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PROSPECTUS SUPPLEMENT
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First Allmerica Financial Insurance Company
Allmerica Financial Life Insurance and Annuity Company
VEL II Account
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Supplement Dated May 1, 2000 to Prospectuses Dated May 1, 2000
In July, 1997, a lawsuit on behalf of a putative class was instituted in
Louisiana against First Allmerica Financial Life Insurance Company ("First
Allmerica") and Allmerica Financial Life Insurance and Annuity Company
("Allmerica Financial") and certain of their affiliates alleging fraud, unfair
or deceptive acts, breach of contract, misrepresentations, and related claims in
the sale of life insurance policies. First Allmerica and Allmerica Financial
deny all allegations of wrongdoing. In October, 1997, the plaintiffs voluntarily
dismissed the Louisiana suit and filed a substantially similar action in Federal
District Court in Worcester, Massachusetts; SEE BUSSIE, ET AL. VS ALLMERICA
FINANCIAL CORPORATION, ET.AL., Civil Action No. 97-40204. In early November
1998, the parties entered into a settlement agreement ("Settlement"), for which
the Court granted preliminary approval on December 4, 1998. A Fairness Hearing
was held on March 19, 1999, and on May 19, 1999 the Court issued an order
certifying members of the class ("Class Members") for settlement purposes and
granting final approval of the Settlement.
Class Members under the litigation include certain persons and entities who at
any time from January 1, 1978 up through and including May 31, 1998 (the "Class
Period") have or had an ownership interest in certain whole life, universal
life, or variable universal life insurance policies issued by First Allmerica,
Allmerica Financial, or their affiliates. As used herein, "Policy" refers to a
life insurance policy issued by First Allmerica, Allmerica Financial, or their
affiliates and owned by a Class Member during the Class Period.
Under the Settlement, Class Members may choose between (1) General Policy Relief
or (2) the Alternative Dispute Resolution ("ADR") Process, as described in the
Notice sent to all Class Members by the Court beginning on July 31, 1999.
General Policy Relief includes the opportunity for the Class Member or for
certain affiliated persons ("Affinity Group") of the Class Member to purchase
(1) an annuity enhanced with contributions by First Allmerica or Allmerica
Financial or (2) a new, discounted life insurance product, including the
variable life insurance policy described in the attached prospectus.
If a variable life insurance policy described in the attached prospectus is
issued in connection with General Policy Relief, the policy (the "Enhanced
Policy") will be issued with a 70% discount ("Discount Enhancement") applied to
the lesser of the first year premium you elect to pay or the target premium. The
target premium is the measure used for determining first year commissions. The
availability of the Discount Enhancement is subject to certain conditions,
including the following:
- An insurable interest must exist between the Owner of the Enhanced
Policy (the Class Member or a designated member of his or her Affinity
Group) and the prospective Insured who must be under age 85 and provide
satisfactory evidence of insurability.
- The Discount Enhancement is not available if the Enhanced Policy is
purchased with money derived from any insurance or any product issued
by First Allmerica, Allmerica Financial, or their affiliates, such as a
withdrawal, surrender, or policy loan.
- The Discount Enhancement will not include any charges associated with
any extra premiums required if an insured is in a substandard
underwriting class; see CHARGES AND DEDUCTIONS.
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- The Discount Enhancement only applies to the original Face Amount at
the time the Enhanced Policy is issued and does not apply to any
subsequent increase in Face Amount. The Face Amount of the Enhanced
Policy will be subject to minimum size requirements as set forth in the
prospectus, and may not exceed the larger of $100,000 or two times the
Total Amount of the Policy that gave rise to membership in the Class.
- The Discount Enhancement only applies to the first premium for the
Enhanced Policy; the Owner is responsible for paying the entire amount
of all future premiums.
- The portion of the first premium to be paid by the Owner must be paid
in full before coverage under the Enhanced Policy will become
effective.
- If the Enhanced Policy is returned during the Free Look Period, the
provisions described under "THE POLICY - Free Look Period" will apply
only to the actual cash premium paid by the Owner. The Owner will not
be entitled to receive any portion of the Discount Enhancement.
- The Other Insured Rider and Children's Insurance Rider, which are
described in APPENDIX A - OPTIONAL BENEFITS, are not available on an
Enhanced Policy.
- If the Owner (1) elects to withdraw policy value during the first two
years through policy loans, withdrawals, or surrender, or (2) exchanges
the Enhanced Policy for another insurance policy or annuity, then the
Owner cannot retain the excess (if any) of the Discount Enhancement
over the surrender charge. For more information about the Surrender
Charge, see CHARGES AND DEDUCTIONS - Surrender Charge.
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Supplement dated May 1, 2000
VEL 93
2
