) This charge does not apply or is reduced under certain circumstances.
See "Surrender Charge."
(2) This charge is $25 after the 12th transfer during each Contract Year
prior to the Annuity Commencement Date. There are exceptions to this
charge. See "Transfers" and "Automatic Rebalancing."
(3) This charge is not imposed during the Annuity Period.
</FN>
</TABLE>
6
<PAGE>
<TABLE>
THE SERIES' ANNUAL EXPENSES (1,2) (as a percentage of average net assets)
<CAPTION>
Management Other
Fees After Expenses Total Series
Expense After Expense Operating
Reimbursement Reimbursement Expenses
------------- ------------- ------------
<S> <C> <C> <C>
Domestic Income 0.05% 0.55% 0.60%
Emerging Growth 0.00% 0.85% 0.85%
Enterprise 0.44% 0.16% 0.60%
Government 0.36% 0.24% 0.60%
Growth and Income 0.00% 0.75% 0.75%
Money Market 0.12% 0.48% 0.60%
Morgan Stanley Real Estate Securities 1.00% 0.07% 1.07%
Strategic Stock 0.00% 0.65% 0.65%
Asian Equity 0.80% 0.40% 1.20%
Emerging Markets Equity 1.25% 0.50% 1.75%
Equity Growth 0.00% 0.85% 0.85%
Global Equity 0.00% 1.15% 1.15%
International Magnum 0.00% 1.15% 1.15%
Fixed Income 0.00% 0.70% 0.70%
High Yield 0.00% 0.80% 0.80%
Mid Cap Value 0.00% 1.05% 1.05%
Value 0.00% 0.85% 0.85%
<FN>
(1) The other expenses are estimated for the current fiscal year for the
Strategic Stock and the Asian Equity Portfolios, because they do not
have financial statements covering a period of at least ten months.
(2) If certain voluntary expense reimbursements from the investment adviser
were terminated, management fees and other expenses would have been as
set out in the following table. For the Strategic Stock and Asian Equity
Portfolios, such fees and expenses, absent reimbursement, are estimated
for the current fiscal year.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Management Other Total
Fees Expenses Expenses
---------- -------- --------
<S> <C> <C> <C>
Domestic Income 0.50% 0.55% 1.05%
Emerging Growth 0.70% 1.44% 2.14%
Enterprise 0.50% 0.16% 0.66%
Government 0.50% 0.24% 0.74%
Growth and Income 0.60% 1.03% 1.63%
Money Market 0.50% 0.48% 0.98%
Morgan Stanley Real Estate Securities 1.00% 0.07% 1.07%
Strategic Stock 0.05% 2.28% 2.33%
Asian Equity 0.80% 2.30% 3.10%
Emerging Markets Equity 1.25% 2.87% 4.12%
Equity Growth 0.55% 1.50% 2.05%
Global Equity 0.80% 1.63% 2.43%
International Magnum 0.80% 1.98% 2.78%
Fixed Income 0.40% 1.31% 1.71%
High Yield 0.50% 1.18% 1.68%
Mid Cap Value 0.75% 1.38% 2.13%
Value 0.55% 1.32% 1.87%
</TABLE>
7
<PAGE>
EXAMPLE (3) If you surrender your Contract (or if you annuitize under
circumstances where a surrender charge is payable) (4) 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>
If all amounts are invested 1 YEAR 3 YEARS 5 YEARS 10 YEARS
in one of the following ------ ------- ------- --------
Series:
---------------------------
<S> <C> <C> <C> <C>
Domestic Income $75 $110 $147 $239
Emerging Growth $78 $118 $160 $265
Enterprise $75 $110 $147 $239
Government $75 $110 $147 $239
Growth and Income $77 $114 $155 $255
Money Market $75 $110 $147 $239
Morgan Stanley Real Estate Securities $80 $124 $171 $287
Strategic Stock $76 $111 N/A N/A
Asian Equity $87 $139 N/A N/A
Emerging Markets Equity $87 $144 $204 $352
Equity Growth $78 $118 $160 $265
Global Equity $81 $127 $175 $295
International Magnum $81 $127 $175 $295
Fixed Income $76 $113 $152 $250
High Yield $78 $118 $161 $268
Mid Cap Value $80 $124 $170 $285
Value $78 $118 $160 $265
</TABLE>
EXAMPLE (3) If you do NOT surrender your Contract (or if you annuitize under
circumstances where a surrender charge is not payable) (4) 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>
If all amounts are invested 1 YEAR 3 YEARS 5 YEARS 10 YEARS
in one of the following ------ ------- ------- --------
Series:
---------------------------
<S> <C> <C> <C> <C>
Domestic Income $21 $65 $111 $239
Emerging Growth $24 $73 $124 $265
Enterprise $21 $65 $111 $239
Government $21 $65 $111 $239
Growth and Income $23 $69 $119 $255
Money Market $21 $65 $111 $239
Morgan Stanley Real Estate Securities $26 $79 $135 $287
Strategic Stock $22 $66 N/A N/A
Asian Equity $33 $94 N/A N/A
Emerging Markets Equity $33 $99 $168 $352
Equity Growth $24 $73 $124 $265
Global Equity $27 $82 $139 $295
8
<PAGE>
International Magnum $27 $82 $139 $295
Fixed Income $22 $68 $116 $250
High Yield $24 $73 $125 $268
Mid Cap Value $26 $79 $134 $285
Value $24 $73 $124 $265
<FN>
(3) In these Examples, "N/A" indicates that SEC rules require that the
Strategic Stock and the Asian Equity Portfolios complete the Example for
only the one and three year periods.
(4) For a description of the circumstances under which the Surrender Charge
may be payable under annuitization, see "Surrender Charge."
</FN>
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 are based, with respect to all of
the Series, on an estimated Average Account Value of $40,000.
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 this Prospectus, or in 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. The amount of any
subsequent purchase payment that you make must be at least $100. If your
Account Value falls below $500, we may cancel your interest in the Contract
and treat it as a full surrender. We also may transfer funds from a Division
(other than the Money Market Division) or Guarantee Period under your Contract
without charge to the Money Market Division if the Account Value of that
Division or Guarantee Period falls below $500. (See "Contract Issuance and
Purchase Payments.")
PURCHASE PAYMENT ACCUMULATION
Purchase payments will be accumulated on a variable or fixed basis until
the Annuity Commencement Date. For variable accumulation, you may allocate
part or all of your Account Value to one or more of the 17 available Divisions
of Separate Account D. Each such Division invests solely in shares of one of
17 corresponding Series. (See "The Series.") As the value of the investments
in a Series' 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 Guarantee Periods available in our Fixed Account
at the time you make your allocation. Each Guarantee
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<PAGE>
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.")
Over the lifetime of your Contract, you may allocate part or all of your
Account Value to no more than eighteen Divisions and Guarantee Periods. This
limit includes those Divisions and Guarantee Periods from which you have
either transferred or withdrawn all of your Account Value previously allocated
to such Divisions or Guarantee Periods.
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 AGL, the amount of which is fixed
and guaranteed by AGL. The amount of the payments 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 AGL 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%. AGL may in the future
offer other forms of the 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, Automatic
Rebalancing, 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.")
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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.
We will refund to you the Owner Account Value plus any premium taxes and
Annual Contract Fee 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 first page 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
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 Growth and Income Division may also advertise "yield." The
Money Market Division may advertise "yield" and "effective yield."
The performance information that may be presented is not an estimate or
guarantee of future investment performance and does not represent the actual
experience of amounts invested by a particular Owner.
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<PAGE>
Additional information concerning a Division's performance appears in the
Statement.
TOTAL RETURN AND YIELD QUOTATIONS. 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 Contract Fee. 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 Contract Fee.
Yield, effective yield, total return, and cumulative total return figures do
not include the effect of any Surrender Charge that may be imposed Total
return and cumulative total return figures also do not include the effect of
the Annual Contract Fee.
DIVISION PERFORMANCE. The investment performance for each Division that
invests in a corresponding Series of the Trust will generally reflect the
investment performance of that corresponding Series for the periods stated.
This information appears in the Statement. For periods prior to the date the
Contracts became available, the performance information for a Division will be
calculated on a hypothetical basis by applying current Separate Account fees
and charges under the Contract to the historical performance of the
corresponding Series. 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.
Information about the experience of the investment advisers to the
Series of the Fund appears in the prospectus for the Fund.
AGL may also advertise or report to Owners its ratings as an insurance
company by the A. M. Best Company. Each year, A. M. Best reviews the financial
status of thousands of insurers, culminating in the assignment of Best's
Ratings. These ratings reflect their current opinion of the relative financial
strength and operating performance of an insurance company in comparison to
the norms of the life/health industry. Best's Ratings range from A++ to F. An
A++ rating means, in the opinion of A. M. Best, that the insurer has
demonstrated the strongest ability to meet its respective policyholder and
other contractual obligations. A. M. Best publishes Best's Insurance Reports,
Life-Health Edition. The 1997 Edition reaffirmed AGL's rating of A++
(Superior), as of July 1997, for financial position and operating performance.
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<PAGE>
In addition, the claims-paying ability of AGL as measured by the
Standard & Poor's Corporation may be referred to in advertisements or in
reports to Owners. A Standard & Poor's insurance claims-paying ability rating
is an assessment of an operating insurance company's financial capacity to
meet the obligations of its insurance policies in accordance with their terms.
Standard & Poor's ratings range from AAA to D. The Company's claims-paying
ability is A++ (Excellent), reaffirmed as of June 1997.
AGL may additionally advertise its rating from Duff & Phelps Credit
Rating Co. A Duff & Phelps rating is an assessment of a company's insurance
claims paying ability. Duff & Phelps ratings range from AAA to CCC. Duff &
Phelps rates the claims-paying ability of AGL as AAA, the highest level,
reaffirmed as of August 1997.
The ratings from A. M. Best, Standard & Poors, and Duff & Phelps reflect
the claims paying ability and financial strength of AGL. THEY ARE NOT A RATING
OF INVESTMENT PERFORMANCE THAT PURCHASERS OF INSURANCE PRODUCTS HAVE
EXPERIENCED OR ARE LIKELY TO EXPERIENCE IN THE FUTURE.
OTHER INFORMATION
In addition, AGL 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. AGL 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
The table below shows the Accumumlation Unit value for the below-listed
Divisions of Separate Account D on the date purchase payments were first
allocated to each Division, as well as the Accumulation Unit value and number
of Accumulation Units outstanding for the indicated date therafter.
Accumulation
Unit Values Accumulation Accumulation
(Beginning of Unit Values Units Outstanding
Division Period)* at 12/31/97 at 12/31/97
-------- ------------- ------------ -----------------
<S> <C> <C> <C>
Domestic Income $ 8.951759 $ 9.781081 140,179.030
Emerging Growth $ 7.012841 $ 7.942509 627,503.779
Enterprise $ 14.101272 $ 17.240471 436,617.612
Government $ 8.702150 $ 9.402347 93,147.080
Growth and Income $ 5.000000 $ 5.889714 1,883,485.263
Money Market $ 7.771505 $ 8.010579 195,357.851
Morgan Stanley Real Estate Securities $ 7.469787 $ 8.930383 226,773.370
Strategic Stock $ 5.000000 $ 5.113696 453,980.311
Asian Equity $ 5.227120 $ 2.866335 70,260.047
Emerging Markets Equity $ 5.055192 $ 4.592849 320,283.628
Equity Growth $ 4.960272 $ 6.241285 848,910.769
Global Equity $ 4.982000 $ 5.905700 430,927.305
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International Magnum $ 5.061205 $ 5.318456 968,270.623
Fixed Income $ 5.003078 $ 5.408434 218,999.860
High Yield $ 5.051645 $ 5.574231 533,823.765
Mid Cap Value $ 5.001685 $ 6.585704 1,004,597.420
Value $ 4.944849 $ 5.801721 1,484,693.134
<FN>
* The dates when the Divisions commenced operations are as follows: the
Growth and Income, Emerging Markets Equity, Equity Growth, and Value
Divisions, January 29, 1997; the Emerging Growth and Fixed Income
Divisions, January 30, 1997; the Enterprise, Morgan Stanley Real Estate
Securities, Global Equity, High Yield, and Mid Cap Value Divisions,
February 5, 1997; the International Magnum Division, February 10, 1997;
the Money Market Division, February 25, 1997; the Government Division,
March 3, 1997; the Domestic Income Division, March 5, 1997; the Asian
Equity Division, June 13, 1997; the Strategic Stock Division, November
3, 1997.
</FN>
</TABLE>
FINANCIAL INFORMATION
The financial statements of AGL are located in the Statement. Please see
the first page of this Prospectus for information on how to obtain a copy of
the Statement. The financial statements of AGL should be considered only as
bearing on the ability of AGL to meet its contractual obligations under the
Contracts; they do not bear on the investment performance of Separate Account
D.
Financial statements of AGL and Separate Account D, including financial
information about the Divisions which invest in the Series of the Trust are
included in the Statement. (See "Contents of Statement of Additional
Information.")
AGL
AGL 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. AGL 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 AGL'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 58 Divisions, 17 of which are available under the Contracts
offered by this Prospectus, and 41 of which are available under contracts
funded through Separate Account D but not 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 AGL's general business
and the assets of Separate Account D belong to AGL. 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 AGL may
conduct, but will be held exclusively to meet AGL's obligations under variable
annuity contracts. Furthermore, the
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<PAGE>
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 AGL.
THE SERIES
The variable benefits under the Contracts are funded by 17 Divisions of
the Separate Account. These Divisions invest in shares of eight separate
investment Series of the Trust and nine separate Series of the Fund. The Trust
and the Fund offer shares of these Series, without sales charges, exclusively
to insurance company variable annuity and variable life insurance separate
accounts and not directly to the public. The Trust and the Fund offer shares
to variable annuity and variable life insurance separate accounts of insurers
that are not affiliated with AGL. We do not foresee any disadvantage to Owners
of Contracts arising out of these arrangements. Nevertheless, differences in
treatment under tax and other laws, as well as other considerations, could
cause the interests of various owners to conflict. For example, violation of
the federal tax laws by one separate account investing in the Trust or the
Fund could cause the contracts funded through another separate account to lose
their tax deferred status, unless remedial action were taken. If a material
irreconcilable conflict arises between separate accounts, a separate account
may be required to withdraw its participation in the Trust or the Fund. If it
becomes necessary for any separate account to replace shares of the Trust or
the Fund with another investment, the Trust or the Fund may have to liquidate
portfolio securities on a disadvantageous basis. At the same time, the Trust's
Board of Trustees, the Fund's Board of Directors and we will monitor events
for any material irreconcilable conflicts that may possibly arise and
determine what action, if any, should be taken to remedy or eliminate the
conflict.
Any dividends or capital gain distributions attributable to Contracts
are automatically reinvested in shares of the Series from which they are
received at the Series' 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 Series and increasing, by an equivalent value, the
number of shares outstanding of the Series. 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 Series of the Trust in which the available Divisions
invest are as follows:
Van Kampen American Capital Life Investment Trust
-------------------------------------------------
Domestic Income Portfolio
Emerging Growth Portfolio
Enterprise Portfolio
Government Portfolio
Growth and Income Portfolio
Money Market Portfolio
Morgan Stanley Real Estate Securities Portfolio
Strategic Stock Portfolio
Van Kampen American Capital Asset Management, Inc. is the investment
adviser of each Series of the Trust. Van Kampen American Capital Distributors,
Inc., is the distributor of shares of each Series of the Trust. The investment
adviser and the distributor are wholly-owned indirect subsidiaries of Morgan
Stanley
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<PAGE>
Group Inc. Morgan Stanley Group Inc. and various of its directly or indirectly
owned subsidiaries, including Morgan Stanley & Co. Incorporated, a registered
broker-dealer and investment adviser and Morgan Stanley International, are
engaged in a wide range of financial services. Their principal businesses
include securities underwriting, distribution and trading; merger,
acquisition, restructuring and other corporate finance advisor activities;
merchant banking; stock brokerage and research services; asset management;
trading of futures, options, foreign exchange, commodities and swaps
(involving foreign exchange, commodities, indices and interest rates); real
estate advice, financing and investing; and global custody, securities
clearance services and securities lending.
The names of the Series of the Fund in which the available Divisions
invest are as follows:
Morgan Stanley Universal Funds, Inc.
------------------------------------
Asian Equity Portfolio
Emerging Markets Equity Portfolio
Equity Growth Portfolio
Global Equity Portfolio
International Magnum Portfolio
Fixed Income Portfolio
High Yield Portfolio
Mid Cap Value Portfolio
Value Portfolio
On May 1, 1997, the Growth Portfolio, a Series of the Fund, changed its
name to the Equity Growth Portfolio.
Morgan Stanley Asset Management Inc. is the investment adviser of the
Asian Equity, Emerging Markets Equity, Equity Growth, Global Equity, and
International Magnum Portfolios. Miller Anderson & Sherrerd, LLP is the
investment adviser of the Fixed Income, High Yield, Mid Cap Value, and Value
Portfolios.
Before selecting any Division, you should carefully read the prospectus
that includes more complete information about the Series in which that
Division invests, including investment objectives and policies, charges and
expenses. You can find information about the investment performance of the
Series of the Trust in the Statement and information about the experience of
the investment advisers to the Series of the Fund in the prospectus for the
Fund. You may obtain additional copies of such a prospectus by contacting
AGL's Annuity Administration Department at the addresses and phone number set
forth on the first page of this Prospectus. When making your request, please
specify the single or the several Series in which you are interested.
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 this Series and consider their ability to assume the risks of
making an investment in this Division.
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<PAGE>
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 Series shares held in the Divisions of Separate Account D
attributable to their Contract should be voted at meetings of shareholders of
the Series. 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
Series that it holds of record in accordance with instructions received with
respect to all AGL annuity contracts participating in that Series.
Separate Account D will also vote all shares of each Series 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 Series is equal to (a) the
Owner's Variable Account Value attributable to that Series divided by (b) the
net asset value of one share of that Series. 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 Series will be computed in a comparable
manner, based on our liability for future Variable Annuity 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.
Series 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.
We believe that AGL's voting instruction procedures comply with current
federal securities law requirements and interpretations thereof. However, AGL
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.
The Fixed Account is not available under Contracts purchased in Oregon.
Our obligations with respect to the Fixed Account are legal obligations of
AGL and are supported by our General Account assets, which also support
obligations incurred by us under other insurance and
17
<PAGE>
annuity contracts. Investments purchased with amounts allocated to the Fixed
Account are the property of AGL, 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 period of time 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 AGL 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. If the
Owner has not provided such Written request and the renewed Guarantee Period
extends beyond the scheduled Annuity Commencement Date, we will nevertheless
contact the Owner regarding the scheduled Annuity Commencement Date. If the
Owner elects to annuitize in this circumstance, the Surrender Charge may be
waived. (See "Annuity Payment Options" and "Surrender Charge.") The first day
of the new Guarantee Period (or other reallocation) will be the day after the
end of the prior Guarantee Period. 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 reserve the
right to automatically transfer without charge, 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 purchase 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%.
Proceeds received by us from an exchange, rollover or transfer, and
which you have allocated to the Fixed Account, within 60 days following the
date of application for a Contract will accrue interest. The interest will be
credited to the Fixed Account during the Guarantee Period and will be
calculated at a rate which is the higher of: (1) the current interest rate
being used by us on the date of the application for the Guarantee Period
selected; or (2) the current interest rate being used by us on the date of
receipt of proceeds. Proceeds received more than 60 days after the date the
application is signed will receive interest at the rate in effect on the date
of receipt of such proceeds.
Interest will be credited to the Fixed Account as of the date of receipt
of such proceeds, and the interest rate used to calculate such interest will
remain in effect for the duration of the Guarantee Period.
Each Guarantee Period has its own Guaranteed Interest Rate, which may
differ from those for other Guarantee Periods. 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. One or more Guarantee
Periods may be offered with a required dollar cost averaging feature. (See
"Transfers.") Currently we make available a one year Guarantee Period, and no
others. However we reserve the right to change the Guarantee Periods that we
are making available at any time.
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<PAGE>
AGL'S MANAGEMENT MAKES THE FINAL DETERMINATION OF THE GUARANTEED
INTEREST RATES TO BE DECLARED. AGL 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 first
page of this Prospectus.
CONTRACT ISSUANCE AND PURCHASE PAYMENTS
The minimum initial purchase payment is $5,000. The amount of any
subsequent purchase payment allocated to any Division or Guarantee Period must
be at least $100. We reserve the right to modify these minimums, in our
discretion.
An application to purchase a Contract must be made by signed Written
application form provided by AGL or by such other medium or format as may be
agreed to by AGL and Van Kampen American Capital Distributors, Inc. as
distributor of the Contracts. 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 correctly-completed
application is not received within five Valuation Dates 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 because of
a partial withdrawal from the Contract, we reserve the right to transfer,
without charge, the remaining balance to the Money Market Division. If the
Owner's Account Value in any Division falls below $500 because of a transfer
to another Division or to the Fixed Account, we reserve the right to transfer
the remaining balance in that Division, without charge and pro rata, to the
Division, Divisions or Fixed Account to which the transfer was made. These
minimum requirements are waived for transfers under the Automatic Rebalancing
program. (See "Automatic Rebalancing.") 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
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<PAGE>
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 first
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 Accumulation 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 canceled to the extent you transfer or withdraw amounts
from a Division or to the extent necessary to pay certain charges 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 Series 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
Series shares held by the Division during the current Valuation Period, by (2)
the net asset value per share of the Series 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
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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 net 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.
The Fixed Account Value is guaranteed by AGL. Therefore, AGL bears the
investment risk with respect to amounts allocated to the Fixed Account, except
to the extent that AGL may vary the Guaranteed Interest Rate for future
Guarantee Periods (subject to the minimum Guaranteed Interest Rate stated in
your Contract).
TRANSFER, AUTOMATIC REBALANCING, 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.
If a transfer would cause your Account Value in any Division or
Guarantee Period to fall below $500, we reserve the right to also transfer the
remaining balance in that Division or Guarantee Period in the same proportions
as the transfer request.
Prior to the Annuity Commencement Date and after the first 30 days
following the date the Contract was issued, you may make up to 12 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 from the one-year Guarantee
Period, to transfers within 15 days before or after the end of the Guarantee
Period in which the transferred amounts were being held or to a renewal at the
end of the Guarantee Period to the same Guarantee Period.
Subject to the above general rules concerning transfers, you may
establish an automatic transfer plan, whereby amounts are automatically
transferred by us from the Money Market Division or the one-year Guarantee
Period (or any other Guarantee Period that is available at that time) to one
or more other Divisions on a monthly, quarterly, semi-annual or annual basis.
This kind of automatic transfer plan is also referred to as a dollar cost
averaging plan, under which the Owner will select the amount to be transferred
and the period of time over which transfers are to occur. We may offer certain
automatic transfer plans to Contract Owners who make new purchase payments and
who are not presently owners of any other annuity contract offered by AGL or
an affiliate of AGL. Under such plans, known as "special automatic transfer
plans," we will establish the period of time over which equal monthly
transfers will be made. We may offer a higher Guaranteed Interest Rate than
would otherwise be available for another Guarantee Period of the same duration
that is not offered under a special automatic transfer plan. Any such higher
interest rate will reflect differences in costs or services (due to such
factors as reduced sales expenses or administrative efficiencies related to
transferring amounts to other Divisions on an automatic, rather than a
discretionary,
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basis) and will not be unfairly discriminatory as to any person. Transfers
under all automatic transfer plans will not count towards the twelve free
transfers each Contract Year, and will not incur a $25 charge. You may obtain
additional information about how to establish an automatic transfer plan from
your sales representative or from us at the telephone numbers and addresses on
the first page of this Prospectus.
If the person or persons that are entitled to make transfers have
completed a Telephone Transfer Privilege form and the form is on file with us,
transfers may be made pursuant to telephone instructions, subject to the terms
of the Telephone Transfer Privilege authorization. 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. Under the Telephone Transfer Privilege 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 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 incomplete or not fully comprehensible,
we will not process the transaction. The phone number for telephone exchanges
is 1-800-200-3883.
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.
AUTOMATIC REBALANCING
Automatic Rebalancing within the Separate Account is available for
Contracts with an Account Value of $25,000 and larger at the time the
application for Automatic Rebalancing is received. Application for Automatic
Rebalancing can be made either at issue or after issue, and may subsequently
be discontinued.
Automatic Rebalancing occurs when funds are transferred by us among the
Separate Account Divisions so that the values in each Division match the
Owner's percentage allocation for Automatic Rebalancing then in effect.
Automatic Rebalancing is available on a quarterly, semi-annual or annual
basis, measured from the Contract Anniversary date. A Contract Anniversary
date which falls on the 29th, 30th, or 31st of the month will result in
Automatic Rebalancing as of the 1st of the next month. Automatic Rebalancing
does not permit transfers to or from any Guarantee Period. Transfers under
Automatic Rebalancing will not count towards the twelve free transfers each
Contract Year, and will not incur a $25 charge.
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
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Valuation Period in which we receive a Written surrender request in good
order, minus any applicable Surrender Charge, minus the amount of any
uncollected Contract Fee (see "Annual Contract Fee") 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, subject to a right
to reinstate the Contract. (See "One-Time Reinstatement Privilege.") 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, to the extent necessary the withdrawal will be taken pro-rata
from the Divisions and Guarantee Periods, based on your Account Value in each.
Partial withdrawal requests must be for at least $100 or, if less, all of your
Account Value. If your remaining Account Value in a Division or Guarantee
Period would be less than $500 as a result of the withdrawal (except for the
Money Market Division), we reserve the right to 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, plus any Surrender Charge, and premium tax if applicable,
payable upon the partial withdrawal. The amount payable to you, therefore,
will be the amount of the withdrawal request.
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 plan may be obtained from your sales representative or from us at
the addresses and phone numbers set forth on the first 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 may select the Annuity Commencement Date when applying to
purchase a Contract 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 may be any
day of any month up to the Annuitant's one hundredth birthday inclusive.
(Pennsylvania has special limitations which may require the Annuity
Commencement Date to be as early as age 85 but in no event beyond age 90.) 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.
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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 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
Values 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.
The 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
The Owner may elect to have annuity payments made beginning on the
Annuity Commencement Date under any one of the Annuity Payment Options
described below. We will notify the Owner 60 to 90 days prior to the scheduled
Annuity Commencement Date that the Contract is scheduled to mature, and
request that an Annuity Payment Option be selected. If the Owner has not
selected an Annuity Payment Option
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ten days prior to the Annuity Commencement Date, we will proceed as follows:
(1) if the scheduled Annuity Commencement Date is any date prior to the
Annuitant's one hundredth birthday, we will extend the Annuity Commencement
Date to the Annuitant's one hundredth birthday; or (2) if the scheduled
Annuity Commencement Date is the Annuitant's one hundredth birthday, the
Account Value less any applicable charges and premium taxes will be paid in
one sum to the Owner. This procedure is different in Pennsylvania because the
Annuity Commencement Date cannot exceed age 90.
The Code 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
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 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
Contract Fee, 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. (See "Contents of
Statement of Additional Information.")
OPTION 1 - LIFE ANNUITY - Annuity payments are payable 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.
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OPTION 3 - JOINT AND LAST SURVIVOR LIFE ANNUITY - Annuity payments are payable
monthly 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.
OPTION 4 - PAYMENTS FOR DESIGNATED PERIOD - Annuity payments are payable
monthly to an Annuitant or other properly-designated payee, or at his or her
death, the Beneficiary, 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 3.5% 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
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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.
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. If
a transfer would cause the value that is attributable to a Contract in any
Division to fall below $500, we reserve the right to transfer the remaining
balance in that Division 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
The death proceeds described below are payable to the Beneficiary under
the Contract if, prior to the Annuity Commencement Date, any of the following
events occurs: (a) the Annuitant dies and no Contingent Annuitant has been
named under a Non-Qualified Contract; (b) the Annuitant dies and we also
receive proof of death of any named Contingent Annuitant; or (c) the Owner
(including the first to die in the case of joint Owners) of a Non-Qualified
Contract dies, regardless of whether said deceased Owner was also the
Annuitant (however, if the Beneficiary is the Owner's surviving spouse, the
Beneficiary may elect to continue the Contract as described in the fifth
paragraph below). The death proceeds, prior to deduction of any applicable
premium taxes, will equal the greatest of (1) the sum of all net 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 Highest
Anniversary Value prior to the date of death, as defined below.
The Highest Anniversary Value prior to the date of death will be
determined as follows:
First, we will calculate the Account Values at the end of each of
the past Contract Anniversaries that occurred prior to the
deceased's 81st birthday;
Second, each of the Account Values will be increased by the amount
of net purchase payments made since the end of such Contract
Years; and
Third, the result will be reduced by the amount of any withdrawals
made since the end of such Contract Years.
The Highest Anniversary Value will be an amount equal to the highest of
such values. The Highest Anniversary Value will not be calculated after the
81st birthday. Net purchase payments are purchase
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payments less applicable premium tax.
We will pay the death proceeds to the Beneficiary as of the date the
proceeds become payable. Such date is the end of the Valuation Period in which
we receive proof of the Owner's or Annuitant's death and a Written request in
good order 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 the death proceeds become payable, 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 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. Also, if the Annuitant dies following the Annuity
Commencement Date, no previously named Contingent Annuitant can become the
Annuitant.
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.
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CHARGES UNDER THE CONTRACTS
PREMIUM TAXES
When applicable, we will deduct an amount to cover premium taxes imposed
by certain states. We may deduct such amount either at the time the tax is
imposed or later. Such deduction may be made, in accordance with applicable
state law:
(1) from purchase payment(s) when received; or
(2) from the Owner's Account Value at the time annuity payments begin; or
(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, AGL may reimburse itself for such tax when
deduction is being made under items 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 6%
2nd 6%
3rd 5%
4th 5%
5th 4%
6th 3%
7th 2%
Thereafter 0%
</TABLE>
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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,
commencement of an Annuity Payment Option, and termination due to insufficient
Account Value.
Nevertheless, the Surrender Charge will NOT apply to withdrawals in the
following circumstances:
The amount of withdrawals that exceeds the cumulative amount of your
purchase payments;
Death of the Annuitant, at any age, after the Annuity Commencement Date;
Death of the Annuitant, at any age, prior to the Annuity Commencement
Date, provided no Contingent Annuitant survives;
Death of the Owner, including the first to die in the case of joint
Owners of a Non-Qualified Contract;
Annuitization over at least 10 years, or life contingent annuitization
where the life expectancy is at least 10 years;
Within the 30 day window under the One-Time Reinstatement Privilege;
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".
The Surrender Charge also does NOT apply to the surrender of a Contract,
or to the withdrawal of Contract Value (limited to the Variable Account Value
and the one year Guarantee Period) of a Contract, issued to owners who are:
(1) employees or registered representatives (or the spouses or minor children
of employees or registered representatives) of any broker-dealer authorized to
sell the Contracts, or (2) officers, directors, or bona-fide full-time
employees of AGL or American General Securities Incorporated, the principal
underwriter of the Contracts, or their affiliated companies, or Van Kampen
American Capital Distributors, Inc., the distributor of the Contracts, or its
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. If
multiple withdrawals are made during a Contract Year, the amount eligible for
the free withdrawal will be recalculated at the time of each withdrawal. After
the first Contract Year, non-automatic and automatic withdrawals may be made
in the same Contract Year subject to the 10% limitation. For withdrawals under
a systematic withdrawal plan, Purchase Payments credited for 30 days or more
are eligible for the 10% free withdrawal.
The Surrender Charge will not apply to any amounts withdrawn which are
in excess of the amount
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permitted by the 10% free withdrawal privilege, described above, if such
amounts are required to be withdrawn to obtain or retain favorable tax
treatment. For example, under certain circumstances the income and estate tax
benefits of a charitable remainder trust may be available only if assets are
withdrawn from a Contract funding such trust more rapidly than the 10% free
withdrawal privilege would permit. This exception is subject to our approval.
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. A penalty tax may be imposed on distributions if the recipient is
under age 59 1/2. (See "Penalty Tax on Premature Distributions.")
TRANSFER CHARGES
The charges to defray the expense of effecting transfers are described
under "Transfer, Automatic Rebalancing, 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 CONTRACT FEE
An Annual Contract Fee of $30 will be deducted from each Owner's Account
Value at the end of each Contract Year prior to the Annuity Commencement Date.
This Fee is for administrative expenses (which do not include expenses of
distributing the Contracts), and we do not expect that the revenues we will
derive from this Fee will exceed such expenses. Unless paid directly, the Fee
will be allocated among the Guarantee Periods and Divisions in proportion to
your Account Value in each. Certain states, however, restrict the amount of
the Fee which can be allocated to the Guarantee Periods. The entire Fee for
the year will be deducted from the proceeds of any full surrender. We reserve
the right to waive the Fee.
CHARGE TO SEPARATE ACCOUNT D
To offset other administrative expenses not covered by the Annual
Contract Fee 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 1.40% of the average daily net asset value of
Separate Account D attributable to the Contracts. Of this amount, .15% 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.
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MISCELLANEOUS
Charges and expenses are paid out of the assets of each Series, as
described in the prospectus relating to that Series. 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
Contracts.
SYSTEMATIC WITHDRAWAL PLAN
Automatic partial withdrawals, with minimum payments of $100, may be
made at periodic intervals through a systematic withdrawal program and the
Contract Owner may choose from payment schedules of monthly, quarterly,
semi-annually, or annually, and may start, stop, increase or decrease
payments. Withdrawals may start as early as 30 days after the issue date of
the Contract and may be taken from the Fixed Account or any Division, as
specified by the Owner. Systematic withdrawals are subject to the terms and
conditions applicable to other partial withdrawals, including Surrender
Charges and exceptions to Surrender Charges.
ONE-TIME REINSTATEMENT PRIVILEGE
If the Account Value is at least $500, the Owner may elect to reinvest
all of the proceeds that were previously liquidated from the Contract within
the past 30 days and have the Surrender Charge and any Annual Contract Fee not
then due credited back to the Contract. The funds will be reinvested at the
value next following the date of receipt of the reinstated Account Value.
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.
This privilege is not available under Contracts purchased in Oregon.
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 to
a partial withdrawal or total surrender made during any period of time that
the Annuitant is confined continuously for 30 days or more (or within 30 days
after discharge) in a hospital or state-licensed in-patient nursing facility.
We must receive
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Written proof of such confinement that is satisfactory to us.
TERMINAL ILLNESS
The rider also provides that no Surrender Charge will apply to a partial
withdrawal or total surrender if we have received a physician's Written
certification that the Annuitant is considered to be 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 AGL 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 AGL.
OWNERS, ANNUITANTS, AND BENEFICIARIES; ASSIGNMENTS
The Owner of a Contract will be the same as the Annuitant, unless the
purchaser designates a different Owner when applying to purchase a Contract.
In the case of joint ownership, both Owners must join in the exercise of any
rights or privileges under the Contract. The Annuitant and any Contingent
Annuitant are designated in the application for a Contract and may not
thereafter be changed.
The Beneficiary and any Contingent Beneficiary are designated when
applying to purchase a Contract. A Beneficiary or Contingent 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 or Contingent 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 or Contingent Beneficiary
before making a change. Under certain retirement programs, spousal consent may
be required to name a Beneficiary other than the spouse or to change a
Beneficiary to a person other than the spouse. We are not responsible for the
validity of any designation of a Beneficiary or Contingent Beneficiary.
If no named Beneficiary or Contingent 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
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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, or combine the Separate Account with another separate
account; (4) add, restrict or remove Guarantee Periods of the Fixed Account;
(5) make any new Division available to you on a basis to be determined by us;
(6)substitute, for the shares held in any Division, the shares of another
Series or the shares of another investment company or any other investment
permitted by law; (7) 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; (8) commence deducting premium taxes or adjust the
amount of premium taxes deducted in accordance with applicable state law; or
(9) make any changes required to comply with the rules of any Series. 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 request in good order. In the case
of payment of death proceeds, if we do not receive a Written request as to the
manner of payment within 60 days after the death proceeds become payable, 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.
Finally, we reserve the right to defer payment of any surrender and
annuity payment amounts or death benefit amounts of any portion of the
Variable Account Value if (a) the New York Stock Exchange is closed other than
customary weekend and holiday closings, or trading on the New York Stock
Exchange is restricted; (b) an emergency exists, as a result of which disposal
of securities is not reasonably practicable or it is not reasonably
practicable to fairly determine the Variable Account Value; or (c) the
Securities and Exchange Commission by order permits the delay for the
protection of Owners. Transfers and allocations of Account Value among the
Divisions and the Fixed Account may also be postponed under these
circumstances.
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.
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The discussion is based on the law, regulations and interpretations
existing on the date of this Prospectus. Congress has in the past and may
again in the future enact legislation changing the tax treatment of annuities
in both the Qualified and the Non-Qualified markets. The Treasury Department
may issue new or amended regulations or other interpretations of existing tax
law. Judicial interpretations may also affect the tax treatment of annuities.
It is possible that such changes could have a retroactive effect. We suggest
that you consult your legal or tax adviser on these issues.
The discussion does not address state or local tax, estate and gift tax,
or social security 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 Series that are
"adequately diversified" in accordance with Treasury Department regulations.
Although we do not control the Series, the investment advisers to the Series
have undertaken to use their best efforts to operate the Series in compliance
with these diversification requirements. A Contract investing in a Series 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 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 taxed 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
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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 issued by us to the
same Owner during any calendar year are to be aggregated for purposes of
determining the amount of any distribution 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 on
or 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.
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. In the case of married individuals filing a joint
return, the deduction will, in general, be the lesser of $4,000 or 100% of the
combined earned income of both spouses, reduced by any deduction for an IRA
purchase payment allowed to the spouse. Single persons who participate in a
tax-qualified retirement plan and who have adjusted gross income not in excess
of $30,000 may fully deduct their IRA purchase payments. Those who have
adjusted gross income in excess of $40,000 will not be able to deduct purchase
payments, and for those with adjusted gross income between $30,000 and $40,000
the deduction is phased out based on the amount of income. Beginning in 1999,
the income range over which the otherwise deductible portion of an IRA
purchase payment will be phased out for single persons will increase, as
follows: 1999--$31,000 to $41,000; 2000--$32,000 to $42,000; 2001--$33,000 to
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$43,000; 2002--$34,000 to $44,000; 2003--$40,000 to $50,000; 2004--$45,000 to
$55,000; and 2005 and thereafter--$50,000 to $60,000.
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 $50,000 and $60,000, and in the
case of married individuals filing separately, with adjusted gross income
between $0 and $10,000. Beginning in 1999, the income range over which the
otherwise deductible portion of an IRA purchase payment will be phased out for
married individuals filing joint tax returns will increase as follows: 1999--
$51,000 to $61,000; 2000--$52,000 to $62,000; 2001--$53,000 to $63,000; 2002--
$54,000 to $64,000; 2003--$60,000 to $70,000; 2004--$65,000 to $75,000;
2005--$70,000 to $80,000; 2006--$75,000 to $85,000; and 2007 and
thereafter--$80,000 to $100,000.
A married individual filing a joint tax return, who is not an active
participant in a tax qualified retirement plan, but whose spouse is an active
participant in such a plan, may, in any year, deduct from his or her taxable
income purchase payments for an IRA equal to the lesser of $2,000 or 100% of
the individual's earned income. For such an individual, the income range over
which the otherwise deductible portion of an IRA purchase payment will be
phased out is $150,000 to $160,000.
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 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.
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, including distributions for qualified
first-time home purchases for the individual, a spouse, children,
grandchildren or ancestor, subject to a $10,000 lifetime maximum, and
distributions for higher education expenses for the individual, a spouse,
children, or grandchildren. 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.
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ROTH IRAS
Beginning in 1998, individuals may purchase a new type of non-deductible
IRA, known as a Roth IRA. Purchase payments for a Roth IRA are limited to
$2,000 per year. This limitation is reduced for adjusted gross income
beginning at $95,000 and is eliminated at $110,000 in the case of single
taxpayers, between $150,000 and $160,000 in the case of married taxpayers
filing joint returns, and between $0 and $15,000 in the case of married
taxpayers filing separately. An overall $2,000 annual limitation continues to
apply to all of a taxpayer's IRA contributions, including Roth IRAs and
non-Roth IRAs.
An individual may make a rollover contribution from a non-Roth IRA to a
Roth IRA, unless the individual has adjusted gross income over $100,000 or the
individual is a married taxpayer filing a separate return. The individual must
pay tax on any portion of the IRA being rolled over that represents income or
a previously deductible IRA contribution. For rollovers in 1998, the
individual may pay that tax ratably in 1998 and over the succeeding three
years. There are no similar limitations on rollovers from a Roth IRA to
another Roth IRA.
Qualified distributions from Roth IRAs are entirely tax free. A
qualified distribution requires that the individual has held the Roth IRA for
at least five years and, in addition, that the distribution is made either
after the individual reaches age 59 1/2 on the individual's death or
disability, or as a qualified first-time home purchase, subject to a $10,000
lifetime maximum, for the individual, a spouse, child, grandchild, or
ancestor.
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.
SIMPLE RETIREMENT ACCOUNTS
Employees and employers may establish an IRA plan known as a simple
retirement account ("SRA"), if certain requirements are met. Under an SRA, the
employer contributes elective employee compensation deferrals up to a maximum
of $6,000 a year. The employer must, in general, make a fully vested matching
contribution for employee deferrals up to 3% of compensation.
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
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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. 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 disability, with certain exceptions.
These exceptions include distributions that are (1) part of a series 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 attaining 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, in connection with Variable Annuity Payments, under "Non-Qualified
Contracts - Taxation of Annuity Payments," except that the number of expected
payments is determined under a provision in the Code. 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 or retires, if later. 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.
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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.
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, or retirement
in appropriate circumstances, 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 AGL AND SEPARATE ACCOUNT D
AGL is taxed as a life insurance company under the Code. The operations
of Separate Account D are part of the total operations of AGL and are not
taxed separately. Under existing federal income tax laws, AGL is not taxed on
investment income derived by Separate Account D (including realized and
unrealized capital gains) with respect to the Contracts. AGL 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 Series may elect to pass through to AGL any taxes withheld by
foreign taxing jurisdictions on foreign source income. Such an election will
result in additional taxable income and income tax to AGL. 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 AGL.
DISTRIBUTION ARRANGEMENTS
The Contracts will be sold by individuals who, in addition to being
licensed by state insurance authorities to sell the Contracts of AGL, are also
registered representatives of American General Securities Incorporated
("AGSI"), the principal underwriter of the Contracts, or registered
representatives of Van Kampen American Capital Distributors, Inc. or other
broker-dealer firms or representatives of other firms that are exempt from
broker-dealer regulation. AGSI, Van Kampen American Capital Distributors, Inc.
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 AGL. 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. AGSI and Van Kampen American
Capital Distributors, Inc. have entered into certain revenue and cost-sharing
arrangements in connection with the marketing of the Contracts.
40
<PAGE>
AGL compensates Van Kampen American Capital Distributors, Inc. ("VKAC
Distributors") and other broker-dealers that sell the Contracts according to
one or more compensation schedules. The schedules provide for commissions of
up to 7% of first year purchase payments received pursuant to the Contracts.
In addition, depending on the schedule selected, AGL may pay continuing
"trail" commissions of up to .75% of Contract Account Value. AGL also has
agreed to pay VKAC Distributors for its promotional activities such as the
solicitaion of selling group agreements between broker-dealers and AGL, agent
appointments with AGL, printing and development of sales literature to be used
by AGL appointed agents as well as related marketing support and related
special promotional campaigns. From time to time VKAC Distributors may engage
in special promotions resulting in the payment by VKAC Distributors of
additional compensation to one or more of the broker-dealers that sell the
Contracts. None of these distribution expenses results in any additional
charges under the Contracts that are not described under "Charges under the
Contracts."
SERVICES AGREEMENT
American General Independent Producer Division ("AGIPD") is party to a
general services agreement with AGL. AGIPD, an affiliate of AGL, is a
corporation incorporated in Delaware on November 24, 1997. Its address is
2727-A Allen Parkway, Houston, Texas 77019. Pursuant to this agreement, AGIPD
provides services to AGL, including most of the administrative, data
processing, systems, customer services, product development, actuarial,
auditing, accounting and legal services for AGL and the Contracts.
LEGAL MATTERS
The legality of the Contracts described in this Prospectus has been
passed upon by Steven A. Glover, Esquire, Senior Counsel of AGIPD. Freedman,
Levy, Kroll & Simonds, Washington, D.C., has advised AGL on certain federal
securities law matters.
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.
41
<PAGE>
A Statement is available from us on request. Its contents are as
follows:
CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
General Information ..................................................... 2
Regulation and Reserves ................................................. 2
Independent Auditors..................................................... 2
Services................................................................. 3
Principal Underwriter.................................................... 3
Annuity Payments......................................................... 3
Gender of Annuitant.................................................... 3
Misstatement of Age or Gender and Other Errors ........................ 4
Change of Investment Adviser or Investment Policy ....................... 4
Performance Data for the Divisions ...................................... 4
Effect of Tax-Deferred Accumulation...................................... 10
Financial Statements..................................................... 11
Index to Financial Statements ........................................... 12
42
<PAGE>
(THIS DOCUMENT IS NOT PART OF A PROSPECTUS)
INDIVIDUAL RETIREMENT ANNUITY DISCLOSURE STATEMENT
INTRODUCTION
THIS DISCLOSURE STATEMENT IS DESIGNED FOR OWNERS OF IRAS ISSUED BY AMERICAN
GENERAL LIFE INSURANCE COMPANY AFTER DECEMBER 31, 1997.
This Disclosure Statement is not part of your certificate 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 certificate 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 certificate is delivered that you do not desire to retain your IRA,
written notification to the Company must be mailed, together with your
certificate, within that period. If such notice is mailed within 20 days,
current contract value or contributions if required, without adjustments for
any applicable sales commissions or administrative expenses, will be refunded.
MAIL NOTIFICATION OF REVOCATION AND YOUR CERTIFICATE 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 you are not an active
participant (see A. below), you may make a contribution of up to the lesser of
$2,000 or 100% of compensation and take a deduction for the entire amount
contributed. If you are a married individual filing a joint return, and your
compensation is less than your spouse's, the total deduction will, in general,
be the lesser of $4,000 or 100% of the combined earned income of both spouses,
reduced by any deduction for an IRA purchase payment allowed to your spouse.
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 (SEP), any Simple Retirement Account 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.
Page 1
<PAGE>
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, (i) filed a separate tax return, and did not live with
your spouse at any time during the year, or (ii) filed a joint return and have
a joint AGI of less than $150,000, your spouse's active participation will not
affect your ability to make deductible contributions. If you are married and
file jointly, your deduction will be phased out between an AGI of $150,000 to
$160,000.
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, the Threshold Level is $30,000. If you are married and file
a joint tax return, the Threshold Level is $50,000. If you are married but
file a separate tax return, the Threshold Level will be $0.
For taxable years beginning in 1999, the Threshold Levels for single
individuals and for married individuals filing jointly will increase as
follows:
<TABLE>
<CAPTION>
Threshold Level
For taxable years beginning in : Single Married (filing jointly)
-------------------------------- --------------------
<S> <C> <C>
1999 $31,000 $51,000
2000 $32,000 $52,000
2001 $33,000 $53,000
2002 $34,000 $54,000
2003 $40,000 $60,000
2004 $45,000 $65,000
2005 $50,000 $70,000
2006 $50,000 $75,000
2007 and thereafter $50,000 $80,000
</TABLE>
A married individual filing a joint tax return, who is not an active
participant, but whose spouse is, may, in any year, make deductible IRA
contributions equal to the lesser of $2,000 or 100% of the individual's earned
income. The Threshold Level for such individual is $150,000.
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
Page 2
<PAGE>
(AGI - Threshold Level) is called your Excess AGI. The Maximum Allowable
Deduction is $2,000. In the case of a married individual filing jointly and
earning less than his or her spouse, the maximum Allowable Deduction is the
lesser of $2,000 or the spouse's income, less any deductible IRA contributions
or contributions to a Roth 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
For the taxable year beginning in 2007, the deduction limit for married
individuals filing jointly will be determined as follows:
$10,000 - Excess AGI
-------------------- x Maximum Allowable Deduction = Deduction Limit
$20,000
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.
EXAMPLE 1: Ms. Smith, a single person, is an active participant and has
an AGI of $31,619. In 1998, she would calculate her deductible IRA
contribution as follows:
Her AGI is $31,619
Her Threshold Level is $30,000
Her Excess AGI is (AGI - Threshold Level) or ($36,619 - $30,000) =
$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. Their 1999 combined
AGI is $55,255. Neither spouse contributed to a Roth IRA. They may each
contribute to an IRA and calculate their deductible contributions to
each IRA as follows:
Their AGI is $55,255
Their Threshold Level is $51,000
Their Excess AGI is (AGI - Threshold Level) or ($55,255 - $51,000)
= $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
Page 3
<PAGE>
EXAMPLE 3: If, in Example 2, Mr. Young did not earn any compensation,
each spouse could still contribute to an IRA and calculate their
deductible contribution to each IRA as in Example 2.
EXAMPLE 4: In 1998, 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.
NON-DEDUCTIBLE CONTRIBUTIONS TO IRAS
Even if you are above the Threshold Level and thus may not make a deductible
contribution of up to $2,000 (or up to $4,000 in the case of married
individuals filing a joint return), you may still contribute up to the lesser
of 100% of compensation or $2,000 to an IRA ($4,000 in the case of married
individuals filing a joint return). 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 (or up to $4,000 in the case of married
individuals filing a joint return) at any time during the year, if your
compensation for the year will be at least $2,000 (or up to $4,000 in the case
of married individuals filing a joint return), 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).
Page 4
<PAGE>
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)
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).
Year Deductible Non-deductible
---- ---------- --------------
1990 $ 2,000
1991 1,800
1994 1,000 $ 1,000
1996 600 1,400
------- -------
$ 5,400 $ 2,400
Deductible Contributions: $ 5,400
Non-Deductible Contributions: 2,400
Earnings on IRAs: 1,200
-------
Total Account Balance of IRA(s) as of 12/31/98: $ 9,000
(before distributions in 1998).
In 1998, the individual takes a distribution of $3,000. The total account
balance in the IRAs on 12/31/98 before 1998 distributions is $9,000. The
non-taxable portion of the distributions for 1998 is figured as follows:
Total non-deductible contributions $2,400
------ x $3,000 = $800
Total account balance in the IRAs before distributions $9,000
Thus, $800 of the $3,000 distribution in 1998 will not be included in the
individual's taxable income. The remaining $2,200 will be taxable for 1998.
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.
Page 5
<PAGE>
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 law, however, any amount
that you elect not to have distributed as a direct rollover will be subject to
20 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 Regulations ss.1.401(a)(31)-1, ss.1.402(c)-2T and
ss.31.3405(c)-1.
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 ss.72(t), unless the
distribution (a) occurs because of your death or disability, (b) is for
certain medical care expenses or to an unemployed individual for health
insurance premiums, (c) is received as a part of a series of substantially
equal payments over your life or life expectancy, (d) is received as a part of
a series of substantially equal payments over the lives or life expectancy of
you and your beneficiary, or (e) the distribution is contributed to a rollover
IRA, (f) is used for a qualified first time home purchase for you, your
spouse, children, grandchildren, or ancestor, subject to a $10,000 lifetime
maximum or (g) is for higher education purposes for you, your spouse, children
or grandchildren.
MINIMUM DISTRIBUTIONS
Under the rules set forth in Code ss.408(b)(3) and ss.401(a)(9), you may not
leave the funds in your certificate indefinitely. Certain minimum
distributions are required. These required distributions may be taken in one
of two ways: (a) by withdrawing the balance of your certificate 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 certificate 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 ss.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.
Page 6
<PAGE>
PROHIBITED TRANSACTIONS
Neither you nor your beneficiary may engage in a prohibited transaction, as
that term is defined in Code ss.4975.
Borrowing any money from this IRA would, under Code ss.408(e)(3), cause the
certificate 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 certificate as security for a loan from the Company, if such loan
were otherwise permitted, would, under Code ss.408(e)(4), cause the portion so
used to be treated as a taxable distribution.
EXCESS CONTRIBUTIONS
Tax Code ss.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 annuity contract and IRA endorsement have been filed by approval 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
(GENERATIONS VARIABLE ANNUITY, FORM NOS. 95020 REV 896 AND 95021 REV 896)
This Financial Disclosure is applicable to IRAs using a Generations Variable
Annuity (contract form numbers 95020 Rev 896 or 95021 Rev 896) purchased from
American General Life Insurance Company on or after May 1, 1998.
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) A maximum annual contract maintenance charge of $30 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.
Page 7
<PAGE>
(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 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,
or defer the charge until the purchase payments are withdrawn,
whether on account of a full or partial surrender, annuitization,
or death of the Annuitant.
(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:
6% 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;
5% of purchase payments for surrenders and withdrawals made
during the fourth contract year following receipt of the
purchase payments surrendered;
4% of purchase payments for surrenders and withdrawals made
during the fifth contract year following receipt of the
purchase payments surrendered;
3% of purchase payments for surrenders and withdrawals made
during the sixth contract year following receipt of the
purchase payments surrendered;
2% 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 during the eighth and subsequent contract years 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 .15% 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. Total fees will range
between 0.60% and 1.75%.
Page 8
<PAGE>
(THE FOLLOWING DOCUMENTS ARE NOT PART OF A PROSPECTUS)
Generations VARIABLE ANNUITY
Disclosures and Forms Section
Index
<TABLE>
<S> <C>
Individual Retirement Annuity Disclosure Statement and Financial Disclosure ..... page 1
1035 Exchange Instructions ...................................................... page 9
Qualified and Non-Qualified Funds Transfer Instructions ......................... page 10
Absolute Assignment Form ........................................................ page 11
Qualified Funds Transfer Form ................................................... page 13
Non-Qualified Funds Transfer Form ............................................... page 14
Change Request Form ............................................................. page 15
Systematic Withdrawals Request Form ............................................. page 17
Automatic Additional Purchase Payment Form ...................................... page 19
Change of Beneficiary Form ...................................................... page 21
Statement of Additional Information Request Form ................................ page 23
</TABLE>
<PAGE>
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<PAGE>
1035 Exchange Instructions
-----------------------------------------------------------------------------
1. Processing Rules
A 1035 exchange is one that qualified under IRC Section 1035 guidelines.
A 1035 exchange is for non-qualified funds only.
The Home Office does not offer tax advice. Applicants and contractowners
should contact their own tax advisors.
To qualify as a 1035 exchange, the following contract types are
required:
* An annuity or life insurance contract in exchange for an annuity
contract.
In addition, the following contract type exchanges are required:
* Individual contract to individual contract.
* Joint contract to joint contract, and
* Two individual contracts on same annuitant(s) with the same
owner(s) to individual or joint contract.
The annuitant and owner on the exchanged contract must be the same on
the new contract.
To qualify as a full 1035 exchange, all existing cash value must be
transferred to the new contract and none of the cash value can be
refunded.
Money from a 1035 exchange cannot be added to an existing annuity
contract, it must fund a new contract.
-----------------------------------------------------------------------------
2. Forms Requirements Annuity
Application (form number which is approved in the state of application).
Replacement form as required by state, if applicable.
Absolute Assignment form (L 8714) for IRC Section 1035(A) Exchange.
External company's contract/policy or lost contract/policy statement.
-----------------------------------------------------------------------------
3. Signature Requirements
The annuitant of the new application (age 15 or older) must sign the
Annuity Application.
The proposed owner of the new contract must sign the Annuity Application
and the Absolute Assignment Form (L 8714).
If the owner is a trust, the trustee must sign the application and
Absolute Assignment Form (L8714) along with the trustee's title.
Page 9
<PAGE>
QUALIFIED AND NON QUALIFIED FUNDS
TRANSFER INSTRUCTIONS
-----------------------------------------------------------------------------
1. Processing Rules
A transfer occurs when an existing policy/contract or account is
liquidated and proceeds are forwarded to another company or to the
client.
There are three types of transfers:
* Trustee-to-Trustee (or Custodian) transfer: Proceeds are sent from
one company directly to another company to fund a like plan
(Example: TSA to TSA, IRA to IRA, Nonqualified to Nonqualified).
* Direct Rollover: Proceeds are sent from one company directly to
another company to fund a different type of plan (Example: TSA to
IRA, 401k to IRA, etc.).
* Rollover: Proceeds are sent from the original company to the
owner. The owner then forwards the check to the new company within
60 days.
Partial transfers are allowed.
Please consult a tax advisor for any tax consequences.
These types of transfers are not 1035 exchanges and do not qualify under
IRC Section 1035 guidelines.
A transfer may be qualified or nonqualified.
NOTE: The Home Office is responsible for qualified administration of
IRAs/SEPs only. Other than IRA's, qualified plans' administration
is the responsibility of the customer or plan administrator. The
Home Office does not provide a plan prototype.
-----------------------------------------------------------------------------
2. Form Requirements
Annuity Application (form number which is approved in the state of
application).
Replacement form as required by state, if applicable, and only when
another annuity contract is being replaced.
External company/institution's contract or lost contract/contract
statement.
Qualified Funds Transfer Form (L 6742) if the funds are qualified and
the Home Office is to request the funds.
Non-Qualified Funds Transfer Authorization (L 8190) if the funds are
non-qualified and coming from a non-insurance/annuity contract and the
Home Office is to request the funds.
If the plan type is IRA, refer the customer to the IRA disclosure
attached to the prospectus.
If the plan type is SEP, submit IRS Form 5305 with the application.
-----------------------------------------------------------------------------
3. Signature Requirements
The annuitant/proposed owner of the new contract (age 15 or older) must
sign the Annuity Application (if different individuals, both must sign).
The owner must sign the Qualified Funds Transfer Form (L 6742) or the
Non-Qualified Funds Transfer Authorization (L 8190) (whichever is
applicable).
If the owner is a trust, then the trustee's signature and title is
required on all appropriate forms.
Page 10
<PAGE>
American General Life Insurance Company
A Subsidiary of American General Corporation
P. O. Box 1401 Houston, Texas 77251-1401
ABSOLUTE ASSIGNMENT
TO EFFECT A SECTION 1035(a) EXCHANGE AND ROLLOVER OF A LIFE INSURANCE OR AN
ANNUITY CONTRACT
American General (Logo) GENERATIONS (TM)
VARIABLE ANNUITY
-----------------------------------------------------------------------------
TO BE COMPLETED ON THE EXISTING CONTRACT:
Contract No.: _________________________ Cash Value: _________________________
Annuitant/Insured: ____________________ Insurer: ____________________________
Owner: ________________________________ Address _____________________________
of Insurer:
_____________________________________
-----------------------------------------------------------------------------
I hereby assign and transfer to American General Life Insurance Company all
rights, title and interest of every nature and transfer to character in and to
the contract described above (contract) in an exchange intended to qualify
under Section 1035(a) of the Internal Revenue Code. In accordance with Section
1035 and its regulations, the Owner and Annuitant on the contract described
above will be the same as on the contract to be issued.
I understand that if the Company underwrites, approves my application for, and
issues to me a new annuity contract which I accept on the life of the same
annuitant in the contract, then the Company intends to surrender the contract
for its cash value.
I UNDERSTAND THAT AS OF THE DATE OF SURRENDER OF THE CONTRACT BY THE COMPANY,
THE CONTRACT WILL NO LONGER PROVIDE ANY COVERAGE.
I UNDERSTAND THAT UPON RECEIPT OF THE SURRENDER VALUE BY THE COMPANY, THE
PROCEEDS WILL BE APPLIED AS AN INITIAL OR ADDITIONAL PREMIUM FOR THE NEW
ANNUITY CONTRACT. The first premium must be paid no later than when the new
contract is delivered. The contract assigned shall not be considered a premium
until the cash surrender value is actually received by the Company. A contract
will not be in effect until the first premium is paid while all statements and
answers in all parts of my application remain correct.
I understand that by executing this assignment, I irrevocably waive all
rights, claims and demands under the contract.
I represent and agree that the Company is furnished this form and is
participating in this transaction at my specific request and as an
accommodation to me. I represent and agree that the Company has made no
representations concerning my tax treatment under Internal Revenue Code
Section 1035 or otherwise.
The Company assumes no responsibility or liability for the undersigned's tax
treatment under Internal Revenue Code Section 1035 or otherwise.
I represent and warrant that no person, firm or corporation has a legal or
equitable interest in the contract, except the undersigned and that no
proceedings of either a legal or equitable nature have been instituted or are
pending against undersigned.
I UNDERSTAND THAT THE FIRST PREMIUM MUST BE PAID NO LATER THAN THE TIME THE
CONTRACT APPLIED FOR IS DELIVERED AND THAT THE CASH VALUE OF THE ASSIGNED
CONTRACT SHALL NOT BE CONSIDERED PART OF THE PREMIUM UNTIL THE CASH SURRENDER
VALUE IS ACTUALLY RECEIVED BY THE COMPANY. I FURTHER UNDERSTAND THAT AN
ANNUITY CONTRACT WILL NOT COME INTO FORCE AS A RESULT OF THIS ASSIGNMENT.
Signed this _____ day of ________________, 19_____ at_________________________
___________________________________ ________________________________________
WITNESS SIGNATURE OF OWNER (ASSIGNEE)
___________________________________ ________________________________________
WITNESS SIGNATURE OF CO-OWNER (IF APPLICABLE)
-----------------------------------------------------------------------------
HOME OFFICE USE ONLY
Received and duplicated filed at the Home Office of the Company at 2727A Allen
Parkway, 3-50, Houston, Texas 77019-2191.
By ____________________________________________,_________________________
(TITLE)
L 8714 REV 996
Page 11
<PAGE>
[ THIS PAGE INTENTIONALLY LEFT BLANK ]
Page 12
<PAGE>
American General (Logo) GENERATIONS (TM)
VARIABLE ANNUITY
QUALIFIED FUNDS TRANSFER FORM
For use by customers transferring Qualified funds (IRA, 401(K), pension plan,
or other qualified deferred compensation) to American General Life Insurance
Company when funds to be invested are not in a life insurance contract or
policy -- THIS FORM IS NOT TO BE USED FOR 1035 EXCHANGES. Disclosure forms
required of the Insurer must be delivered to the customer.
-----------------------------------------------------------------------------
CURRENT TRUSTEE OR CUSTODIAN
Name:_________________________________________________________________________
Address:______________________________________________________________________
-----------------------------------------------------------------------------
PARTICIPANT
Name:_________________________________________________________________________
Account Number:_______________________________________________________________
Sum to be transferred: [ ] Full Account Balance [ ] Other __________________
-----------------------------------------------------------------------------
NOTICE TO CURRENT TRUSTEE OR CUSTODIAN
You are directed to convert to cash the assets held for the Participant under
the IRC 408(a) (Individual Retirement Annuity or Account) or other qualified
account indicated above and transfer the funds to American General Life
Insurance Company as described under "Transfer Information".
Signature-Participant:________________________________________________________
-----------------------------------------------------------------------------
TRANSFER INFORMATION
Make check payable as follows: American General Life Insurance Company
for the benefit (FBO) of________________________________________________
Print Name of Participant
P.O. Box 1401 OR 2727A Allen Parkway, 3-50
Houston, TX 77251-1401 Houston, TX 77019-2191
-----------------------------------------------------------------------------
ACCEPTANCE
American General Life Insurance Company will accept on behalf of the above
named Participant, the transfer of funds from the above account and deposit
said funds into an IRC 408(b) Individual Retirement Annuity or other qualified
account as directed with American General Life Insurance Company subject to
the terms and conditions of said annuity or account.
By:___________________________________________________________/_______________
American General Life Insurance Company Date
-----------------------------------------------------------------------------
If this is a full account balance transfer, Participants who have reached
their required distribution age (701/2) or older must take any required
distribution prior to completing this transaction.
L 6742 REV 394
Page 13
<PAGE>
American General (Logo) GENERATIONS (TM)
VARIABLE ANNUITY
NON-QUALIFIED FUND TRANSFER AUTHORIZATION
For use by customers transferring Non-Qualified funds from a Financial
Institution or Mutual Fund to American General Life Insurance Company. THIS
FORM IS NOT TO BE USED FOR 1035 EXCHANGES.
-----------------------------------------------------------------------------
CURRENT FINANCIAL INSTITUTION
Name:_________________________________________________________________________
Address:______________________________________________________________________
______________________________________________________________________
Phone No.:____________________________________________________________________
-----------------------------------------------------------------------------
ACCOUNT OWNER
Name:_________________________________________________________________________
Account/Certificate Number(s): 1.____________________________________________
2.________________________________________________________________
3.________________________________________________________________
-----------------------------------------------------------------------------
NOTICE TO CURRENT FINANCIAL INSTITUTION
I hereby request and direct the following action to be taken in order to
transfer the proceeds of the account/certificate identified above (Complete
number 1, 2, or 3 as appropriate):
1. [ ] Certificate of Deposit Withdrawal:
[ ] Full [ ] Partial $_______________
Indicate Amount
(Complete a or b)
a. [ ] On the Maturity date of ______/______/______.
b. [ ] Upon receipt of this request.
2. [ ] Fully liquidate Mutual Fund Account (copy of recent statement
attached).
3. [ ] Other type of Account (e.g. savings, checking)
[ ] Full [ ] Partial $_______________
Indicate Amount
Signature-Account Owner:______________________________________________________
-----------------------------------------------------------------------------
TRANSFER INFORMATION
Make check payable as follows: American General Life Insurance Company
for the benefit (FBO) of________________________________________________
Print name of Account Owner
Funds should be sent to:
P.O. Box 1401 OR 2727A Allen Parkway, 3-50
Houston, TX 77251-1401 Houston, TX 77019-2191
(713) 831-3505
-----------------------------------------------------------------------------
ACCEPTANCE
American General Life Insurance Company will accept on behalf of the above
named Participant, the transfer of funds from the above account(s) and deposit
said funds in a flexible premium deferred annuity or other account as directed
with American General Life Insurance Company subject to the terms and
conditions of said annuity or account.
By:_____________________________________________________________________/_____
Authorized Representative of American General Life Insurance Company DATE
-----------------------------------------------------------------------------
L 8190 REV 694
Page 14
<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPERATE ACCOUNT D
--------------------------------------------
A Subsidiary of American General Corporation
--------------------------------------------
Houston, Texas
- CHANGE REQUEST -
COMPLETE AND RETURN THIS REQUEST TO: GENERATIONS (TM)
Annuity Administration VARIABLE ANNUITY
P.O. Box 1401
Houston, TX 77251-1401
(800)200-3883
-----------------------------------------------------------------------------
1. [X] CONTRACT INDENTIFICATION (COMPLETE SECTIONS 1 AND 6 FOR ALL
REQUESTS.) INDICATE CHANGE OR REQUEST DESIRED BELOW.
CONTRACT #:_____________________ ANNUITANT:____________________________
CONTRACT OWNER(S):______________________________________________________
ADDRESS:________________________________________________________________
[ ]CHECK HERE IF CHANGE OF ADDRESS______________________________________
S.S. NO. OR TAX I.D. NO.:_____-_____-_____ Phone Number:(____)__________
-----------------------------------------------------------------------------
2. [ ] DOLLAR COST AVERAGING
Dollar cost average [ ] $__________ OR [ ] __________% (whole % only)
Begin Date:__________
Taken from the [ ] Money Market OR [ ] 1-Year Guarantee Period
Frequency: [ ] Monthly [ ] Quarterly [ ] Semiannually [ ] Annually
Duration: [ ] 12 months [ ] 24 months [ ] 36 months [ ] 48 months
[ ] 60 months
to be allocated to the following divisions(s) as indicated. (Use only
dollars OR percentages below.)
Asian Equity (95) __________
Domestic Income (80) __________
Emerging Growth (81) __________
Emerging Markets Equity (82) __________
Enterprise (83) __________
Equity Growth (87) __________
Fixed Income (84) __________
Global Equity (85) __________
Government (86) __________
Growth and Income (88) __________
High-Yield (89) __________
International Magnum (90) __________
Mid Cap Value (91) __________
Money Market (92) __________
Morgan Stanley Real Estate Sec. (93) __________
Strategic Stock (96) __________
Value (94) __________
Other __________
-----------------------------------------------------------------------------
3. [ ] AUTOMATIC REBALANCING ($25,000 minimum) USE WHOLE PERCENTAGES; TOTAL
MUST EQUAL 100%.
[ ] ADD [ ] CHANGE Automatic Rebalancing of variable investments to the
percentage allocations indicated below:
[ ] Quarterly [ ] Semiannually [ ] Annually (based on contract
anniversary)
[ ] STOP Automatic Rebalancing
Asian Equity (95) __________%
Domestic Income (80) __________%
Emerging Growth (81) __________%
Emerging Markets Equity (82) __________%
Enterprise (83) __________%
Equity Growth (87) __________%
Fixed Income (84) __________%
Global Equity (85) __________%
Government (86) __________%
Growth and Income (88) __________%
High-Yield (89) __________%
International Magnum (90) __________%
Mid Cap Value (91) __________%
Money Market (92) __________%
Morgan Stanley Real Estate Sec. (93) __________%
Strategic Stock (96) __________%
Value (94) __________%
Other __________%
NOTE: Automatic Rebalancing is only available for variable divisions.
Automatic Rebalancing will not change allocation of future purchase
payments.
-----------------------------------------------------------------------------
4. [ ] CHANGE OF ALLOCATION OF FUTURE PURCHASE PAYMENTS
USE WHOLE PERCENTAGES; TOTAL MUST EQUAL 100%
Asian Equity (95) __________%
Domestic Income (80) __________%
Emerging Growth (81) __________%
Emerging Markets Equity (82) __________%
Enterprise (83) __________%
Equity Growth (87) __________%
Fixed Income (84) __________%
Global Equity (85) __________%
Government (86) __________%
Growth and Income (88) __________%
High-Yield (89) __________%
International Magnum (90) __________%
Mid Cap Value (91) __________%
Money Market (92) __________%
Morgan Stanley Real Estate Sec. (93) __________%
Strategic Stock (96) __________%
Value (94) __________%
1-Year Guarantee Period __________%
Other __________%
NOTE: A change to the allocation of future purchase payments will not
alter Automatic Rebalancing allocations.
-----------------------------------------------------------------------------
5. [ ] TRANSFER OF ACCUMULATED VALUES
(AVAILABLE BY EITHER $ OR % ALLOCATION)
Indicate division number along with gross dollar or percentage amount.
(Maintain $ or % consistency)
__________ from Div. ________ to Div. _________
__________ from Div. ________ to Div. _________
__________ from Div. ________ to Div. _________
__________ from Div. ________ to Div. _________
__________ from Div. ________ to Div. _________
__________ from Div. ________ to Div. _________
__________ from Div. ________ to Div. _________
__________ from Div. ________ to Div. _________
NOTE: If a transfer is elected and Automatic Rebalancing is active on
your account, you may want to consider changing the Automatic
Rebalancing allocations (Section 3). Otherwise, the Automatic
Rebalancing will transfer funds in accordance with instructions on file.
-----------------------------------------------------------------------------
6. [X] AFFIRMATION/SIGNATURE (COMPLETE THIS SECTION FOR ALL REQUESTS)
CERTIFICATION: Under penalties of perjury, I certify (1) that the number
shown on this form is my correct taxpayer identification number and (2)
that I am not subject to backup withholding under Section 3406(a)(1)(c)
of the Internal Revenue Code.
The Internal Revenue Service does not require your consent to any
provision of this document other than the certifications required to
avoid backup withholding.
-----------------------------------------------------------------------------
L 8878
Page 15
<PAGE>
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Page 16
<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPERATE ACCOUNT D
--------------------------------------------
A Subsidiary of American General Corporation
--------------------------------------------
Houston, Texas
- SYSTEMATIC WITHDRAWALS REQUEST -
COMPLETE AND RETURN THIS REQUEST TO: GENERATIONS (TM)
Annuity Administration VARIABLE ANNUITY
P.O. Box 1401
Houston, TX 77251-1401
(800)200-3883
-----------------------------------------------------------------------------
1. [X] CONTRACT INDENTIFICATION (COMPLETE SECTIONS 1 AND 6 FOR ALL
REQUESTS.) INDICATE CHANGE OR REQUEST DESIRED BELOW.
CONTRACT #:_____________________ ANNUITANT:____________________________
CONTRACT OWNER(S):______________________________________________________
ADDRESS:________________________________________________________________
[ ]CHECK HERE IF CHANGE OF ADDRESS______________________________________
S.S. NO. OR TAX I.D. NO.:_____-_____-_____ Phone Number:(____)__________
-----------------------------------------------------------------------------
2. [ ] SYSTEMATIC WITHDRAWAL ELECTION (MINIMUM CHECK AMOUNT IS $100.) (USE
EITHER DOLLARS OR WHOLE PERCENTAGES.) (DOLLARS MUST TOTAL SPECIFIED
AMOUNT, OR PERCENTAGES MUST TOTAL 100%.)
WITHDRAWALS PRIOR TO AGE 59 1/2 MAY BE SUBJECT TO AN IRS PENALTY.
CONSULT YOUR TAX ADVISOR FOR ADDITIONAL INFORMATION.
HOW OFTEN SHOULD PAYMENTS BE MADE:
[ ] MONTHLY [ ] QUARTERLY [ ] SEMIANNUALLY [ ] ANNUALLY
First check to be processed on ____/____/____. Subsequent checks will be
processed at the next payout dates on the SAME DAY of the month elected
as your start date. (Date must be between the 5th and 24th of the month
and at least 30 days after issue date.)
SPECIFIED DOLLAR AMOUNT $___________ (Not to be used for partial
withdrawal request)
Unless specified below, withdrawals will be taken from the divisions as
they are currently allocated in your contract.
Asian Equity (95) __________
Domestic Income (80) __________
Emerging Growth (81) __________
Emerging Markets Equity (82) __________
Enterprise (83) __________
Equity Growth (87) __________
Fixed Income (84) __________
Global Equity (85) __________
Government (86) __________
Growth and Income (88) __________
High-Yield (89) __________
International Magnum (90) __________
Mid Cap Value (91) __________
Money Market (92) __________
Morgan Stanley Real Estate Sec. (93) __________
Strategic Stock (96) __________
Value (94) __________
1-Year Guarantee Period __________
Other ____________________ __________
-----------------------------------------------------------------------------
3. [ ] MAILING OF YOUR SYSTEMATIC WITHDRAWAL
NOTE: If no method is indicated, check(s) will be mailed to the owner at
the address of record.
Check one: [ ] Mail check to owner. [ ] Mail check to alternate address.
[ ] Deposit funds directly to bank/firm.*
(available only for systematic withdrawals)
________________________________________________________________________
INDIVIDUAL OR BANK/FIRM
____________________________ _________________________________________
ADDRESS CITY/STATE/ZIP
____________________________ Type of account: [ ] Checking [ ] Savings
IF BANK/FIRM, PROVIDE ACCOUNT NUMBER TO BE REFERENCED FOR DEPOSIT.
*Enclose a voided check from account where funds are to be deposited.
PLEASE DO NOT ENCLOSE A DEPOSIT SLIP.
-----------------------------------------------------------------------------
4. [ ] NOTICE OF WITHHOLDING
The taxable portion of the distribution you receive from your annuity
contract is subject to federal income tax withholding unless you elect
not to have withholding apply. Withholding of state income tax may also
be required by your state of residence. You may elect not to have
withholding apply by checking the appropriate box below. If you elect
not to have withholding apply to your distribution or if you do not have
enough income tax withheld, you may be responsible for payment of
estimated tax. You may incur penalties under the estimated tax rules if
your withholding and estimated tax are not sufficient.
[ ] I do NOT want income tax withheld from each distribution.
[ ] I do want __% or [ ] 10% income tax withheld from each distribution.
-----------------------------------------------------------------------------
5. [X] AFFIRMATION/SIGNATURE
CERTIFICATION: UNDER PENALTIES OF PERJURY, I CERTIFY (1) THAT THE NUMBER
SHOWN ON THIS FORM IS MY CORRECT TAXPAYER IDENTIFICATION NUMBER; AND (2)
THAT I AM NOT SUBJECT TO BACKUP WITHHOLDING UNDER SECTION 3406(A)(1)(C)
OF THE INTERNAL REVENUE CODE.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY
PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO
AVOID BACKUP WITHHOLDING.
Dated at ___________________ this _____ day of ____________ , 19 ______.
____________________________ ____________________________
Witness Owner
____________________________
Co-Owner (if applicable)
L8879
Page 17
<PAGE>
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Page 18
<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPERATE ACCOUNT D
--------------------------------------------
A Subsidiary of American General Corporation
--------------------------------------------
Houston, Texas
AUTOMATIC ADDITIONAL PURCHASE PAYMENT
COMPLETE AND RETURN THIS REQUEST TO: GENERATIONS (TM)
Annuity Administration VARIABLE ANNUITY
P.O. Box 1401
Houston, TX 77251-1401
(800)200-3883
Contract #:___________________________________________________________________
Annuitant:____________________________________________________________________
Contract Owner(s):____________________________________________________________
(Name and ____________________________________________________________________
Address:) ____________________________________________________________________
Amount of Investment: ________________________________________________________
(Minimum $100 per contract)
Frequency: [ ] Monthly [ ] Quarterly [ ] Semiannually [ ] Annually
Date of 1st withdrawal: _______/_______/_______
Name of Bank: _______________________________________________________________
Account Number: _____________________________________________________________
ATTACH A VOIDED CHECK
-----------------------------------------------------------------------------
| |
| |
| |
| |
-----------------------------------------------------------------------------
Please sign and date the authorization below.
I, the undersigned bank account owner, hereby authorize and request American
General Life Insurance Company ("Company") to initiate electronic or other
commercially accepted type debits against the indicated bank account in the
depository institution named above ("Depository") for purchase payments due on
the contract listed above. I hereby agree to indemnify and hold the Company
harmless from any loss, claim or liability of any kind by reason or dishonor
of any debit.
I agree that this Authorization may be terminated by me or the Company at any
time and for any reason by providing written notice of such termination to the
non-terminating party and may be terminated by the Company immediately if any
debit is not honored by the Depository named above for any reason.
_________________________________________________ __________________________
Signature of Bank Account Owner(s) Date
L 8877
Page 19
<PAGE>
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Page 20
<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPERATE ACCOUNT D
--------------------------------------------
A Subsidiary of American General Corporation
--------------------------------------------
Houston, Texas
CHANGE OF BENEFICIARY
COMPLETE AND RETURN THIS REQUEST TO: GENERATIONS (TM)
Annuity Administration VARIABLE ANNUITY
P.O. Box 1401
Houston, TX 77251-1401
(800)200-3883
(Before completing this form please read instructions below and on reverse
side.)
-----------------------------------------------------------------------------
Contract No. | Contract Owner | Annuitant
-----------------------------------------------------------------------------
METHOD OF PAYMENT: The death proceeds shall be payable in equal shares to the
designated beneficiaries as may be living, unless otherwise provided below. In
the event no beneficiary survives the Annuitant or Owner, and if this form, or
the Contract does not provide otherwise, the proceeds will be paid to the
executors or administrators of the deceased's Estate.
-----------------------------------------------------------------------------
PRIMARY BENEFICIARY:
FULL NAME RELATIONSHIP TO ANNUITANT PERCENTAGES(IF APPLICABLE)
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
If a living or non-testamentary trust is designated as a primary beneficiary,
complete the following:
___________________________________________________Date:_____________________
Name of Trust
CONTINGENT BENEFICIARY (proceeds payable under this designation only if none
of the designated primary beneficiaries survive the deceased Annuitant or
Owner):
FULL NAME RELATIONSHIP TO ANNUITANT PERCENTAGES(IF APPLICABLE)
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
If a living or non-testamentary trust is designated as a contingent
beneficiary, complete the following:
___________________________________________________Date:_____________________
Name of Trust
-----------------------------------------------------------------------------
The undersigned contract owner hereby revokes any previous beneficiary
designation and any optional mode of settlement with respect to any death
benefit proceeds payable at the death of the annuitant or owner.
I represent and certify that no insolvency or bankruptcy proceedings are now
pending against me.
Dated at __________________ this __________ day of _________________, 19_____.
______________________________________ ____________________________________
WITNESS CONTRACT OWNER
______________________________________ ____________________________________
WITNESS Additional Signature if Required
-----------------------------------------------------------------------------
This change of beneficiary and/or method of settlement has been approved by
the Company at its Home Office, and presentation of the Contract for
endorsement has been waived.
AMERICAN GENERAL LIFE INSURANCE COMPANY
DATE OF APPROVAL: _______________________________________ BY: ________________
L 8876
Page 21
<PAGE>
INSTRUCTIONS FOR DESIGNATING BENEFICIARY
1. All signatures must be in INK and should appear exactly as the name is
given in the contract. A separate election for change of beneficiary
must be completed for each contract.
2. The full name of the new Beneficiary, relationship to the Annuitant,
current mailing address and taxpayer identification number (S.S. No.)
should be given for all Beneficiaries. If Beneficiary is to receive
payment under life income option, give date of birth.
3. If a Beneficiary is a married woman, her full given name should be used.
For example, Mary E. Jones, not Mrs. J.F. Jones. If a Trustee is
designated, notification as to the type of trust created should be
furnished the Company.
4. If two Beneficiaries are to share jointly, the last name entered should
be followed by the words "equally, or to the survivor;" if three or more
Beneficiaries are to share jointly, the last name entered should be
followed by the words "equally, or to the survivors or survivor." If the
interest of one Beneficiary is to be contingent to the interest of
another, after the name of the first Beneficiary the following words
should be placed: "if living; otherwise to."
For your assistance, examples of the wording to be used in some of the more
common designations are set out below. In difficult cases where there is doubt
as to the proper wording, the Company will prepare a special form for your
signature on request.
<TABLE>
<S> <C>
1. One Beneficiary Jane Doe, wife of the Annuitant.
2. Two Primary Beneficiaries Jane Doe, wife of the Annuitant, and John Doe, son, equally, or to the
survivor.
3. One Primary and Two Contingent Beneficiaries Jane Doe, wife of the Annuitant, if living; otherwise to John Doe and Mary
Doe, children of the Annuitant, equally, or to the survivor.
4. One Primary and One Contingent Beneficiary Jane Doe, wife of the Annuitant, if living; otherwise to John Doe, son.
5. Two Primary and One Contingent Beneficiaries John Doe and Mary Doe, parents of the Annuitant, equally, or to the
survivor; otherwise, to Jane Doe, sister of the Annuitant.
6. Wife, Primary; Named and Un-named Children, Jane Doe, wife of the Annuitant, if living; otherwise to Henry Doe, Barbara
Contingent Beneficiaries Doe, and Paul Doe, children of the Annuitant, and any other then living
children born of the marriage of the Annuitant and said wife, equally, or to
the survivors.
7. Wife, Primary; Children and Step-Children Mary Doe, wife of the Annuitant, if living; otherwise, Henry Doe, son of the
Contingents Annuitant, Mary Doe, stepdaughter of the Annuitant, and any then living
children born of the marriage of the Annuitant and said wife, equally, or to
the survivor.
8. Wife, Primary; Unnamed Children with Second Jane Doe, wife of the Annuitant, if living; otherwise any then living children
Contingents born of the marriage of the Annuitant and said wife, equally, or to the
survivor; otherwise to Harry Doe and Mabel Doe, parents of the Annuitant,
equally, or to the survivor.
9. Business Designations A. The Beacon Oil Company, Incorporated, a Texas Corporation
Houston, Texas, employer (or creditor), or its successors or
assigns.
B. John Doe, Business Partner.
C. Harry Doe, Employer (or employee).
10. Trustee - Written Trust The American General Bank, Houston, Texas, as Trustee, or its successors
in Trust, under Trust Instrument dated May 31, 1995.
Trustee - Testamentary Trust Trustee as provided in the Last Will and Testament of the Annuitant,
or successors thereunder.
11. Estate The Executors, Administrators, or Assigns of the Annuitant.
</TABLE>
L 8876
Page 22
<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPERATE ACCOUNT D
--------------------------------------------
A Subsidiary of American General Corporation
--------------------------------------------
Houston, Texas
GENERATIONS (TM)
VARIABLE ANNUITY
To Obtain a Statement of Additional Information, please complete the form
below and mail to:
American General Life Insurance Company
Attn: Annuity Correspondence Unit
P.O. Box 1401
Houston, TX 77251-1401
Please send a Statement of Additional Information for the Generations Variable
Annuity to me at the following address:
______________________________________
Name
______________________________________
Address
______________________________________
City/State Zip Code
L8953
Page 23
<PAGE>
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Page 24
<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
1-800-200-3883 713-831-3505
STATEMENT OF ADDITIONAL INFORMATION
Dated May 1, 1998
This Statement of Additional Information ("Statement") is not a
prospectus. It should be read with the Prospectus for American General Life
Insurance Company Separate Account D ("Separate Account D"), dated May 1,
1998, concerning flexible payment deferred individual annuity Generations (TM)
Contracts ("Contracts") investing in certain Series of the Van Kampen American
Capital Life Investment Trust and the Morgan Stanley Universal Funds, Inc..
You can obtain a copy of the Prospectus for the Contracts, and any supplements
thereto, by contacting American General Life Insurance Company ("AGL") at the
address or telephone numbers given above. You have the option of receiving
benefits on a fixed basis through AGL's Fixed Account or on a variable basis
through AGL's Separate Account D. Terms used in this Statement have the same
meanings as are defined in the Prospectus under the heading "Glossary."
<TABLE>
TABLE OF CONTENTS
<S> <C>
General Information........................................................ 2
Regulation and Reserves ................................................... 2
Independent Auditors....................................................... 2
Services................................................................... 3
Principal Underwriter...................................................... 3
Annuity Payments........................................................... 3
Gender of Annuitant...................................................... 3
Misstatement of Age or Gender and Other Errors.......................... 4
Change of Investment Adviser or Investment Policy.......................... 4
Performance Data for the Divisions......................................... 4
Effect of Tax-Deferred Accumulation........................................ 10
Financial Statements....................................................... 11
Index to Financial Statements.............................................. 12
</TABLE>
1
<PAGE>
GENERAL INFORMATION
AGL (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, AGL redomesticated as a
Texas insurer and changed its name to American General Life Insurance Company.
AGL 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
AGL 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. AGL'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 AGL 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 AGL would be.
Pursuant to state insurance laws and regulations, AGL 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 AGL 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.
INDEPENDENT AUDITORS
The consolidated financial statements of AGL and the financial
statements of the Generations Divisions of Separate Account D included in this
Statement have been audited by Ernst & Young
2
<PAGE>
LLP, independent auditors, as set forth in their respective reports thereon
appearing elsewhere herein. Such financial statements have been included in
this Statement 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
AGL and American General Independent Producer Division ("AGIPD") are
parties to a services agreement which has been entered into among most of the
affiliated companies within the American General Corporation holding company
system, including certain life insurance companies. AGIPD is a corporation
incorporated in Delaware on November 24, 1997, with its home office located at
2727-A Allen Parkway, Houston, Texas 77019. AGIPD provides shared services
including data processing, systems, customer services, product development,
actuarial, auditing, accounting and legal to AGL and certain other life
insurance companies at cost. AGL did not pay any fees to AGIPD in 1997 because
no services were performed.
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, AGL's Separate Account A and AGL's Separate Account VL-R, all of
which are unit investment trusts registered under the Investment Company Act
of 1940, as amended. AGSI, a Texas corporation, is a wholly owned subsidiary
of AGL and a member of the National Association of Securities Dealers, Inc.
As principal underwriter, with respect to all contracts issued by AGL
and funded through Separate Account D, AGSI has received from AGL $13,954 in
1997 and less than $1,000 of compensation for each of the previous two years.
The securities offered pursuant to the Contracts are offered on a
continuous basis.
ANNUITY PAYMENTS
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>
MISSTATEMENT OF AGE OR GENDER AND OTHER ERRORS
If the age or gender 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 gender. If we made any overpayments because
of incorrect information about age or gender, 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 Series nor any investment policy may be changed without the
consent of AGL. 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.
PERFORMANCE DATA FOR THE DIVISIONS
Investment results for the available Divisions of Separate Account D may
be quoted from time to time. Such results will not be an estimate or guarantee
of future investment performance, and will not represent the actual experience
of amounts invested by a particular Owner. Performance figures will be carried
to the nearest one-hundredth of one percent and may include the effect of
voluntary fee waivers and expense reimbursements in favor of the Funds from
their investment adviser and administrator.
AVERAGE ANNUAL TOTAL RETURN CALCULATIONS
Each Division may advertise its average annual total return. Each
Division's average annual total return quotation is computed in accordance
with a standard method prescribed by the Securities and Exchange Commission
("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 then-applicable
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 the Annual Contract Fee, but do
not include the charges for any applicable premium taxes. 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. In addition, a
Division may, from time to time, advertise average annual total return on a
non-standardized basis, where the actual historical performance of the
corresponding series in which the Division invests pre-dates the effective
date of the Division.
4
<PAGE>
Average annual total return quotations for the period ended December 31,
1997 are set forth, for the indicated Divisions, in the table below.
<TABLE>
<CAPTION>
Investment Division Since Division Inception *
------------------- ------------------------
<S> <C>
Domestic Income 3.97 %
Emerging Growth 7.94 %
Enterprise 18.21 %
Government 2.47 %
Growth and Income 12.88 %
Money Market (3.45)%
Morgan Stanley Real Estate Securities 15.15 %
Strategic Stock (21.27)%
Asian Equity (72.81)%
Emerging Markets Equity (16.35)%
Equity Growth 21.73 %
Global Equity 14.02 %
International Magnum (1.03)%
Fixed Income 2.29 %
High Yield 4.83 %
Mid Cap Value 28.37 %
Value 12.37 %
<FN>
* The dates when the Divisions commenced operations are as follows: the
Enterprise and Government Divisions, June 1, 1992; the Money Market
Division, June 10, 1992; the Domestic Income Division, June 29, 1992;
the Growth and Income, Emerging Markets Equity, Equity Growth, and Value
Divisions, January 29, 1997; the Emerging Growth and Fixed Income
Divisions, January 30, 1997; the Global Equity, Mid Cap Value, and High
Yield Divisions, February 5, 1997; the International Magnum Division,
February 10, 1997; the Morgan Stanley Real Estate Securities Division,
February 15, 1997; the Asian Equity Division, June 13, 1997; the
Strategic Stock Division, November 3, 1997.
</FN>
</TABLE>
TOTAL RETURN CALCULATIONS (WITHOUT SURRENDER CHARGE OR ANNUAL CONTRACT FEE)
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 Contract Fee. If reflected, these charges would reduce
the performance results presented.
CUMULATIVE TOTAL RETURN CALCULATIONS (WITHOUT SURRENDER CHARGE OR ANNUAL
CONTRACT FEE)
No standard 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 applicable Surrender Charge or the Annual Contract Fee.
Cumulative total return quotations reflect changes in Accumulation Unit value
and are calculated by
5
<PAGE>
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 at the end of the applicable period of a
hypothetical $1,000 investment made at the beginning of the
applicable period.
HYPOTHETICAL PERFORMANCE
Each Division may advertise hypothetical performance, based on the
calculations described above, where all or a portion of the actual historical
performance of the corresponding Series in which the Division invests
pre-dates the effective date of the Division. The tables below provide
hypothetical performance information for the available Divisions of Separate
Account D based on the actual historical performance of the corresponding
Series in which each of these Divisions invests. This information reflects all
actual charges and deductions of these Series and all Separate Account charges
and deductions, with respect to the Contracts, that hypothetically would have
been made had the Separate Account, with respect to the Contracts, been
invested in these Series for all the periods indicated.
<TABLE>
Hypothetical Historical Average Annual Total Returns
(Through December 31, 1997)
<CAPTION>
Since
Series
Investment Division One Year Five Years Inception*
------------------- -------- ---------- ---------
<S> <C> <C> <C>
Domestic Income 4.26 % 7.89% 6.77 %
Emerging Growth 12.66 % N/A 18.61 %
Enterprise 21.82 % 16.38% 11.02 %
Government 1.95 % 4.00% 5.55 %
Growth and Income 16.09 % N/A 15.96 %
Money Market 2.72 % 3.22% 4.52 %
Morgan Stanley Real Estate Securities 13.69 % N/A 24.51 %
Strategic Stock N/A N/A (21.27)%
Asian Equity N/A N/A (72.81)%
Emerging Markets Equity (7.04)% N/A (7.14)%
Equity Growth N/A N/A 21.73 %
Global Equity N/A N/A 14.02 %
International Magnum N/A N/A (1.03)%
Fixed Income N/A N/A 2.29 %
High Yield N/A N/A 4.83 %
Mid Cap Value N/A N/A 28.87 %
Value N/A N/A 12.37 %
</TABLE>
6
<PAGE>
<TABLE>
Hypothetical Historical Total Returns
(Through December 31, 1997)
<CAPTION>
Since
Series
Investment Division One Year Five Years Inception*
------------------- -------- ---------- ---------
<S> <C> <C> <C>
Domestic Income 10.35 % 8.50% 6.83 %
Emerging Growth 18.75 % N/A 20.36 %
Enterprise 27.93 % 16.84% 11.06 %
Government 8.04 % 4.69% 5.61 %
Growth and Income 22.18 % N/A 21.32 %
Money Market 8.80 % 3.92% 4.57 %
Morgan Stanley Real Estate Securities 19.79 % N/A 26.15 %
Strategic Stock N/A N/A 15.21 %
Asian Equity N/A N/A (66.44)%
Emerging Markets Equity (1.04)% N/A (2.70)%
Equity Growth N/A N/A 28.37 %
Global Equity N/A N/A 20.78 %
International Magnum N/A N/A 5.75 %
Fixed Income N/A N/A 8.87 %
High Yield N/A N/A 11.55 %
Mid Cap Value N/A N/A 35.72 %
Value N/A N/A 18.97 %
</TABLE>
<TABLE>
Hypothetical Historical Cumulative Total Returns
(Through December 31, 1997)
<CAPTION>
Since
Series
Investment Division One Year Five Years Inception*
------------------- -------- ---------- ---------
<S> <C> <C> <C>
Domestic Income 10.35 % 50.32% 95.60 %
Emerging Growth 18.75 % N/A 58.84 %
Enterprise 27.93 % 117.68% 242.33 %
Government 8.04 % 25.73% 89.80 %
Growth and Income 22.18 % N/A 21.82 %
Money Market 8.80 % 21.21% 69.03 %
Morgan Stanley Real Estate Securities 19.79 % N/A 78.60 %
Strategic Stock N/A N/A 2.27 %
Asian Equity N/A N/A (45.16)%
Emerging Markets Equity (1.04)% N/A (3.36)%
Equity Growth N/A N/A 25.83 %
Global Equity N/A N/A 18.54 %
International Magnum N/A N/A 5.08 %
Fixed Income N/A N/A 8.10 %
High Yield N/A N/A 10.34 %
Mid Cap Value N/A N/A 31.67 %
Value N/A N/A 17.33 %
</TABLE>
7
<PAGE>
<TABLE>
Hypothetical Historical Growth of a $1,000 Investment in the Divisions
(Through December 31, 1997)
<CAPTION>
Since
Series
Investment Division One Year Five Years Inception*
------------------- -------- ---------- ---------
<S> <C> <C> <C>
Domestic Income $1,103.47 $1,503.23 $1,956.01
Emerging Growth $1,187.52 N/A $1,588.41
Enterprise $1,279.27 $2,176.83 $3,423.33
Government $1,080.38 $1,257.29 $1,897.97
Growth and Income $1,221.83 N/A $1,218.17
Money Market $1,088.04 $1,212.13 $1,690.30
Morgan Stanley Real Estate Securities $1,197.86 N/A $1,785.98
Strategic Stock N/A N/A $1,022.74
Asian Equity N/A N/A $548.36
Emerging Markets Equity $989.64 N/A $966.39
Equity Growth N/A N/A $1,258.25
Global Equity N/A N/A $1,185.41
International Magnum N/A N/A $1,050.83
Fixed Income N/A N/A $1,081.02
High Yield N/A N/A $1,103.45
Mid Cap Value N/A N/A $1,316.70
Value N/A N/A $1,173.29
- --------------------------
<FN>
* The inception dates for each Division are set forth in the footnote
under "Average Annual Total Return Calculations," on page five of this
Statement. The inception dates for each Series funding the Divisions
are: April 7, 1986 for the Money Market, Enterprise, and Government
Series; November 4, 1987 for the Domestic Income Series; July 3, 1995
for the Emerging Growth and Morgan Stanley Real Estate Securities
Series; October 1, 1996 for the Emerging Markets Equity Series; November
23, 1996 for the Growth and Income Series; January 2, 1997 for the
Equity Growth, Global Equity, International Magnum, Fixed Income, High
Yield, Mid Cap Value, and Value Series; March 3, 1997 for the Asian
Equity Series; November 3, 1997 for the Strategic Stock Series.
</FN>
</TABLE>
YIELD CALCULATIONS
The yields for the Domestic Income Division and the Government Division
are each computed in accordance with a standard method prescribed by the SEC.
The yields for the Domestic Income Division and the Government Division, based
upon the one month period ended December 31, 1997), were 6.75% and 3.92%
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 6
YIELD = 2[(------- +1) - 1]
cd
8
<PAGE>
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
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, and the Administrative Expense Charge 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, 1997 was 3.71%.
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
365/7
return +1) -1. The Money Market Division's effective yield for the seven
day period ended December 31, 1997 was 3.78%.
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 ("VARDSR") 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. VARDSR rankings compare only variable annuity issuers. The
performance analyses prepared by Lipper and VARDSR 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, VARDSR prepares
risk adjusted rankings, which consider the effects of market risk on total
return performance.
9
<PAGE>
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 considered to be a measure of inflation;
(4) the Lehman Brothers Government and Domestic Strategic Income Index, the
Salomon Brothers High Grade Domestic Strategic 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.
EFFECT OF TAX-DEFERRED ACCUMULATION
The Contracts qualify for tax-deferred treatment on earnings. This
tax-deferred treatment increases the amount available for accumulation by
deferring taxes on any earnings until the earnings are withdrawn. The longer
the taxes are deferred, the more the accumulation potential effectively grows
over the term of the Contracts.
The hypothetical tables set out below illustrate this potential. The
tables compare accumulations based on a single initial purchase payment of
$100,000 compounded annually under (1) a Contract, under which earnings are
not taxed until withdrawn in connection with a full surrender, partial
withdrawal, or annuitization, or termination due to insufficient Account Value
("withdrawal of earnings") and (2) an investment under which earnings are
taxed on a current basis ("Taxable Investment"), based on an assumed tax rate
of 28%, and the assumed earning rates specified.
<TABLE>
<CAPTION>
5 YEARS 10 YEARS 20 YEARS
------- -------- --------
(7.50% earnings rate)
<S> <C> <C> <C>
Contract $143,563 $206,103 $424,785
Contract (after Taxes) $131,365 $176,394 $333,845
Taxable Investment $130,078 $169,202 $286,294
</TABLE>
<TABLE>
<CAPTION>
(10.00% earnings rate)
<S> <C> <C> <C>
Contract $161,051 $259,374 $672,750
Contract (after Taxes) $143,957 $214,749 $512,380
Taxable Investment $141,571 $200,423 $401,694
</TABLE>
The hypothetical tables do not reflect any fees or charges imposed under
a Contract or Taxable Investment. However, the Contracts impose a Mortality
and Expense Risk Charge of 1.25%, a Surrender Charge (applicable to withdrawal
of earnings for the first seven Contract years) up to a maximum of 6%, an
Administrative Expense Charge of 0.15%, and an Annual Contract Fee of $30. A
Taxable Investment could incur comparable fees or charges. Fees and charges
would reduce the return from a Contract or Taxable Investment.
10
<PAGE>
Under the Contracts, a withdrawal of earnings is subject to tax, and may
be subject to an additional 10% penalty before age 59 1/2.
These tables are only illustrations of the effect of tax-deferred
accumulations and are not a guarantee of future performance.
FINANCIAL STATEMENTS
Separate Account D has 58 Divisions as of the date of this Statement, 17
of which are available under the Contracts that are the subject of this
Statement. The December 31, 1997 financial statements for the Generations
Divisions of Separate Account D which are included herein relate only to these
17 Divisions. Of the remaining 41 Divisions only 27 had operations as of
December 31,1997. The remaining 14 Divisions of Separate Account D had no
operations as of December 31, 1997.
Certain names of the available Divisions of Separate Account D have
changed. Subsequent to December 31, 1995 the names of the Domestic Strategic
Income Fund and the Common Stock Fund were changed to Domestic Income
Portfolio and Enterprise Portfolio, respectively. In addition, the Emerging
Growth Fund, the Government Fund, and the Money Market Fund are now referred
to as the Emerging Growth Portfolio, the Government Portfolio, and the Money
Market Portfolio, respectively. As of May 1, 1997, the Growth Portfolio
changed its name to the Equity Growth Portfolio.
The financial statements of AGL that are included in this Statement
should be considered primarily as bearing on the ability of AGL to meet its
obligations under the Contracts.
11
<PAGE>
<TABLE>
INDEX TO
FINANCIAL STATEMENTS
<CAPTION>
Page No.
--------
<S> <C>
I. Generations Divisions of Separate Account D Financial Statements
Report of Ernst & Young LLP, Independent Auditors................... 13
Statement of Net Assets ............................................ 14
Statement of Operations............................................. 14
Statement of Changes in Net Assets.................................. 15
Notes to Financial Statements....................................... 16
II. AGL Consolidated Financial Statements
Report of Ernst & Young LLP, Independent Auditors................... 20
Consolidated Balance Sheets......................................... 21
Consolidated Income Statements...................................... 23
Consolidated Statements of Shareholders' Equity..................... 24
Consolidated Statements of Cash Flows............................... 25
Notes to Consolidated Financial Statements.......................... 26
</TABLE>
12
<PAGE>
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
and
Contract Owners
American General Life Insurance Company
Sierra Asset Manager Divisions
of 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,
1997, the related statements 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 audit.
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 31,1997,
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, 1997, 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
--------------------
Ernst & Young LLP
Houston, Texas
February 20, 1998
Page 13
<PAGE>
American General Life Insurance Company
Generations Division
SEPARATE ACCOUNT D
<TABLE>
STATEMENT OF NET ASSETS
December 31, 1997
<S> <C>
ASSETS:
Investment securities - at market (cost $65,979,445)................ $ 65,816,261
Due from American General Life Insurance Company.................... 2,087
--------------
NET ASSETS..................................................... $ 65,818,348
==============
CONTRACT OWNER RESERVES:
Reserves for redeemable annuity contracts........................... $ 65,818,348
--------------
TOTAL CONTRACT OWNER RESERVES.................................. $ 65,818,348
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
Period Ended December 31, 1997
<S> <C>
INVESTMENT INCOME:
Dividends from mutual funds......................................... $ 783,848
EXPENSES:
Expense and mortality fee........................................... 367,057
--------------
NET INVESTMENT INCOME.......................................... 416,791
--------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments.................................... 115,840
Capital gain distributions from mutual funds........................ 2,054,895
Net unrealized loss from investments................................ (163,184)
--------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................ 2,007,551
--------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............... $ 2,424,342
==============
</TABLE>
See accompanying notes.
Page 14
<PAGE>
American General Life Insurance Company
Generations Divisions
SEPARATE ACCOUNT D
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
Period Ended December 31, 1997
<S> <C>
OPERATIONS:
Net investment income............................................... $ 416,791
Net realized gain on investments.................................... 115,840
Capital gain distributions from mutual funds........................ 2,054,895
Net unrealized loss on investments.................................. (163,184)
--------------
Increase in net assets resulting from operations............... 2,424,342
--------------
PRINCIPAL TRANSACTIONS:
Contract purchase payments, less sales and administrative
expenses and premium taxes......................................... 64,192,290
Payments to contract owners:
Terminations and withdrawals........................................ (798,284)
--------------
Increase in net assets resulting from principal transactions........ 63,394,006
--------------
TOTAL INCREASE IN NET ASSETS................................... 65,818,348
NET ASSETS:
Beginning of period................................................. 0
End of period....................................................... $ 65,818,348
==============
</TABLE>
See accompanying notes.
Page 15
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Generations Divisions
SEPARATE ACCOUNT D
Note A - Organization
The Generations Divisions (the "Divisions") of American General Life
Insurance Company Separate Account D (the "Separate Account") received their
first deposits in January, 1997. The Separate Account was established by
resolution of the Board of Directors of American General Life Insurance
Company (the "Company") on November 19, 1973. The Separate Account is
registered under the Investment Company Act of 1940 as a unit investment trust
and at December 31, 1997 consisted of forty-four Divisions, forty-two of which
are currently available to purchasers through annuity contracts. An additional
Generations Division, the Van Kampen American Capital Life Investment Trust
Strategic Stock Portfolio, became available to contract owners during October,
1997. In late May 1997, an exchange offer was extended to VAriety Plus
contract owners whereby these contract owners could exchange their current
VAriety Plus contracts for the new Generations contract. The new contract
would have the same account value as the exchanged contract. As of December
31, 1997, exchanges from VAriety Plus contracts accounted for approximately
14% of the Generations Divisions' total contract purchase payments. The
Divisions funded by series of the Morgan Stanley Universal Funds, Inc. and the
Van Kampen American Capital Life Investment Trust which are available to
Generations contract owners at December 31, 1997 are as follows:
<TABLE>
<S> <C>
VAN KAMPEN AMERICAN CAPITAL
MORGAN STANLEY UNIVERSAL FUNDS, INC.: LIFE INVESTMENT TRUST ("LIT"):
Asian Equity Portfolio LIT Domestic Income Portfolio
Emerging Markets Equity Portfolio LIT Emerging Growth Portfolio
Fixed Income Portfolio LIT Enterprise Portfolio
Global Equity Portfolio LIT Government Portfolio
Equity Growth Portfolio LIT Growth and Income Portfolio
High Yield Portfolio LIT Money Market Portfolio
International Magnum Portfolio LIT Morgan Stanley Real Estate Portfolio
Mid Cap Value Portfolio LIT Strategic Stock Portfolio
Value Portfolio
</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 Morgan Stanley
Universal Funds, Inc. mutual funds and Van Kampen American Capital Life
Investment Trust 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 Divisions and are paid to the Company. The annual rate
for the administrative expense charge is 0.15% and the annual rate for the
mortality and expense risk charge is 1.25%. 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. For the
period ended December 31, 1997, no maintenance charges were collected. A
surrender charge is applicable to certain withdrawal amounts pursuant to the
contract and is payable to the Company. The total surrender charges collected
for the period ended December 31, 1997 were $3,303.
The funds pay their investment advisers, Van Kampen American Capital
Asset Management, Inc., Morgan Stanley Asset Management, Inc., and Miller
Anderson & Sherrerd, LLP, a monthly fee based on each fund's average net asset
value.
Page 16
<PAGE>
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES & BASIS OF PRESENTATION -
CONTINUED
ANNUITY RESERVES - Annuity reserves are computed for currently payable
contracts according to the 1983a Individual Annuity Mortality Table projected
under Scale G factors. The assumed interest rate is 3.5 percent. Charges to
annuity reserves for mortality and expense risk 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 - 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 D - 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, 1997.
<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>
MORGAN STANLEY UNIVERSAL FUNDS, INC.:
Asian Equity Portfolio.............. 35,708.541 $ 5.64 $ 201,396 $ 316,249 $ (114,853)
Emerging Markets Equity Portfolio... 155,981.070 9.43 1,470,902 1,764,716 (293,814)
Fixed Income Portfolio.............. 113,784.004 10.41 1,184,491 1,174,177 10,314
Global Equity Portfolio............. 216,773.902 11.74 2,544,926 2,488,964 55,962
Equity Growth Portfolio............. 415,846.751 12.74 5,297,888 5,006,513 291,375
High Yield Portfolio................ 280,998.087 10.59 2,975,770 3,022,332 (46,562)
International Magnum Portfolio...... 496,079.929 10.38 5,149,310 5,554,496 (405,186)
Mid Cap Value Portfolio............. 496,657.187 13.32 6,615,474 6,393,881 221,593
Value Portfolio..................... 731,164.223 11.78 8,613,115 8,634,924 (21,809)
------------ ------------ -------------
34,053,272 34,356,252 (302,980)
VAN KAMPEN AMERICAN CAPITAL:
LIT Domestic Income Portfolio....... 166,200.524 8.25 1,371,154 1,407,660 (36,506)
LIT Emerging Growth Portfolio....... 302,956.112 16.45 4,983,628 4,705,712 277,916
LIT Enterprise Portfolio............ 415,627.828 18.11 7,527,020 8,048,971 (521,951)
LIT Government Portfolio............ 98,192.432 8.92 875,876 852,763 23,113
LIT Growth and Income Portfolio..... 915,240.691 12.12 11,092,717 10,693,042 399,675
LIT Money Market Portfolio.......... 1,565,014.320 1.00 1,565,014 1,565,014 0
LIT Morgan Stanley Real Estate
Securities Portfolio........... 127,771.132 15.85 2,025,172 2,037,240 (12,068)
LIT Strategic Stock Portfolio....... 226,576.405 10.25 2,322,408 2,312,791 9,617
------------ ------------ -------------
$ 31,762,989 31,623,193 139,796
$ 65,816,261 $ 65,979,445 $ (163,184)
============ ============ =============
</TABLE>
The aggregate cost of purchases and proceeds from sales of investments
for the period ended December 31, 1997 were $70,212,619 and $4,349,014,
respectively. The cost of total investments owned at December 31, 1997 was the
same for both financial reporting and federal income tax purposes. Gross
unrealized appreciation and gross unrealized depreciation as of December 31,
1997 were $1,289,565 and $1,452,749, respectively.
Page 17
<PAGE>
Note E - Summary of Changes in Units
Changes in Units for the Year Ended December 31, 1997
<TABLE>
<CAPTION>
Morgan Stanley Morgan Stanley Morgan Stanley Morgan Stanley Morgan Stanley
CONTRACTS IN Asian Equity Emerging Markets Fixed Income Global Equity Equity Growth
ACCUMULATION PERIOD Portfolio Equity 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.................... 63,928.070 292,520.126 195,502.682 410,903.211 812,548.750
Surrenders........................... 0.000 (2,711.276) (6,489.425) (4,352.239) (22,327.053)
Transfers to annuity................. 0.000 0.000 0.000 0.000 0.000
Transfers between funds.............. 6,331.977 30,474.778 29,986.603 24,376.333 58,689.072
-------------- -------------- -------------- -------------- --------------
Outstanding at end of period......... 70,260.047 320,283.628 218,999.860 430,927.305 848,910.769
============== ============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
Morgan Stanley Morgan Stanley Morgan Stanley Morgan Stanley Van Kampen
High Yield International Mid Cap Value Value LIT Domestic
Portfolio Magnum Portfolio Portfolio Portfolio Income Portfolio
<S> <C> <C> <C> <C> <C>
Outstanding at beginning of period... 0.000 0.000 0.000 0.000 0.000
Purchase payments.................... 489,468.330 820,619.283 925,401.988 1,347,645.572 123,082.193
Surrenders........................... (7,003.579) (5,004.795) (12,820.318) (19,306.896) (503.766)
Transfers to annuity................. 0.000 0.000 0.000 0.000 0.000
Transfers between funds.............. 51,359.014 152,656.135 92,015.750 156,354.458 17,600.603
-------------- -------------- -------------- -------------- --------------
Outstanding at end of period......... 533,823.765 968,270.623 1,004,597.420 1,484,693.134 140,179.030
============== ============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
Van Kampen
Van Kampen Van Kampen Van Kampen LIT Growth Van Kampen
LIT Emerging LIT Enterprise LIT Government and Income LIT Money Market
Growth Portfolio Portfolio Portfolio Portfolio Market Portfolio
<S> <C> <C> <C> <C> <C>
Outstanding at beginning of period... 0.000 0.000 0.000 0.000 0.000
Purchase payments.................... 537,468.499 394,842.289 104,479.532 1,669,358.574 609,179.193
Surrenders........................... (4,958.871) (4,046.252) (5,321.123) (5,980.786) (14,325.569)
Transfers to annuity................. 0.000 0.000 0.000 0.000 0.000
Transfers between funds.............. 94,994.151 45,821.575 (6,011.329) 220,107.475 (399,495.773)
-------------- -------------- -------------- -------------- --------------
Outstanding at end of period......... 627,503.779 436,617.612 93,147.080 1,883,485.263 195,357.851
============== ============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
Van Kampen
LIT Morgan Stanley Van Kampen
Real Estate LIT Strategic
Securities Portfolio Stock Portfolio
<S> <C> <C>
Outstanding at beginning of period... 0.000 0.000
Purchase payments.................... 193,816.246 339,311.452
Surrenders........................... (1,772.429) 0.000
Transfers to annuity................. 0.000 0.000
Transfers between funds.............. 34,729.553 114,668.859
-------------- --------------
Outstanding at end of period......... 226,773.370 453,980.311
============== ==============
</TABLE>
Page 18
<PAGE>
Note F - Net Assets Represented By:
December 31, 1997
<TABLE>
CONTRACTS IN ACCUMULATION PERIOD
<CAPTION>
Units Unit Value Amount
<S> <C> <C> <C>
MORGAN STANLEY UNIVERSAL FUNDS, INC.:
Asian Equity Portfolio.................. 70,260.047 $ 2.866335 $ 201,389
Emerging Markets Equity Portfolio....... 320,283.628 4.592849 1,471,014
Fixed Income Portfolio................. 218,999.860 5.408434 1,184,446
Global Equity Portfolio................. 430,927.305 5.905700 2,544,927
Equity Growth Portfolio................. 848,910.769 6.241285 5,298,294
High Yield Portfolio.................... 533,823.765 5.574231 2,975,657
International Magnum Portfolio.......... 968,270.623 5.318456 5,149,705
Mid Cap Value Portfolio................. 1,004,597.420 6.585704 6,615,981
Value Portfolio......................... 1,484,693.134 5.801721 8,613,775
------------
34,055,188
------------
VAN KAMPEN AMERICAN CAPITAL:
LIT Domestic Income Portfolio........... 140,179.030 9.781081 1,371,102
LIT Emerging Growth Portfolio........... 627,503.779 7.942509 4,983,954
LIT Enterprise Portfolio................ 436,617.612 17.240471 7,527,493
LIT Government Portfolio................ 93,147.080 9.402347 875,801
LIT Growth and Income Portfolio......... 1,883,485.263 5.889714 11,093,190
LIT Money Market Portfolio.............. 195,357.851 8.010579 1,564,930
LIT Morgan Stanley Real Estate
Securities Portfolio................ 226,773.370 8.930383 2,025,173
LIT Strategic Stock Portfolio........... 453,980.311 5.113696 2,321,517
------------
31,763,160
------------
65,818,348
============
</TABLE>
NOTE G - YEAR 2000 CONTINGENCy
The Company is in the process of modifying its information technology to be
ready for the Year 2000. The Company expects the project to be substantially
complete by 1998. All costs associated with required modifications will be
paid for by the Company.
Page 19
<PAGE>
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 and Stockholders
American General Life Insurance Company
We have audited the accompanying consolidated balance sheets of American
General Life Insurance Company (an indirectly wholly owned subsidiary of
American General Corporation) and subsidiaries as of December 31, 1997 and ,
and the related consolidated statements of income, shareholders' equity, and
cash flows for each of the three years in the period ended December 31, 1997.
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, 1997 and , and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles.
/s/ERNST & YOUNG LLP
--------------------
Ernst & Young LLP
February 23, 1998
Ernst & Young LLP is a member of Ernst & Young International, Ltd.
20
<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31
1997 1996
---------------------------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Investments:
Fixed maturity securities, at fair value (amortized cost -
$26,131,207 in 1997 and $24,762,134 in 1996) $ 27,386,715 $ 25,395,381
Equity securities, at fair value (cost - $19,208 in 1997
and $17,642 in 1996) 21,114 20,555
Mortgage loans on real estate 1,659,921 1,707,843
Policy loans 1,093,694 1,006,137
Investment real estate 129,364 145,442
Other long-term investments 55,118 43,344
Short-term investments 100,061 94,882
---------------------------------
Total investments 30,445,987 28,413,584
Cash 99,284 33,550
Investment in Parent Company (cost - $8,597 in 1997
and 1996) 37,823 28,597
Indebtedness from affiliates 96,519 86,488
Accrued investment income 433,111 392,058
Accounts receivable 208,209 170,457
Deferred policy acquisition costs 835,031 1,042,783
Property and equipment 33,827 35,414
Other assets 132,659 134,289
Assets held in separate accounts 11,242,270 7,727,189
---------------------------------
Total assets $ 43,564,720 $ 38,064,409
=================================
</TABLE>
SEE ACCOMPANYING NOTES.
Page 21
<PAGE>
<TABLE>
<CAPTION>
December 31
1997 1996
---------------------------------
(IN THOUSANDS)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Future policy benefits $ 27,849,893 $ 26,558,538
Other policy claims and benefits payable 42,677 41,679
Other policyholders' funds 398,314 376,675
Federal income taxes 543,379 402,361
Indebtedness to affiliates 4,712 3,376
Other liabilities 421,861 325,630
Liabilities related to separate accounts 11,242,270 7,727,189
---------------------------------
Total liabilities 40,503,106 35,435,448
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 850 850
Additional paid-in capital 1,184,743 933,342
Net unrealized investment gains 427,526 219,151
Retained earnings 1,442,495 1,469,618
---------------------------------
Total shareholders' equity 3,061,614 2,628,961
---------------------------------
Total liabilities and shareholders' $ 43,564,720 $ 38,064,409
equity =================================
</TABLE>
SEE ACCOMPANYING NOTES.
22
<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY
Consolidated Income Statements
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
---------------------------------------------
(IN THOUSANDS)
Revenues:
<S> <C> <C> <C>
Revenues:
Premiums and other considerations $ 428,721 $ 382,923 $ 342,420
Net investment income 2,198,623 2,095,072 2,011,088
Net realized investment gains (losses) 29,865 28,502 (1,942)
Other 53,370 41,968 27,172
---------------------------------------------
Total revenues 2,710,579 2,548,465 2,378,738
Benefits and expenses:
Benefits 1,757,504 1,689,011 1,641,206
Operating costs and expenses 379,012 347,369 309,110
Interest expense 782 830 2,180
---------------------------------------------
Total benefits and expenses 2,137,298 2,037,210 1,952,496
---------------------------------------------
Income before income tax expense 573,281 511,255 426,242
Income tax expense 198,724 176,660 143,947
---------------------------------------------
Net income $ 374,557 $ 334,595 $ 282,295
=============================================
</TABLE>
SEE ACCOMPANYING NOTES.
23
<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY
Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
--------------------------------------------
(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 850 850 -
Change during year - - 850
--------------------------------------------
Balance at end of year 850 850 850
Additional paid-in capital:
Balance at beginning of year 933,342 858,075 850,358
Capital contribution from Parent Company 250,000 75,000 -
--------------------------------------------
Other changes during year 1,401 267 7,717
--------------------------------------------
Balance at end of year 1,184,743 933,342 858,075
Net unrealized investment gains (losses):
Balance at beginning of year 219,151 493,594 (730,900)
Change during year 208,375 (274,443) 1,224,494
--------------------------------------------
Balance at end of year 427,526 219,151 493,594
Retained earnings:
Balance at beginning of year 1,469,618 1,324,703 1,249,109
Net income 374,557 334,595 282,295
Dividends paid (401,680) (189,680) (206,701)
--------------------------------------------
Balance at end of year 1,442,495 1,469,618 1,324,703
--------------------------------------------
Total shareholders' equity $ 3,061,614 $ 2,628,961 $ 2,683,222
=============================================
</TABLE>
SEE ACCOMPANYING NOTES.
24
<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY
<TABLE>
Consolidated Statements of Cash Flows
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
-----------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 374,557 $ 334,595 $ 282,295
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Change in accounts receivable (37,752) 3,846 (18,654)
Change in future policy benefits and other
policy claims (1,143,736) (543,193) (70,383)
Amortization of policy acquisition costs 115,467 102,189 68,295
Policy acquisition costs deferred (219,339) (188,001) (203,607)
Change in other policyholders' funds 21,639 63,174 (69,126)
Provision for deferred income tax expense 13,264 12,388 (9,773)
Depreciation 16,893 16,993 18,119
Amortization (28,276) (30,758) (35,825)
Change in indebtedness to/from affiliates (8,695) 4,432 7,596
Change in amounts payable to brokers 31,769 (25,260) 30,964
Net (gain) loss on sale of investments (29,865) (28,502) 1,942
Other, net 30,409 32,111 46,863
-----------------------------------------------
Net cash (used in) provided by operating activities (863,665) (378,286) 181,006
INVESTING ACTIVITIES
Purchases of investments and loans made (29,638,861) (27,245,453) (14,573,323)
Sales or maturities of investments and receipts
from repayment of loans 28,300,238 25,889,422 12,528,185
Sales and purchases of property and equipment, net (9,230) (8,057) (12,114)
-----------------------------------------------
Net cash used in investing activities (1,347,853) (1,364,088) (2,057,252)
FINANCING ACTIVITIES
Policyholder account deposits 4,187,191 3,593,380 3,372,522
Policyholder account withdrawals (1,759,660) (1,746,987) (1,258,560)
Dividends paid (401,680) (189,680) (206,701)
Capital contribution from Parent 250,000 75,000 -
Other 1,401 267 67
-----------------------------------------------
Net cash provided by financing activities 2,277,252 1,731,980 1,907,328
-----------------------------------------------
Increase (decrease) in cash 65,734 (10,394) 31,082
Cash at beginning of year 33,550 43,944 12,862
Cash at end of year $ 99,284 $ 33,550 $ 43,944
===============================================
</TABLE>
Interest paid amounted to approximately $1,004,000, $1,080,000, and $1,933,000
in 1997, 1996, and 1995, respectively.
SEE ACCOMPANYING NOTES.
25
<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY
Notes to Consolidated Financial Statements
DECEMBER 31, 1997
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, structured settlements, and
fixed and variable annuities throughout the United States. In addition, a
variety of equity products is sold through its broker/dealer, American General
Securities, Inc. The Company serves the estate planning needs of middle- and
upper-income households and the insurance needs of small-to medium-sized
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 health care, educational, 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") and 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.
The preparation of financial statements requires management to make estimates
and assumptions that affect amounts reported in the financial statements and
disclosures of contingent assets and liabilities. Ultimate results could
differ from those estimates.
26
<PAGE>
1. ACCOUNTING POLICIES (CONTINUED)
1.2 STATUTORY ACCOUNTING
The Company and its wholly owned life insurance subsidiaries are required to
file financial statements with state regulatory authorities. State insurance
laws and regulations prescribe accounting practices for calculating statutory
net income and equity. In addition, state regulators may permit 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 statutory equity at
December 31, 1997.
Statutory financial statements differ from GAAP. Significant differences were
as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
-----------------------------------------------
<S> <C> <C> <C>
Net income:
Statutory net income (1997 balance is
unaudited) $ 327,813 $ 284,070 $ 197,769
Deferred policy acquisition costs 103,872 85,812 135,312
Deferred income taxes (13,264) (12,388) 9,773
Adjustments to policy reserves (30,162) (19,954) (77,591)
Goodwill amortization (2,067) (2,169) (2,195)
Net realized gain on investments 20,139 14,140 22,874
Gain on sale of subsidiary - - 661
Other, net (31,774) (14,916) (4,308)
-----------------------------------------------
GAAP net income $ 374,557 $ 334,595 $ 282,295
===============================================
Shareholders' equity:
Statutory capital and surplus (1997 balance
is unaudited) $ 1,636,327 $ 1,441,768 $ 1,298,323
Deferred policy acquisition costs 835,031 1,042,783 605,501
Deferred income taxes (535,703) (410,007) (549,663)
Adjustments to policy reserves (319,680) (297,434) (311,065)
Acquisition-related goodwill 51,424 55,626 57,795
Asset valuation reserve ("AVR") 255,975 291,205 263,295
Interest maintenance reserve ("IMR") 9,596 63 3,114
Investment valuation differences 1,272,339 643,289 1,417,775
Benefit plans, pretax 6,103 6,749 6,023
Surplus from separate accounts (150,928) (106,026) (76,645)
Other, net 1,130 (39,055) (31,231)
-----------------------------------------------
Total GAAP shareholders' equity $ 3,061,614 $ 2,628,961 $ 2,683,222
================================================
</TABLE>
27
<PAGE>
1. ACCOUNTING POLICIES (CONTINUED)
1.2 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 (generally in proportion to the present
value of expected gross profits from surrender charges and investment,
mortality, and expense margins), rather than being charged to operations as
incurred; (b) future policy benefits are based on estimates of mortality,
interest, and withdrawals generally representing the Company's 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, computer software, 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. In addition, statutory
accounting principles require life insurance companies to establish an AVR and
an IMR. The AVR is designed to address the credit-related risk for bonds,
preferred stocks, derivative instruments, and mortgages and market risk for
common stocks, real estate, and other invested assets. The IMR is composed of
investment- and liability-related realized gains and losses that result from
interest rate fluctuations. These realized gains and losses, net of tax, are
amortized into income over the expected remaining life of the asset sold or
the liability released.
1.3 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.
28
<PAGE>
1. ACCOUNTING POLICIES (CONTINUED)
1.4 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 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, and loans for which management has
a concern based on its 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 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.
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, if applicable, or fair value
less costs to sell. Changes in estimates of fair value less costs to sell are
recognized as realized gains (losses) through a valuation allowance.
29
<PAGE>
1. ACCOUNTING POLICIES (CONTINUED)
1.4 INVESTMENTS (CONTINUED)
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 future cash flows of the
property are less than the carrying amount. In such event, the property is
written down to fair value, determined by 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.
INVESTMENT INCOME
Interest on fixed maturity securities, performing and restructured mortgage
loans, and policy loans is recorded as income when earned and is adjusted for
any amortization of premium or discount. Interest on impaired mortgage loans
is recorded as income when received. Dividends are recorded as income on
ex-dividend dates.
REALIZED INVESTMENT GAINS (LOSSES)
Realized investment gains (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.
1.5 SEPARATE ACCOUNTS
Separate accounts are assets and liabilities associated with certain
contracts, principally annuities; the investment risk lies solely with the
contract holder rather than the Company. Consequently, the Company's liability
for these accounts equals the value of the account assets. Investment income,
realized investment gains (losses), and policyholder 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.
30
<PAGE>
1. ACCOUNTING POLICIES (CONTINUED)
1.6 DEFERRED POLICY ACQUISITION COSTS ("DPAC")
Certain costs of writing an insurance policy, including agents' commissions,
underwriting and marketing expenses, are deferred and reported as DPAC.
DPAC associated with interest-sensitive life insurance contracts, insurance
investment contracts, and participating life insurance contracts, to the
extent recoverable from expected future gross profits, is deferred and
amortized generally in proportion to the present value of expected future
gross profits from surrender charges and investment, mortality, and expense
margins. Expected future gross profits are adjusted to include the impact of
realized and unrealized gains (losses) as if net unrealized investment gains
(losses) 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. DPAC associated with all other insurance
contracts, to the extent recoverable from future policy revenues, is amortized
over the premium-paying period of the related contracts using assumptions that
are consistent with those used in computing policy benefit reserves.
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.
1.7 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 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 1.6).
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 contracts, premiums are recognized when due. When the revenue is
recorded, an estimate of the cost of the
31
<PAGE>
1. ACCOUNTING POLICIES (CONTINUED)
1.7 PREMIUM RECOGNITION (CONTINUED)
related benefit is recorded in the future policy benefits account on the
consolidated balance sheet. Also, this cost is recorded in the consolidated
statement of income as a benefit in the current year and in all future years
during which the policy is expected to be renewed.
1.8 OTHER ASSETS
Acquisition-related goodwill, which is included in other assets, is charged to
expense in equal amounts over 40 years. The carrying value of goodwill is
regularly reviewed for indicators of impairment in value.
1.9 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.
1.10 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 equal 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 expected policyholder deaths, 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 2.0% to 13.5% at December 31, 1997.
32
<PAGE>
1. ACCOUNTING POLICIES (CONTINUED)
1.10 POLICY AND CONTRACT CLAIMS RESERVES (CONTINUED)
The claims 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.
1.11 REINSURANCE
The Company limits its exposure to loss on any single insured to $1.5 million
by ceding additional risks through reinsurance contracts with other insurers.
Ceded reinsurance becomes a liability of the reinsurer assuming the risk. The
Company diversifies its risk of exposure to reinsurance loss by using several
reinsurers that have strong claims-paying ability ratings. If a 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.
Benefits paid and future policy benefits related to ceded reinsurance
contracts are recorded as reinsurance receivables. The cost of reinsurance is
recognized over the life of the underlying reinsured policies using
assumptions consistent with those used to account for the underlying policies.
33
<PAGE>
1. ACCOUNTING POLICIES (CONTINUED)
1.12 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 contracts accounted for 2.22% and 2.47% of life
insurance in force at December 31, 1997 and 1996, respectively. Such business
is accounted for in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 120.
1.13 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/non-life 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.
Income taxes are provided for in accordance with SFAS No. 109. 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 No. 109, state
income taxes are included in income tax expense.
1.14 NEW ACCOUNTING STANDARD NOT YET ADOPTED
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
REPORTING COMPREHENSIVE INCOME, which establishes standards for reporting and
displaying comprehensive income and its components in the financial
statements. Beginning in 1998, the Company must adopt this statement for all
periods presented. Application of this statement will not change recognition
or measurement of net income and, therefore, will not impact the Company's
consolidated results of operations or financial position.
34
<PAGE>
2. INVESTMENTS
2.1 INVESTMENT INCOME
Investment income by type of investment was as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-----------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Investment income:
Fixed maturities $ 1,966,528 $ 1,846,549 $ 1,759,358
Equity securities 1,067 1,842 6,773
Mortgage loans on real estate 157,035 175,833 185,022
Investment real estate 22,157 22,752 16,397
Policy loans 62,939 58,211 52,939
Other long-term investments 3,135 2,328 1,996
Short-term investments 8,626 9,280 6,234
Investment income from affiliates 11,094 11,502 12,570
-----------------------------------------------
Gross investment income 2,232,581 2,128,297 2,041,289
Investment expenses 33,958 33,225 30,201
-----------------------------------------------
Net investment income $ 2,198,623 $ 2,095,072 $ 2,011,088
===============================================
</TABLE>
The carrying value of investments that have produced no investment income
during 1997 was less than 1% of total invested assets. The ultimate
disposition of these investments is not expected to have a material effect on
the Company's results of operations and financial position.
35
<PAGE>
2. INVESTMENTS (CONTINUED)
2.2 NET REALIZED INVESTMENT GAINS (LOSSES)
Realized gains (losses) by type of investment were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-----------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Fixed maturities:
Gross gains $ 42,966 $ 46,498 $ 38,657
Gross losses (34,456) (47,29 (41,022)
-----------------------------------------------
Total fixed maturities 8,510 (795) (2,365)
Equity securities 1,971 18,304 9,710
Other investments 19,384 10,993 (9,287)
-----------------------------------------------
Net realized investment gains (losses)
before tax 29,865 28,502 (1,942)
Income tax expense 10,452 9,976 547
-----------------------------------------------
Net realized investment gains (losses)
after tax $ 19,413 $ 18,526 $ (2,489)
================================================
</TABLE>
36
<PAGE>
2. INVESTMENTS (CONTINUED)
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 1.4). Amortized cost and fair value at
December 31, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED COST UNREALIZED UNREALIZED FAIR
GAIN LOSS VALUE
-------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
DECEMBER 31, 1997
Fixed maturity securities:
Corporate securities:
Investment-grade $ 17,913,942 $ 906,235 $ 17,551 $ 18,802,626
Below investment-grade 950,438 34,290 4,032 980,696
-------------------------------------------------------------------
Mortgage-backed securities* 6,614,704 278,143 4,260 6,888,587
U.S. government obligations 289,406 46,529 74 335,861
Foreign governments 318,212 18,076 3,534 332,754
State and political subdivisions 44,505 1,686 - 46,191
-------------------------------------------------------------------
Total fixed maturity securities $ 26,131,207 $ 1,284,959 $ 29,451 $ 27,386,715
===================================================================
Equity securities $ 19,208 $ 2,145 $ 239 $ 21,114
===================================================================
Investment in Parent Company $ 8,597 $ 29,226 $ - $ 37,823
===================================================================
</TABLE>
37
<PAGE>
2. INVESTMENTS (CONTINUED)
2.3 FIXED MATURITY AND EQUITY SECURITIES (CONTINUED)
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED COST UNREALIZED UNREALIZED FAIR
GAIN LOSS VALUE
-------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
DECEMBER 31, 1996
Fixed maturity securities:
Corporate securities:
Investment grade $ 15,639,170 $ 528,602 $ 90,379 $ 16,077,393
Below investment grade 898,187 29,384 5,999 921,572
Mortgage-backed securities* 7,547,616 186,743 54,543 7,679,816
U.S. government obligations 313,759 26,597 1,050 339,306
Foreign governments 313,655 13,255 248 326,662
State and political subdivisions 48,553 1,003 226 49,330
Redeemable preferred stocks 1,194 108 - 1,302
-------------------------------------------------------------------
Total fixed maturity securities $ 24,762,134 $ 785,692 $ 152,445 $ 25,395,381
===================================================================
Equity securities $ 17,642 $ 3,021 $ 108 $ 20,555
===================================================================
Investment in Parent Company $ 8,597 $ 20,000 $ - $ 28,597
===================================================================
<FN>
* Primarily include pass-through securities guaranteed by and mortgage
obligations ("CMOs") collateralized by the U.S. government and
government agencies.
</FN>
</TABLE>
38
<PAGE>
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>
1997 1996
------------------------------------
(IN THOUSANDS)
<S> <C> <C>
Gross unrealized gains $ 1,316,330 $ 808,713
Gross unrealized losses (29,690) (152,553)
DPAC and other fair value adjustments (621,867) (315,117)
Deferred federal income taxes (237,247) (121,892)
------------------------------------
Net unrealized gains on securities $ 427,526 219,151
====================================
</TABLE>
The contractual maturities of fixed maturity securities at December 31, 1997
were as follows:
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
------------------------------------
(IN THOUSANDS)
<S> <C> <C>
Fixed maturity securities, excluding mortgage-backed securities:
Due in one year or less $ 205,719 $ 207,364
Due after one year through five years 5,008,933 5,216,174
Due after five years through ten years 9,163,681 9,604,447
Due after ten years 5,138,169 5,470,143
Mortgage-backed securities 6,614,705 6,888,587
------------------------------------
Total fixed maturity securities $ 26,131,207 $ 27,386,715
====================================
</TABLE>
Actual maturities may differ from contractual maturities, since borrowers may
have the right to call or prepay obligations. In addition, corporate
requirements and investment strategies may result in the sale of investments
before maturity. Proceeds from sales of fixed maturities were $14.8 billion,
$16.2 billion, and $7.3 billion during 1997, 1996, and 1995, respectively.
39
<PAGE>
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, 1997 and :
<TABLE>
<CAPTION>
OUTSTANDING PERCENT OF PERCENT
AMOUNT TOTAL NONPERFORMING
-----------------------------------------------------
(IN MILLIONS)
<S> <C> <C> <C>
DECEMBER 31, 1997
Geographic distribution:
South Atlantic $ 456 27.5% 1.8%
Pacific 340 20.5 14.4
Mid-Atlantic 288 17.3 -
East North Central 186 11.2 -
Mountain 151 9.1 2.7
West South Central 132 7.9 .1
East South Central 94 5.7 -
West North Central 19 1.1 -
New England 17 1.1 -
Allowance for losses (23) (1.4) -
-------------------------------
Total $ 1,660 100.0% 3.6%
===============================
Property type:
Office $ 622 37.5% 4.6%
Retail 463 27.9 3.0
Industrial 324 19.5 1.8
Apartments 223 13.4 6.1
Hotel/motel 40 2.4 -
Other 11 .7 -
Allowance for losses (23) (1.4) -
-------------------------------
Total $ 1,660 100.0% 3.6%
===============================
</TABLE>
40
<PAGE>
2. Investments (continued)
2.4 Mortgage Loans on Real Estate (continued)
<TABLE>
<CAPTION>
OUTSTANDING PERCENT OF PERCENT
AMOUNT TOTAL NONPERFORMING
-----------------------------------------------------
(IN MILLIONS)
<S> <C> <C> <C>
DECEMBER 31, 1996
Geographic distribution:
South Atlantic $ 522 30.6% 8.1%
Pacific 407 23.8 8.1
Mid-Atlantic 231 13.5 -
East North Central 168 9.8 -
Mountain 153 9.0 2.8
West South Central 141 8.2 5.3
East South Central 109 6.4 -
West North Central 13 0.8 -
New England 13 0.8 -
Allowance for losses (49) (2.9) -
-------------------------------
Total $ 1,708 100.0% 5.0%
===============================
Property type:
Office $ 590 34.5% -%
Retail 502 29.4 2.5
Industrial 304 17.8 6.0
Apartments 264 15.5 8.3
Hotel/motel 54 3.2 -
Other 43 2.5 78.8
Allowance for losses (49) (2.9) -
-------------------------------
Total $ 1,708 100.0% 5.0%
===============================
</TABLE>
41
<PAGE>
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>
DECEMBER 31
1997 1996
------------------------------------
(IN MILLIONS)
<S> <C> <C>
Impaired loans:
With allowance* $ 35 $ 60
Without allowance - -
------------------------------------
Total impaired loans $ 35 $ 60
====================================
<FN>
* Represents gross amounts before allowance for mortgage loan losses of
$10 million and $9 million, respectively.
</FN>
</TABLE>
<TABLE>
<CAPTION>
1997 1996 1995
------------------------------------------------------
(IN MILLIONS)
<S> <C> <C> <C>
Average investment $ 48 $ 72 $ 102
Interest income earned $ 3 $ 6 $ 8
Interest income -- cash basis $ - $ 6 $ 8
</TABLE>
42
<PAGE>
2. INVESTMENTS (CONTINUED)
2.5 INVESTMENT SUMMARY
Investments of the Company were as follows:
<TABLE>
<CAPTION>
December 31, 1997
-----------------------------------------------------
FAIR CARRYING
COST VALUE AMOUNT
-----------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Fixed maturities:
Bonds:
United States government and government
agencies and authorities $ 289,406 $ 335,861 $ 335,861
States, municipalities, and political
subdivisions 44,505 46,191 46,191
Foreign governments 318,212 332,754 332,754
Public utilities 1,848,546 1,952,724 1,952,724
Mortgage-backed securities 6,614,704 6,888,587 6,888,587
All other corporate bonds 17,015,834 17,830,598 17,830,598
-----------------------------------------------------
Total fixed maturities 26,131,207 27,386,715 27,386,715
Equity securities:
Common stocks:
Industrial, miscellaneous, and other 5,604 5,785 5,785
Nonredeemable preferred stocks 13,604 15,329 15,329
-----------------------------------------------------
Total equity securities 19,208 21,114 21,114
Mortgage loans on real estate* 1,659,921 xxx 1,659,921
Investment real estate 129,364 xxx 129,364
Policy loans 1,093,694 xxx 1,093,694
Other long-term investments 55,118 xxx 55,118
Short-term investments 100,061 xxx 100,061
-----------------------------------------------------
Total investments $ 29,188,573 $ xxx $ 30,445,987
=====================================================
<FN>
* Amount is net of a $23 million allowance for losses.
</FN>
</TABLE>
43
<PAGE>
3. DEFERRED POLICY ACQUISITION COSTS
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>
1997 1996 1995
------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at January 1 $ 1,042,783 $ 605,501 $ 1,479,115
Capitalization 219,339 188,001 203,607
Amortization (115,467) (102,189) (68,295)
Change in the effect of SFAS No. 115 (311,624) 351,470 (1,008,926)
------------------------------------------------------
Balance at December 31 $ 835,031 $ 1,042,783 $ 605,501
======================================================
</TABLE>
4. OTHER ASSETS
Other assets consisted of the following:
<TABLE>
<CAPTION>
December 31
1997 1996
------------------------------------
(IN THOUSANDS)
<S> <C> <C>
Goodwill $ 51,424 $ 55,626
Other 81,235 78,663
------------------------------------
Total other assets $ 132,659 $ 134,289
====================================
</TABLE>
44
<PAGE>
5. FEDERAL INCOME TAXES
5.1 TAX LIABILITIES
Income tax liabilities were as follows:
<TABLE>
<CAPTION>
December 31
1997 1996
------------------------------------
(IN THOUSANDS)
<S> <C> <C>
Current tax (receivable) payable $ 7,676 $ (7,646)
Deferred tax liabilities, applicable to:
Net income 298,456 288,115
Net unrealized investment gains 237,247 121,892
------------------------------------
Total deferred tax liabilities 535,703 410,007
------------------------------------
Total current and deferred tax liabilities $ 543,379 $ 402,361
====================================
</TABLE>
Components of deferred tax liabilities and assets at December 31 were as
follows:
<TABLE>
<CAPTION>
1997 1996
------------------------------------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax liabilities applicable to:
Deferred policy acquisition costs $ 226,653 $ 308,802
Basis differential of investments 486,194 254,402
------------------------------------
Other 139,298 130,423
------------------------------------
Total deferred tax liabilities 852,145 693,627
Deferred tax assets applicable to:
Policy reserves (232,539) (219,677)
Other (83,903) (63,943)
------------------------------------
Total deferred tax assets before valuation
allowance (316,442) (283,620)
Valuation allowance - -
------------------------------------
Total deferred tax assets, net of valuation
allowance (316,442) (283,620)
------------------------------------
Net deferred tax liabilities $ 535,703 $ 410,007
====================================
</TABLE>
45
<PAGE>
5. FEDERAL INCOME TAXES (CONTINUED)
5.1 TAX LIABILITIES (CONTINUED)
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, 1997. 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.
5.2 TAX EXPENSE
Components of income tax expense for the year were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Current expense $ 185,460 $ 164,272 $ 153,720
Deferred expense (benefit):
Deferred policy acquisition cost 27,644 21,628 38,275
Policy reserves (27,496) (27,460) (49,177)
Basis differential of investments 3,769 4,129 3,710
Other, net 9,347 14,091 (2,581)
------------------------------------------------------
Total deferred expense (benefit) 13,264 12,388 (9,773)
------------------------------------------------------
Income tax expense $ 198,724 $ 176,660 $ 143,947
======================================================
</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>
1997 1996 1995
------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Income tax at statutory percentage of GAAP
pretax income $ 200,649 $ 178,939 $ 149,185
Tax-exempt investment income (9,493) (9,347) (10,185)
Goodwill 723 759 768
Tax on sale of subsidiary - - (661)
Other 6,845 6,309 4,840
------------------------------------------------------
Income tax expense $ 198,724 $ 176,660 143,947
======================================================
</TABLE>
46
<PAGE>
5. FEDERAL INCOME TAXES (CONTINUED)
5.3 TAXES PAID
Income taxes paid amounted to approximately $168 million, $182 million, and
$90 million in 1997, 1996, and 1995, respectively.
5.4 TAX RETURN EXAMINATIONS
The Parent Company and the majority of its subsidiaries file a consolidated
federal income tax return. The Internal Revenue Service has completed
examinations of the Company's tax returns through 1988 and is currently
examining tax returns for 1989 through 1996. In addition, the tax returns of
companies recently acquired are also being examined. Although the final
outcome of any issues raised in examination is uncertain, the Company believes
that the ultimate liability, including interest, will not exceed amounts
recorded in the consolidated financial statements.
6. TRANSACTIONS WITH AFFILIATES
Affiliated notes and accounts receivable were as follows:
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
-----------------------------------------------------------------------
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 $ 3,288 $ 4,725 $ 3,239
American General Corporation,
8 1/4%, due 2004 17,125 32,953 19,572 19,572
American General Corporation,
Restricted Subordinated Note,
13 1/2%, due 2002 31,494 31,494 33,550 33,550
-----------------------------------------------------------------------
Total notes receivable from
affiliates 53,344 67,735 57,847 56,361
Accounts receivable from affiliates - 28,784 - 30,127
-----------------------------------------------------------------------
Indebtedness from affiliates $ 53,344 $ 96,519 $ 57,847 $ 86,488
=======================================================================
</TABLE>
47
<PAGE>
6. TRANSACTIONS WITH AFFILIATES (CONTINUED)
Various American General companies provide services to the Company,
principally mortgage servicing and investment advisory services. The Company
paid approximately $33,916,000, $22,083,000, and $21,006,000 for such services
in 1997, 1996, and 1995, respectively. Accounts payable for such services at
December 31, 1997 and were not material. In addition, the Company rents
facilities and provides services to various American General companies. The
Company received approximately $6,455,000, $1,255,000, and $2,086,000 for such
services and rent in 1997, 1996, and 1995, respectively. Accounts receivable
for rent and services at December 31, 1997 and 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, the Franklin Life
Insurance Company ("Franklin"), an affiliated company, is entitled to one vote
per share, voting together with the holders of common stock.
During 1996, the Company's residential mortgage loan portfolio of $42 million
was sold to American General Finance at carrying value plus accrued interest.
7. STOCK-BASED COMPENSATION
Certain officers of the Company participate in American General Corporation's
stock and incentive plans which provide for the award of stock options,
restricted stock awards, performance awards, and incentive awards to key
employees. Stock options constitute the majority of such awards. Expense
related to stock options is measured as the excess of the market price of the
stock at the measurement date over the exercise price. The measurement date is
the first date on which both the number of shares that the employee is
entitled to receive and the exercise price are known. Under the stock option
plans, no expense is recognized, since the market price equals the exercise
price at the measurement date.
48
<PAGE>
7. STOCK-BASED COMPENSATION (CONTINUED)
Under an alternative accounting method, compensation expense arising from
stock options would be measured at the estimated fair value of the options at
the date of grant. Had compensation expense for the stock options been
determined using this method, net income would have been as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Net income as reported $ 374,557 $ 334,595 $ 282,295
Net income pro forma 373,328 334,029 281,821
</TABLE>
The average fair values of the options granted during 1997, 1996, and 1995
were $10.33, $7.07, and $6.93, respectively. The fair value of each option was
estimated at the date of grant using a Black-Scholes option pricing model. The
weighted average assumptions used to estimate the fair value of the stock
options were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------------------------------------------------
<S> <C> <C> <C>
Dividend yield 3.0% 4.0% 4.0%
Expected volatility 22.0% 22.3% 23.0%
Risk-free interest rate 6.4% 6.2% 6.9%
Expected life 6 YEARS 6 years 6 years
</TABLE>
8. BENEFIT PLANS
8.1 PENSION PLANS
The Company has noncontributory, defined benefit pension plans covering most
employees. Pension benefits 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 is to contribute
annually no more than the maximum amount deductible for federal income tax
purposes. The Company uses the projected unit credit method for computing
pension expense.
49
<PAGE>
8. BENEFIT PLANS (CONTINUED)
8.1 PENSION PLANS (CONTINUED)
The components of pension expense and underlying assumptions were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost - benefits earned during period $ 1,891 $ 1,826 $ 1,346
Interest cost on projected benefit obligation 2,929 2,660 2,215
Actual return on plan assets (15,617) (9,087) (10,178)
Amortization of unrecognized net asset - (261) (888)
Amortization of unrecognized prior service cost 195 197 197
Deferral of net asset gain 10,148 4,060 5,724
Amortization of gain - 68 38
------------------------------------------------------
Total pension income $ (454) $ (537) $ (1,546)
======================================================
Assumptions:
Weighted average discount rate on benefit
obligation 7.25% 7.50% 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>
50
<PAGE>
8. BENEFIT PLANS (CONTINUED)
8.1 PENSION PLANS (CONTINUED)
The funded status of the plans and the prepaid pension expenses included in
other assets at DECEMBER 31 were as follows:
<TABLE>
<CAPTION>
December 31
1997 1996
------------------------------------
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of benefit obligation:
Vested $ 32,926 $ 27,558
Nonvested 3,465 4,000
Additional minimum liability - 205
------------------------------------
Accumulated benefit obligation 36,391 31,763
Effect of increase in compensation levels 7,002 5,831
------------------------------------
Projected benefit obligation 43,393 37,594
Plan assets at fair value 80,102 65,159
------------------------------------
Plan assets in excess of projected benefit obligation 36,709 27,565
Unrecognized net gain (23,548) (15,881)
Unrecognized prior service cost 78 274
------------------------------------
Prepaid pension expense $ 13,239 $ 11,958
====================================
</TABLE>
More than 85% of the plan assets were invested in fixed maturity and equity
securities at the plan's most recent balance sheet date.
8.2 POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company and its life insurance subsidiaries, together with certain other
insurance subsidiaries of the Parent Company, have life, medical, 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. The Company has reserved the
right to change or eliminate these benefits at any time.
51
<PAGE>
8. BENEFIT PLANS (CONTINUED)
8.2 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 its 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>
December 31
1997 1996
------------------------------------
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of benefit obligation:
Retirees $ 2,469 $ 5,199
Fully eligible active plan participants 259 251
Other active plan participants 3,214 2,465
------------------------------------
Accumulated postretirement benefit obligation 5,942 7,915
Plan assets at fair value 159 106
------------------------------------
Accumulated postretirement benefit obligation in excess
of plan assets at fair value 5,783 7,809
Unrecognized net gain (1,950) (243)
------------------------------------
Accrued postretirement benefit cost $ 3,833 $ 7,566
====================================
Weighted-average discount rate on postretirement benefit
obligation 7.25% 7.50%
</TABLE>
The components of postretirement benefit expense were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost-- benefits earned $ 211 $ 218 $ 171
Interest cost on accumulated postretirement
benefit obligation 390 626 638
------------------------------------------------------
Postretirement benefit expense $ 601 $ 844 $ 809
======================================================
</TABLE>
52
<PAGE>
9. DERIVATIVE FINANCIAL INSTRUMENTS
9.1 USE OF DERIVATIVE FINANCIAL INSTRUMENTS
The Company's use of derivative financial instruments is generally limited to
interest rate and currency swap agreements, and options to enter into interest
rate swap agreements (call swaptions). The Company accounts for its derivative
financial instruments as hedges. Hedge accounting requires a high correlation
between changes in fair values or cash flows or the derivative financial
instruments and the specific items being hedged, both at inception and
throughout the life of the hedge.
9.2 INTEREST RATE AND CURRENCY SWAP AGREEMENTS
Interest rate swap agreements are used to 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. Currency swap agreements are infrequently used 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.
The difference between amounts paid and received on swap agreements is
recorded on an accrual basis as an adjustment to net investment income or
interest expense, 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 swap agreements are recognized in the consolidated balance
sheet if they hedge investments carried at fair value or if they hedge
anticipated purchases of such investments. In this event, changes in the fair
value of a swap agreement are reported in net unrealized gains on securities
included in shareholders' equity, consistent with the treatment of the related
investment security. For swap agreements hedging anticipated investment
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.
Swap agreements generally have terms of two to ten years. Any gain or loss
from early termination of a swap agreement is deferred and amortized into
income over the remaining term of the related investment. If the underlying
investment is extinguished or sold, any related gain or loss on swap
agreements is recognized in income. Average floating rates may change
significantly, thereby affecting future cash flows.
53
<PAGE>
9. DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
9.2 INTEREST RATE AND CURRENCY SWAP AGREEMENTS (CONTINUED)
Interest rate and currency swap agreements related to investment securities at
December 31 were as follows:
<TABLE>
<CAPTION>
1997 1996
------------------------------------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Interest rate swap agreements to pay fixed rate:
Notional amount $ 15 $ 60
Average receive rate 6.74% 6.19%
Average pay rate 6.48% 6.42%
Interest rate swap agreements to receive fixed rate:
Notional amount $144 $ 44
Average receive rate 6.89% 6.84%
Average pay rate 6.37% 6.01%
Currency swap agreements (receive U.S. dollars/pay Canadian
dollars):
Notional amount (in U.S. dollars) $139 $ 99
Average exchange rate 1.50 1.57
</TABLE>
9.3 CALL SWAPTIONS
Options to enter into interest rate swap agreements are used to limit the
Company's exposure to reduced spreads between investment yields and interest
crediting rates should interest rates decline significantly over prolonged
periods. During such periods, the spread between investment yields and
interest crediting rates may be reduced as a result of certain limitations on
the Company's ability to manage interest crediting rates. Call swaptions allow
the Company to enter into interest rate swap agreements to receive fixed rates
and pay lower floating rates, effectively increasing the spread between
investment yields and interest crediting rates.
Premiums paid to purchase call swaptions are included in investments and are
amortized to net investment income over the exercise period of the swaptions.
If a call swaption is terminated, any gain is deferred and amortized to
insurance and annuity benefits over the expected life of the insurance and
annuity contracts and any unamortized premium is charged to income. If a call
swaption ceases to be an effective hedge, any related gain or loss is
recognized in income.
54
<PAGE>
9. DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
9.3 CALL SWAPTIONS (CONTINUED)
During 1997, the Company purchased call swaptions which expire in 1998. These
call swaptions had a notional amount of $1.35 billion and strike rates ranging
from 4.5% to 5.5% at December 31, 1997. Should the strike rates remain below
market rates, the call swaptions will expire and the Company's exposure would
be limited to the premiums paid.
9.4 CREDIT AND MARKET RISK
Derivative financial instruments expose the Company to credit risk in the
event of non-performance by counterparties. The Company limits this exposure
by entering into agreements with counterparties having high credit ratings and
by regularly monitoring the ratings. The Company does not expect any
counterparty to fail to meet its obligation; however, non-performance would
not have a material impact on the Company's consolidated results of operations
and financial position.
The Company's exposure to market risk is mitigated by the offsetting effects
of changes in the value of the agreements and the related items being hedged.
Derivative financial instruments related to investment securities did not have
a material effect on net investment income in 1997, 1996 or 1995.
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 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 for life insurance contracts from its disclosure
requirements. Care should be exercised in drawing conclusions based on fair
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.
55
<PAGE>
10. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
Carrying amounts and fair values for those financial instruments covered by
SFAS 107 at DECEMBER 31, 1997 are presented below:
<TABLE>
<CAPTION>
FAIR CARRYING
VALUE AMOUNT
------------------------------------
(IN MILLIONS)
<S> <C> <C>
Assets:
Fixed maturity and equity securities * $ 27,408 $ 27,408
Mortgage loans on real estate $ 1,702 $ 1,660
Policy loans $ 1,127 $ 1,094
Investment in parent company $ 38 $ 38
Indebtedness from affiliates $ 97 $ 97
Liabilities:
Insurance investment contracts $ 24,011 $ 24,497
<FN>
* Includes derivative financial instruments with negative fair value of
$4.2 million and $10.8 million and positive fair value of $7.2 million
and $.6 million at December 31, 1997 and 1996, respectively.
</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 some private placements, by
discounting expected future cash flows using a current market rate
applicable to yield, credit quality, and average life of investments.
MORTGAGE LOANS ON REAL ESTATE
Fair value of mortgage loans was estimated primarily using discounted
cash flows based on contractual maturities and risk-adjusted discount
rates.
56
<PAGE>
10. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
POLICY LOANS
Fair value of policy loans was estimated using discounted cash flows and
actuarially determined assumptions incorporating market rates.
INVESTMENT IN PARENT COMPANY
The fair value of the investment in Parent Company is based on quoted
market prices of American General Corporation common stock.
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.
INDEBTEDNESS FROM AFFILIATES
Indebtedness from affiliates is composed of accounts receivable and
notes receivable from affiliates. Due to the short-term nature of
accounts receivable, fair value is assumed to equal carrying value. Fair
value of notes receivable was estimated using discounted cash flows
based on contractual maturities and discount rates that were based on
U.S. Treasury rates for similar maturity ranges.
11. DIVIDENDS PAID
American General Life Insurance Company paid $402 million, $189 million, and
$207 million in dividends on common stock to AGC Life Insurance Company in
1997, 1996, and 1995, respectively. The 1995 dividends included $701 thousand
in the form of furniture and equipment. In addition, in 1996, the Company paid
$680 thousand in dividends on preferred stock to Franklin.
57
<PAGE>
12. 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, 1997,
approximately $2.6 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 $2.0 billion of
consolidated shareholders' equity is similarly restricted as to transfer from
its subsidiaries to the Company.
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.
In recent years, various life insurance companies have been named as
defendants in class action lawsuits relating, to life insurance pricing and
sales practices, and a number of these lawsuits has resulted in substantial
settlements. The Company is a defendant in such purported class action
lawsuits, asserting claims related to pricing and sales practices. These
claims are being defended vigorously by the Company. Given the uncertain
nature of litigation and the early stages of this litigation, the outcome of
these actions cannot be predicted at this time. The Company nevertheless
believes that the ultimate outcome of all such pending litigation should not
have a material adverse effect on the Company's financial position; however,
it is possible that settlements or adverse determinations in one or more of
these actions or other future proceedings could have a material adverse effect
on results of operations for a given period. No provision has been made in the
consolidated financial statements related to this pending litigation because
the amount of loss, if any, from these actions cannot be reasonably estimated
at this time.
The Company is a party to various other lawsuits and proceedings arising in
the ordinary course of business. Many of these lawsuits and proceedings arise
in jurisdictions, such as Alabama, that permit damage awards disproportionate
to the actual economic damages
58
<PAGE>
12. RESTRICTIONS, COMMITMENTS, AND CONTINGENCIES (CONTINUED)
incurred. Based upon information presently available, the Company believes
that the total amounts that will ultimately be paid, if any, arising from
these lawsuits and proceedings will not have a material adverse effect on the
Company's results of operations and financial position. However, it should be
noted that the frequency of large damage awards, including large punitive
damage awards, that bear little or no relation to actual economic damages
incurred by plaintiffs in jurisdictions like Alabama continues to increase and
creates the potential for an unpredictable judgment in any given suit.
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, 1997 and , the Company has accrued $7.6
million and $16.1 million, respectively, for guaranty fund assessments, net of
$4.3 million and $4.1 million, respectively, of premium tax deductions. The
Company has recorded receivables of $9.7 million and $10.9 million at December
31, 1997 and 1996, respectively, for expected recoveries against the payment
of future premium taxes. Expenses incurred for guaranty fund assessments were
$2.1 million, $6.0 million, and $22.4 million in 1997, 1996, and 1995,
respectively.
59
<PAGE>
13. REINSURANCE
Reinsurance transactions for the years ended December 31, 1997, 1996, and 1995
were as follows:
<TABLE>
<CAPTION>
PERCENTAGE
CEDED TO OTHER ASSUMED FROM OF AMOUNT
GROSS AMOUNT COMPANIES OTHER COMPANIES NET AMOUNT ASSUMED TO NET
----------------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
December 31, 1997
Life insurance in force $ 45,963,710 $ 10,926,255 $ 4,997 $ 35,042,452 0.01%2
=======================================================================
Premiums:
Life insurance and annuities $ 100,357 $ 37,294 $ 75 $ 63,138 0.12%
Accident and health insurance 1,208 172 - 1,036 0.00%
-----------------------------------------------------------------------
Total premiums $ 101,565 $ 37,466 $ 75 $ 64,174 0.12%
=======================================================================
Premiums:
Life insurance and annuities $ 104,225 $ 34,451 $ 36 $ 69,810 0.05%
Accident and health insurance 1,426 64 - 1,362 0.00%
-----------------------------------------------------------------------
Total premiums $ 105,651 $ 34,515 $ 36 $ 71,172 0.05%
=======================================================================
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%
=======================================================================
</TABLE>
60
<PAGE>
13. REINSURANCE (CONTINUED)
Reinsurance recoverable on paid losses was approximately $2,278,000,
$6,904,000, and $6,190,000 at December 31, 1997, 1996, and 1995, respectively.
Reinsurance recoverable on unpaid losses was approximately $3,210,000,
$4,282,000, and $2,775,000 at December 31, 1997, 1996, and 1995, respectively.
14. ACQUISITIONS
Effective December 31, 1995, the Company purchased Franklin United Life
Insurance Company, a subsidiary of Franklin, which is a wholly owned
subsidiary of the Parent Company. This purchase was effected through issuance
of $8.5 million in preferred stock to Franklin. The acquisition was accounted
for using the purchase method of accounting and is not material to the
operations of the Company.
15. YEAR 2000 CONTINGENCY (UNAUDITED)
Management has been engaged in a program to render the Company's computer
systems (hardware and mainframe and personal applications software) Year 2000
compliant. The Company will incur internal staff costs as well as third-party
vendor and other expenses to prepare the systems for Year 2000. The cost of
testing and conversion of systems applications has not had, and is not
expected to have, a material adverse effect on the Company's results of
operations or financial condition. However, risks and uncertainties exist in
most significant systems development projects. If conversion of the Company's
systems is not completed on a timely basis, due to nonperformance by
third-party vendors or other unforeseen circumstances, the Year 2000 problem
could have a material adverse impact on the operations of the Company.
61
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
PART A: None
PART B:
(1) Financial Statements of the Generations Divisions of
American General Life Insurance Company Separate
Account D:
Report of Ernst & Young LLP, Independent Auditors
Statement of Net Assets as of December 31, 1997
Statement of Operations for the year ended December 31, 1997
Statements of Changes in Net Assets for the years ended
December 31, 1997 and 1996
Notes to Financial Statements
(2) Consolidated Financial Statements of American General
Life Insurance Company:
Report of Ernst & Young LLP, Independent Auditors
Consolidated Balance Sheets as of December 31, 1997 and 1996
Consolidated Statements of Income for the years ended
December 31, 1997, 1996 and 1995
Consolidated Statements of Shareholders' Equity for the
years ended December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
PART C: None
<TABLE>
(b) Exhibits
<S> <C>
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)
C-1
<PAGE>
2 None
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, and Van Kampen American Capital
Distributors, Inc. (14)
(b)(i) Specimen Form of Selling Group and General Agent Agreement
utilizing American Capital Marketing, Inc. as distributor.
(4)
(ii) Specimen 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) Form of Selling Group Agreement by and among American
General Life Insurance Company, American General Securities
Incorporated, and Van Kampen American Capital Distributors,
Inc. (12)
(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 Investment Trust, Van
Kampen American Capital Asset Management, Inc., and Van
Kampen American Capital Distributors, Inc. (14)
(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)
(v) Participation Agreement by and among American General Life
Insurance Company, Morgan Stanley Universal Funds, Inc.,
Morgan Stanley Asset Management, Inc. and Miller Anderson &
Sherrerd LLP.(14)
(d) Form of Agreement between American General Life Insurance
Company and Dealer regarding exchange and allocation
transaction requests.(4)
C-2
<PAGE>
4(a) Specimen form of Combination Fixed and Variable Annuity
Contract (Form No. 91010). (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. (9)
(B) Specimen form of Individual Retirement Annuity Disclosure
Statement available under Contract Form Nos. 95020 and
95021. (8)
(C) Specimen form of Individual Retirement Annuity Disclosure
Statement and additional specialized forms available under
Contract Form Nos. 95020 Rev 896 and 95021 Rev 896. (10)
(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 Rev 896). (12)
(ii) Specimen form of Combination Fixed and Variable Annuity
contract (Form No. 95021 Rev 896). (12)
(iii) Specimen form of pages for Contract Forms 95020 Rev 896 and
95021 Rev 896, filed in the following states: California,
Idaho, Kansas, Massachusetts, Minnesota, North Carolina,
North Dakota, Oklahoma, Pennsylvania, South Carolina, Texas,
Utah, and West Virginia. (12)
(iv) Specimen form of Waiver of Surrender Charges Rider for
Contract Form Nos. 95020 Rev 896 and 95021 Rev 896. (12)
C-3
<PAGE>
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
Rev 896 and 95021 Rev 896. (13)
(iii) Specimen form of Application (amended) for Contract Form
Nos. 95020 Rev 896 and 95021 Rev 896. (14)
(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)
(iv) Specimen form of Generations Service Request, including
telephone transfer authorization. (13)
(v) Specimen form of Generations Service Request (amended),
including telephone transfer authorization. (14)
(vi) Specimen form of Annuity Ticket Order under Contract Form
Nos. 95020 Rev 896 and 95021 Rev 896. (13)
(vii) Specimen form of Annuity Order Ticket (amended) under
Contract Form Nos. 95020 Rev 896 and 95021 Rev 896. (14)
(viii) Specimen form of confirmation of initial purchase payment
under Contract Form Nos. 95020 Rev 896 and 95021 Rev 896.
(13)
(ix) Specimen form of Special Request for Surrender Charge Waiver
under Contract Form Nos. 95020 Rev 896 and 95021 Rev 896.
(13)
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 Form of services agreement dated July 31, 1975, (limited to
introduction and first two recitals, and sections 1-3) among
various affiliates of American General Corporation,
including American General Life Insurance Company and
American General Independent Producer Division (16)
C-4
<PAGE>
9(a) Opinion and consent of Counsel with respect to contract Form
Nos. 91010, 93020 and 93021. (4)
(b) Opinion and Consent of Counsel with respect to Contract Form
Nos. 95020 Rev 896 and 95021 Rev 896. (14)
10 Consent of Independent Auditors.
11 None
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 ended December
31, 1995, 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 ended December 31, 1995,
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 ended December
31, 1995, 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)(A) Computations of standardized average annual total returns
for each Division available under Contract Form Nos. 95020
Rev 896 and 95021 Rev 896 for the one and five year periods
ended December 31, 1997, and since inception.
(B) Computations of hypothetical historical standardized average
annual total returns for the Emerging Growth, Enterprise,
Domestic Income, Government, and Money Market Divisions,
available under Contract Form Nos. 95020 Rev 896 and 95021
Rev 896 for the one and five year periods ended December
31,1995, and since inception. (13)
(C) Computation of hypothetical historical standardized average
annual total returns for the Real Estate Securities
Division, available under Contract Form Nos. 95020 Rev 896
and 95021 Rev 896 for the one and five year periods ended
December 31, 1996, and since inception. (14)
(D) Computations of hypothetical historical average annual total
returns for the Growth and Income, Strategic Stock, Asian
Equity, Emerging Markets Equity, Equity Growth,
C-5
<PAGE>
Global Equity, International Magnum, Fixed Income, High
Yield, Mid Cap Value, and Value Divisions, available under
Contract Form Nos. 95020 Rev 896 and 95021 Rev 896 for the
one and five year periods ended December 31, 1997, and since
inception.
(ii)(A) Computations of hypothetical historical non-standardized
total returns for the Emerging Growth, Enterprise, Domestic
Income, Government, and Money Market Divisions, available
under Contract Form Nos. 95020 Rev 896 and 95021 Rev 896 for
the one and five year periods ended December 31, 1995, and
since inception. (13)
(B) Computation of hypothetical historical non-standardized
total returns for the Real Estate Securities Division,
available under Contract Form Nos. 95020 Rev 896 and 95021
Rev 896 for the one and five year periods ended December 31,
1996, and since inception. (14)
(C) Computations of hypothetical historical total returns for
the Growth and Income, Strategic Stock, Asian Equity,
Emerging Markets Equity, Equity Growth, Global Equity,
International Magnum, Fixed Income, High Yield, Mid Cap
Value, and Value Divisions, available under Contract Form
Nos. 95020 Rev 896 and 95021 Rev 896 for the one and five
year periods ended December 31, 1997, and since inception.
(iii)(A) Computations of hypothetical historical non-standardized
cumulative total returns for the Emerging Growth,
Enterprise, Domestic Income, Government, and Money Market
Divisions, available under Contract Form Nos. 95020 Rev 896
and 95021 Rev 896 for the one and five year periods ended
December 31,1995, and since inception. (13)
(B) Computation of hypothetical historical non-standardized
cumulative total returns for the Real Estate Securities
Division, available under Contract Form Nos. 95020 Rev 896
and 95021 Rev 896 for the one and five year periods ended
December 31, 1996, and since inception. (14)
(C) Computations of hypothetical historical cumulative total
returns for the Growth and Income, Strategic Stock, Asian
Equity, Emerging Markets Equity, Equity Growth, Global
Equity, International Magnum, Fixed Income, High Yield, Mid
Cap Value, and Value Divisions,, available under Contract
Form Nos. 95020 Rev 896 and 95021 Rev 896 for the one and
five year periods ended December 31, 1997, and since
inception.
(iv) Computations of hypothetical historical 30 day yield for the
Domestic Income Division and the Government Division,
available under Contract Form Nos. 95020 Rev 896 and 95021
Rev 896 for the one month period ended December 31, 1995.
(13)
(v) Computations of hypothetical historical seven day yield and
effective yield for the Money Market Division, available
under Contract Form Nos. 95020 Rev 896 and 95021 Rev 896 for
the seven day period ended December 31, 1995. (13)
14 Financial Data Schedule (See Exhibit 27 below).
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,
C-6
<PAGE>
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. (11)
(h) Power of Attorney with respect to Registration Statements
and Amendments thereto signed by Rodney O. Martin, Jr. and
Robert F. Herbert, Jr. (12)
(i) 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.
Fravel and LaGrasse (14)
(j) 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.
D'Agostino, Imhoff and Polkinghorn (15)
16 Amended Statement of Exemptive Relief Relied Upon. (12)
17 Representation Regarding Reasonableness of Fees and Charges
Deducted Under the Contracts, under Contract Form Nos. 95020
Rev 896 and 95021 Rev 896. (13)
Exhibit 17 has been superseded by an undertaking that
appears in item 32 hereof. (14)
27 (Inapplicable because, notwithstanding item 24.(b) as to
Exhibits, the Commission Staff has advised that no such
Schedule is required.)
<FN>
(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.
C-7
<PAGE>
(2) Previously filed in the initial filing of this Registration Statement
(File No. 33-43390) on October 16, 1991. (At least one Post-Effective
Amendment filed subsequently inadvertently referred to Form No. 91010 as
93010.)
(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. (At least one
Post-Effective Amendment filed subsequently inadvertently referred to
Form No. 91010 as 93010.)
(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 Post-Effective Amendment No. 6 to this
Registration Statement (File No. 33-43390), filed on March 14, 1996.
(9) Included in Part A of Post-Effective Amendment No. 7 to this
Registration Statement (File No. 33-43390), filed on April 30, 1996.
(10) Included in Part A of this Amendment.
(11) Previously filed in Post-Effective Amendment No. 7 to this Registration
Statement (File No. 33-43390), filed on April 30, 1996.
(12) Previously filed in preliminary form in Post-Effective Amendment No. 9
to this Registration Statement (File No. 33-43390), filed on August 16,
1996. These exhibits have not been filed in definitive form in reliance
on Rule 483(d)(3) under the Securities Act of 1933.
(13) Previously filed in Post-Effective Amendment No. 10 to this Registration
Statement (File No. 33-43390), filed on November 1, 1996.
(14) Previously filed in Post-Effective Amendment No. 12 to this Registration
Statement (File No. 33-43390), filed on April 30, 1997).
(15) Incorporated herein by reference to Pre-Effective Amendment No. 1 to
Separate Account D's Registration Statement (File No. 333-40637), filed
on February 12, 1998.
(16) Incorporated herein by reference to Post-Effective Amendment No. 23 to
Registrant's Separate Account A's Registration Statement (File No.
33-44745), filed on April 24, 1998.
</FN>
</TABLE>
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.
C-8
<PAGE>
<TABLE>
<CAPTION>
Positions And Offices
Name And Principal With The
Business Address Depositor
------------------ ----------------------
<S> <C>
Rodney O. Martin, Jr. Chairman, President & Chief
2727-A Allen Parkway Executive Officer
Houston, TX 77019
James S. D'Agostino, Jr. Vice Chariman
2929 Allen Parkway
Houston, TX 77019
Jon P. Newton Vice Chairman
2929 Allen Parkway
Houston, TX 77019
David A. Fravel Director & Executive Vice President
2727-A Allen Parkway
Houston, TX. 77019
Robert F. Herbert, Jr. Director, Senior Vice President,
2727-A Allen Parkway Chief Financial Officer, Treasurer
Houston, TX 77019 & Controller
Royce G. Imhoff, II Director, Senior Vice President
2727-A Allen Parkway & Chief Marketing Officer
Houston, TX 77019
John V. LaGrasse Director, Senior Vice President
2727-A Allen Parkway & Chief Systems Officer
Houston, TX 77019
Philip K. Polkinghorn Director, Senior Vice President, Product
2727-A Allen Parkway Development Center
Houston, TX 77019
Gary D. Reddick Executive Vice President
#1 Franklin Square
Springfield, IL 62713
F. Paul Kovach, Jr. Senior Vice President, Broker Dealers
2727 Allen Parkway and Financial Institutions Marketing Group
Houston, TX 77019
Wayne A. Barnard Senior Vice President & Chief Actuary
2727-A Allen Parkway
Houston, TX 77019
B. Shelby Baetz Senior Vice President, General Counsel
2727-A Allen Parkway & Secretary
Houston, TX 77019
Simon J. Leech Senior Vice President, Houston Service
Center
2727-A Allen Parkway
Houston, TX 77019
C-9
<PAGE>
Bryan D. Murphy Senior Vice President, Insurance Operations
2727-A Allen Parkway
Houston, TX 77019
Robert A. Slepicka Senior Vice President, Corporate
2727-A Allen Parkway Markets Group
Houston, TX 77019
Don M. Ward Senior Vice President, Variable Products -
2727-A Allen Parkway Marketing
Houston, TX 77019
Farideh Farrokhi Vice President & Assistant Controller -
2727-A Allen Parkway Financial Reporting and Fund Accounting
Houston, TX 77019
Rosalia S. Nolan Vice President, Policy Administration
2727-A Allen Parkway
Houston, TX 77019
K. David Nunley Vice President & Tax Compliance Officer
2727-A Allen Parkway
Houston, TX 77019
Larry M. Robinson Vice President, Variable Products-Marketing
2727-A Allen Parkway
Houston, TX 77019
Richard W. Scott Vice President & Chief
2929 Allen Parkway Investment Officer
Houston, TX 77019
Pauletta P. Cohn Assistant Secretary
2727-A Allen Parkway
Houston, TX 77019
Steven A. Glover Assistant Secretary
2727-A Allen Parkway
Houston, TX 77019
Joyce R. Bilski Administrative Officer
2727-A Allen Parkway
Houston, TX 77019
Liza Glass Administrative Officer
2727-A Allen Parkway
Houston, TX 77019
Patricia L. Myles Administrative Officer
2727-A Allen Parkway
Houston, TX 77019
</TABLE>
C-10
<PAGE>
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR
OR REGISTRANT
The following is a list of American General Corporation's subsidiaries as of
March 31, 1998. 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......................................................... Missouri
American General Life and Accident Insurance Company (6).................... Tennessee
American General Exchange, Inc. ......................................... Tennessee
Independent Fire Insurance Company....................................... Florida
American General Property Insurance Company of Florida................ Florida
Old Faithful General Agency, Inc...................................... Texas
Independent Life Insurance Company....................................... Georgia
American General Life Insurance Company (7)................................. Texas
(REGISTRANT IS A SEPARATE ACCOUNT OF AMERICAN GENERAL LIFE INSURANCE
COMPANY, DEPOSITOR)
American General Annuity Service Corporation ............................ Texas
American General Life Insurance Company of New York .................... New York
The Winchester Agency Ltd. .............................................. New York
The Variable Annuity Life Insurance Company ............................. Texas
The Variable Annuity Marketing Company ............................... Texas
VALIC Investment Services Company .................................... Texas
VALIC Retirement Services Company .................................... Texas
VALIC Trust Company .................................................. Texas
The Franklin Life Insurance Company ........................................ Illinois
The American Franklin Life Insurance Company ............................ Illinois
Franklin Financial Services Corporation ................................. Delaware
HBC Development Corporation ................................................ Virginia
Western National Corporation................................................ Delaware
WNL Holding Corp......................................................... Delaware
American General Annuity Insurance Company (8)........................ Texas
Conseco Annuity Guarantee Company..................................... Texas
Independent Advantage Financial and Insurance Services, Inc. ......... California
Western National Financial Institution Group, Inc..................... Delaware
WNL Brokerage Services, Inc........................................... Delaware
WNL Insurance Services, Inc........................................... Delaware
WNL Investment Advisory Services, Inc................................. Delaware
American General Capital Services, Inc. ........................................... Delaware
American General Corporation* ..................................................... Delaware
American General Delaware Management Corporation (1)............................... Delaware
American General Finance, Inc. .................................................... Indiana
AGF Investment Corp. ....................................................... Indiana
American General Auto Finance, Inc. . ...................................... Delaware
American General Finance Corporation (9).................................... Indiana
American General Finance Group, Inc. .................................... Delaware
C-11
<PAGE>
American General Financial Services, Inc. (10)........................ 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 Independent Producer Division Co.................................. Delaware
American General Investment Advisory Services, Inc.* ............................. Texas
American General Investment Holding Corporation11.................................. Delaware
American General Investment Management Corporation (11)............................ Delaware
American General Realty Advisors, Inc. ............................................ Delaware
American General Realty Investment Corporation .................................... Texas
AGLL Corporation (12)....................................................... Delaware
American General Land Holding Company ...................................... Delaware
AG Land Associates, LLC (12)............................................. California
GDI Holding, Inc.* (13)..................................................... California
Hunter's Creek Communications Corporation .................................. Florida
Pebble Creek Service Corporation ........................................... Florida
SR/HP/CM Corporation ....................................................... Texas
American General Property Insurance Company ....................................... Tennessee
Green Hills Corporation ........................................................... Delaware
Knickerbocker Corporation ......................................................... Texas
American Athletic Club, Inc. ............................................... Texas
Pavilions Corporation.............................................................. Delaware
USLIFE Corporation................................................................. New York
All American Life Insurance Company......................................... Illinois
1149 Investment Corp..................................................... Delaware
American General Life Insurance Company of Pennsylvania..................... Pennsylvania
New D Corporation*.......................................................... Iowa
The Old Line Life Insurance Company of America.............................. Wisconsin
The United States Life Insurance Company in the City of New York............ New York
USLIFE Advisers, Inc........................................................ New York
USLIFE Agency Services, Inc................................................. Illinois
USLIFE Credit Life Insurance Company........................................ Illinois
USLIFE Credit Life Insurance Company of Arizona.......................... Arizona
USLIFE Indemnity Company................................................. Nebraska
USLIFE Financial Corporation of Delaware*................................... Delaware
Midwest Holding Corporation.............................................. Delaware
I.C. Cal*............................................................. Nebraska
Midwest Property Management Co........................................ Nebraska
USLIFE Financial Institution Marketing Group, Inc........................... California
USLIFE Insurance Services Corporation....................................... Texas
USLIFE Realty Corporation................................................... Texas
C-12
<PAGE>
405 Leasehold Operating Corporation...................................... New York
405 Properties Corporation*.............................................. New York
USLIFE Real Estate Services Corporation.................................. Texas
USLIFE Realty Corporation of Florida..................................... Florida
USLIFE Systems Corporation.................................................. Delaware
American General Finance Foundation, Inc. is not included on this list. It is
a non-profit corporation.
NOTES
<FN>
(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 AGC 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) On November 26, 1996, American General Institutional Capital A ("AG Cap
Trust A"), a Delaware business trust, was created. On March 10, 1997,
American General Institutional Capital B ("AG Cap Trust B"), also a
Delaware business trust, was created. Both AG Cap Trust A's and AG Cap
Trust B's business and affairs are conducted through their trustees:
Bankers Trust Company and Bankers Trust (Delaware). Capital securities
of each are held by non-affiliated third party investors and common
securities of AG Cap Trust A and AG Cap Trust B are held by AGC.
(3) On November 14, 1997, American General Capital I, American General
Capital II, American General Capital III, and American General Capital
IV (collectively, the "Trusts"), all Delaware business trusts, were
created. Each of the Trusts' business and affairs are conducted through
its trustees: Bankers Trust (Delaware) and James L. Gleaves (not in his
individual capacity but solely as Trustee).
(4) On July 10, 1997, the following insurance subsidiaries of AGC became the
direct owners of the parenthetically indicated percentages of membership
units of SBIL B, L.L.C. ("SBIL B"), a U.S. limited liability company:
VALIC (22.6%), FL (8.1%), AGLA (4.8%) and AGL (4.8%).
Through its aggregate 40.3% interest in SBIL B, VALIC, FL, AGLA and AGL
indirectly own approximately 28% of the securities of SBI, an English
company, and 14% of the securities of ESBL, an English company, SBP, an
English company, and SBFL, a Cayman Islands company. These interests are
held for investment purposes only.
(5) Effective December 5, 1997, AGC and Grupo Nacional Provincial, S.A.
("GNP") completed the purchase by AGC of a 40% interest in Grupo
Nacional Provincial Pensions S.A. de C.V., a new holding company formed
by GNP, one of Mexico's largest financial services companies.
(6) AGLA owns approximately 11% of Whirlpool Financial Corp. ("Whirlpool")
on a fully diluted basis. The total investment of AGLA in Whirlpool
represents approximately 3% of the voting power of the capital stock of
Whirlpool, but approximately 11% of the Whirlpool stock which has voting
rights.
C-13
<PAGE>
The interests in Whirlpool (which is a corporations that is not
associated with AGC) are held for investment purposes only.
(7) AGL owns 100% of the common stock of American General Securities
Incorporated ("AGSI"), a full-service NASD broker-dealer. AGSI, in turn,
owns 100% of the stock of the following insurance agencies:
American General Insurance Agency, Inc. (Missouri)
American General Insurance Agency of Hawaii, Inc. (Hawaii)
American General Insurance Agency of Massachusetts, Inc. (Massachusetts)
In addition, the following agencies are indirectly related to AGSI, but
not owned or controlled by AGSI:
American General Insurance Agency of Ohio, Inc. (Ohio)
American General Insurance Agency of Texas, Inc. (Texas)
American General Insurance Agency of Oklahoma, Inc. (Oklahoma)
Insurance Masters Agency, Inc. (Texas)
AGSI and the foregoing agencies are not affiliates or subsidiaries of
AGL under applicable holding company laws, but they are part of the AGC
group of companies under other laws.
(8) WNL Series Trust is a Massachusetts business trust, all of the shares of
which are held in the separate account of American General Annuity
Insurance Company ("AGAIC") for the benefit of AGAIC variable annuity
policyholders.
(9) American General Finance Corporation is the parent of an additional 48
wholly owned subsidiaries incorporated in 30 states and Puerto Rico for
the purpose of conducting its consumer finance operations, INCLUDING
those noted in footnote 7 below.
(10) American General Financial Services, Inc. is the parent of an additional
7 wholly owned subsidiaries incorporated in 4 states and Puerto Rico for
the purpose of conducting its consumer finance operations.
(11) American General Investment Management, L.P. is jointly owned by AGIHC
and AGIMC. AGIHC holds a 99% limited partnership interest, and AGIMC
owns a 1% general partnership interest.
(12) 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.
(13) AGRI owns only a 75% interest in GDI Holding, Inc.
</FN>
</TABLE>
All of the subsidiaries of AGL are included in its consolidated financial
statements, which are filed in Part B of this Registration Statement.
C-14
<PAGE>
ITEM 27. NUMBER OF CONTRACT OWNERS
As of March 31, 1998, there were 1954 owners of Contracts of the class
presently offered by this Registration Statement.
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.
C-15
<PAGE>
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 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,
American General Life Insurance Company Separate Account A and
American General Life Insurance Company Separate Account VL-R.
(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>
F. Paul Kovach, Jr. Director & President
American General Securities
Incorporated
2727 Allen Parkway
Houston, TX 77019
Royce G. Imhoff, II Director
American General Life
2727-A Allen Parkway
Houston, Texas 77019
Rodney O. Martin, Jr. Director
American General Life
2727-A Allen Parkway
Houston, TX 77019
Robert F. Herbert, Jr. Associate Tax Officer
American General Life
2727-A Allen Parkway
Houston, Texas 77019
C-16
<PAGE>
John V. LaGrasse Vice President
American General Life
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
K. David Nunley Associate Tax Officer
2727-A 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 Independent Producer Division at its principal executive office
located at 2727-A Allen Parkway, Houston, TX 77019.
ITEM 31. MANAGEMENT SERVICES
Not Applicable.
C-17
<PAGE>
ITEM 32. UNDERTAKINGS
The Registrant undertakes: A) to file a post-effective amendment to this
Registration Statement 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 a prospectus, 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.
REPRESENTATION REGARDING THE REASONABLENESS OF AGGREGATE FEES AND CHARGES
DEDUCTED UNDER THE CONTRACTS PURSUANT TO SECTION 26(E)(A) OF THE INVESTMENT
COMPANY ACT OF 1940
AGL represents that the fees and charges deducted under the Contracts
that are identified as Contract Form Nos. 91010, 93020, and 93021 (and any
state variations thereof, including Form No. 91011), 95020 Rev 896 and 95021
Rev 896 and comprehended by this Registration Statement, in the aggregate, are
reasonable in relation to the services rendered, the expenses expected to be
incurred, and the risks assumed by AGL under the Contracts. AGL bases its
representation on its assessment of all of the facts and circumstances,
including such relevant factors, as: the nature and extent of such services,
expenses and risks; the need for AGL to earn a profit; the degree to which the
Contracts include innovative features; and the regulatory standards for
exemptive relief under the Investment Company Act of 1940 used prior to
October 1996, including the range of industry practice. This representation
applies to all contracts sold pursuant to this Registration Statement,
including those sold on the terms specifically described in the prospectuses
contained herein, or any variations therein, based on supplements,
endorsements, or riders to any contracts or prospectuses, or otherwise.
C-18
<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 22nd day of
April, 1998.
AMERICAN GENERAL LIFE INSURANCE
COMPANY SEPARATE ACCOUNT D
(Registrant)
BY: AMERICAN GENERAL LIFE
INSURANCE COMPANY
(On behalf of the Registrant and itself)
BY: /s/ROBERT F. HERBERT, JR.
--------------------------
Robert F. Herbert, Jr.
Senior Vice President
ATTEST: /s/STEVEN A. GLOVER
-------------------
Steven A. Glover
Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this amended
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
RODNEY O. MARTIN, JR.*
------------------------------- Principal Executive Officer
(Rodney O. Martin, Jr.)
ROBERT F. HERBERT, JR.*
------------------------------- Principal Financial and Accounting Officer
(Robert (F. Herbert, Jr.)
</TABLE>
Directors
---------
JAMES S. D' AGOSTINO, JR.* JOHN V. LaGRASSE*
------------------------------- -------------------------------
(James S. D' Agostino, Jr.) (John V. LaGrasse)
DAVID A. FRAVEL* RODNEY O. MARTIN, JR.*
------------------------------- -------------------------------
(David A. Fravel) (Rodney O. Martin, Jr.)
ROBERT F. HERBERT, JR.* JON P. NEWTON*
------------------------------- -------------------------------
(Robert F. Herbert, Jr.) (Jon P. Newton)
ROYCE G. IMHOFF, II* PHILIP K. POLKINGHORN*
------------------------------- -------------------------------
(Royce G. Imofft, II) (Philip K. Polkinghorn)
/s/STEVEN A. GLOVER
---------------------
*By: Steven A. Glover, Attorney-in-Fact April 24, 1998
<PAGE>
EXHIBIT INDEX
10 Consent of Independent Auditors.
13(b)(i)(A) Computations of standardized average annual total returns for
each Division available under Contract Form Nos. 95020 Rev 896
and 95021 Rev 896 for the one and five year periods ended
December 31, 1997, and since inception.
13(b)(i)(D) Computations of hypothetical historical average annual total
returns for the Growth and Income, Strategic Stock, Asian
Equity, Emerging Markets Equity, Equity Growth, Global Equity,
International Magnum, Fixed Income, High Yield, Mid Cap Value,
and Value Divisions, available under Contract Form Nos. 95020
Rev 896 and 95021 Rev 896 for the one and five year periods
ended December 31, 1997, and since inception.
13(b)(ii)(C) Computations of hypothetical historical total returns for the
Growth and Income, Strategic Stock, Asian Equity, Emerging
Markets Equity, Equity Growth, Global Equity, International
Magnum, Fixed Income, High Yield, Mid Cap Value, and Value
Divisions, available under Contract Form Nos. 95020 Rev 896
and 95021 Rev 896 for the one and five year periods ended
December 31, 1997, and since inception.
13(b)(iii)(C) Computations of hypothetical historical cumulative total
returns for the Growth and Income, Strategic Stock, Asian
Equity, Emerging Markets Equity, Equity Growth, Global Equity,
International Magnum, Fixed Income, High Yield, Mid Cap Value,
and Value Divisions, available under Contract Form Nos. 95020
Rev 896 and 95021 Rev 896 for the one and five year periods
ended December 31, 1997, and since inception.
EXHIBIT 10
ERNST & YOUNG LLP One Houston Center Phone: 713 750 1500
Suite 2400 Fax: 713 750 1501
1221 McKinney Street
Houston, Texas 77010-2007
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference made to our firm under the caption "Independent
Auditors" and to the use of our report dated February 20, 1998, as to the
Generations Divisions of American General Life Insurance Company Separate
Account D, and February 23, 1998, as to American General Life Insurance
Company, in Post-Effective Amendment No. 16 to the Registration Statement
(Form N-4 No. 33-43390) of American General Life Insurance Company Separate
Account D.
/s/ERNST & YOUNG LLP
Houston, Texas
April 22, 1998
EXHIBIT 13(b)(i)(A)
<TABLE>
12/31/97
GENERATIONS
STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS AAT
Fees based on ave $40,000 account 1 YEAR 5 YEAR SINCE
USING HYPOTHETICAL UNIT VALUES AATR AATR INCEPTION
================================================================================================================
<S> <C> <C> <C>
12/31/92 11/04/87
DOMESTIC INCOME #80 12/31/97 12/31/97 12/31/97
365 1826 3710
INITIAL INVESTMENT 1,000.00 1,000.00 1,000.00
BEG OF PERIOD UV 8.863023 6.506032 5.000000
# OF UNITS PURCHASED 112.828321 153.703517 200.000000
END OF PERIOD UV 9.780062 9.780062 9.780062
END OF PERIOD VALUE 1,103.47 1,503.23 1,956.01
SURRENDER CHARGE PERCENTAGE 6.0% 4.0% 0.0%
FREE 10% WITHDRAWAL 0.00 100.00 100.00
LESS SURRENDER CHARGES 60.00 36.00 0.00
LESS ANNUAL FEE ($) $0.88 $5.11 $11.16
REDEEMABLE VALUE (after fees & CDSC) 1,042.59 1,462.12 1,944.86
PERCENT RETURN 4.26% 7.89% 6.77%
---------------------------------------------------------------------------------------------------------------
07/03/95
EMERGING GROWTH #81 12/31/97
365 N/A 912
INITIAL INVESTMENT 1,000.00 N/A 1,000.00
BEG OF PERIOD UV 6.687952 N/A 5.000000
# OF UNITS PURCHASED 149.522604 N/A 200.000000
END OF PERIOD UV 7.942063 N/A 7.942063
END OF PERIOD VALUE 1,187.52 N/A 1,588.41
SURRENDER CHARGE PERCENTAGE 6.0% N/A 6.0%
FREE 10% WITHDRAWAL 0.00 N/A 100.00
LESS SURRENDER CHARGES 60.00 N/A 54.00
LESS ANNUAL FEE ($) $0.95 N/A $3.22
REDEEMABLE VALUE (after fees & CDSC) 1,126.57 N/A 1,531.19
PERCENT RETURN 12.66% N/A 18.61%
---------------------------------------------------------------------------------------------------------------
04/07/86
ENTERPRISE #83 12/31/97
365 1826 4286
INITIAL INVESTMENT 1,000.00 1,000.00 1,000.00
BEG OF PERIOD UV 13.380059 7.863121 5.000000
# OF UNITS PURCHASED 74.738086 127.175965 200.000000
END OF PERIOD UV 17.116664 17.116664 17.116664
END OF PERIOD VALUE 1,279.27 2,176.83 3,423.33
SURRENDER CHARGE PERCENTAGE 6.0% 4.0% 0.0%
FREE 10% WITHDRAWAL 0.00 100.00 100.00
LESS SURRENDER CHARGES 60.00 36.00 0.00
LESS ANNUAL FEE ($) $1.02 $5.89 $14.72
REDEEMABLE VALUE (after fees & CDSC) 1,218.24 2,134.94 3,408.61
PERCENT RETURN 21.82% 16.38% 11.02%
---------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
12/31/97
GENERATIONS
STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS AAT
Fees based on ave $40,000 account 1 YEAR 5 YEAR SINCE
USING HYPOTHETICAL UNIT VALUES AATR AATR INCEPTION
================================================================================================================
<S> <C> <C> <C>
04/07/86
GOVERNMENT #86 12/31/97
365 1826 4286
INITIAL INVESTMENT 1,000.00 1,000.00 1,000.00
BEG OF PERIOD UV 8.783813 7.547854 5.000000
# OF UNITS PURCHASED 113.845775 132.487989 200.000000
END OF PERIOD UV 9.489836 9.489836 9.489836
END OF PERIOD VALUE 1,080.38 1,257.29 1,897.97
SURRENDER CHARGE PERCENTAGE 6.0% 4.0% 0.0%
FREE 10% WITHDRAWAL 0.00 100.00 100.00
LESS SURRENDER CHARGES 60.00 36.00 0.00
LESS ANNUAL FEE ($) $0.86 $4.51 $12.52
REDEEMABLE VALUE (after fees & CDSC) 1,019.51 1,216.78 1,885.44
PERCENT RETURN 1.95% 4.00% 5.55%
---------------------------------------------------------------------------------------------------------------
12/23/96
GROWTH AND INCOME #88 12/31/97
365 N/A 373
INITIAL INVESTMENT 1,000.00 N/A 1,000.00
BEG OF PERIOD UV 4.985000 N/A 5.000000
# OF UNITS PURCHASED 200.601805 N/A 200.000000
END OF PERIOD UV 6.090833 N/A 6.090833
END OF PERIOD VALUE 1,221.83 N/A 1,218.17
SURRENDER CHARGE PERCENTAGE 6.0% N/A 6.0%
FREE 10% WITHDRAWAL 0.00 N/A 100.00
LESS SURRENDER CHARGES 60.00 N/A 54.00
LESS ANNUAL FEE ($) $0.98 N/A $0.96
REDEEMABLE VALUE (after fees & CDSC) 1,160.85 N/A 1,163.20
PERCENT RETURN 16.09% N/A 15.96%
---------------------------------------------------------------------------------------------------------------
04/07/86
MONEY MARKET #92 12/31/97
365 1826 4286
INITIAL INVESTMENT 1,000.00 1,000.00 1,000.00
BEG OF PERIOD UV 7.767625 6.972417 5.000000
# OF UNITS PURCHASED 128.739480 143.422288 200.000000
END OF PERIOD UV 8.451506 8.451506 8.451506
END OF PERIOD VALUE 1,088.04 1,212.13 1,690.30
SURRENDER CHARGE PERCENTAGE 6.0% 4.0% 0.0%
FREE 10% WITHDRAWAL 0.00 100.00 100.00
LESS SURRENDER CHARGES 60.00 36.00 0.00
LESS ANNUAL FEE ($) $0.87 $4.36 $11.00
REDEEMABLE VALUE (after fees & CDSC) 1,027.17 1,171.77 1,679.30
PERCENT RETURN 2.72% 3.22% 4.52%
---------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
12/31/97
GENERATIONS
STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS AAT
Fees based on ave $40,000 account 1 YEAR 5 YEAR SINCE
USING HYPOTHETICAL UNIT VALUES AATR AATR INCEPTION
================================================================================================================
<S> <C> <C> <C>
07/03/95
REAL ESTATE SECURITIES #93 12/31/97
365 N/A 912
INITIAL INVESTMENT 1,000.00 N/A 1,000.00
BEG OF PERIOD UV 7.454877 N/A 5.000000
# OF UNITS PURCHASED 134.140375 N/A 200.000000
END OF PERIOD UV 8.929879 N/A 8.929879
END OF PERIOD VALUE 1,197.86 N/A 1,785.98
SURRENDER CHARGE PERCENTAGE 6.0% N/A 6.0%
FREE 10% WITHDRAWAL 0.00 N/A 100.00
LESS SURRENDER CHARGES 60.00 N/A 54.00
LESS ANNUAL FEE ($) $0.96 N/A $3.21
REDEEMABLE VALUE (after fees & CDSC) 1,136.90 N/A 1,728.77
PERCENT RETURN 13.69% N/A 24.51%
---------------------------------------------------------------------------------------------------------------
10/01/96
MS EMERGING MARKETS #82 12/31/97
365 N/A 456
INITIAL INVESTMENT 1,000.00 N/A 1,000.00
BEG OF PERIOD UV 4.882548 N/A 5.000000
# OF UNITS PURCHASED 204.811095 N/A 200.000000
END OF PERIOD UV 4.831965 N/A 4.831965
END OF PERIOD VALUE 989.64 N/A 966.39
SURRENDER CHARGE PERCENTAGE 6.0% N/A 6.0%
FREE 10% WITHDRAWAL 0.00 N/A 100.00
LESS SURRENDER CHARGES 60.00 N/A 54.00
LESS ANNUAL FEE ($) $0.00 N/A $0.72
REDEEMABLE VALUE (after fees & CDSC) 929.64 N/A 911.67
PERCENT RETURN -7.04% N/A -7.14%
---------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
12/31/97
GENERATIONS
STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS AAT
Fees based on ave $40,000 account 1 YEAR 5 YEAR SINCE
USING ACTUAL AATR AATR INCEPTION
================================================================================================================
<S> <C> <C> <C>
02/27/98
LIT STRATEGIC STOCK #96 12/31/97
N/A N/A 58
INITIAL INVESTMENT N/A N/A 1,000.00
BEG OF PERIOD UV N/A N/A 5.000000
# OF UNITS PURCHASED N/A N/A 200.000000
END OF PERIOD UV N/A N/A 5.113696
END OF PERIOD VALUE N/A N/A 1,022.74
SURRENDER CHARGE PERCENTAGE N/A N/A 6.0%
FREE 10% WITHDRAWAL N/A N/A 0.00
LESS SURRENDER CHARGES N/A N/A 60.00
LESS ANNUAL FEE ($) N/A N/A $0.00
REDEEMABLE VALUE (after fees & CDSC) N/A N/A 962.74
PERCENT RETURN N/A N/A -21.27%
---------------------------------------------------------------------------------------------------------------
06/13/97
MS ASIAN EQUITY #95 12/31/97
N/A N/A 201
INITIAL INVESTMENT N/A N/A 1,000.00
BEG OF PERIOD UV N/A N/A 5.227120
# OF UNITS PURCHASED N/A N/A 191.309937
END OF PERIOD UV N/A N/A 2.866335
END OF PERIOD VALUE N/A N/A 548.36
SURRENDER CHARGE PERCENTAGE N/A N/A 6.0%
FREE 10% WITHDRAWAL N/A N/A 0.00
LESS SURRENDER CHARGES N/A N/A 60.00
LESS ANNUAL FEE ($) N/A N/A $0.00
REDEEMABLE VALUE (after fees & CDSC) N/A N/A 488.36
PERCENT RETURN N/A N/A -72.81%
---------------------------------------------------------------------------------------------------------------
01/29/97
MS EQUITY GROWTH PORT #87 12/31/97
N/A N/A 336
INITIAL INVESTMENT N/A N/A 1,000.00
BEG OF PERIOD UV N/A N/A 4.960272
# OF UNITS PURCHASED N/A N/A 201.601848
END OF PERIOD UV N/A N/A 6.241285
END OF PERIOD VALUE N/A N/A 1,258.25
SURRENDER CHARGE PERCENTAGE N/A N/A 6.0%
FREE 10% WITHDRAWAL N/A N/A 0.00
LESS SURRENDER CHARGES N/A N/A 60.00
LESS ANNUAL FEE ($) N/A N/A $0.00
REDEEMABLE VALUE (after fees & CDSC) N/A N/A 1,198.25
PERCENT RETURN N/A N/A 21.73%
---------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
12/31/97
GENERATIONS
STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS AAT
Fees based on ave $40,000 account 1 YEAR 5 YEAR SINCE
USING ACTUAL AATR AATR INCEPTION
================================================================================================================
<S> <C> <C> <C>
01/02/97
MS INTERNATIONAL MAGNUM #85 12/31/97
N/A N/A 363
INITIAL INVESTMENT N/A N/A 1,000.00
BEG OF PERIOD UV N/A N/A 5.000000
# OF UNITS PURCHASED N/A N/A 200.000000
END OF PERIOD UV N/A N/A 5.318456
END OF PERIOD VALUE N/A N/A 1,063.69
SURRENDER CHARGE PERCENTAGE N/A N/A 6.0%
FREE 10% WITHDRAWAL N/A N/A 0.00
LESS SURRENDER CHARGES N/A N/A 60.00
LESS ANNUAL FEE ($) N/A N/A $0.00
REDEEMABLE VALUE (after fees & CDSC) N/A N/A 1,003.69
PERCENT RETURN N/A N/A 0.37%
PERCENT RETURN - NO FEES & NOT SURRENDERED N/A N/A 6.41%
---------------------------------------------------------------------------------------------------------------
02/10/97
MS GLOBAL EQUITY #85 12/31/97
N/A N/A 324
INITIAL INVESTMENT N/A N/A 1,000.00
BEG OF PERIOD UV N/A N/A 5.061205
# OF UNITS PURCHASED N/A N/A 200.722601
END OF PERIOD UV N/A N/A 5.905700
END OF PERIOD VALUE N/A N/A 1,185.41
SURRENDER CHARGE PERCENTAGE N/A N/A 6.0%
FREE 10% WITHDRAWAL N/A N/A 0.00
LESS SURRENDER CHARGES N/A N/A 60.00
LESS ANNUAL FEE ($) N/A N/A $0.00
REDEEMABLE VALUE (after fees & CDSC) N/A N/A 1,125.41
PERCENT RETURN N/A N/A 14.02%
---------------------------------------------------------------------------------------------------------------
01/29/97
MA VALUE #94 12/31/97
N/A N/A 336
INITIAL INVESTMENT N/A N/A 1,000.00
BEG OF PERIOD UV N/A N/A 4.944849
# OF UNITS PURCHASED N/A N/A 202.230644
END OF PERIOD UV N/A N/A 5.801721
END OF PERIOD VALUE N/A N/A 1,173.29
SURRENDER CHARGE PERCENTAGE N/A N/A 6.0%
FREE 10% WITHDRAWAL N/A N/A 0.00
LESS SURRENDER CHARGES N/A N/A 60.00
LESS ANNUAL FEE ($) N/A N/A $0.00
REDEEMABLE VALUE (after fees & CDSC) N/A N/A 1,113.29
PERCENT RETURN N/A N/A 12.37%
---------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
12/31/97
GENERATIONS
STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS AAT
Fees based on ave $40,000 account 1 YEAR 5 YEAR SINCE
USING ACTUAL AATR AATR INCEPTION
================================================================================================================
<S> <C> <C> <C>
01/02/97
MA MID CAP VALUE #91 12/31/97
N/A N/A 363
INITIAL INVESTMENT N/A N/A 1,000.00
BEG OF PERIOD UV N/A N/A 5.000000
# OF UNITS PURCHASED N/A N/A 200.000000
END OF PERIOD UV N/A N/A 6.585704
END OF PERIOD VALUE N/A N/A 1,317.14
SURRENDER CHARGE PERCENTAGE N/A N/A 6.0%
FREE 10% WITHDRAWAL N/A N/A 0.00
LESS SURRENDER CHARGES N/A N/A 60.00
LESS ANNUAL FEE ($) N/A N/A $0.00
REDEEMABLE VALUE (after fees & CDSC) N/A N/A 1,257.14
PERCENT RETURN N/A N/A 25.89%
---------------------------------------------------------------------------------------------------------------
01/02/97
MA HIGH YIELD #89 12/31/97
N/A N/A 363
INITIAL INVESTMENT N/A N/A 1,000.00
BEG OF PERIOD UV N/A N/A 5.000000
# OF UNITS PURCHASED N/A N/A 200.000000
END OF PERIOD UV N/A N/A 5.574231
END OF PERIOD VALUE N/A N/A 1,114.85
SURRENDER CHARGE PERCENTAGE N/A N/A 6.0%
FREE 10% WITHDRAWAL N/A N/A 0.00
LESS SURRENDER CHARGES N/A N/A 60.00
LESS ANNUAL FEE ($) N/A N/A $0.00
REDEEMABLE VALUE (after fees & CDSC) N/A N/A 1,054.85
PERCENT RETURN N/A N/A 5.52%
---------------------------------------------------------------------------------------------------------------
01/02/97
MA FIXED INCOME #84 12/31/97
N/A N/A 363
INITIAL INVESTMENT N/A N/A 1,000.00
BEG OF PERIOD UV N/A N/A 5.000000
# OF UNITS PURCHASED N/A N/A 200.000000
END OF PERIOD UV N/A N/A 5.408434
END OF PERIOD VALUE N/A N/A 1,081.69
SURRENDER CHARGE PERCENTAGE N/A N/A 6.0%
FREE 10% WITHDRAWAL N/A N/A 0.00
LESS SURRENDER CHARGES N/A N/A 60.00
LESS ANNUAL FEE ($) N/A N/A $0.00
REDEEMABLE VALUE (after fees & CDSC) N/A N/A 1,021.69
PERCENT RETURN N/A N/A 2.18%
---------------------------------------------------------------------------------------------------------------
</TABLE>
EXHIBIT 13(b)(i)(D)
<TABLE>
12/31/97
GENERATIONS
AVERAGE ANNUAL TOTAL RETURNS AAT
AND TOTAL RETURNS RETURN
Fees based on ave $40,000 account 1 YEAR 5 YEAR SINCE
USING HYPOTHETICAL UNIT VALUES AATR AATR INCEPTION
================================================================================================================
<S> <C> <C> <C>
10/01/96
MS EMERGING MARKETS #82 12/31/97
365 N/A 456
INITIAL INVESTMENT 1,000.00 N/A 1,000.00
BEG OF PERIOD UV 4.882548 N/A 5.000000
# OF UNITS PURCHASED 204.811095 N/A 200.000000
END OF PERIOD UV 4.831965 N/A 4.831965
END OF PERIOD VALUE 989.64 N/A 966.39
SURRENDER CHARGE PERCENTAGE 6.0% N/A 6.0%
FREE 10% WITHDRAWAL 0.00 N/A 100.00
LESS SURRENDER CHARGES 60.00 N/A 54.00
LESS ANNUAL FEE ($) $0.00 N/A $0.72
REDEEMABLE VALUE (after fees & CDSC) 929.64 N/A 911.67
PERCENT RETURN -7.04% N/A -7.14%
PERCENT RETURN - NO FEES & NOT SURRENDERED -1.04% N/A -2.70%
---------------------------------------------------------------------------------------------------------------
12/23/96
GROWTH AND INCOME #88 12/31/97
365 N/A 373
INITIAL INVESTMENT 1,000.00 N/A 1,000.00
BEG OF PERIOD UV 4.985000 N/A 5.000000
# OF UNITS PURCHASED 200.601805 N/A 200.000000
END OF PERIOD UV 6.090833 N/A 6.090833
END OF PERIOD VALUE 1,221.83 N/A 1,218.17
SURRENDER CHARGE PERCENTAGE 6.0% N/A 6.0%
FREE 10% WITHDRAWAL 0.00 N/A 100.00
LESS SURRENDER CHARGES 60.00 N/A 54.00
LESS ANNUAL FEE ($) $0.98 N/A $0.96
REDEEMABLE VALUE (after fees & CDSC) 1,160.85 N/A 1,163.21
PERCENT RETURN 16.09% N/A 15.96%
PERCENT RETURN - NO FEES & NOT SURRENDERED 22.18% N/A 21.32%
---------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
12/31/97
GENERATIONS
AVERAGE ANNUAL TOTAL RETURNS AAT
AND TOTAL RETURNS RETURN
Fees based on ave $40,000 account 1 YEAR 5 YEAR SINCE
USING ACTUAL UNIT VALUES AATR AATR INCEPTION
================================================================================================================
<S> <C> <C> <C>
11/03/97
LIT STRATEGIC STOCK #96 12/31/97
N/A N/A 58
INITIAL INVESTMENT N/A N/A 1,000.00
BEG OF PERIOD UV N/A N/A 5.000000
# OF UNITS PURCHASED N/A N/A 200.000000
END OF PERIOD UV N/A N/A 5.113696
END OF PERIOD VALUE N/A N/A 1,022.74
SURRENDER CHARGE PERCENTAGE N/A N/A 6.0%
FREE 10% WITHDRAWAL N/A N/A 0.00
LESS SURRENDER CHARGES N/A N/A 60.00
LESS ANNUAL FEE ($) N/A N/A $0.00
REDEEMABLE VALUE (after fees & CDSC) N/A N/A 962.74
PERCENT RETURN N/A N/A -21.27%
PERCENT RETURN - NO FEES & NOT SURRENDERED N/A N/A 15.21%
---------------------------------------------------------------------------------------------------------------
06/13/97
MS ASIAN EQUITY #95 12/31/97
N/A N/A 201
INITIAL INVESTMENT N/A N/A 1,000.00
BEG OF PERIOD UV N/A N/A 5.227120
# OF UNITS PURCHASED N/A N/A 191.309937
END OF PERIOD UV N/A N/A 2.866335
END OF PERIOD VALUE N/A N/A 548.36
SURRENDER CHARGE PERCENTAGE N/A N/A 6.0%
FREE 10% WITHDRAWAL N/A N/A 0.00
LESS SURRENDER CHARGES N/A N/A 60.00
LESS ANNUAL FEE ($) N/A N/A $0.00
REDEEMABLE VALUE (after fees & CDSC) N/A N/A 488.36
PERCENT RETURN N/A N/A -72.81%
PERCENT RETURN - NO FEES & NOT SURRENDERED N/A N/A -66.44%
---------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
12/31/97
GENERATIONS
AVERAGE ANNUAL TOTAL RETURNS AAT
AND TOTAL RETURNS RETURN
Fees based on ave $40,000 account 1 YEAR 5 YEAR SINCE
USING ACTUAL UNIT VALUES AATR AATR INCEPTION
================================================================================================================
<S> <C> <C> <C>
01/29/97
MS EQUITY GROWTH PORT #87 12/31/97
336
INITIAL INVESTMENT N/A N/A 1,000.00
BEG OF PERIOD UV N/A N/A 4.960272
# OF UNITS PURCHASED N/A N/A 201.601848
END OF PERIOD UV N/A N/A 6.241285
END OF PERIOD VALUE N/A N/A 1,258.25
SURRENDER CHARGE PERCENTAGE N/A N/A 6.0%
FREE 10% WITHDRAWAL N/A N/A 0.00
LESS SURRENDER CHARGES N/A N/A 60.00
LESS ANNUAL FEE ($) N/A N/A $0.00
REDEEMABLE VALUE (after fees & CDSC) 1,198.25
PERCENT RETURN N/A N/A 21.73%
PERCENT RETURN - NO FEES & NOT SURRENDERED N/A N/A 28.37%
---------------------------------------------------------------------------------------------------------------
02/05/97
MS GLOBAL EQUITY #85 12/31/97
329
INITIAL INVESTMENT N/A N/A 1,000.00
BEG OF PERIOD UV N/A N/A 4.982000
# OF UNITS PURCHASED N/A N/A 200.722601
END OF PERIOD UV N/A N/A 5.905700
END OF PERIOD VALUE N/A N/A 1,185.41
SURRENDER CHARGE PERCENTAGE N/A N/A 6.0%
FREE 10% WITHDRAWAL N/A N/A 0.00
LESS SURRENDER CHARGES N/A N/A 60.00
LESS ANNUAL FEE ($) N/A N/A $0.00
REDEEMABLE VALUE (after fees & CDSC) 1,125.41
PERCENT RETURN N/A N/A 14.02%
PERCENT RETURN - NO FEES & NOT SURRENDERED N/A N/A 20.78%
---------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
12/31/97
GENERATIONS
AVERAGE ANNUAL TOTAL RETURNS AAT
AND TOTAL RETURNS RETURN
Fees based on ave $40,000 account 1 YEAR 5 YEAR SINCE
USING ACTUAL UNIT VALUES AATR AATR INCEPTION
================================================================================================================
<S> <C> <C> <C>
02/10/97
MS INTERNATIONAL MAGNUM #90 12/31/97
324
INITIAL INVESTMENT N/A N/A 1,000.00
BEG OF PERIOD UV N/A N/A 5.061205
# OF UNITS PURCHASED N/A N/A 197.581406
END OF PERIOD UV N/A N/A 5.318456
END OF PERIOD VALUE N/A N/A 1,050.83
SURRENDER CHARGE PERCENTAGE N/A N/A 6.0%
FREE 10% WITHDRAWAL N/A N/A 0.00
LESS SURRENDER CHARGES N/A N/A 60.00
LESS ANNUAL FEE ($) N/A N/A $0.00
N/A N/A
REDEEMABLE VALUE (after fees & CDSC) 990.83
PERCENT RETURN N/A N/A -1.03%
PERCENT RETURN - NO FEES & NOT SURRENDERED N/A N/A 5.75%
---------------------------------------------------------------------------------------------------------------
01/30/97
MA FIXED INCOME #84 12/31/97
335
INITIAL INVESTMENT N/A N/A 1,000.00
BEG OF PERIOD UV N/A N/A 5.003078
# OF UNITS PURCHASED N/A N/A 199.876956
END OF PERIOD UV N/A N/A 5.408434
END OF PERIOD VALUE N/A N/A 1,081.02
SURRENDER CHARGE PERCENTAGE N/A N/A 6.0%
FREE 10% WITHDRAWAL N/A N/A 0.00
LESS SURRENDER CHARGES N/A N/A 60.00
LESS ANNUAL FEE ($) N/A N/A $0.00
N/A N/A
REDEEMABLE VALUE (after fees & CDSC) 1,021.02
PERCENT RETURN N/A N/A 2.29%
PERCENT RETURN - NO FEES & NOT SURRENDERED N/A N/A 8.87%
---------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
12/31/97
GENERATIONS
AVERAGE ANNUAL TOTAL RETURNS AAT
AND TOTAL RETURNS RETURN
Fees based on ave $40,000 account 1 YEAR 5 YEAR SINCE
USING ACTUAL UNIT VALUES AATR AATR INCEPTION
================================================================================================================
<S> <C> <C> <C>
02/05/97
MA HIGH YIELD #89 12/31/97
329
INITIAL INVESTMENT N/A N/A 1,000.00
BEG OF PERIOD UV N/A N/A 5.051645
# OF UNITS PURCHASED N/A N/A 197.955320
END OF PERIOD UV N/A N/A 5.574231
END OF PERIOD VALUE N/A N/A 1,103.45
SURRENDER CHARGE PERCENTAGE N/A N/A 6.0%
FREE 10% WITHDRAWAL N/A N/A 0.00
LESS SURRENDER CHARGES N/A N/A 60.00
LESS ANNUAL FEE ($) N/A N/A $0.00
N/A N/A
REDEEMABLE VALUE (after fees & CDSC) 1,043.45
PERCENT RETURN N/A N/A 4.83%
PERCENT RETURN - NO FEES & NOT SURRENDERED N/A N/A 11.55%
---------------------------------------------------------------------------------------------------------------
02/05/97
MA MID CAP VALUE #91 12/31/97
329
INITIAL INVESTMENT N/A N/A 1,000.00
BEG OF PERIOD UV N/A N/A 5.001685
# OF UNITS PURCHASED N/A N/A 199.932623
END OF PERIOD UV N/A N/A 6.585704
END OF PERIOD VALUE N/A N/A 1,316.70
SURRENDER CHARGE PERCENTAGE N/A N/A 6.0%
FREE 10% WITHDRAWAL N/A N/A 0.00
LESS SURRENDER CHARGES N/A N/A 60.00
LESS ANNUAL FEE ($) N/A N/A $0.00
N/A N/A
REDEEMABLE VALUE (after fees & CDSC) 1,256.70
PERCENT RETURN N/A N/A 28.87%
PERCENT RETURN - NO FEES & NOT SURRENDERED N/A N/A 35.72%
---------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
12/31/97
GENERATIONS
AVERAGE ANNUAL TOTAL RETURNS AAT
AND TOTAL RETURNS RETURN
Fees based on ave $40,000 account 1 YEAR 5 YEAR SINCE
USING ACTUAL UNIT VALUES AATR AATR INCEPTION
================================================================================================================
<S> <C> <C> <C>
01/29/97
MA VALUE #94 12/31/97
336
INITIAL INVESTMENT N/A N/A 1,000.00
BEG OF PERIOD UV N/A N/A 4.944849
# OF UNITS PURCHASED N/A N/A 202.230644
END OF PERIOD UV N/A N/A 5.801721
END OF PERIOD VALUE N/A N/A 1,173.29
SURRENDER CHARGE PERCENTAGE N/A N/A 6.0%
FREE 10% WITHDRAWAL N/A N/A 0.00
LESS SURRENDER CHARGES N/A N/A 60.00
LESS ANNUAL FEE ($) N/A N/A $0.00
N/A N/A
REDEEMABLE VALUE (after fees & CDSC) 1,113.29
PERCENT RETURN N/A N/A 12.37%
PERCENT RETURN - NO FEES & NOT SURRENDERED N/A N/A 18.97%
---------------------------------------------------------------------------------------------------------------
</TABLE>
EXHIBIT 13(b)(iii)(C)
<TABLE>
12/31/97
GENERATIONS TOTAL
CUMULATIVE 1 YEAR 5 YEAR RETURN
TOTAL RETURNS TOTAL TOTAL SINCE
USING HYPOTHETICAL UNIT VALUES RETURN RETURN INCEPTION
================================================================================================================
<S> <C> <C> <C>
MS EMERGING MARKETS #82 10/01/96
BEG OF PERIOD UV 4.882548 N/A 5.000000
# OF UNITS PURCHASED 204.811095 N/A 200.000000
END OF PERIOD UV 4.831965 N/A 4.831965
END OF PERIOD VALUE 989.64 N/A 966.39
DIFFERENCE (10.36) N/A (33.61)
PERCENT CHANGE -1.04% N/A -3.36%
---------------------------------------------------------------------------------------------------------------
GROWTH AND INCOME #88 12/96
BEG OF PERIOD UV 4.985000 N/A 5.000000
# OF UNITS PURCHASED 200.601805 N/A 200.000000
END OF PERIOD UV 6.090833 N/A 6.090833
END OF PERIOD VALUE 1,221.83 N/A 1,218.17
DIFFERENCE 221.83 N/A 218.17
PERCENT CHANGE 22.18% N/A 21.82%
---------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
12/31/97
GENERATIONS TOTAL
CUMULATIVE 1 YEAR 5 YEAR RETURN
TOTAL RETURNS TOTAL TOTAL SINCE
USING ACTUAL UNIT VALUES RETURN RETURN INCEPTION
================================================================================================================
<S> <C> <C> <C>
LIT STRATEGIC STOCK #96 11/03/97
N/A N/A 12/31/97
BEG OF PERIOD UV N/A N/A 5.000000
# OF UNITS PURCHASED N/A N/A 200.000000
END OF PERIOD UV N/A N/A 5.113696
END OF PERIOD VALUE N/A N/A 1,022.74
DIFFERENCE N/A N/A 22.74
PERCENT CHANGE N/A N/A 2.27%
---------------------------------------------------------------------------------------------------------------
MS ASIAN EQUITY #95 06/13/97
BEG OF PERIOD UV N/A N/A 5.227120
# OF UNITS PURCHASED N/A N/A 191.309937
END OF PERIOD UV N/A N/A 2.866335
END OF PERIOD VALUE N/A N/A 548.36
DIFFERENCE N/A N/A (451.64)
PERCENT CHANGE N/A N/A -45.16%
---------------------------------------------------------------------------------------------------------------
MS EQUITY GROWTH PORT #87 01/29/97
BEG OF PERIOD UV 4.960272
# OF UNITS PURCHASED N/A N/A 201.601848
END OF PERIOD UV N/A N/A 6.241285
END OF PERIOD VALUE N/A N/A 1,258.25
DIFFERENCE N/A N/A 258.25
PERCENT CHANGE N/A N/A 25.83%
---------------------------------------------------------------------------------------------------------------
MS GLOBAL EQUITY #85 02/05/97
BEG OF PERIOD UV N/A N/A 4.982000
# OF UNITS PURCHASED N/A N/A 200.722601
END OF PERIOD UV N/A N/A 5.905700
END OF PERIOD VALUE N/A N/A 1,185.41
DIFFERENCE N/A N/A 185.41
PERCENT CHANGE N/A N/A 18.54%
---------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
12/31/97
GENERATIONS TOTAL
CUMULATIVE 1 YEAR 5 YEAR RETURN
TOTAL RETURNS TOTAL TOTAL SINCE
USING ACTUAL UNIT VALUES RETURN RETURN INCEPTION
================================================================================================================
<S> <C> <C> <C>
MS INTERNATIONAL MAGNUM #90 02/10/97
BEG OF PERIOD UV N/A N/A 5.061205
# OF UNITS PURCHASED N/A N/A 197.581406
END OF PERIOD UV N/A N/A 5.318456
END OF PERIOD VALUE N/A N/A 1,050.83
DIFFERENCE N/A N/A 50.83
PERCENT CHANGE N/A N/A 5.08%
---------------------------------------------------------------------------------------------------------------
MA FIXED INCOME #84 01/30/97
BEG OF PERIOD UV N/A N/A 5.003078
# OF UNITS PURCHASED N/A N/A 199.876956
END OF PERIOD UV N/A N/A 5.408434
END OF PERIOD VALUE N/A N/A 1,081.02
DIFFERENCE N/A N/A 81.02
PERCENT CHANGE N/A N/A 8.10%
---------------------------------------------------------------------------------------------------------------
MA HIGH YIELD #89 02/05/97
BEG OF PERIOD UV N/A N/A 5.051645
# OF UNITS PURCHASED N/A N/A 197.955320
END OF PERIOD UV N/A N/A 5.574231
END OF PERIOD VALUE N/A N/A 1,103.45
DIFFERENCE N/A N/A 103.45
PERCENT CHANGE N/A N/A 10.34%
---------------------------------------------------------------------------------------------------------------
MA MID CAP VALUE #91 02/05/97
BEG OF PERIOD UV N/A N/A 5.001685
# OF UNITS PURCHASED N/A N/A 199.932623
END OF PERIOD UV N/A N/A 6.585704
END OF PERIOD VALUE N/A N/A 1,316.70
DIFFERENCE N/A N/A 316.70
PERCENT CHANGE N/A N/A 31.67%
---------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
12/31/97
GENERATIONS TOTAL
CUMULATIVE 1 YEAR 5 YEAR RETURN
TOTAL RETURNS TOTAL TOTAL SINCE
USING ACTUAL UNIT VALUES RETURN RETURN INCEPTION
================================================================================================================
<S> <C> <C> <C>
MA VALUE #94 01/29/97
BEG OF PERIOD UV N/A N/A 4.944849
# OF UNITS PURCHASED N/A N/A 202.230644
END OF PERIOD UV N/A N/A 5.801721
END OF PERIOD VALUE N/A N/A 1,173.29
DIFFERENCE N/A N/A 173.29
PERCENT CHANGE N/A N/A 17.33%
---------------------------------------------------------------------------------------------------------------
</TABLE>
EXHIBIT 13(b)(ii)(C)
<TABLE>
12/31/97
GENERATIONS
AVERAGE ANNUAL TOTAL RETURNS AAT
AND TOTAL RETURNS RETURN
Fees based on ave $40,000 account 1 YEAR 5 YEAR SINCE
USING HYPOTHETICAL UNIT VALUES AATR AATR INCEPTION
================================================================================================================
<S> <C> <C> <C>
10/01/96
MS EMERGING MARKETS #82 12/31/97
365 N/A 456
INITIAL INVESTMENT 1,000.00 N/A 1,000.00
BEG OF PERIOD UV 4.882548 N/A 5.000000
# OF UNITS PURCHASED 204.811095 N/A 200.000000
END OF PERIOD UV 4.831965 N/A 4.831965
END OF PERIOD VALUE 989.64 N/A 966.39
SURRENDER CHARGE PERCENTAGE 6.0% N/A 6.0%
FREE 10% WITHDRAWAL 0.00 N/A 100.00
LESS SURRENDER CHARGES 60.00 N/A 54.00
LESS ANNUAL FEE ($) $0.00 N/A $0.72
REDEEMABLE VALUE (after fees & CDSC) 929.64 N/A 911.67
PERCENT RETURN -7.04% N/A -7.14%
PERCENT RETURN - NO FEES & NOT SURRENDERED -1.04% N/A -2.70%
---------------------------------------------------------------------------------------------------------------
12/23/96
GROWTH AND INCOME #88 12/31/97
365 N/A 373
INITIAL INVESTMENT 1,000.00 N/A 1,000.00
BEG OF PERIOD UV 4.985000 N/A 5.000000
# OF UNITS PURCHASED 200.601805 N/A 200.000000
END OF PERIOD UV 6.090833 N/A 6.090833
END OF PERIOD VALUE 1,221.83 N/A 1,218.17
SURRENDER CHARGE PERCENTAGE 6.0% N/A 6.0%
FREE 10% WITHDRAWAL 0.00 N/A 100.00
LESS SURRENDER CHARGES 60.00 N/A 54.00
LESS ANNUAL FEE ($) $0.98 N/A $0.96
REDEEMABLE VALUE (after fees & CDSC) 1,160.85 N/A 1,163.21
PERCENT RETURN 16.09% N/A 15.96%
PERCENT RETURN - NO FEES & NOT SURRENDERED 22.18% N/A 21.32%
---------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
12/31/97
GENERATIONS
AVERAGE ANNUAL TOTAL RETURNS AAT
AND TOTAL RETURNS RETURN
Fees based on ave $40,000 account 1 YEAR 5 YEAR SINCE
USING ACTUAL UNIT VALUES AATR AATR INCEPTION
================================================================================================================
<S> <C> <C> <C>
11/03/97
LIT STRATEGIC STOCK #96 12/31/97
N/A N/A 58
INITIAL INVESTMENT N/A N/A 1,000.00
BEG OF PERIOD UV N/A N/A 5.000000
# OF UNITS PURCHASED N/A N/A 200.000000
END OF PERIOD UV N/A N/A 5.113696
END OF PERIOD VALUE N/A N/A 1,022.74
SURRENDER CHARGE PERCENTAGE N/A N/A 6.0%
FREE 10% WITHDRAWAL N/A N/A 0.00
LESS SURRENDER CHARGES N/A N/A 60.00
LESS ANNUAL FEE ($) N/A N/A $0.00
REDEEMABLE VALUE (after fees & CDSC) N/A N/A 962.74
PERCENT RETURN N/A N/A -21.27%
PERCENT RETURN - NO FEES & NOT SURRENDERED N/A N/A 15.21%
---------------------------------------------------------------------------------------------------------------
06/13/97
MS ASIAN EQUITY #95 12/31/97
N/A N/A 201
INITIAL INVESTMENT N/A N/A 1,000.00
BEG OF PERIOD UV N/A N/A 5.227120
# OF UNITS PURCHASED N/A N/A 191.309937
END OF PERIOD UV N/A N/A 2.866335
END OF PERIOD VALUE N/A N/A 548.36
SURRENDER CHARGE PERCENTAGE N/A N/A 6.0%
FREE 10% WITHDRAWAL N/A N/A 0.00
LESS SURRENDER CHARGES N/A N/A 60.00
LESS ANNUAL FEE ($) N/A N/A $0.00
REDEEMABLE VALUE (after fees & CDSC) N/A N/A 488.36
PERCENT RETURN N/A N/A -72.81%
PERCENT RETURN - NO FEES & NOT SURRENDERED N/A N/A -66.44%
---------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
12/31/97
GENERATIONS
AVERAGE ANNUAL TOTAL RETURNS AAT
AND TOTAL RETURNS RETURN
Fees based on ave $40,000 account 1 YEAR 5 YEAR SINCE
USING ACTUAL UNIT VALUES AATR AATR INCEPTION
================================================================================================================
<S> <C> <C> <C>
01/29/97
MS EQUITY GROWTH PORT #87 12/31/97
336
INITIAL INVESTMENT N/A N/A 1,000.00
BEG OF PERIOD UV N/A N/A 4.960272
# OF UNITS PURCHASED N/A N/A 201.601848
END OF PERIOD UV N/A N/A 6.241285
END OF PERIOD VALUE N/A N/A 1,258.25
SURRENDER CHARGE PERCENTAGE N/A N/A 6.0%
FREE 10% WITHDRAWAL N/A N/A 0.00
LESS SURRENDER CHARGES N/A N/A 60.00
LESS ANNUAL FEE ($) N/A N/A $0.00
REDEEMABLE VALUE (after fees & CDSC) 1,198.25
PERCENT RETURN N/A N/A 21.73%
PERCENT RETURN - NO FEES & NOT SURRENDERED N/A N/A 28.37%
---------------------------------------------------------------------------------------------------------------
02/05/97
MS GLOBAL EQUITY #85 12/31/97
329
INITIAL INVESTMENT N/A N/A 1,000.00
BEG OF PERIOD UV N/A N/A 4.982000
# OF UNITS PURCHASED N/A N/A 200.722601
END OF PERIOD UV N/A N/A 5.905700
END OF PERIOD VALUE N/A N/A 1,185.41
SURRENDER CHARGE PERCENTAGE N/A N/A 6.0%
FREE 10% WITHDRAWAL N/A N/A 0.00
LESS SURRENDER CHARGES N/A N/A 60.00
LESS ANNUAL FEE ($) N/A N/A $0.00
REDEEMABLE VALUE (after fees & CDSC) 1,125.41
PERCENT RETURN N/A N/A 14.02%
PERCENT RETURN - NO FEES & NOT SURRENDERED N/A N/A 20.78%
---------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
12/31/97
GENERATIONS
AVERAGE ANNUAL TOTAL RETURNS AAT
AND TOTAL RETURNS RETURN
Fees based on ave $40,000 account 1 YEAR 5 YEAR SINCE
USING ACTUAL UNIT VALUES AATR AATR INCEPTION
================================================================================================================
<S> <C> <C> <C>
02/10/97
MS INTERNATIONAL MAGNUM #90 12/31/97
324
INITIAL INVESTMENT N/A N/A 1,000.00
BEG OF PERIOD UV N/A N/A 5.061205
# OF UNITS PURCHASED N/A N/A 197.581406
END OF PERIOD UV N/A N/A 5.318456
END OF PERIOD VALUE N/A N/A 1,050.83
SURRENDER CHARGE PERCENTAGE N/A N/A 6.0%
FREE 10% WITHDRAWAL N/A N/A 0.00
LESS SURRENDER CHARGES N/A N/A 60.00
LESS ANNUAL FEE ($) N/A N/A $0.00
N/A N/A
REDEEMABLE VALUE (after fees & CDSC) 990.83
PERCENT RETURN N/A N/A -1.03%
PERCENT RETURN - NO FEES & NOT SURRENDERED N/A N/A 5.75%
---------------------------------------------------------------------------------------------------------------
01/30/97
MA FIXED INCOME #84 12/31/97
335
INITIAL INVESTMENT N/A N/A 1,000.00
BEG OF PERIOD UV N/A N/A 5.003078
# OF UNITS PURCHASED N/A N/A 199.876956
END OF PERIOD UV N/A N/A 5.408434
END OF PERIOD VALUE N/A N/A 1,081.02
SURRENDER CHARGE PERCENTAGE N/A N/A 6.0%
FREE 10% WITHDRAWAL N/A N/A 0.00
LESS SURRENDER CHARGES N/A N/A 60.00
LESS ANNUAL FEE ($) N/A N/A $0.00
N/A N/A
REDEEMABLE VALUE (after fees & CDSC) 1,021.02
PERCENT RETURN N/A N/A 2.29%
PERCENT RETURN - NO FEES & NOT SURRENDERED N/A N/A 8.87%
---------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
12/31/97
GENERATIONS
AVERAGE ANNUAL TOTAL RETURNS AAT
AND TOTAL RETURNS RETURN
Fees based on ave $40,000 account 1 YEAR 5 YEAR SINCE
USING ACTUAL UNIT VALUES AATR AATR INCEPTION
================================================================================================================
<S> <C> <C> <C>
02/05/97
MA HIGH YIELD #89 12/31/97
329
INITIAL INVESTMENT N/A N/A 1,000.00
BEG OF PERIOD UV N/A N/A 5.051645
# OF UNITS PURCHASED N/A N/A 197.955320
END OF PERIOD UV N/A N/A 5.574231
END OF PERIOD VALUE N/A N/A 1,103.45
SURRENDER CHARGE PERCENTAGE N/A N/A 6.0%
FREE 10% WITHDRAWAL N/A N/A 0.00
LESS SURRENDER CHARGES N/A N/A 60.00
LESS ANNUAL FEE ($) N/A N/A $0.00
N/A N/A
REDEEMABLE VALUE (after fees & CDSC) 1,043.45
PERCENT RETURN N/A N/A 4.83%
PERCENT RETURN - NO FEES & NOT SURRENDERED N/A N/A 11.55%
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02/05/97
MA MID CAP VALUE #91 12/31/97
329
INITIAL INVESTMENT N/A N/A 1,000.00
BEG OF PERIOD UV N/A N/A 5.001685
# OF UNITS PURCHASED N/A N/A 199.932623
END OF PERIOD UV N/A N/A 6.585704
END OF PERIOD VALUE N/A N/A 1,316.70
SURRENDER CHARGE PERCENTAGE N/A N/A 6.0%
FREE 10% WITHDRAWAL N/A N/A 0.00
LESS SURRENDER CHARGES N/A N/A 60.00
LESS ANNUAL FEE ($) N/A N/A $0.00
N/A N/A
REDEEMABLE VALUE (after fees & CDSC) 1,256.70
PERCENT RETURN N/A N/A 28.87%
PERCENT RETURN - NO FEES & NOT SURRENDERED N/A N/A 35.72%
---------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
12/31/97
GENERATIONS
AVERAGE ANNUAL TOTAL RETURNS AAT
AND TOTAL RETURNS RETURN
Fees based on ave $40,000 account 1 YEAR 5 YEAR SINCE
USING ACTUAL UNIT VALUES AATR AATR INCEPTION
================================================================================================================
<S> <C> <C> <C>
01/29/97
MA VALUE #94 12/31/97
336
INITIAL INVESTMENT N/A N/A 1,000.00
BEG OF PERIOD UV N/A N/A 4.944849
# OF UNITS PURCHASED N/A N/A 202.230644
END OF PERIOD UV N/A N/A 5.801721
END OF PERIOD VALUE N/A N/A 1,173.29
SURRENDER CHARGE PERCENTAGE N/A N/A 6.0%
FREE 10% WITHDRAWAL N/A N/A 0.00
LESS SURRENDER CHARGES N/A N/A 60.00
LESS ANNUAL FEE ($) N/A N/A $0.00
N/A N/A
REDEEMABLE VALUE (after fees & CDSC) 1,113.29
PERCENT RETURN N/A N/A 12.37%
PERCENT RETURN - NO FEES & NOT SURRENDERED N/A N/A 18.97%
---------------------------------------------------------------------------------------------------------------
</TABLE>
