SEPARATE ACCOUNT B OF PARAGON LIFE INSURANCE CO, 485BPOS, 2000-04-28

SEPARATE ACCOUNT B OF PARAGON LIFE INSURANCE CO
485BPOS, 2000-04-28

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<PAGE>

As filed with the Securities and Exchange Commission on 28 April 2000

Registration No. 33-58796
811-7534

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

POST-EFFECTIVE AMENDMENT NO. 12
TO
FORM S-6

FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2

SEPARATE ACCOUNT B OF PARAGON LIFE INSURANCE COMPANY
(Exact Name of Registrant)

PARAGON LIFE INSURANCE COMPANY
100 South Brentwood Boulevard
St. Louis, MO 63105
(Address of Principal Executive Office)

Matthew P. McCauley, Esquire
Paragon Life Insurance Company
700 Market Street
St. Louis, MO 63101
(Name and Address of Agent for Service of Process)

Copy to:

Stephen E. Roth, Esquire
Sutherland, Asbill & Brennan LLP
1275 Pennsylvania Ave., N.W.
Washington, D.C. 20004-2404

It is proposed that this filing will become effective (check appropriate space)

[_] immediately upon filing pursuant to paragraph (b), of Rule 485

[X] 1 May 2000 pursuant to paragraph (b) of Rule 485

[_] 60 days after filing pursuant to paragraph (a)(1) of Rule 485

[_] on (date), pursuant to paragraph (a)(1) of rule 485

[_] 75 days after filing pursuant to paragraph (a)(2) of rule 485

[_] on (date) pursuant to paragraph (a)(2) of Rule 485

Title of securities being registered: Group and Individual Flexible Premium
Variable Life Insurance Policies.

<PAGE>

Post-Effective Amendment No. 12 to the registration statement on Form S-6 (the
"Registration Statement") is being filed pursuant to paragraph (b) of Rule 485
under the Securities Act of 1933 (the "Act") to update the Registration
Statement, which describes five variable life insurance policies (the
"Policies") issued by the depositor and the registrant described in the five
prospectuses included in the Registration Statement. The Policies are
substantially identical, except that different subaccounts investing in
different underlying funds are available as allocation options under each of the
five Policies.

multi-pr
<PAGE>

[LOGO OF PARAGON LIFE INSURANCE COMPANY]
. GROUP AND INDIVIDUAL
FLEXIBLE PREMIUM VARIABLE LIFE
INSURANCE POLICIES

50407
Prospectus dated May 1, 2000 Com
Scudder
[LOGO OF SCUDDER VARIABLE LIFE INVESTMENT FUND]
Variable Life
Investment Fund

<PAGE>

GROUP AND INDIVIDUAL FLEXIBLE PREMIUM
VARIABLE LIFE INSURANCE POLICIES
ISSUED BY
PARAGON LIFE INSURANCE COMPANY
100 South Brentwood
St. Louis, MO 63105
(314) 862-2211

This Prospectus describes flexible premium variable life insurance policies
offered by Paragon Life Insurance Company (the "Company," "we," or "us") which
are designed for use in employer-sponsored insurance programs. When a Group
Contract is issued, Certificates showing the rights of the Owners and/or
Insureds will be issued under the Group Contract. Individual Policies will be
issued when a Group Contract is not issued. The terms of the Certificate and
the Individual Policy are very similar and are collectively referred to in this
Prospectus as "Policy" or "Policies."

The Policies are designed to provide lifetime insurance protection to age 95
and provide flexibility to vary premium payments and change the level of death
benefits payable under the Policies. Flexibility allows an Owner to provide for
changing insurance needs under a single insurance policy. An Owner can allocate
net premiums among several investment portfolios ("Funds") with different
investment objectives.

The Policy provides for: (1) a value upon surrendering the Policy; (2) loans;
and (3) a death benefit payable on the Insured's death. As long as the Policy
remains in force, the death benefit payable on the Insured's death will not be
less than the Face Amount of the Policy. The Policy will remain in force so
long as there is enough value to pay certain monthly charges.

The Owner may allocate net premiums to one or more of the Divisions of Separate
Account B (the "Separate Account"). The Policy value will vary to reflect the
investment experience of the Divisions selected by the Owner. Depending on the
death benefit option elected, portions of the death benefit may also vary. The
Owner bears the entire investment risk under the Policies; there is no minimum
guaranteed value.

Each Division of the Separate Account will invest solely in Class A Shares of a
corresponding investment portfolio of Scudder Variable Life Investment Fund:

FUND FUND
- --------------------------------------------------------------------------------
Money Market Portfolio Global Discovery Portfolio
Bond Portfolio International Portfolio
Capital Growth Portfolio 21st Century Growth Portfolio
Balanced Portfolio Large Company Growth Portfolio
Growth and Income Portfolio
- --------------------------------------------------------------------------------

The date of this Prospectus is May 1, 2000.

1
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Please read this Prospectus carefully and keep it. A full description of the
Funds is contained in the prospectus for each Fund, which must accompany this
Prospectus.

It may not be a good decision to purchase a Policy as a replacement for another
type of life insurance or as a means to obtain additional insurance protection
if the purchaser already owns another flexible premium variable life insurance
policy.

The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy or adequacy of this Prospectus. Any
representation to the contrary is a criminal offense.

2
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TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary.................................................................. 4
The Company, The Separate Account, and The Funds......................... 10
The Company
The Separate Account
The Funds
Addition, Deletion, or Substitution of Investments
Payment and Allocation of Premiums....................................... 14
Issuance of a Policy
Premiums
Allocation of Net Premiums and Cash Value
Policy Lapse and Reinstatement
Policy Benefits.......................................................... 18
Death Benefit
Cash Value
Policy Rights and Privileges............................................. 23
Exercising Rights and Privileges Under the Policies
Loans
Surrender and Partial Withdrawals
Transfers
Right to Examine Policy
Conversion Right to a Fixed Benefit Policy
Eligibility Change Conversion
Payment of Benefits at Maturity
Payment of Policy Benefits
Charges and Deductions................................................... 28
Sales Charges
Premium Tax Charge
Monthly Deduction
Partial Withdrawal Transaction Charge
Separate Account Charges
General Matters Relating to the Policy................................... 31
Distribution of the Policies............................................. 35
General Provisions of the Group Contract................................. 35
Federal Tax Matters...................................................... 36
Safekeeping of the Separate Account's Assets............................. 39
Voting Rights............................................................ 39
State Regulation of the Company.......................................... 40
Management of the Company................................................ 41
Legal Matters............................................................ 42
Legal Proceedings........................................................ 42
Experts.................................................................. 42
Additional Information................................................... 42
Definitions.............................................................. 43
Financial Statements..................................................... F-1
Appendix A............................................................... A-1
</TABLE>

The Policies are not available in all states.

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SUMMARY OF THE POLICY

The following summary of Prospectus information should be read with the
detailed information which follows in this Prospectus. Unless we provide
otherwise, the description of the Policies contained in this Prospectus assumes
that a Policy is in effect and that there is no outstanding Indebtedness.

The Policy

The Policies (either an Individual Policy or a Certificate) described in this
Prospectus are designed for use in employer-sponsored insurance programs and
are issued in three situations.

. First--Policies in the form of Certificates are issued pursuant to Group
Contracts entered into between the Company and Contractholders (see
"General Provisions of the Group Contract");

. Second--Individual Policies can be issued in connection with employer-
sponsored insurance programs where Group Contracts are not issued; and

. Third--Individual Policies can be issued in connection with Corporate
Programs, where Group Contracts are not issued.

The Insured under a Policy is usually an employee of the Contractholder or
sponsoring employer or the employee's spouse. An Executive Program Policy is
issued with a maximum Face Amount in excess of $500,000 under a Group Contract
or an employer-sponsored insurance program. Generally, only an employee
is eligible to be an Insured under an Executive Program Policy. If there is
sufficient Cash Surrender Value, Individual Insurance under a Group Contract or
other employer-sponsored insurance program will continue should the Group
Contract or other program cease or the employee's employment end (see "Payment
and Allocation of Premiums--Issuance of a Policy").

On behalf of Owners, the Contractholder will make planned premium payments
under the Group Contract equal to an amount authorized by employees to be
deducted from their wages. In addition, Owners may pay additional premiums. In
Corporate Programs only the Owner will remit planned and additional premiums. A
similar procedure will apply when an Individual Policy is issued in connection
with an employer-sponsored program.

The Policies are "variable" policies because, unlike the fixed benefits under
other types of life insurance contracts, the Cash Value and, under certain
circumstances, the death benefit under a Policy may increase or decrease
depending upon the investment experience of the Funds underlying the Divisions
to which the Owner has allocated net premium payments. So long as a Policy's
Cash Surrender Value continues to be sufficient to pay the monthly deduction,
an Owner is guaranteed a minimum death benefit equal to the Face Amount of his
or her Policy or an accelerated death benefit in a reduced amount determined in
accordance with certain riders available under the Policy. (See "General
Matters Relating to the Policy--Additional Insurance Benefits.")

Right to Examine Policy

The Owner has a limited right to return a Policy for cancellation within 20
days after the delivery of the Policy to the Owner, within 45 days after the
Owner signs the application, or within 10 days after the Company mails a notice
of this cancellation right to the Owner whichever is latest. If a Policy is
cancelled within this time period, a refund will be paid which will equal all
premiums paid under the Policy or any different amount required by state law.
The Owner also has a right to cancel a requested increase in Face Amount. Upon
cancellation of an increase, the Owner may request that the Company refund the
amount of the additional charges deducted in connection with the increase, or
have the amount of the additional charges added to the Cash Value. (See "Policy
Rights and Privileges--Right to Examine Policy.")

The Separate Account

The Owner may allocate the net premiums to one or more Divisions. (See "The
Company, The Separate Account and The Funds" for a complete description of the
available Funds.) An Owner may change future allocations of net premiums at any
time by notifying the Company directly.

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Subject to certain restrictions, an Owner may transfer Cash Values among the
Divisions of the Separate Account. Currently, no charge is assessed for
transfers. The Company reserves the right to modify the transfer privilege.
(See "Policy Rights and Privileges--Transfers.")

Premiums

An Owner has flexibility concerning the amount and frequency of premium
payments. An initial premium equal to one-twelfth ( 1/12) of the planned annual
premium set forth in the specifications page of a Policy is necessary to start
a Policy. The planned annual premium is an amount specified for each Policy
based on the requested initial Face Amount and certain other factors.

. Under Group Contracts and employer-sponsored programs, the initial
premium and subsequent planned premiums generally are remitted by the
Contractholder or sponsoring employer on behalf of the Owner at intervals
agreed to by the Contractholder or employer.

. In Corporate Programs, the Owner will pay premiums generally on a
schedule agreed to by the Company.

However, as discussed below, planned premiums need not be paid so long as there
is sufficient Cash Surrender Value to keep the Policy in force. Subject to
certain limitations, additional premium payments in any amount and at any
frequency may be made directly by the Owner. (See "Payment and Allocation of
Premiums--Issuance of a Policy--Premiums.")

A Policy will lapse (and terminate without value) when the Cash Surrender Value
is not enough to pay the next monthly deduction and a grace period of 62 days
expires without an adequate payment being made by the Owner. (See "Payment and
Allocation of Premiums--Policy Lapse and Reinstatement.")

Death Benefit

Death benefit proceeds are payable to the Beneficiary when the Insured dies or
to the Owner, prior to the Insured's death under circumstances described in
available riders. (See "General Matters Relating to the Policy--Additional
Insurance Benefits.") Two death benefit options are available, as follows:

. Under the "Level Type" death benefit, the death benefit is the Face
Amount of the Policy or, if greater, the applicable percentage of Cash
Value; and

. Under the "Increasing Type" death benefit, the death benefit is the Face
Amount of the Policy plus the Cash Value or, if greater, the applicable
percentage of Cash Value.

So long as a Policy remains in force, the minimum death benefit under either
option will be at least equal to the current Face Amount. (See "Policy
Benefits--Death Benefit.")

The minimum initial Face Amount is generally $25,000 under the Company's
current rules. Executive Program Policies generally have a minimum Face Amount
of $100,000. The maximum Face Amount is generally $500,000. However, we may
establish a higher maximum Face Amount for Executive or Corporate Program
Policies. The Owner may generally change the Face Amount (subject to the
minimum and maximum amounts applicable to his or her Policy) and the death
benefit option, but in certain cases evidence of insurability may be required.
(See "Policy Benefits--Death Benefit.")

Riders

5
<PAGE>

insurance programs may not provide each of the additional benefits described
above. Generally, Executive Program Policies only have the acceleration of
death benefits rider. Generally, Corporate Programs have none of the additional
benefits described above. (See "General Matters Relating to the Policy--
Additional Insurance Benefits.") We will deduct the cost of these additional
insurance benefits from Cash Value as part of the monthly deduction. (See
"Charges and Deductions--Monthly Deduction.")

Cash Value

The Policies provide for a Cash Value equal to the total of the Policy's Cash
Value in the Separate Account and the Loan Account (securing Policy Loans). A
Policy's Cash Value will reflect premium payments, the investment performance
of any selected Divisions of the Separate Account, transfers, any Policy Loans,
Loan Account interest rate credited, any partial withdrawals, and the charges
imposed in connection with the Policy. (See "Policy Benefits--Cash Value.")
There is no minimum guaranteed Cash Value.

Charges and Deductions

Sales Charges. We deduct a front-end sales charge of 1% of premiums from each
premium paid ("premium expense charge"). We deduct an additional charge on
Policies that are deemed to be individual Policies under the Omnibus Budget
Reconciliation Act of 1990 ("OBRA"). The additional charge, which is for
federal income taxes measured by premiums, is equal to 1% of each premium
payment, and compensates the Company for a significantly higher corporate
income tax liability resulting from changes made to the Internal Revenue Code
by OBRA.

Premium Tax Charge. We deduct a charge of 2% to cover state premium taxes from
premiums paid. (See "Charges and Deductions--Premium Tax Charge.")

Monthly Deduction. We make a monthly deduction from the Policy's Cash Value in
the Separate Account. The monthly deduction includes the following:

. Administrative Charge. We deduct an administrative charge (see the
specification pages of the Policy) based on 1) the number of Insureds
covered under a Group Contract or other employer-sponsored insurance
program, and 2) the amount of administrative services provided by the
Company. The charge will not exceed $6.00 per month during the first
Policy Year and $3.50 per month during renewal years.

. Cost of Insurance Charge. We deduct a cost of insurance charge calculated
on each Monthly Anniversary. We determine monthly cost of insurance rates
based upon expectations as to future mortality experience. For a
discussion of the factors affecting the rate class of the Insured, see
"Charges and Deductions--Monthly Deduction--Cost of Insurance."

. A charge for any additional insurance benefits provided by a rider.

Separate Account Charges.

. Mortality and Expense Risk Charge. We deduct a daily charge not to exceed
.0024547% (an annual rate of .90%) of the net assets of each Division for
the Company's assumption of certain mortality and expense risks incurred
in connection with the Policies. (See "Charges and Deductions--Separate
Account Charges.")

. Federal Taxes. No charges are currently made for federal or state income
taxes. (See "Federal Tax Matters.")

. Annual Expenses of the Funds (after fee waiver and reimbursement as
applicable). The value of the assets of the Divisions will reflect the
management fee and other expenses incurred by the Funds. The following
table describes the Fund fees and expenses during the time that the Owner
owns the Policy. These fees and expenses are shown as a percentage of net
assets for the year ended December 31, 1999.

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The prospectus for each Fund contains more detail concerning a Fund's fees
and expenses. (See "The Company, The Separate Account and The Funds.")

<TABLE>
<CAPTION>
Management Fees
(after fee Other Expenses Total
waiver (after reimbursement Annual
Fund as applicable) as applicable) Expenses
<S> <C> <C> <C>
Money Market Portfolio 0.37% 0.06% 0.43%
Bond Portfolio 0.48% 0.09% 0.57%
Capital Growth Portfolio 0.46% 0.03% 0.49%
Balanced Portfolio 0.48% 0.08% 0.56%
Growth and Income Portfolio 0.48% 0.08% 0.56%
International Portfolio 0.85% 0.18% 1.03%
Global discovery Portfolio(/1/) 0.98% 0.65% 1.63%
Large Company Growth Portfolio(/2/) 0.00% 1.25% 1.25%
21st Century Growth Portfolio(/3/) 0.00% 1.50% 1.50%
</TABLE>

(/1/)Please note that beginning May 1, 2000, with the new Scudder Variable
Life Investment Fund prospectus, Scudder Kemper Investments had agreed to
maintain the expenses for the Global Discovery Portfolio at 1.25% of the
portfolio's average daily net assets. These expense limits will remain in
effect until at least April 30, 2001.

(/2/)The Adviser continues to maintain the expenses for the Large Company
Growth Portfolio at 1.25% of the portfolio's average daily net assets
through April 30, 2001. Without these reimbursements, the Management Fee
would have been .745% and Other Expenses would have been 2.72% for total
expenses of 3.47%.

(/3/)The Adviser also continues to maintain the management expenses for the
21st Century Growth Portfolio at 1.50% of the portfolio's average daily net
assets through April 30, 2001. Without these reimbursements, the Management
Fee would have been .875% and Other Expenses would have been 2.02% for
total expenses of 2.90%.

The expense information regarding the Funds was provided by those Funds. We
have not independently verified this information. We cannot guarantee that the
reimbursements provided by certain Funds will continue.

Partial Withdrawal Transaction Charge. We deduct a transaction charge equal to
the lesser of $25 or 2% of the amount withdrawn on each partial withdrawal of
amounts from the Separate Account. Currently, there are no transaction charges
imposed for transfers of amounts between Divisions. In addition, transfers and
withdrawals are subject to restrictions relative to amount and frequency. (See
"Payment and Allocation of Premiums--Allocation of Net Premiums and Cash
Value," "Policy Rights and Privileges--Surrender and Partial Withdrawals--
Transfers," and "Charges and Deductions--Partial Withdrawal Transaction
Charge.")

Policy Loans

After the first Policy Anniversary an Owner may borrow against the Cash Value
of a Policy. All outstanding Indebtedness will be deducted from proceeds
payable at the Insured's death, upon maturity, or upon surrender. We transfer a
portion of the Policy's Cash Value in each Division of the Separate Account to
which the loan is allocated to the Loan Account as security for the loan.
Therefore, a Policy Loan may have a permanent impact on the Policy's Cash Value
even if it is repaid. A Policy Loan may be repaid in whole or in part at any
time while the Policy is in force. (See "Policy Rights and Privileges--Loans.")
Loans taken from, or secured by, a Policy may in certain circumstances be
treated as taxable distributions from the Policy. Moreover, with certain
exceptions, a 10% additional income tax would be imposed on the portion of any
loan that is included in income. (See "Federal Tax Matters.")

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Surrender and Partial Withdrawals

At any time that a Policy is in effect, an Owner may elect to surrender the
Policy and receive its Cash Surrender Value. An Owner may also request a
partial withdrawal of the Cash Value of the Policy. A partial withdrawal may
reduce the Face Amount and the death benefit payable under the Policy. (See
"Policy Rights and Privileges--Surrender and Partial Withdrawals.") Surrenders
and partial withdrawals may have federal income tax consequences. (See "Federal
Tax Matters.")

Conversion Right

During the first 24 Policy Months following a Policy's Issue Date, the Owner
may convert the Policy to a life insurance policy that provides for benefits
that do not vary with the investment return of the Divisions. The Owner also
has a similar right with respect to increases in the Face Amount. (See "Policy
Rights and Privileges--Conversion Right to a Fixed Benefit Policy.")

Eligibility Change Conversion

In the event that the Insured is no longer eligible for coverage under the
Group Contract, either because the Group Contract has terminated or because the
employee is no longer employed by the Contractholder, the Individual Insurance
provided by the Policy issued in connection with the Group Contract will
continue unless the Policy is cancelled or surrendered by the Owner or there is
insufficient Cash Surrender Value to prevent the Policy from lapsing.

If a Certificate was issued in connection with the Group Contract, the
Certificate will be amended automatically to continue in force as an Individual
Policy. The new Individual Policy will provide benefits which are identical to
those provided under the Certificate. If an Individual Policy was issued in
connection with a Group Contract, the Individual Policy will continue in force
following the termination of the Group Contract. (See "Policy Rights and
Privileges--Eligibility Change Conversion.")

Illustrations

Illustrations in Appendix A show how death benefits and Cash Values may vary
based on certain hypothetical rate of return assumptions as well as assumptions
pertaining to the level of the charges. These rates are not guaranteed. They
are illustrative only and do not show past or future performance. If a Policy
is surrendered in the early Policy Years, the Cash Value payable will be low
compared to premiums accumulated with interest, and consequently the insurance
protection provided prior to surrender will be costly.

Policy Tax Compliance

We intend for the Policy to satisfy the definition of a life insurance contract
under Section 7702 of the Internal Revenue Code (the "Code"). Assuming that a
Policy qualifies as a life insurance contract under the Code, a Policy Owner
should not be taxed for receiving value from the Policy, until there is a
distribution from the Policy. Also, death benefits payable under a Policy
should be excludable from the gross income of the Beneficiary.

A Policy may be treated as a "modified endowment contract." If the Policy is a
modified endowment contract, it will affect the tax advantages offered under
the Policy. (See "Federal Tax Matters.")

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Specialized Uses of the Policy

Because the Policy provides for an accumulation of Cash Value as well as a
death benefit, the Policy can be used for various individual and business
financial planning purposes. Purchasing the Policy in part for such purposes
entails certain risks. For example, if the investment performance of Divisions
to which Cash Value is allocated is poorer than expected or if sufficient
premiums are not paid, the Policy may lapse or may not accumulate sufficient
Cash Value to fund the purpose for which the Policy was purchased. Partial
withdrawals and Policy Loans may significantly affect current and future Cash
Value, Cash Surrender Value, or death benefit proceeds. Depending upon Division
investment performance and the amount of a Policy Loan, the loan may cause a
Policy to lapse. Because the Policy is designed to provide benefits on a long-
term basis, before purchasing a Policy for a specialized purpose a purchaser
should consider whether the long-term nature of the Policy is consistent with
the purpose for which it is being considered. Using a Policy for a specialized
purpose may have tax consequences. (See "Federal Tax Matters.")

Questions

If you have any questions, you may write or call the Company at 100 South
Brentwood, St. Louis, MO 63105, (314) 862-2211.

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THE COMPANY AND THE SEPARATE ACCOUNT

The Company

Paragon Life Insurance Company is a stock life insurance company incorporated
under the laws of Missouri. We were organized in 1981 as General American
Insurance Company and on December 31, 1987, our name was changed. No change in
operations or ownership took place in connection with the name change. Our main
business is writing individual and group life insurance policies and annuity
contracts. As of December 31, 1999, we had assets of $400 million. We are
admitted to do business in 49 states and the District of Columbia. Our
principal offices are at 100 South Brentwood, St. Louis, Missouri 63105 ("Home
Office"). Our Internal Revenue Service Employer Identification Number is 43-
1235869.

We are a wholly-owned subsidiary of General American Life Insurance Company
(the "Parent Company"), a Missouri life insurance company. The Parent Company
is wholly owned by GenAmerica Corporation, a Missouri general business
corporation, which is wholly owned by Metropolitan Life Insurance Company, a
New York insurance company.

Guarantee. In addition, the Parent Company agrees to guarantee that we will
have sufficient funds to meet all of our contractual obligations. In the event
a Policyholder presents a legitimate claim for payment on a Paragon insurance
Policy, the Parent Company will pay such claim directly to the Policyholder if
Paragon is unable to make such payment. This guarantee, which does not have a
predetermined termination date, can be modified or ended only as to policies
not yet issued. The guarantee agreement is binding on the Parent Company, its
successor or assignee and shall end only if the guarantee is assigned to an
organization having a financial rating from Standard & Poor's equal to or
better than the Parent Company's rating. The Parent Company does not intend
that this guarantee cover the investment experience or Cash Values of the
Policy.

Ratings. We may from time to time publish in advertisements, sales literature,
and reports to Owners or Contractholders, the ratings and other information
assigned to us by one or more independent rating organizations such as A. M.
Best Company, Standard & Poor's, and Duff & Phelps. The purpose of the ratings
is to reflect our financial strength and/or claims paying ability and should
not be considered as bearing on the investment performance of assets held in
the Separate Account. Each year the A. M. Best Company reviews the financial
status of thousands of insurers, culminating in the assignment of Best's
ratings. These ratings reflect Best's current opinion of the relative financial
strength and operating performance of an insurance company in comparison to the
norms of the life/health insurance industry. In addition, the claims paying
ability of the Company as measured by Standard & Poor's Insurance Ratings
Services or Duff & Phelps may be referred to in advertisements or sales
literature or in reports to Owners or Contractholders. These ratings are
opinions of an operating insurance company's financial capacity to meet the
obligations of its insurance policies in accordance with their terms. These
ratings do not reflect the investment performance of the Separate Account or
the degree of risk associated with an investment in the Separate Account.

Advertisements. We also may include in advertisements and other literature
certain rankings assigned to us by the National Association of Insurance
Commissioners ("NAIC"), and our analyses of statistical information produced by
the NAIC. These rankings and analyses of statistical information may describe,
among other things, our growth, premium income, investment income, capital
gains and losses, policy reserves, policy claims, and life insurance in force.
Our use of such rankings and statistical information is not an endorsement by
the NAIC.

Advertisements and literature prepared by the Company also may include
discussions of taxable and tax-deferred investment programs (including
comparisons based on selected tax brackets), alternative investment vehicles,
and general economic conditions.

The Separate Account

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In addition, the Separate Account receives and invests net premiums for other
flexible premium variable life insurance policies issued by us.

The Separate Account is divided into Divisions. Each Division will invest in
Funds as shown on the cover page of this Prospectus. Income and both realized
and unrealized gains or losses from the assets of each Division of the Separate
Account are credited to or charged against that Division without regard to
income, gains, or losses from any other Division of the Separate Account or
arising out of any other business we may conduct.

Although the assets of the Separate Account are the property of the Company,
the assets in the Separate Account equal to the reserves and other liabilities
of the Separate Account are not chargeable with liabilities arising out of any
other business which we may conduct. The assets of the Separate Account are
available to cover the general liabilities of the Company only to the extent
that the Separate Account's assets exceed its Policy liabilities. From time to
time, these excess assets may be transferred from the Separate Account and
included in the Company's general assets. Before making any such transfers, we
will consider any possible adverse impact the transfer may have on the Separate
Account.

The Separate Account has been registered with the Securities and Exchange
Commission ("SEC" or "Commission") as a unit investment trust under the
Investment Company Act of 1940 (the "1940 Act") and meets the definition of a
"separate account" under federal securities laws. Registration with the SEC
does not involve supervision of the management or investment practices or
policies of the Separate Account or the Company by the Commission.

The Funds

The Separate Account invests in Class A shares of Scudder Variable Life
Investment Fund (the "Scudder Variable Fund"), a series-type mutual fund
registered with the SEC as open-end, diversified management investment company.
The assets of the Fund used by the Policies are held separate from the assets
of the other Funds, and each Fund has investment objectives and policies which
are generally different from those of the other Funds. The income or losses of
one Fund generally have no effect on the investment performance of any other
Fund.

Investment Results. The investment objectives and policies of certain Funds are
similar to the investment objectives and policies of other portfolios that may
be managed by the same investment adviser or manager. The investment results of
the Funds may differ from the results of these other portfolios. There can be
no guarantee, and no representation is made, that the investment results of any
of the Funds will be comparable to the investment results of any other
portfolio, even if the other portfolio has the same investment adviser or
manager.

The following summarizes the investment policies of each Fund:

Money Market Portfolio

The Money Market Portfolio seeks to maintain the stability of capital and,
consistent therewith, to maintain the liquidity of capital and to provide
current income. The Portfolio seeks to maintain a net asset value of $1.00 per
share. Unless otherwise indicated, the portfolio's investment objective and
policies may be changed without a vote of shareholders.

Bond Portfolio

The Bond Portfolio pursues a policy of investing for a high level of income
consistent with a high quality portfolio of debt securities. Unless otherwise
indicated, the portfolio's investment objective and policies may be changed
without a vote of shareholders.

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Capital Growth Portfolio

The Capital Growth Portfolio seeks to maximize long-term capital growth through
a broad and flexible investment program. Unless otherwise indicated, the
portfolio's investment objective and policies may be changed without a vote of
shareholders.

Balanced Portfolio

The Balanced Portfolio pursues a balance of growth and income from a
diversified portfolio of equity and fixed income securities. The Portfolio also
seeks long-term preservation of capital through a quality-oriented investment
approach that is designed to reduce risk. Unless otherwise indicated, the
portfolio's investment objective and policies may be changed without a vote of
shareholders.

Growth and Income Portfolio

The Growth and Income Portfolio seeks long-term growth of capital, current
income and growth of income. Unless otherwise indicated, the portfolio's
investment objective and policies may be changed without a vote of
shareholders.

Global Discovery Portfolio

The Global Discovery Portfolio pursues above-average capital appreciation over
the long term by investing primarily in the equity securities of small
companies located throughout the world. Unless otherwise indicated, the
portfolio's investment objective and policies may be changed without a vote of
shareholders.

International Portfolio

The International Portfolio seeks long-term growth of capital primarily through
diversified holdings of marketable foreign equity investments. Unless otherwise
indicated, the portfolio's investment objective and policies may be changed
without a vote of shareholders.

21st Century Growth Portfolio

(Please note: This fund was previously named Small Company Growth Portfolio)

The 21st Century Growth Portfolio pursues long-term growth of capital by
investing primarily in equity securities issued by emerging growth companies.
Unless otherwise indicated, the portfolio's investment objective and policies
may be changed without a vote of shareholders.

Large Company Growth Portfolio

Large Company Growth Portfolio seeks long-term growth of capital through
investment primarily in the equity securities of seasoned, financially strong
U.S. growth companies. Unless otherwise indicated, the portfolio's investment
objective and policies may be changed without a vote of shareholders.

There is no assurance that any of the Funds will achieve its stated objective.
More detailed information, including a description of risks, is in the
prospectus for the Funds, which must accompany or precede this Prospectus and
which should be read carefully. Please also refer to the "Annual Expenses of
the Funds" information of this Prospectus for a list of the Funds' annual
expenses.

Agreements. We have has entered into or may enter into arrangements with
certain Funds pursuant to which we receive a fee based upon an annual
percentage of the average net asset amount invested by us on behalf of the
Separate Account and other separate accounts of the Company. These arrangements
vary among the Funds and are entered into because of administrative services
provided by the Company.

12
<PAGE>

Resolving Material Conflicts. All of the Funds are also available to registered
separate accounts of other insurance companies offering variable annuity and
variable life insurance products. As a result, there is a possibility that a
material conflict may arise between the interests of Owners of Policies and of
Owners of Policies whose Cash Values are allocated to other separate accounts
investing in the Funds. In the event a material conflict arises, the Company
will take any necessary steps, including removing the assets of the Separate
Account from one or more of the Funds, to resolve the matter.

Addition, Deletion, or Substitution of Investments. We reserve the right,
subject to compliance with applicable law, to make additions to, deletions
from, or substitutions for the shares of the Funds that are held by the
Separate Account or that the Separate Account may purchase. We reserve the
right to (1) eliminate the shares of any of the Funds and (2) substitute shares
of another fund if the shares of a Fund are no longer available for investment,
or further investment in any Fund becomes inappropriate in view of the purposes
of the Separate Account. We will not substitute any shares without notice to
the Owner and prior approval of the SEC, to the extent required by the 1940 Act
or other applicable law, as required

We also reserve the right to establish additional Divisions of the Separate
Account. We will establish new Divisions when marketing needs or investment
conditions warrant. Any new Division will be made available to existing Owners
on a basis to be determined by the Company. To the extent approved by the SEC,
we may also:

. Eliminate or combine one or more Divisions;

. Substitute one Division for another Division; or

. Transfer assets between Divisions if marketing, tax, or investment
conditions warrant.

We may make changes in the Policy by appropriate endorsement in the event of a
substitution or change. We will notify all Owners of any such changes.

If we deem it to be in the best interests of persons having voting rights under
the Policy, and to the extent any necessary SEC approvals or Owner votes are
obtained, the Separate Account may be:

(a) operated as a management company under the 1940 Act;

(b) deregistered under that Act in the event such registration is no longer
required; or

To the extent permitted by applicable law, we may transfer the assets of the
Separate Account associated with the Policy to another separate account.

We cannot guarantee that the shares of the Funds will always be available. The
Funds each sell shares to the Separate Account in accordance with the terms of
a participation agreement between the Fund distributors and us. Should this
agreement terminate or should shares become unavailable for any other reason,
the Separate Account will not be able to purchase the existing Fund shares.
Should this occur, we will be unable to honor Owner requests to allocate Cash
Values or premium payments to the Divisions of the Separate Account investing
in such shares. In the event that a Fund is no longer available, we will take
reasonable steps to obtain alternative investment options.

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PAYMENT AND ALLOCATION OF PREMIUMS

Issuance of a Policy

We will generally issue a Group Contract to employers whose employees and/or
their spouses may become Owners (and/or Insureds) under the Group Contract so
long as the employee is within the class of employees eligible to be included
in the Group Contract. The class(es) of employees covered by a particular Group
Contract are set forth in that Group Contract's specifications pages.

The Group Contract will be issued upon receipt of an application for a Group
Contract signed by an appropriate officer of the employer and acceptance by us
at our Home Office. (See "General Provisions of the Group Contract--Issuance.")
Individuals (i.e., eligible employees and/or their spouses) wishing to purchase
a Policy, whether under a Group Contract or an employer-sponsored insurance
program, must complete the appropriate application for Individual Insurance and
submit it to our authorized representative or us at our Home Office. We will
issue to each Contractholder either a Certificate or an Individual Policy to
give to each Owner.

Individual Policies, rather than Certificates, will be issued:

(1) to independent contractors of the employer;

(2) to persons who wish to continue coverage after a Group Contract has
terminated;

(3) to persons who wish to continue coverage after they no longer are
employed by the Group Contractholder;

(4) if state law restrictions make issuance of a Group Contract
impracticable; or

(5) if the employer chooses to use an employer-sponsored insurance program
that does not involve a Group Contract.

Corporate Programs. Corporate Programs will generally involve Individual
Policies. We will issue Policies on the lives of eligible Insureds, (generally
employees of a sponsoring employer), and the Owner will usually be the
sponsoring employer or its designee.

Issue Ages. A Policy generally will be issued only to Insureds of Issue Ages 17
through 70 who supply satisfactory evidence of insurability. We may issue
Policies to individuals falling outside the Issue Ages or decline to issue
Policies to individuals within the Issue Ages.

Employee Eligibility. In order for an employee to be eligible to purchase a
Policy, the employee must be actively at work at the time the application for
Individual Insurance is signed. In addition, the Contractholder may determine
specific classes to which the employee must belong to be eligible to purchase a
Policy. "Actively at work" means that the employee must work for the
Contractholder or sponsoring employer at the employee's usual place of work (or
such other places as required by the Contractholder or sponsoring employer) in
the course of such work for the full number of hours and the full rate of pay,
as set by the employment practices of the employer. Ordinarily the time worked
per week must not be less than 30 hours. However, we reserve the right to waive
or modify the "actively at work" requirement at our discretion.

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<PAGE>

specifications pages. Employees of any Associated Companies of the
Contractholder will be considered employees of the Contractholder. We may also
allow an individual who is an independent contractor working primarily for the
sponsoring employer to be considered an eligible employee. An independent
contractor may receive an Individual Policy rather than a Certificate depending
upon state law applicable to the contracts. An employee may include a partner
in a partnership if the employer is a partnership.

Guaranteed Issue. Other than in Executive Programs or Corporate Programs, we
will issue the Policy and any children's insurance rider applied for by the
employee pursuant to our guaranteed issue procedure. We offer the guaranteed
issue procedure only when an employee is given the opportunity to purchase a
Policy for the first time. Under this procedure the employee is required to
answer qualifying questions in the application for Individual Insurance, but is
not required to submit to a medical or paramedical examination. The maximum
Face Amount that an employee can generally apply for under the guaranteed issue
procedure ("Guaranteed Issue Amount") is three times the employee's salary up
to a ceiling that is based on the number of eligible employees under a Group
Contract or other employer-sponsored insurance program. We may offer guaranteed
issue with Executive Programs or Corporate Programs depending upon the number
of eligible employees or if other existing insurance coverage is cancelled.

Simplified Underwriting. The employee must submit to a simplified underwriting
procedure requiring the employee to respond satisfactorily to certain health
questions in the application:

. where the Face Amount exceeds the guaranteed issue limits;

. where the Policy has been offered previously to the employee;

. where the guaranteed issue requirements set forth in the application for
Individual Insurance are not met; or

. in connection with certain programs that may be offered without
guaranteed issue

A blood test may be required. This requirement is generally applicable only to
Executive Programs or Corporate Programs.

Simplified underwriting must be followed in connection with the issuance of any
children's rider, if the employee is not eligible for guaranteed issue
underwriting, or, (even when the employee is eligible,) if the child does not
satisfy the guaranteed issue requirements set forth in the application for
Individual Insurance.

Acceptance of an application is always subject to our underwriting rules, and
we reserve the right to reject an application for any reason.

Employee's Spouse. If a Policy is to be issued to a spouse, the appropriate
application for Individual Insurance must be supplied. We will subject the
spouse to the simplified underwriting procedure described above. Guaranteed
issue is not available. We generally do not offer spouse coverage under
Executive Program Policies or Corporate Program Policies.

Issue Date. The Issue Date is the effective date for all coverage provided in
the original application for Individual Insurance. The Issue Date is used to
determine Policy Anniversaries, Policy Years, and Policy Months. A Policy will
not take effect until:

. the appropriate application for Individual Insurance is signed;

. the initial premium has been paid prior to the Insured's death;

. the Insured is eligible for it; and

. the information in the application is determined to be acceptable to the
Company.

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<PAGE>

Amount. If available, interim insurance will start as of the date of the
application. Interim insurance ends on the earliest of the following dates:

. the date insurance begins on the Policy applied for;

. the date a Policy other than the Policy applied for is offered to the
applicant;

. the date the Company notifies the applicant that the application for any
proposed Insured is declined;

. 60 days from the date of application; or

. termination of employment with the Contractholder or sponsoring employer.

Premiums

The initial premium is due on the Issue Date, and usually will be paid by the
Contractholder or employer on behalf of the Owner. The Company requires that
the initial premium for a Policy be at least equal to one-twelfth ( 1/12) of
the planned annual premium for the Policy set forth in the specifications
pages. The planned annual premium is an amount specified for each Policy based
on the requested initial Face Amount, the Issue Age of the Insured and the
charges under the Policy. (See "Charges and Deductions.") The Owner is not
required to pay premiums equal to the planned annual premium.

We will apply premiums paid by a Contractholder or sponsoring employer or
designated payor to a Policy as of the Valuation Date we receive the premiums.
Premiums will be "received" on a Valuation Date when we receive supporting
documentation necessary for us to determine the amount of premium per Policy
and the cash premium.

Planned Premium Payments. After the initial premium, and subject to the
limitations described below, premiums may be paid in any amount and at any
interval. Under Group Contracts and Individual Policies issued in connection
with other employer-sponsored insurance programs, the planned annual premium
usually will be paid by the Contractholder or sponsoring employer on behalf of
the Owner pursuant to a planned premium payment schedule. A planned premium
payment schedule provides for premium payments in a level amount at fixed
intervals (usually monthly) agreed to by the Contractholder or employer and us.

The amount of the premiums paid by the sponsoring employer or Contractholder
will be equal to the amount authorized by the employee. The Owner may skip
planned premium payments. Failure to pay one or more planned premium payments
will not always cause the Policy to lapse. The Policy will lapse if the Cash
Surrender Value is insufficient to cover the next Monthly Deduction. (See
"Payment and Allocation of Premiums--Policy Lapse and Reinstatement.")

Unscheduled Premiums. In addition to any planned payments made, an Owner may
make unscheduled premium payments at any time and in any amount, subject to the
minimum and maximum premium limitations described below. The payment of an
unscheduled premium payment may have Federal income tax consequences. (See
"Federal Tax Matters.") As mentioned above, an Owner may also skip planned
premium payments. Therefore, unlike conventional insurance policies, a Policy
does not obligate the Owner to pay premiums in accordance with a rigid and
inflexible premium schedule.

Continuance of Insurance. Failure of the Contractholder to pay the planned
premium payments authorized by its employees may cause the Group Contract to
terminate. (See "General Provisions of the Group Contract--Termination.")
Provided that there is sufficient Cash Surrender Value to prevent the Policy
from lapsing, the Individual Insurance provided will automatically continue in
the event of Group Contract termination. (See "Policy Rights and Privileges--
Eligibility Change Conversion.") Individual Insurance will also continue if the
employee's employment with the Contractholder or sponsoring employer
terminates. In either circumstance, an Owner of an Individual Policy (or a
Certificate converted by amendment to an Individual Policy) will establish a
new schedule of planned premiums. The new schedule will have the same planned
annual premium, and the payment intervals will be no more frequent than
quarterly. In Corporate Programs, there will generally be no change in planned
or scheduled premiums upon discontinuing the employment of an Insured.

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<PAGE>

Premium Limitations. Every premium payment paid must be at least $20. Total
premiums paid under a Policy may not exceed the current maximum premium
limitations established by federal tax laws in any Policy Year. The maximum
premium limitation for a Policy Year is the sum of the premiums paid under the
Policy that will not at any time exceed the guideline premium limitations
referred to in Section 7702(c) of the Internal Revenue Code of 1986. If at any
time a premium is paid which would result in total premiums exceeding the
current maximum premium limitation, we will accept only that portion of the
premium which will make total premiums equal the maximum. Any part of the
premium in excess of the maximum premiums will be returned directly to the
Owner within 60 days of the end of the Policy Year in which payment is received
(unless we agree) and no further premiums will be accepted until allowed by the
current maximum premium limitations prescribed by Federal tax law. See "Federal
Tax Matters" for a further explanation of premium limitations.

Section 7702A creates an additional premium limitation, which, if exceeded, can
change the tax status of a Policy to that of a "modified endowment contract." A
modified endowment contract is a life insurance contract, from which
withdrawals are treated (for tax purposes) (1) as a distribution of any taxable
income under the contract, and (2) as a distribution of nontaxable investment
in the contract. Also, such withdrawals may be subject to a 10% federal income
tax penalty. We have adopted administrative steps designed to notify an Owner
when we believe that a premium payment will cause a Policy to become a modified
endowment contract. Owner will be given a limited amount of time to request
that the premium be reversed in order to avoid the Policy's classification as a
modified endowment contract. (See "Federal Tax Matters.")

Allocation of Net Premiums and Cash Value

Net Premiums. The net premium equals:

(1) the premium paid; less

(2) the premium expense charge;

(3) any charge to compensate us for anticipated higher corporate income
taxes resulting from the sale of a Policy; and

(4) the premium tax charge. (See "Charges and Deductions--Sales Charges.")

Allocation of Net Premiums. In the application for a Policy, the Owner
indicates how net premiums are to be allocated among the 14 Divisions of the
Separate Account. Beginning with the initial premium payment, all premiums will
be allocated in accordance with the Owner's instructions upon our receipt of
the premiums. However, the minimum percentage, of any allocation to a Division
is 10 percent of the net premium, and fractional percentages may not be used.

The allocation for future net premiums may be changed without charge at any
time by providing notice in writing directly to us. Any change in allocation
will take effect immediately upon our receipt of the written notification. No
charge is imposed for changing the allocations of future net premiums.

The Policy's Cash Value also may be transferred between the Divisions of the
Separate Account. (See "Policy Rights and Privileges--Transfers.")

The value of amounts allocated to the Divisions will vary with the investment
performance of the Funds underlying the Divisions. The Owner bears the entire
investment risk. Investment performance will affect the Policy's Cash Value,
and may affect the death benefit as well. Owners should periodically review
their allocations of premiums and values in light of market conditions and
overall financial planning requirements.

Policy Lapse and Reinstatement

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<PAGE>

premiums have been paid. Lapse will occur only when the Cash Surrender Value is
insufficient to cover the monthly deduction, and a grace period expires without
a sufficient payment being made. (See also "General Provisions of the Group
Contract--Grace Period--Termination.") Thus, the payment of premiums in any
amount does not guarantee that the Policy will remain in force until the
Maturity Date.

The grace period, which is 62 days, begins on the Monthly Anniversary on which
the Cash Surrender Value is not enough to cover the next monthly deduction,
premium expense charge, and premium tax charge. We will notify the Owner at the
beginning of the grace period by mail. The notice will specify the amount of
premium required to keep the Policy in force and the date the payment is due.
Subject to minimum premium requirements, the amount of the premium required to
keep the Policy in force will be the amount of the current monthly deduction.
(See "Charges and Deductions.") If the Company does not receive the required
amount within the grace period, the Policy will lapse and terminate without
Cash Value. If the Insured dies during the grace period, any overdue monthly
deductions will be deducted from the death benefit payable.

Reinstatement. The Owner may reinstate a lapsed Policy by written application
at any time within five years after the date of lapse and before the Maturity
Date. The right to reinstate a lapsed Policy will not be affected by the
termination of a Group Contract or the termination of an employee's employment
during the reinstatement period. Reinstatement is subject to the following
conditions:

. Evidence of the insurability of the Insured satisfactory to us (including
evidence of insurability of any person covered by a rider to reinstate
the rider).

. Payment of a premium that, after the deduction of any premium expense
charge and any premium tax charge, is large enough to cover: (a) the
monthly deductions due at the time of lapse, and (b) two times the
monthly deduction due at the time of reinstatement.

. Payment or reinstatement of any Indebtedness. Any Indebtedness reinstated
will cause a Cash Value of an equal amount also to be reinstated.

Any loan paid at the time of reinstatement will cause an increase in Cash Value
equal to the amount of the repaid loan. The Policy cannot be reinstated if it
has been surrendered. The amount of Cash Value on the date of reinstatement
will be equal to the amount of any Indebtedness reinstated, increased by the
net premiums paid at reinstatement and any loans paid at the time of
reinstatement.

The effective date of reinstatement will be the date of our approval of the
application for reinstatement. There will be a full monthly deduction for the
Policy Month that includes that date.

POLICY BENEFITS

Death Benefit

As long as the Policy remains in force, we will, (upon proof of the Insured's
death), pay the death benefit proceeds of a Policy in accordance with the death
benefit option in effect at the time of the Insured's death. Payment of death
benefit proceeds will not be affected by termination of the Group Contract,
employer-sponsored insurance program or by termination of an employee's
employment.

If a rider permitting the accelerated payment of death benefit proceeds has
been added to the Policy, the death benefit may be paid in a single sum prior
to the death of the Insured and may be less than otherwise would be paid upon
the death of the Insured. (See "General Matters Relating to the Policy--
Additional Insurance Benefits.")

The amount of the death benefit proceeds payable will be determined at the end
of the Valuation Period during which the Insured's death occurred. The proceeds
may be paid in a single sum or under one or more of the settlement options set
forth in the Policy. (See "Policy Rights and Privileges--Payment of Policy
Benefits.") Death benefit proceeds will be paid to the surviving Beneficiary or
Beneficiaries specified in the application or as subsequently changed.

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<PAGE>

The Policy provides two death benefit options: a "Level Type" death benefit
("Option A") and an "Increasing Type" death benefit ("Option B"). Option B
generally will be the only option presented. The death benefit under either
option will never be less than the current Face Amount of the Policy as long as
the Policy remains in force. (See "Payment and Allocation of Premiums--Policy
Lapse and Reinstatement.") The minimum Face Amount currently is $25,000. The
maximum Face Amount is generally $500,000. However, in connection with a
particular Group Contract or employer sponsored insurance program, we may
establish a substantially higher Face Amount for Policies issued under that
Contract or program.

Option A. Under Option A, the death benefit is:

(1) the current Face Amount of the Policy or, if greater,

(2) the applicable percentage of Cash Value on the date of death.

The applicable percentage is 250% for an Insured Attained Age 40 or below on
the Policy Anniversary prior to the date of death. For Insureds with an
Attained Age over 40 on that Policy Anniversary, the percentage is lower and
declines with age as shown in the Applicable Percentage Table below. Under
Option A the death benefit will remain level at the Face Amount unless the
applicable percentage of Cash Value exceeds the current Face Amount, in which
case the amount of the death benefit will vary as the Cash Value varies. Owners
who prefer to have favorable investment performance reflected in higher Cash
Value for the same Face Amount, rather than increased death benefit, generally
should select Option A.

APPLICABLE PERCENTAGE TABLE

<TABLE>
<CAPTION>
Applicable
Attained Age Percentage
- ------------ ----------
<S> <C>
40...................... 250%
41...................... 243
42...................... 236
43...................... 229
44...................... 222
45...................... 215
46...................... 209
47...................... 203
48...................... 197
49...................... 191
50...................... 185
51...................... 178
52...................... 171
53...................... 164
54...................... 157
55...................... 150
56...................... 146
57...................... 142
58...................... 138
59...................... 134
60...................... 130
</TABLE>
<TABLE>
<CAPTION>
Applicable
Attained Age Percentage
- ------------ ----------
<S> <C>
61...................... 128%
62...................... 126
63...................... 124
64...................... 122
65...................... 120
66...................... 119
67...................... 118
68...................... 117
69...................... 116
70...................... 115
71...................... 113
72...................... 111
73...................... 109
74...................... 107
75 to 90................ 105
91...................... 104
92...................... 103
93...................... 102
94...................... 101
95 or older............. 100
</TABLE>

The applicable percentages in the foregoing table are based on federal tax law
requirements described in Section 7702(d) of the Code. The Company reserves the
right to alter the applicable percentage to the extent necessary to comply with
changes to Section 7702(d) or any successor provision thereto.

Option B. Under Option B, the death benefit is equal to:

(1) the current Face Amount plus the Cash Value of the Policy or, if
greater,

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<PAGE>

(2) the applicable percentage of the Cash Value on the date of death. The
applicable percentage is the same as under Option A.

Under Option B, the amount of the death benefit will always vary as the Cash
Value varies (but will never be less than the Face Amount).

Owners who prefer to have favorable investment performance reflected in higher
death benefits for the same Face Amount generally should select Option B. All
other factors equal, for the same premium dollar, Option B provides lower
initial Face Amount resulting in earlier cash accumulation.

Change in Death Benefit Option. After the first Policy Anniversary, the Owner
may change the death benefit option. We reserve the right to limit the number
of changes in death benefit options to one each Policy Year. A request for a
change must be made directly to us in writing. The effective date of such a
change will be the Monthly Anniversary on or following the date we receive the
change request.

If the death benefit option is changed from Option A to Option B, the Face
Amount after the change will equal the Face Amount before the change less the
Cash Value on the effective date of the change. Satisfactory evidence of
insurability must be submitted directly to us with a request for a change from
Option A to Option B. This change may not be made if it would result in a Face
Amount of less than $25,000.

If the death benefit option is changed from Option B to Option A, the Face
Amount after the change will equal the Face Amount before the change plus the
Cash Value on the effective date of change.

A change in death benefit option will not in itself result in an immediate
change in the amount of a Policy's death benefit or Cash Value. No charges will
be imposed upon a change from death benefit Option B to Option A. Changing from
Option A to Option B, however, will result in a decrease in the Face Amount. In
addition, if, prior to or accompanying a change in the death benefit option,
there has been an increase in the Face Amount, the cost of insurance charge may
be different for the increased amount. (See "Charges and Deductions--Monthly
Deduction--Cost of Insurance.")

No change in death benefit option will be permitted that results in the death
benefit under a Policy being included in gross income because the federal tax
law requirements are not satisfied. (See "Federal Tax Matters.")

Change in Face Amount. Subject to certain limitations set forth below, an Owner
may increase or decrease the Face Amount of a Policy (without changing the
death benefit option) after the first Policy Anniversary. A written request for
a change in the Face Amount must be sent directly to us. A change in Face
Amount may affect the cost of insurance rate and the net amount at risk, both
of which affect an Owner's cost of insurance charge. (See "Charges and
Deductions--Monthly Deduction--Cost of Insurance.") In addition, a change in
Face Amount may have federal income tax consequences. (See "Federal Tax
Matters.")

Face Amount Decreases. Any decrease in the Face Amount will become effective on
the Monthly Anniversary on or following our receipt of the written request. The
amount of the requested decrease must be at least $5,000 and the Face Amount
remaining in force after any requested decrease may not be less than the
minimum amount Face Amount, generally $25,000. If, following a decrease in Face
Amount, the Policy would not comply with the maximum premium limitations
required by federal tax law (see "Payment and Allocation of Premiums"), the
decrease may be limited or Cash Value may be returned to the Owner (at the
Owner's election), to the extent necessary to meet those requirements. A
decrease in the Face Amount will reduce the Face Amount in the following order:

(1)The Face Amount provided by the most recent increase;

(2) The next most recent increases successively; and

(3) The initial Face Amount.

20
<PAGE>

This order of reduction will be used to determine the amount of subsequent cost
of insurance charges (see "Charges and Deductions--Monthly Deduction--Cost of
Insurance").

Face Amount Increases. For an increase in the Face Amount, we require that
satisfactory evidence of insurability be submitted. If approved, the increase
will become effective on the Monthly Anniversary on or following receipt of the
satisfactory evidence of insurability. In addition, the Insured must have an
Attained Age of 80 or less on the effective date of the increase. The amount of
the increase may not be less than $5,000. The Face Amount may not be increased
more than the maximum Face Amount for that Policy, generally $500,000. However,
in connection with a particular Group Contract or employer-sponsored insurance
program, we may establish a substantially higher Face Amount for Policies
issued under that Contract or program. Although an increase need not
necessarily be accompanied by additional premium, the Cash Surrender Value in
effect immediately after the increase must be sufficient to cover the next
monthly deduction. (See "Charges and Deductions--Monthly Deduction.") An
increase in the Face Amount may result in certain additional charges. (See
"Charges and Deductions.")

Cancellation of an Increase. An increase in Face Amount may be cancelled within
the later of:

. 20 days from the date the Owner received the new Policy specifications
page for the increase;

. within 10 days of mailing the right to cancellation notice to the Owner;
or

. within 45 days after the application for an increase was signed.

Upon cancellation, any additional charges, which would not have been assessed
without the increase, will be refunded to the Owner if requested. If a request
for a refund is not made, the charges will be restored to the Policy's Cash
Value and allocated to Divisions in the same manner as they were deducted.
Premiums paid following an increase in Face Amount and prior to the time the
right to cancel the increase expires will become part of the Policy's Cash
Value and will not be subject to refund. (See "Policy Rights and Privileges--
Right to Examine Policy.")

Methods of Affecting Insurance Protection. An Owner may increase or decrease
the pure insurance protection provided by a Policy--the difference between the
death benefit and the Cash Value--in several ways as insurance needs change.
Examples include increasing or decreasing the Face Amount, changing the level
of premium payments, and, to a lesser extent, making partial withdrawals from
the Policy. Although the consequences of each of these methods will depend upon
the individual circumstances, they may be generally summarized as follows:

(a) A decrease in the Face Amount will, subject to the applicable percentage
limitations (see "Policy Benefits--Death Benefit"), decrease the pure insurance
protection and the cost of insurance charges under the Policy without reducing
the Cash Value.

(b) An increase in the Face Amount may increase the amount of pure insurance
protection, depending on the amount of Cash Value and the resultant applicable
percentage limitation. If the insurance protection is increased, the Policy
charges generally will increase as well.

(c) An increased level of premium payments will reduce the pure insurance
protection if Option A is in effect. However, when the applicable percentage of
Cash Value exceeds either the Face Amount (if Option A is in effect) or the
Cash Value plus the Face Amount (if Option B is in effect), increased premium
payments will increase the pure insurance protection. Increased premiums should
also increase the amount of funds available to keep the Policy in force.

(d) A reduced level of premium payments generally will increase the amount of
pure insurance protection, depending on the applicable percentage limitations.
If the reduced level of premium payments is insufficient to cover monthly
deductions or to offset negative investment performance, Cash Value may also
decrease, which in turn will increase the possibility that the Policy will
lapse. (See "Payment and Allocation of Premiums--Policy Lapse and
Reinstatement.")

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<PAGE>

(e) A partial withdrawal will reduce the death benefit. (See "Policy Rights and
Privileges--Surrender and Partial Withdrawals.") However, it only affects the
amount of pure insurance protection and cost of insurance charges if the death
benefit before or after the withdrawal is based on the applicable percentage of
Cash Value, because otherwise the decrease in the death benefit is offset by
the amount of Cash Value withdrawn. The primary use of a partial withdrawal is
to withdraw Cash Value.

Payment of Death Benefit Proceeds. Death benefit proceeds under the Policy
ordinarily will be paid within seven days after we receive all documentation
required. Payment may, however, be postponed in certain circumstances. (See
"General Matters Relating to the Policy--Postponement of Payments.") The Owner
may decide the form in which the proceeds will be paid. During the Insured's
lifetime, the Owner may arrange for the death benefit proceeds to be paid in a
single sum or under one or more of the optional methods of settlement described
below. The death benefit will be increased by the amount of the monthly cost of
insurance for the portion of the month from the date of death to the end of the
month, and reduced by any outstanding Indebtedness. (See "General Matters
Relating to the Policy--Additional Insurance Benefits," and "Charges and
Deductions.")

When no election for an optional method of settlement is in force when the
Insured dies, the Beneficiary may select one or more of the optional methods of
settlement at any time before death benefit proceeds are paid. (See "Policy
Rights and Privileges--Payment of Policy Benefits.")

An election or change of method of settlement must be in writing. A change in
Beneficiary revokes any previous settlement election. Once payments have begun,
the settlement option may not be changed.

Cash Value

The Cash Value of the Policy is equal to the total of the Policy's Cash Value
in the Separate Account and the Loan Account. The Policy's Cash Value in the
Separate Account will reflect:

. the investment performance of the chosen Divisions;

. the frequency and amount of net premiums paid;

. transfers;

. partial withdrawals;

. Policy Loans;

. Loan account interest rate credited; and

. the charges assessed in connection with the Policy.

An Owner may at any time surrender the Policy and receive the Policy's Cash
Surrender Value. (See "Policy Rights and Privileges--Surrender and Partial
Withdrawals.") There is no guaranteed minimum Cash Value.

Determination of Cash Value. Cash Value is determined on a daily basis. On the
Investment Start Date, the Cash Value in a Division will equal the portion of
any net premium allocated to the Division, reduced by the portion of the
monthly deductions due from the Issue Date through the Investment Start Date
allocated to that Division. Depending upon the length of time between the Issue
Date and the Investment Start Date, this amount may be more than the amount of
one monthly deduction. (See "Payment and Allocation of Premiums.") Thereafter,
on each Valuation Date, the Cash Value in a Division will equal:

(1) The Cash Value in the Division on the preceding Valuation Date, multiplied
by the Division's Net Investment Factor (defined below) for the current
Valuation Period; plus

(2) Any net premium payments received during the current Valuation Period which
are allocated to the Division; plus

(3) Any loan repayments allocated to the Division during the current Valuation
Period; plus

22
<PAGE>

(4) Any amounts transferred to the Division from another Division during the
current Valuation Period; plus

(5) That portion of the interest credited on outstanding Policy Loans which is
allocated to the Division during the current Valuation Period; minus

(6) Any amounts transferred from the Division during the current Valuation
Period (including amounts securing Policy Loans) plus transfer charges if any;
minus

(7) Any partial withdrawals plus any partial withdrawal transaction charge,
from the Division during the current Valuation Period; minus

(8) If a Monthly Anniversary occurs during the current Valuation Period, the
portion of the monthly deduction allocated to the Division during the current
Valuation Period to cover the Policy Month which starts during that Valuation
Period. (See "Charges and Deductions.")

The Policy's Cash Value in the Separate Account equals the sum of the Policy's
Cash Values in each Division.

Net Investment Factor. The Net Investment Factor measures the investment
performance of a Division during a Valuation Period. The Net Investment Factor
for each Division for a Valuation Period is calculated as follows:

(1) The value of the assets at the end of the preceding Valuation Period; plus

(2) The investment income and capital gains--realized or unrealized--credited
to the assets in the Valuation Period for which the Net Investment Factor is
being determined; minus

(3) The capital losses, realized or unrealized, charged against those assets
during the Valuation Period; minus

(4) Any amount charged against each Division for taxes or other economic burden
resulting from the application of tax laws, determined by the Company to be
properly attributable to the Divisions or the Policy, or any amount set aside
during the Valuation Period as a reserve for taxes attributable to the
operation or maintenance of each Division; minus

(5) A charge not to exceed .0024547% of the net assets for each day in the
Valuation Period. This corresponds to 0.90% per year for mortality and expense
risks; divided by

(6) The value of the assets at the end of the preceding Valuation Period.

The Company may use an equivalent method to determine Cash Value in each
Division on each Valuation Date in lieu of the Net Investment Factor method.
This method directly determines the units of Cash Value in each Division and
the corresponding unit value. Unit value is obtained as follows:

(1) The value of assets in a Division are obtained by multiplying shares
outstanding by the net asset value as of the Valuation Date; minus

(2) A reduction based upon a charge not to exceed .0024547% of the net assets
for each day in the Valuation Period is made (This corresponds to 0.90% per
year for mortality and expense risk charge); divided by

(3) Aggregate units outstanding in the Division at the end of the preceding
Valuation Period.

POLICY RIGHTS AND PRIVILEGES

Exercising Rights and Privileges Under the Policies

23
<PAGE>

allocations, borrow, etc.) by directly notifying us in writing at our Home
Office. We will send all reports and other notices described herein or in the
Policy directly to the Owner.

Loans

Loan Privileges. After the first Policy Anniversary, the Owner may, by written
request directly to us, borrow an amount up to the Loan Value of the Policy,
with the Policy serving as sole security for such loan. The Loan Value is equal
to (a) minus (b), where

. (a) is 85% of the Cash Value of the Policy on the date the Policy Loan is
requested; and

. (b) is the amount of any outstanding Indebtedness.

Loan interest is due and payable in arrears on each Policy Anniversary or on a
pro rata basis for such shorter period as the loan may exist. The minimum
amount that may be borrowed is $100. The loan may be completely or partially
repaid at any time while the Insured is living. Any amount due to an Owner
under a Policy Loan ordinarily will be paid within seven days after we receive
the loan request at our Home Office, although payments may be postponed under
certain circumstances. (See "General Matters Relating to the Policy--
Postponement of Payments.")

When a Policy Loan is made, Cash Value equal to the amount of the loan and loan
interest due will be transferred to the Loan Account as security for the loan.
Unless the Owner requests a different allocation, amounts will be transferred
from the Divisions of the Separate Account in the same proportion that the
Policy's Cash Value in each Division bears to the Policy's total Cash Value
(not including the Cash Value in the Loan Account), at the end of the Valuation
Period during which the request for a Policy Loan is received. This will reduce
the Policy's Cash Value in the Separate Account. These transactions will not be
considered transfers for purposes of the limitations on transfers between
Divisions.

Loan Account Interest Rate Credited. Cash Value transferred to the Loan Account
to secure a Policy Loan will accrue interest daily at an annual rate not less
than 5%. The rate is declared by action of our management as authorized by our
Board of Directors. The Loan Account interest credited will be transferred to
the Divisions: (1) each Policy Anniversary; (2) when a new loan is made; (3)
when a loan is partially or fully repaid; and (4) when an amount is needed to
meet a monthly deduction.

Interest Rate Charged for Policy Loans. The interest rate charged will be at an
annual rate of 8%. Interest charged will be due and payable annually in arrears
on each Policy Anniversary or for the duration of the Policy Loan, if shorter.
If the Owner does not pay the interest charged when it is due, an amount of
Cash Value equal to that which is due will be transferred to the Loan Account.
(See "Policy Rights and Privileges--Loans--Effect of Policy Loans.") The amount
transferred will be deducted from the Divisions in the same proportion that the
portion of the Cash Value in each Division bears to the total Cash Value of the
Policy (not including the Cash Value in the Loan Account).

Effect of Policy Loans. A loan taken from, or secured by, a Policy may have
federal income tax consequences. (See "Federal Tax Matters.")

Whether or not a Policy Loan is repaid, it will permanently affect the Cash
Value of a Policy, and may permanently affect the amount of the death benefit.
This is because the collateral for the Policy Loan (the amount held in the Loan
Account) does not participate in the performance of the Separate Account while
the loan is outstanding. If the Loan Account interest credited is less than the
investment performance of the selected Division, the Policy values will be
lower as a result of the loan. Conversely, if the Loan Account interest
credited is higher than the investment performance of the Division, the Policy
values may be higher.

In addition, if the Indebtedness exceeds the Cash Value on any Monthly
Anniversary, the Policy may lapse, subject to a grace period. (See "Charges and
Deductions.") A sufficient payment must be made within the later of:

24
<PAGE>

(1) the grace period of 62 days from the Monthly Anniversary immediately
before the date Indebtedness exceeds the Cash Value; or

(2) 31 days after notice that the Policy will terminate without a
sufficient payment has been mailed.

If a sufficient payment is not received, the Policy will lapse and terminate
without value. A lapsed Policy may later be reinstated. (See "Payment and
Allocation of Premiums--Policy Lapse and Reinstatement.")

All outstanding Indebtedness will be deducted from the proceeds payable upon
the death of the Insured, surrender, or the maturity of the Policy.

Repayment of Indebtedness. A Policy Loan may be repaid in whole or in part at
any time prior to the death of the Insured and as long as a Policy is in
effect. All repayments should be made directly to us. Amounts paid while a
Policy Loan is outstanding will be treated as premiums unless the Owner
requests in writing that the payments be treated as repayment of Indebtedness.
When a loan repayment is made, an amount securing the Indebtedness in the Loan
Account equal to the loan repayment will be transferred to the Divisions in the
same proportion that Cash Value in the Loan Account bears to the Cash Value in
each Loan Subaccount. A Loan Subaccount exists for each Division. Amounts
transferred to the Loan Account to secure Indebtedness are allocated to the
appropriate Loan Subaccount to reflect their origin.

Surrender and Partial Withdrawals

During the lifetime of the Insured and while a Policy is in force, the Owner
may surrender, or make a partial withdrawal of the Policy by sending a written
request to us. Any restrictions are described below. The amount available upon
surrender is the Cash Surrender Value (described below) at the end of the
Valuation Period during which the surrender request is received by us. Amounts
payable upon surrender or a partial withdrawal ordinarily will be paid within
seven days of receipt of the written request. (See "General Matters Relating to
the Policy--Postponement of Payments.") Surrenders and partial withdrawals may
have federal income tax consequences. (See "Federal Tax Matters.")

Surrender. To effect a surrender, the Policy must be returned to us along with
the request, or the request must be accompanied by a completed affidavit of
lost Policy. Upon request, we can provide a lost Policy Certificate. Upon
surrender, we will pay the Cash Surrender Value to the Owner. The Cash
Surrender Value equals the Cash Value on the date of surrender, less any
Indebtedness. Surrender proceeds will be paid in a single sum. If the request
is received on a Monthly Anniversary, the monthly deduction otherwise
deductible will be included in the amount paid. Coverage under a Policy will
terminate as of the date of surrender.

Partial Withdrawals. After the first Policy Year, an Owner may make up to one
partial withdrawal each Policy Month from the Separate Account. The minimum
amount of a partial withdrawal, net of any transaction charges, is $500. The
minimum amount that can be withdrawn from a Division is $50, or the Policy's
Cash Value in a Division, if smaller. The maximum amount that may be withdrawn,
including the partial withdrawal transaction charge, is the Loan Value. The
partial withdrawal transaction charge is equal to the lesser of $25 or 2% of
the amount withdrawn. The Owner may allocate the amount withdrawn, subject to
the above conditions, among the Divisions. If no allocation is specified, then
the partial withdrawal will be allocated among the Divisions in the same
proportion that the Policy's Cash Value in each Division bears to the total
Cash Value of the Policy (not including the Cash Value in the Loan Account) on
the date the request for the partial withdrawal is received.

25
<PAGE>

Amount. The death benefit also will be reduced in this circumstance. If Option
B is in effect and the death benefit equals the Face Amount plus the Cash
Value, the partial withdrawal will not reduce the Face Amount, but it will
reduce the Cash Value and, thus, the death benefit by the amount of the partial
withdrawal plus the partial withdrawal transaction charge. The Face Amount will
be decreased in the following order: (1) the Face Amount at issue; and (2) any
increases in the same order in which they were issued.

Generally, the partial withdrawal transaction charge will be allocated among
the Divisions in the same proportion as the partial withdrawal is allocated.
If, following a partial withdrawal, insufficient funds remain in a Division to
pay the partial withdrawal transaction charge allocated to a Division, the
unpaid charges will be allocated equally among the remaining Divisions. In
addition, an Owner may request that the partial withdrawal transaction charge
be paid from the Owner's Cash Value in another Division.

The Face Amount remaining in force after a partial withdrawal may not be less
than $25,000. Any request for a partial withdrawal that would reduce the Face
Amount below this amount will not be approved.

Partial withdrawals may affect the way in which the cost of insurance charge is
calculated and the amount of pure insurance protection afforded under a Policy.
(See "Policy Benefits--Death Benefit--Methods of Affecting Insurance
Protection.")

Transfers

Under the Company's current rules, a Policy's Cash Value (not including amounts
credited to the Loan Account), may be transferred among the Divisions available
with the Policy. Requests for transfers from or among Divisions must be made in
writing directly to us and may be made once each Policy Month. Transfers must
be in amounts of at least $250 or, if smaller, the Policy's Cash Value in a
Division. We will make transfers and determine all values in connection with
transfers as of the end of the Valuation Period during which the transfer
request is received.

All requests received on the same Valuation Day will be considered a single
transfer request. Each transfer must meet the minimum requirement of $250 or
the entire Cash Value in a Division. Where a single transfer request calls for
more than one transfer, and not all of the transfers would meet the minimum
requirements, we will make those transfers that do meet the requirements.
Transfers resulting from Policy Loans will not be counted for purposes of the
limitations on the amount or frequency of transfers allowed in each month or
year.

Although we currently intend to continue to permit transfers for the
foreseeable future, the Policy provides that we may modify the transfer
privilege, by changing the minimum amount transferable, by altering the
frequency of transfers, by imposing a transfer charge, by prohibiting
transfers, or in such other manner as we may determine.

Right to Examine Policy

The Owner may cancel a Policy within 10 days of after receiving it or such
longer period if required by state law. If a Policy is cancelled within this
time period, a refund will be paid. The refund will equal all premiums paid
under the Policy.

To cancel the Policy, the Owner should mail or deliver the Policy directly to
us. A refund of premiums paid by check may be delayed until the check has
cleared the Owner's bank. (See "General Matters Relating to the Policy--
Postponement of Payments.")

As noted above, a request for an increase in Face Amount (see "Policy
Benefits--Death Benefit") also may be cancelled. The request for cancellation
must be made within the latest of:

. 20 days from the date the Owner received the new Policy specifications
pages for the increase;

. 10 days of mailing the right to cancellation notice to the Owner; or

. 45 days after the Owner signed the application for the increase.

26
<PAGE>

Upon cancellation of an increase, the Owner may request that we refund the
amount of the additional charges deducted in connection with the increase. This
amount will equal the amount by which the monthly deductions since the increase
went into effect exceeded the monthly deductions which would have been made
absent the increase. (See "Charges and Deductions--Monthly Deduction.") If no
request is made, we will increase the Policy's Cash Value by the amount of
these additional charges. This amount will be allocated among the Divisions in
the same manner as it was deducted.

Conversion Right to a Fixed Benefit Policy

Once during the first 24 Policy Months following the Issue Date of the Policy,
the Owner may, upon written request, convert a Policy still in force to a life
insurance policy that provides for benefits that do not vary with the
investment return of the Divisions. In the event a Certificate has been amended
to operate as an Individual Policy following an Insured's change in eligibility
under a Group Contract, the conversion right will be measured from the Issue
Date of the original Certificate. (See "Policy Rights and Privileges--
Eligibility Change Conversion.") No evidence of insurability will be required
when this right is exercised. However, we will require that the Policy be in
force and that the Owner repay any existing Indebtedness. At the time of the
conversion, the new Policy will have, at the Owner's option, either the same
death benefit or the same net amount at risk as the original Policy. The new
Policy will also have the same Issue Date and Issue Age as the original Policy.
The premiums for the new Policy will be based on our rates in effect for the
same Issue Age and rate class as the original Policy.

Eligibility Change Conversion

If an Insured's eligibility under a Group Contract or employer-sponsored
insurance program ends due to its termination or due to the termination of the
employee's employment, the Insured's coverage will continue unless the Policy
is no longer in force. Even if the Policy is not in force due to lapse, the
right to reinstate and thus to convert a lapsed Policy will not be affected by
the change in the employee's eligibility during the reinstatement period.

If a Certificate was issued under the Group Contract, the Certificate will be
amended automatically so that it will continue in force as an Individual
Policy. The rights, benefits, and guaranteed charges will not be altered by
this amendment. The amendment will be mailed to the Owner within 31 days (a)
after we receive written notice that the employee's employment ended or (b)
after the termination of the Group Contract. If, at the time the conversion
occurs, the Policy is in a grace period (see "Payment and Allocation of
Premiums--Policy Lapse and Reinstatement"), any premium necessary to prevent
the Policy from lapsing must be paid us before the new Individual Policy will
be mailed. A new planned premium schedule will be established which will have
the same planned annual premium utilized under the Group Contract. The new
planned payment intervals will be no more frequent than quarterly. The Company
may allow payment of planned premium through periodic (usually monthly)
authorized electronic funds transfer. Of course, unscheduled premium payments
can be made at any time. (See "Payment and Allocation of Premiums--Premiums.")

If an Individual Policy was issued under the Group Contract or other employer-
sponsored insurance program including a Corporate Program or Executive Program,
the Policy will continue in force following the change in eligibility. The
rights, benefits, and guaranteed charges under the Policy will remain the same
following this change in eligibility.

When an employee's spouse is the Insured under a Policy, the spouse's insurance
coverage also will continue in the event the employee is no longer eligible. If
a Certificate was originally issued to the employee's spouse, the Certificate
will be amended automatically as described above. If an Individual Policy was
originally issued, the Individual Policy will continue as described above. In
addition, if an Associated Company ceases be to under common control with the
Contractholder, the Insureds of the Associated Company (i.e., employees of the
Associated Company and their spouses) may continue their insurance in the
manner described above.

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<PAGE>

Payment of Benefits at Maturity

If the Insured is living and the Policy is in force, the Company will pay the
Cash Surrender Value of the Policy to the Owner on the Maturity Date. An Owner
may elect to have amounts payable on the Maturity Date paid in a single sum or
under a settlement option. (See "Policy Rights and Privileges--Payment of
Policy Benefits.") Amounts payable on the Maturity Date ordinarily will be paid
within seven days of that date, although payment may be postponed under certain
circumstances. (See "General Matters Relating to the Policy--Postponement of
Payments.") A Policy will mature if and when the Insured reaches Attained Age
95.

Payment of Policy Benefits

A lump sum payment will be made. Provisions for settlement of proceeds
different from a lump sum payment may only be made upon written our agreement.

Settlement Options. We may offer settlement options that apply to the payment
of death benefit proceeds, as well as to benefits payable at maturity. Once a
settlement option is in effect, there will no longer be value in the Separate
Account.

Accelerated Death Benefits. We offer certain riders which permit the Owner to
elect to receive an accelerated payment of the Policy's death benefit in a
reduced amount under certain circumstances. (See "General Matters Relating to
the Policy--Additional Insurance Benefits.")

CHARGES AND DEDUCTIONS

We will deduct charges in connection with the Policies to compensate us for
providing the insurance benefits set forth in the Policies and any additional
benefits added by rider, administering the Policies, incurring expenses in
distributing the Policies, and assuming certain risks in connection with the
Policies. We may realize a profit on one or more of these charges. We may use
any such profit for any corporate purpose, including, among other things,
payments of sales and distribution expenses.

Sales Charges

Prior to allocation of net premiums among the Divisions, premium payments will
be reduced by a front-end sales charge ("premium expense charge") equal to 1%
of the premium.

In addition, as a result of OBRA, insurance companies are generally required to
capitalize and amortize certain policy acquisition expenses over a ten year
period rather than currently deducting such expenses. A higher capitalization
expense applies to the deferred acquisition expenses of Policies that are
deemed to be individual contracts under OBRA and will result in a significantly
higher corporate income tax liability for the Company in early Policy Years.
Thus, under Policies that are deemed to be individual contracts under OBRA, we
make an additional charge of 1% of each premium payment to compensate us for
the anticipated higher corporate income taxes that result from the sale of such
a Policy. Among other possible employer-sponsored programs, Corporate Program
Policies are deemed to be individual contracts.

The net premium payment is calculated as the premium payment less:

. the premium expense charge less;

. any charge to compensate the Company for anticipated higher corporate
income taxes resulting from the sale of a Policy; and

. the premium tax charge (described below).

The sales charges will not change if an Insured is no longer eligible under a
Group Contract or employer-sponsored insurance program, but continues coverage
on an individual basis.

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<PAGE>

Premium Tax Charge

Various states and subdivisions impose a tax on premiums received by insurance
companies. Premium taxes vary from jurisdiction to jurisdiction. To cover these
premium taxes, premium payments will be reduced by a premium tax charge of 2%
from all Policies.

Monthly Deduction

Charges will be deducted monthly from the Cash Value of each Policy ("monthly
deduction") to compensate us for (a) certain administrative costs; (b)
insurance underwriting and acquisition expenses in connection with issuing a
Policy; (c) the cost of insurance; and (d) the cost of optional benefits added
by rider. The monthly deduction will be deducted on the Investment Start Date
and on each succeeding Monthly Anniversary. It will be allocated among each
Division in the same proportion that a Policy's Cash Value in each Division
bears to the total Cash Value of the Policy (not including the Cash Value in
the Loan Account) on the date the deduction is made. Because portions of the
monthly deduction, such as the cost of insurance, can vary from month to month,
the monthly deduction itself will vary in amount from month to month.

Monthly Administrative Charge. We are responsible for the administration of the
Policies and the Separate Account. Administrative expenses include premium
billing and collection, recordkeeping, processing death benefit claims, cash
surrenders, partial withdrawals, Policy changes, reporting and overhead costs,
processing applications, and establishing Policy records. We assess a monthly
administration charge from each Policy. The amount of this charge is set forth
in the specifications pages of the Policy and depends on the number of
employees eligible to be covered at issue of a Group Contract or an employer-
sponsored insurance program. The following table sets forth the range of
monthly administrative charges under the Policy:

<TABLE>
<CAPTION>
Eligible First Subsequent
Employees Year Years
--------- ----- ----------
<S> <C> <C>
250-499..................................................... $5.00 $2.50
500-999..................................................... $4.75 $2.25
1000+....................................................... $4.50 $2.00
</TABLE>

For Group Contracts or other employer-sponsored insurance programs (1) with
fewer than 250 eligible employees, (2) with additional administrative costs, or
(3) that are offered as Executive Programs or Corporate Programs, the monthly
administrative charge may be higher, but will not exceed $6.00 per month during
the first Policy Year and $3.50 per month in renewal years.

These charges are guaranteed not to increase over the life of the Policy. The
administrative charge will not change in the event that the Insured is no
longer eligible for group coverage, but continues coverage on an individual
basis. In addition, when we believe that lower administrative costs will be
incurred in connection with a particular Group Contract or employer-sponsored
insurance program we may modify the above schedule for that Group Contract or
other employer-sponsored insurance program. The amount of the administrative
charge applicable to a particular Policy will be set forth in specifications
pages for that Policy.

Cost of Insurance. The cost of insurance is deducted on each Monthly
Anniversary for the next Policy Month. Because the cost of insurance depends
upon a number of variables, the cost will vary for each Policy Month. The cost
of insurance is determined separately for the initial Face Amount and for any
increases in Face Amount. We will determine the monthly cost of insurance
charge by multiplying the applicable cost of insurance rate or rates by the net
amount at risk for each Policy Month.

Cost of Insurance Rates. The cost of insurance rates are determined at the
beginning of each Policy Year for the initial Face Amount and each increase in
Face Amount. We will determine the current cost of insurance rates based on our
expectations as to future mortality experience. We currently issue the Policies
on a guaranteed issue or simplified underwriting basis without regard to the
sex of the Insured. Whether a Policy is

29
<PAGE>

issued on a guaranteed issue or simplified underwriting basis does not affect
the cost of insurance charge determined for that Policy.

The current cost of insurance rates will be based on the Attained Age of the
Insured, the rate class of the Insured, and possibly the gender mix (i.e., the
proportion of men and women covered under a particular Group Contract or
employer-sponsored program). The cost of insurance rates generally increase as
the Insured's Attained Age increases. An Insured's rate class is generally
based on the number of eligible employees as well as other factors that may
affect the mortality risk we assume in connection with a particular Group
Contract or employer-sponsored insurance program. All other factors being
equal, the cost of insurance rates generally decrease by rate class as the
number of eligible employees in the rate class increase. We reserve the right
to change criteria on which a rate class will be based in the future.

If gender mix is a factor, we will estimate the gender mix of the pool of
Insureds under a Group Contract or employer-sponsored insurance program upon
issuance of the Contract. Each year on the Group Contract or employer-sponsored
insurance program's anniversary, we may adjust the rate to reflect the actual
gender mix for the particular group. In the event that the Insured's
eligibility under a Group Contract (or other employer-sponsored insurance
program) ceases, the cost of insurance rate will continue to reflect the gender
mix of the pool of Insureds at the time the Insured's eligibility ceased.
However, at some time in the future, we reserve the right to base the gender
mix and rate class on the group consisting of those Insureds who are no longer
under a Group Contract or employer-sponsored program.

The current cost of insurance rates will not be greater than the guaranteed
cost of insurance rates set forth in the Policy. These guaranteed rates are
125% of the maximum rates that could be charged based on the 1980 Commissioners
Standard Ordinary Mortality Table C ("1980 CSO Table"). The guaranteed rates
are higher than 100% of the maximum rates in the 1980 CSO Table because we use
guaranteed or simplified underwriting procedures whereby the insured is not
required to submit to a medical or paramedical examination. The current cost of
insurance rates are generally lower than 100% of the 1980 CSO Table. Any change
in the actual cost of insurance rates, will apply to all persons of the same
Attained Age and rate class whose Face Amounts have been in force for the same
length of time. Any change in the actual cost of insurance rates will not
include changes made to adjust for changes in the gender mix of the pool of
Insureds under a particular Group Contract or employer-sponsored insurance
program. (For purposes of computing guideline premiums under Section 7702 of
the Internal Revenue Code of 1986, as amended, the Company will use 100% of the
1980 CSO Table.)

Net Amount at Risk. The net amount at risk for a Policy Month is (a) the death
benefit at the beginning of the Policy Month divided by 1.0040741), less (b)
the Cash Value at the beginning of the Policy Month. Dividing the death benefit
by 1.0040741 reduces the net amount at risk, solely for purposes of computing
the cost of insurance, by taking into account assumed monthly earnings at an
annual rate of 5%.

The net amount at risk may be affected by changes in the Cash Value or changes
in the Face Amount of the Policy. If there is an increase in the Face Amount
and the rate class applicable to the increase is different from that for the
initial Face Amount, we will calculate the net amount at risk separately for
each rate class. When we determine the net amounts at risk for each rate class,
when Option A is in effect, we will consider the Cash Value first to be a part
of the initial Face Amount. If the Cash Value is greater than the initial Face
Amount, we will consider the excess Cash Value a part of each increase in
order, starting with the first increase. If Option B is in effect, we will
determine the net amount at risk for each rate class by the Face Amount
associated with that rate class. In calculating the cost of insurance charge,
the cost of insurance rate for a Face Amount is applied to the net amount at
risk for the corresponding rate class.

Because the calculation of the net amount at risk is different under Option A
and Option B when more than one rate class is in effect, a change in the death
benefit option may result in a different net amount at risk for each rate
class. Since the cost of insurance is calculated separately for each rate
class, any change in the net amount at risk resulting from a change in the
death benefit option may affect the total cost of insurance paid by the Owner.

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Partial withdrawals and decreases in Face Amount will affect the manner in
which the net amount at risk for each rate class is calculated. (See "Policy
Benefits--Death Benefit," and "Policy Rights and Privileges--Surrender and
Partial Withdrawals.")

Additional Insurance Benefits. The monthly deduction will include charges for
any additional benefits provided by rider. (See "General Matters Relating to
the Policy--Additional Insurance Benefits.")

Partial Withdrawal Transaction Charge

A transaction charge which is the lesser of $25 or 2% of the amount withdrawn
will be assessed on each partial withdrawal, to cover administrative costs
incurred in processing the partial withdrawal.

Separate Account Charges

Mortality and Expense Risk Charge. The Company will deduct a daily charge from
the Separate Account at the rate not to exceed .0024547% of the net assets of
each Division of the Separate Account. This equals an annual rate of .90% of
those net assets. This deduction is guaranteed not to increase for the duration
of the Policy. We may realize a profit from this charge and may use this profit
to finance distribution expenses.

The mortality risk we assume is that an Insured may die sooner than anticipated
and that we will pay an aggregate amount of death benefits greater than
anticipated. The expense risk assumed is that expenses incurred in issuing and
administering the Policy will exceed the amounts realized from the
administrative charges assessed against the Policy.

Federal Taxes. Currently no charge is made to the Separate Account for federal
income taxes that may be incurred by the Separate Account. We may make such a
charge in the future. Charges for other taxes incurred by the Account may also
be made. (See "Federal Tax Matters.")

Expenses of the Funds. The value of the net assets of the Separate Account will
reflect the investment advisory fee and other expenses incurred by the Funds.
(See "Summary of the Policy--Separate Account Charges--Annual Expenses of the
Funds" and "The Company, the Separate Accounts and The Funds--The Funds.")

GENERAL MATTERS RELATING TO THE POLICY

Postponement of Payments

Payment of any amount due from the Separate Account because of surrender,
partial withdrawals, election of an accelerated death benefit under a rider,
death of the Insured, or the Maturity Date, as well as payments of a Policy
loan and transfers, may be postponed whenever:

(1) the New York Stock Exchange is closed other than customary weekend and
holiday closings, or trading on the New York Stock Exchange is
restricted as determined by the SEC;

(2) the SEC by order permits postponement for the protection of Owners; or

(3) an emergency exists, as determined by the SEC, as a result of which
disposal of securities is not reasonably practicable or it is not
reasonably practicable to determine the value of the Separate Account's
net assets.

Payments under the Policy of any amounts derived from premiums paid by check
may be delayed until such time as the check has cleared the Owner's bank.

The Contract

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the rights and benefits described in the Certificate or Individual Policy and
incorporated by reference into the Group Contract, the Owner has no rights
under the Group Contract. All statements made by the Insured in the application
are considered representations and not warranties, except in the case of fraud.
Only statements in the application and any supplemental applications can be
used to contest a claim or the validity of the Policy. Any change to the Policy
must be approved in writing by the President, a Vice President, or the
Secretary of the Company. No agent has the authority to alter or modify any of
the terms, conditions, or agreements of the Policy or to waive any of its
provisions.

Control of Policy

The Insured will be the Owner of the Policy unless another person is shown as
the Owner in the application. Ownership may be changed as described below. The
Owner is entitled to all rights provided by the Policy,
prior to its Maturity Date. After the Maturity Date, the Owner cannot change
the payee nor the mode of payment, unless otherwise provided in the Policy. Any
person whose rights of ownership depend upon some future event will not possess
any present rights of ownership. If there is more than one Owner at a given
time, all must exercise the rights of ownership. If the Owner should die, and
the Owner is not the Insured, the Owner's interest will go to his or her estate
unless otherwise provided.

Beneficiary

The Beneficiary(ies) is (are) the person(s) specified in the application or by
later designation. Unless otherwise stated in the Policy, the Beneficiary has
no rights in a Policy before the death of the Insured. If there is more than
one Beneficiary at the death of the Insured, each will receive equal payments
unless otherwise provided by the Owner. If no Beneficiary is living at the
death of the Insured, the proceeds will be payable to the Owner or, if the
Owner is not living, to the Owner's estate.

Change of Owner or Beneficiary

The Owner may change the ownership and/or Beneficiary designation by written
request in a form acceptable to us at any time during the Insured's lifetime.
The Company may require that the Policy be returned for endorsement of any
change. The change will take effect as of the date the request is signed,
whether or not the Insured is living when the request is received by us. We
will not be liable for any payment made or action taken before we receive the
written request for change. If the Owner is also a Beneficiary of the Policy at
the time of the Insured's death, the Owner may, within 60 days of the Insured's
death, designate another person to receive the Policy proceeds. Changing the
Owner may have adverse tax consequences.

Policy Changes

We reserve the right to limit the number of Policy changes to one per Policy
Year and to restrict such changes in the first Policy Year. Currently, no
change may be made during the first Policy Year. For this purpose, changes
include increases or decreases in Face Amount and changes in the death benefit
option. No change will be permitted that would result in the death benefit
under a Policy being included in gross income due to not satisfying the
requirements of Section 7702 of the Internal Revenue Code or any applicable
successor provision.

Conformity with Statutes

If any provision in a Policy is in conflict with the laws of the state
governing the Policy, the provision will be deemed to be amended to conform to
such laws.

Claims of Creditors

To the extent permitted by law, neither the Policy nor any payment thereunder
will be subject to the claims of creditors or to any legal process.

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Incontestability

The Policy is incontestable after it has been in force for two years from the
Issue Date during the lifetime of the Insured. An increase in Face Amount or
addition of a rider after the Issue Date is incontestable after such increase
or addition has been in force for two years from its effective date during the
lifetime of the Insured. Any reinstatement of a Policy is incontestable, except
for nonpayment of premiums, only after it has been in force during the lifetime
of the Insured for two years after the effective date of the reinstatement.

Assignment

We will be bound by an assignment of a Policy only if: (a) it is in writing;
(b) the original instrument or a certified copy is filed with us at our Home
Office; and (c) we send an acknowledged copy to the Owner. We are not
responsible for determining the validity of any assignment. Payment of Policy
proceeds is subject to the rights of any assignee of record. If a claim is
based on an assignment, we may require proof of the interest of the claimant. A
valid assignment will take precedence over any claim of a Beneficiary.

Suicide

Suicide within two years of the Issue Date is not covered by the Policy. If the
Insured dies by suicide, while sane or insane, within two years from the Issue
Date (or within the maximum period permitted by the laws of the state in which
the Policy was delivered, if less than two years), the amount payable will be
limited to premiums paid, less any partial withdrawals and outstanding
Indebtedness. If the Insured, while sane or insane, dies by suicide within two
years after the effective date of any increase in Face Amount, the death
benefit for that increase will be limited to the amount of the monthly
deductions for the increase.

If the Insured is a Missouri citizen when the Policy is issued, this provision
does not apply on the Issue Date of the Policy, or on the effective date of any
increase in Face Amount, unless the Insured intended suicide at the time of
application for the Policy or any increase in Face Amount.

Misstatement of Age and Corrections

If the age of the Insured has been misstated in the application, the amount of
the death benefit will be that which the most recent cost of insurance charge
would have purchased for the correct age.

Any payment or Policy changes we make in good faith, relying on our records or
evidence supplied with respect to such payment, will fully discharge our duty.
We reserve the right to correct any errors in the Policy.

Additional Insurance Benefits

Subject to certain requirements, one or more of the following additional
insurance benefits may be added to a Policy by rider. However, some Group
Contracts or employer-sponsored insurance programs may not offer each of the
additional benefits described below. Certain riders may not be available in all
states. In addition, should it be determined that the tax status of a Policy as
life insurance is adversely affected by the addition of any of these riders, we
will cease offering such riders. The descriptions below are intended to be
general; the terms of the Policy riders providing the additional benefits may
vary from state to state, and the Policy should be consulted. The cost of any
additional insurance benefits will be deducted as part of the monthly
deduction. (See "Charges and Deductions--Monthly Deduction.")

Waiver of Monthly Deductions Rider. Provides for the waiver of the monthly
deductions while the Insured is totally disabled, subject to certain
limitations described in the rider. The Insured must have become disabled
before age 65.

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will be paid upon receipt of proof by us that death resulted directly from
accidental injury and independently of all other causes; occurred within 120
days from the date of injury; and occurred before the Policy Anniversary
nearest age 70 of the Insured.

Children's Life Insurance Rider. Provides for term insurance on the Insured's
children, as defined in the rider. To be eligible for insurance under the
rider, the child to be insured must not be confined in a hospital at the time
the application is signed. Under the terms of the rider, the death benefit will
be payable to the named
Beneficiary upon the death of any insured child. Upon receipt of proof of the
Insured's death before the rider terminates, the rider will be continued on a
fully paid-up term insurance basis.

HIV Acceleration of Death Benefits Rider. Provides for the Owner's election an
accelerated payment, prior to the death of the Insured upon receipt of
satisfactory evidence that the Insured has tested seropositive for the human
immunodeficiency virus ("HIV") after both the Policy and rider are issued. We
will pay the Policy's death benefit (less any Indebtedness and any term
insurance added by riders), calculated on the date that we receive satisfactory
evidence that the Insured has tested seropositive for HIV, reduced by a $100
administrative processing fee. We will pay the accelerated benefit to the Owner
in a single payment in full settlement of the obligations under the Policy. The
rider may be added to the Policy only after the Insured satisfactorily meets
certain underwriting requirements which will generally include a negative HIV
test result to a blood or other screening test acceptable to us.

The federal income tax consequences associated with (i) adding the HIV
Acceleration of Death Benefit Rider or (ii) receiving the benefit provided
under the rider are uncertain. Accordingly, we urge you to consult a tax
advisor about such consequences before adding the HIV Acceleration of Death
Benefit Rider to your Policy or requesting a benefit under the rider.

Accelerated Death Benefit Settlement Option Rider. Provides for the accelerated
payment of a portion of death benefit proceeds in a single sum to the Owner if
the Insured is terminally ill or permanently confined to a nursing home. Under
the rider, which is available at no additional cost, the Owner may make a
voluntary election to completely settle the Policy in return for accelerated
payment of a reduced death benefit. The Owner may make such an election under
the rider if evidence, including a certification from a licensed physician, is
provided to us that the Insured (1) has a life expectancy of 12 months or less
or (2) is permanently confined to a qualified nursing home and is expected to
remain there until death. Any irrevocable Beneficiary and assignees of record
must provide written authorization in order for the Owner to receive the
accelerated benefit. The Accelerated Death Benefit Settlement Option Rider is
not available with Corporate Programs.

The amount of the death benefit payable under the rider will equal the Cash
Surrender Value under the Policy on the date we receive satisfactory evidence
of either (1) or (2), above (less any Indebtedness and any term insurance added
by other riders), plus the product of the applicable "benefit factor"
multiplied by the difference of (a) minus (b), where (a) equals the Policy's
death benefit proceeds, and (b) equals the Policy's Cash Surrender Value. The
"benefit factor", in the case of terminal illness, is 0.85 and, in the case of
permanent nursing home confinement, is 0.70.

Pursuant to the Health Insurance Portability and Accountability Act of 1996, we
believe that for federal income tax purposes an accelerated death benefit
payment made under the Accelerated Death Benefit Settlement Option Rider should
be fully excludable from the gross income of the Beneficiary, as long as the
Beneficiary is the Insured under the Policy. However, you should consult a
qualified tax advisor about the consequences of adding this Rider to a Policy
or requesting an accelerated death benefit payment under this Rider.

Records and Reports

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deductions made since the last report, and any outstanding Policy Loans. The
Owner will also be sent without comment periodic reports for the Funds and a
list of the portfolio securities held in each Fund. Receipt of premium payments
directly from the Owner, transfers, partial withdrawals, Policy Loans, loan
repayments, changes in death benefit options, increases or decreases in Face
Amount, surrenders and reinstatements will be confirmed promptly following each
transaction.

An Owner may request in writing a projection of illustrated future Cash
Surrender Values and death benefits. This projection will be furnished by us
for a nominal fee.

DISTRIBUTION OF THE POLICIES

Walnut Street Securities, Inc. ("Walnut Street") acts as principal underwriter
of the Policies pursuant to an Underwriting Agreement with us. Walnut Street is
a wholly-owned subsidiary of GenAmerica Corporation, a Missouri general
business corporation, which is also a parent company of the Company. GenAmerica
Corporation is wholly owned by Metropolitan Life Insurance Company, a New York
Insurance Company. Walnut Street is registered with the SEC under the
Securities Exchange Act of 1934 as a broker-dealer and is a member of the
National Association of Securities Dealers. Walnut Street's Internal Revenue
Service employer identification No. is 43-1333368. It is a Missouri corporation
formed May 4, 1984. Walnut Street's address is 400 South 4th Street, Suite
1000, St. Louis, MO 63102. The Policies will be sold by broker-dealers who have
entered into written sales agreements with Walnut Street. Sales of the Policies
may take place in all states (except New York) and the District of Columbia.

Broker-dealers will receive commissions based upon a commission schedule in the
sales agreement with us and Walnut Street. Broker-dealers compensate their
registered representative agents. Commissions are payable on net collected
premiums received by the Company. Maximum commissions payable to a broker-
dealer during the first year of a Group Contract or other employer-sponsored
insurance program are (a) 18% of premiums that do not exceed the cost of
insurance assessed during the first Policy Year plus (b) 1% of premiums in
excess of the cost of insurance assessed during that Policy Year. In all
renewal years of a Group Contract or other employer-sponsored insurance program
maximum commissions are (a) 3% of premiums that do not exceed the cost of
insurance assessed during the respective Policy Year plus (b) 1% of premiums in
excess of the cost of insurance assessed during that Policy Year. In lieu of
the part (b) of renewal commissions described above payable on premiums
received in excess of the cost of insurance assessed, renewal commissions may
be up to 0.25% per year of the average Cash Value of a Policy during a Policy
Year or calendar year. In no event will commissions be payable for more than 20
years.

GENERAL PROVISIONS OF THE GROUP CONTRACT

Issuance

The Group Contract will be issued upon receipt of a signed application for
Group Insurance signed by a duly authorized officer of the employer and
acceptance by a duly authorized officer of the Company at its Home Office.

Premium Payments

The Contractholder will give planned premium payments for Insureds of the
Contractholder or an Associated Company in an amount authorized by the employee
to be deducted from his wages. All planned premiums under a Group Contract must
be given in advance. The planned premium payment interval is agreed to by the
Contractholder and us. Prior to each planned payment interval, we will furnish
the Contractholder with a statement of the planned premium payments to be made
under the Group Contract or such other notification as has been agreed to by
the Contractholder and us.

Grace Period

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If the Contractholder does not give premiums prior to the end of the grace
period, the Group Contract will terminate. However, the Individual Insurance
will continue following the Group Contract's termination, provided such
insurance is not surrendered or cancelled by the Owner. (See "Policy Rights and
Privileges--Eligibility Change Conversion.")

Termination

Except as described in "Grace Period" above, the Group Contract will be
terminated immediately upon default. In addition, we may end a Group Contract
or any of its provisions on 31 days' notice. If the Group Contract terminates,
any Policies in effect will remain in force on an individual basis, unless such
insurance is surrendered or cancelled by the Owner. New Policies will be issued
as described in "Policy Rights and Privileges--Eligibility Change Conversion."

Right to Examine Group Contract

The Contractholder may terminate the Group Contract within 20 days after
receiving it, within 45 days after the application was signed or within 10 days
of mailing a notice of the cancellation right, whichever is latest. To cancel
the Group Contract, the Contractholder should mail or deliver the Group
Contract to us.

Entire Contract

The Group Contract, with the attached copy of the Contractholder's application
and other attached papers, if any, is the entire contract between the
Contractholder and us. All statements made by the Contractholder, any Owner or
any Insured will be deemed representations and not warranties. Misstatements
will not be used in any contest or to reduce claim under the Group Contract,
unless it is in writing. A copy of the application containing such misstatement
must have been given to the Contractholder or to the Insured or to his
Beneficiary, if any.

Incontestability

We cannot contest the Group Contract after it has been in force for two years
from the date of issue.

Ownership of Group Contract

The Contractholder owns the Group Contract. The Group Contract may be changed
or ended by agreement between us and the Contractholder without the consent of,
or notice to, any person claiming rights or benefits under the Group Contract.
However, the Contractholder does not have any ownership interest in the
Policies issued under the Group Contract. The rights and benefits under the
Policies inure to the benefit of the Owners, Insureds, and Beneficiaries as set
forth herein and in the Policies.

FEDERAL TAX MATTERS

Introduction

The following summary provides a general description of the federal income tax
considerations associated with the Policy and does not purport to be complete
or to cover all tax situations. This discussion is not intended as tax advice.
Counsel or other competent tax advisors should be consulted for more complete
information. This discussion is based upon our understanding of the present
federal income tax laws. No representation is made as to the likelihood of
continuation of the present federal income tax laws or as to how they may be
interpreted by the Internal Revenue Service.

Tax Status of the Policy

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which are set forth in the Internal Revenue Code. Guidance as to how these
requirements are to be applied is limited. Nevertheless, we believe that the
Policy should satisfy the applicable requirements. If it is subsequently
determined that a Policy does not satisfy the applicable requirements, we may
take appropriate steps to bring the Policy into compliance with such
requirements and we reserve the right to restrict Policy transactions in order
to do so.

In certain circumstances, owners of variable life insurance contracts have been
considered for federal income tax purposes to be the owners of the assets of
the variable account supporting their contracts due to their ability to
exercise investment control over those assets. Where this is the case, the
contract owners have been currently taxed on income and gains attributable to
the variable account assets. There is little guidance in this area, and some
features of the Policies, such as the flexibility of a Owner to allocate
premiums and cash values, have not been explicitly addressed in published
rulings. While we believe that the Policies do not give Owners investment
control over Variable Account assets, we reserve the right to modify the
Policies.as necessary to prevent a Owner from being treated as the owner of the
Variable Account assets supporting the Policy.

In addition, the Code requires that the investments of the Variable Account be
"adequately diversified" in order for the Policies to be treated as life
insurance contracts for federal income tax purposes. It is intended that the
Variable Account, through its decisions, will satisfy these diversification
requirements.

The following discussion assumes that the Policy will qualify as a life
insurance contract for federal income tax purposes.

Tax Treatment of Policy Benefits

In General. We believe that the death benefit under a Policy should be
excludible from the gross income of the beneficiary. Federal, state and local
transfer, and other tax consequences of ownership or receipt of Policy proceeds
depend on the circumstances of each Owner or beneficiary. A tax advisor should
be consulted on these consequences.

Generally, the Owner will not be deemed to be in constructive receipt of the
Policy cash value until there is a distribution. When distributions from a
Policy occur, or when loans are taken out from or secured by a Policy, the tax
consequences depend on whether the Policy is classified as a "modified
endowment contract."

Modified Endowment Contracts. Under the Internal Revenue Code, certain life
insurance contracts are classified as "modified endowment contracts," with less
favorable tax treatment than other life insurance contracts. Due to the
flexibility of the Policies as to premiums and benefits, the individual
circumstances of each Policy will determine whether it is classified as a
modified endowment contract. The rules are too complex to be summarized here,
but generally depend on the amount of premiums paid during the first seven
Policy years. Certain changes in a Policy after it is issued could also cause
it to be classified as a modified endowment contract. A current or prospective
Owner should consult with a competent advisor to determine whether a Policy
transaction will cause the Policy to be classified as a modified endowment
contract.

Distributions Other Than Death Benefits from Modified Endowment Contracts.
Policies classified as modified endowment contracts are subject to the
following tax rules:

(1) All distributions other than death benefits, including distributions
upon surrender and withdrawals, from a modified endowment contract will be
treated first as distributions of gain taxable as ordinary income and as
tax-free recovery of the Owner's investment in the Policy only after all
gain has been distributed.

(2) Loans taken from or secured by a Policy classified as a modified
endowment contract are treated as distributions and taxed accordingly.

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<PAGE>

(3) A 10 percent additional income tax is imposed on the amount subject to
tax except where the distribution or loan is made when the Owner has
attained age 59 1/2 or is disabled, or where the distribution is part of a
series of substantially equal periodic payments for the life (or life
expectancy) of the Owner or the joint lives (or joint life expectancies) of
the Owner and the Owner's beneficiary or designated beneficiary.

If a Policy becomes a modified endowment contract, distributions that occur
during the contract year will be taxed as distributions from a modified
endowment contract. In addition, distributions from a Policy within two years
before it becomes a modified endowment contract will be taxed in this manner.
This means that a distribution made from a Policy that is not a modified
endowment contract could later become taxable as a distribution from a modified
endowment contract.

Distributions Other Than Death Benefits from Policies that are not Modified
Endowment Contracts. Distributions other than death benefits from a Policy that
is not classified as a modified endowment contract are generally treated first
as a recovery of the Owner's investment in the Policy and only after the
recovery of all investment in the Policy as taxable income. However, certain
distributions which must be made in order to enable the Policy to continue to
qualify as a life insurance contract for federal income tax purposes if Policy
benefits are reduced during the first 15 Policy years may be treated in whole
or in part as ordinary income subject to tax.

Loans from or secured by a Policy that is not a modified endowment contract are
generally not treated as distributions.

Finally, neither distributions from nor loans from or secured by a Policy that
is not a modified endowment contract are subject to the 10 percent additional
income tax.

Investment in the Policy. Your investment in the Policy is generally your
aggregate premiums. When a distribution is taken from the Policy, your
investment in the Policy is reduced by the amount of the distribution that is
tax-free.

Policy Loans. In general, interest on a Policy loan will not be deductible. If
a Policy loan is outstanding when a Policy is canceled or lapses, the amount of
the outstanding indebtedness will be added to the amount distributed and will
be taxed accordingly. Before taking out a Policy loan, you should consult a tax
adviser as to the tax consequences.

Multiple Policies. All modified endowment contracts that are issued by us (or
our affiliates) to the same Owner during any calendar year are treated as one
modified endowment contract for purposes of determining the amount includible
in the Owner's income when a taxable distribution occurs.

Accelerated Death Benefit Settlement Option Rider. We believe that payments
received under the Accelerated Death Benefit Settlement Option Rider should be
fully excludable from the gross income of the beneficiary if the beneficiary is
the insured under the Policy. However, you should consult a qualified tax
adviser about the consequences of adding this rider to a Policy or requesting
payment under this rider.

HIV Acceleration of Death Benefit Rider. The tax consequences association with
the HIV Acceleration of Death Benefit Rider are uncertain and a tax advisor
should be consulted.

Business Uses of Policy. Businesses can use the Policies in various
arrangements, including nonqualified deferred compensation or salary
continuance plans, split dollar insurance plans, executive bonus plans, tax
exempt and nonexempt welfare benefit plans, retiree medical benefit plans and
others. The tax consequences of such plans may vary depending on the particular
facts and circumstances. If you are purchasing the Policy for any arrangement
the value of which depends in part on its tax consequences, you should consult
a qualified tax adviser. In recent years, moreover, Congress has adopted new
rules relating to life insurance owned by businesses. Any business
contemplating the purchase of a new Policy or a change in an existing Policy
should consult a tax adviser.

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Other Tax Considerations. The transfer of the Policy or designation of a
beneficiary may have federal, state, and/or local transfer and inheritance tax
consequences, including the imposition of gift, estate, and generation-skipping
transfer taxes. For example, the transfer of the Policy to, or the designation
as a beneficiary of, or the payment of proceeds to, a person who is assigned to
a generation which is two or more generations below the generation assignment
of the owner may have generation skipping transfer tax consequences under
federal tax law. The individual situation of each owner or beneficiary will
determine the extent, if any, to which federal, state, and local transfer. and
inheritance taxes may be imposed and how ownership or receipt of Policy
proceeds will be treated for purposes of federal, state and local estate,
inheritance, generation skipping and other taxes.

Possible Tax Law Changes. Although the likelihood of legislative changes is
uncertain, there is always the possibility that the tax treatment of the Policy
could change by legislation or otherwise. Consult a tax adviser with respect to
legislative developments and their effect on the Policy.

Our Income Taxes

Under current federal income tax law, we are not taxed on the Separate
Account's, operations. Thus, currently we do not deduct a charge from the
Separate Account for federal income taxes. We reserve the right to charge the
Separate Account for any future federal income taxes or economic burdens we may
incur.

Under current laws in several states, we may incur state and local taxes (in
addition to premium taxes). These taxes are not now significant and we are not
currently charging for them. If they increase, we may deduct charges for such
taxes.

SAFEKEEPING OF THE SEPARATE ACCOUNT'S ASSETS

The Company holds assets of the Separate Account. The assets are kept
physically segregated and held separate and apart from our general assets. We
maintain records of all purchases and redemptions of Fund shares by each of the
Divisions. Additional protection for the assets of the Separate Account is
afforded by Financial Institution Bonds issued by St. Paul Fire and Marine
Company with a limit of $25 million, covering all officers and employees of the
Company who have access to the assets of the Separate Account.

VOTING RIGHTS

To the extent required by law, the Company will vote the shares held in the
Separate Account at regular and special shareholder meetings of the underlying
Funds in accordance with instructions received from persons having voting
interests in the corresponding Divisions of the Separate Account. If, however,
the 1940 Act or any regulation thereunder should be amended or if the present
interpretation thereof should change, and as a result the Company determines
that it is permitted to vote shares of the underlying Funds in its own right,
it may elect to do so.

The Owners of Policies ordinarily are the persons having a voting interest in
the Divisions of the Separate Account. The number of votes which an Owner has
the right to instruct will be calculated separately for each Division. The
number of votes which each Owner has the right to instruct will be determined
by dividing a Policy's Cash Value in a Division by the net asset value per
share of the corresponding Fund in which the Division invests. Fractional
shares will be counted. The number of votes of the Fund which the Owner has
right to instruct will be determined as of the date coincident with the date
established by that Fund for determining shareholders eligible to vote at the
meeting of the underlying Funds. Voting instructions will be solicited by
written communications prior to such meeting in accordance with procedures
established by the underlying Funds.

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Because the Funds serve as investment vehicles for this Policy as well as for
other variable life insurance policies sold by insurers other than the Company
and funded through other separate investment accounts, persons owning the other
policies will enjoy similar voting rights. We will vote Fund shares held in the
Separate Account for which no timely voting instructions are received and Fund
shares that we own as a consequence of accrued charges under the Policies, in
proportion to the voting instructions which are received with respect to all
Policies participating in a Fund. Each person having a voting interest in a
Division will receive proxy material, reports, and other materials relating to
the appropriate Fund.

Disregard of Voting Instructions. The Company may, when required by state
insurance regulatory authorities, disregard voting instructions if the
instructions require that the shares be voted so as to cause a change in the
subclassification or investment objective of or one or more of the Funds or to
approve or disapprove an investment advisory contract for a Fund. In addition,
the Company itself may disregard voting instructions in favor of changes
initiated by an Owner in the investment policy or by the investment adviser or
sub-adviser of a Fund if the Company reasonably disapproves of such changes. A
proposed change would be disapproved only if the proposed change is contrary to
state law or prohibited by state regulatory authorities, or we determine that
the change would have an adverse effect on its general assets in that the
proposed investment policy for a Fund may result in overly speculative or
unsound investments. In the event we do disregard voting instructions, a
summary of that action and the reasons for such action will be included in the
next annual report to Owners.

IMSA

The Company is a member of the Insurance Market place Standards Association
("IMSA"), and as such may include the IMSA logo and information about IMSA
membership in its advertisements. Companies that belong to IMSA subscribe to a
set of ethical standards covering the various aspects of sales and service for
individually sold life insurance and annuities.

STATE REGULATION OF THE COMPANY

We are a stock life insurance company organized under the laws of Missouri and
subject to regulation by the Missouri Division of Insurance. An annual
statement is filed with the Director of Insurance on or before March 1 each
year covering the operations and reporting on the financial condition of the
Company as of December 31 of the preceding year. Periodically, the Director of
Insurance examines our liabilities and reserves and the liabilities and
reserves of the Separate Account and certifies their adequacy. A full
examination of the Company's operations is conducted by the National
Association of Insurance Commissioners at least once every three years.

In addition, we are subject to the insurance laws and regulations of other
states within which it is licensed or may become licensed to operate.
Generally, the insurance departments of other states apply the laws of the
state of domicile in determining permissible investments.

40
<PAGE>

MANAGEMENT OF THE COMPANY

<TABLE>
<CAPTION>
Name Principal Occupation(s) During Past Five Years/1/
--------------------------- --------------------------------------------------
<C> <S>
Executive Officers/2/

Carl H. Anderson/4/ President and Chief Executive Officer since June
1986. Vice President, New Ventures, since June
1986, General American Life Insurance Co., St.
Louis, Mo (GenAm).

Matthew K. Duffy/4/ Vice President and Chief Financial Officer since
June 1996. Formerly Director of Accounting,
Prudential Insurance Company of America, March
1987-June 1996.

E. Thomas Hughes, Jr./4/ Treasurer since December 1994. Corporate Actuary
General American Life and Treasurer, GenAm since October 1994.
Insurance Company
700 Market Street
St. Louis, MO 63101

Matthew P. McCauley/4/ Vice President and General Counsel since 1984.
General American Life Secretary since August 1981. Vice President and
Insurance Company Associate General Counsel, GenAm, since December
700 Market Street 30, 1995.
St. Louis, MO 63101

Craig K. Nordyke/4/ Executive Vice President and Chief Actuary since
November 1996. Vice President and Chief Actuary
August 1990-November 1996.

John R. Tremmel Vice President--Operations and System Development
since January 1999. Formerly Chief Operating
Officer, ISP Alliance, April 1998-December 1998.
Vice President and General Manager of National
Operations Centers, Norell Corporation, January
1995-March 1998. Senior Vice President, Citicorp
Insurance Group, September 1986-December 1995.

Directors/3/

Richard A. Liddy Chairman and Chief Executive Officer, GenAm, since
January 2000. Chairman, President, and Chief
Executive Officer, GenAm, May 1992-January 2000.

Warren J. Winer Executive Vice President--Group, GenAm, since
September 1995. Formerly, Managing Director, Wm.
M. Mercer, July 1993-August 1995.

Bernard H Wolzenski Executive Vice President--Individual, GenAm, since
October 1991.

A. Greig Woodring President and CEO, Reinsurance Group of America,
Inc., since May 1993, and Executive Vice
President--Reinsurance, GenAm, since January 1990.
</TABLE>
- --------
/1 /All positions listed are with the Company unless otherwise indicated.
/2 /The principal business address of each person listed is Paragon Life
Insurance Company, 100 South Brentwood, St. Louis, MO 63105 unless otherwise
noted.
/3 /The principal business address of each person listed is General American
Life Insurance Company, 700 Market Street, St. Louis, MO 63101, except A.
Greig Woodring--Reinsurance Group of America, 1370 Timberlake Manor Parkway,
Chesterfield, MO 63017.
/4 /Indicates Executive Officers who are also Directors.

41
<PAGE>

LEGAL MATTERS

Sutherland Asbill & Brennan LLP of Washington, D.C. has provided advice on
certain legal matters relating to aspects of federal securities laws. All
matters of Missouri law pertaining to the Policies, including the validity of
the Policies and the Company's right to issue the Policies and the Group
Contract under Missouri insurance law, and all legal matters relating to the
Parent Company's resolution concerning Policies issued by Paragon have been
passed upon by Matthew P. McCauley, Esquire, General Counsel of Paragon Life
Insurance Company.

LEGAL PROCEEDINGS

There are no legal proceedings to which the Separate Account is a party or to
which the assets of the Separate Account are subject. The Company is not
involved in any litigation that is of material importance in relation to its
total assets or that relates to the Separate Account.

EXPERTS

The financial statements of the Company and the Separate Account included in
this Prospectus and in the registration statement have been included in
reliance upon the reports of KPMG LLP, independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing.

Actuarial matters included in this Prospectus have been examined by Craig K.
Nordyke, FSA, MAAA, Executive Vice President and Chief Actuary of the Company,
as stated in the opinion filed as an exhibit to the registration statement.

ADDITIONAL INFORMATION

A registration statement has been filed with the Securities and Exchange
Commission, under the Securities Act of 1933, as amended, with respect to the
Policies offered hereby. This Prospectus does not contain all the information
set forth in the registration statement and the amendments and exhibits to the
registration statement, to all of which reference is made for further
information concerning the Separate Account, the Company and the Policy offered
hereby. Statements contained in this Prospectus as to the contents of the
Policy and other legal instruments are summaries. For a complete statement of
the terms thereof reference is made to such instruments as filed.

FINANCIAL STATEMENTS

The financial statements of the Company which are included in this Prospectus
should be distinguished from the financial statements for the Separate Account
included in this Prospectus, and should be considered only as bearing on the
ability of the Company to meet its obligations under the Policy. They should
not be considered as bearing on the investment performance of the assets held
in the Separate Account.

42
<PAGE>

DEFINITIONS

Attained Age--The Issue Age of the Insured plus the number of completed Policy
Years.

Associated Companies--The companies listed in a Group Contract's specifications
pages that are under common control through stock ownership, contract or
otherwise, with the Contractholder.

Beneficiary--The person(s) named in an Individual Insurance Policy or by later
designation to receive Policy proceeds in the event of the Insured's death. A
Beneficiary may be changed as set forth in the Policy and this Prospectus.

Cash Value--The total amount that a Policy provides for investment at any time.
It is equal to the total of the amounts credited to the Owner in the Separate
Account and in the Loan Account.

Cash Surrender Value--The Cash Value of a Policy on the date of surrender, less
any Indebtedness.

Certificate--A document issued to Owners of Policies issued under Group
Contracts, setting forth or summarizing the Owner's rights and benefits.

Contractholder--The employer, association, sponsoring organization or trust
that is issued a Group Contract.

Corporate Program--A category of Policies available, usually as an Individual
Policy, in which the sponsoring employer or its designated trust is generally
the Owner of the Policy.

Division--A subaccount of the Separate Account. Each Division invests
exclusively in an available underlying Fund.

Employee--A person who is employed and paid for services by an employer on a
regular basis. To qualify as an employee, a person ordinarily must work for an
employer at least 30 hours per week. The Company may waive or modify this
requirement at its discretion. An employee may also include an independent
contractor acting in many respects as an employee with a sponsoring employer.
An employee may include a partner in a partnership if the employer is a
partnership.

Executive Program--A category of Policies issued under Group Contracts or
employer-sponsored insurance programs that have a maximum Face Amount available
for each Policy generally in excess of $500,000.

Face Amount--The minimum death benefit under the Policy so long as the Policy
remains in force.

Group Contract--A group flexible premium variable life insurance contract
issued to the Contractholder by the Company.

Home Office--The service office of the Company, the mailing address of which is
100 South Brentwood, St. Louis, Missouri 63105.

Indebtedness--The sum of all unpaid Policy Loans and accrued interest charged
on loans.

Individual Insurance--Insurance provided under a Group Contract or under an
Individual Policy issued in connection with an employer-sponsored insurance
program on an employee or an employee's spouse.

Insured--The person whose life is insured under a Policy. The term may include
both an employee and an employee's spouse.

Investment Start Date--The date the initial premium is applied to the Divisions
of the Separate Account. This date is the later of the Issue Date or the date
the initial premium is received at the Company's Home Office.

43
<PAGE>

Issue Age--The Insured's Age at his or her last birthday as of the date the
Policy is issued.

Issue Date--The effective date of coverage under a Policy. The Issue Date is
the date from which Policy Anniversaries, Policy Years, and Policy Months are
measured.

Loan Account--The account of the Company to which amounts securing Policy Loans
are allocated. It is a part of the Company's general assets.

Loan Value--The maximum amount that may be borrowed under a Policy after the
first Policy Anniversary.

Maturity Date--The Policy Anniversary on which the Insured reaches Attained Age
95.

Monthly Anniversary--The same date in each succeeding month as the Issue Date
except that whenever the Monthly Anniversary falls on a date other than a
Valuation Date, the Monthly Anniversary will be deemed the next Valuation Date.
If any Monthly Anniversary would be the 29th, 30th, or 31st day of a month that
does not have that number of days, then the Monthly Anniversary will be the
last day of that month.

Net Premium--The premium less any premium expense charge and any charge for
premium taxes.

Owner--The Owner of a Policy, as designated in the application or as
subsequently changed.

Policy--Either the Certificate or the Individual Policy offered by the Company
and described in this Prospectus. Under Group Contracts, the Policy may be
issued on the employee or on the employee's spouse.

Policy Anniversary--The same date each year as the Issue Date.

Policy Month--A month beginning on the Monthly Anniversary.

Policy Year--A period beginning on a Policy Anniversary and ending on the day
immediately preceding the next Policy Anniversary.

Separate Account--The Separate Account B, a separate investment account
established by the Company to receive and invest the net premiums paid under
the Policy.

Spouse--An employee's legal spouse. The term does not include a spouse who is
legally separated from the employee.

Valuation Date--Each day that the New York Stock Exchange is open for trading,
except on the day after Thanksgiving when the Company is closed.

Valuation Period--The period between two successive Valuation Dates, commencing
at the close of business of a Valuation Date and ending at the close of
business of the next succeeding Valuation Date.

44
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Paragon Life Insurance Company:

We have audited the accompanying balance sheets of Paragon Life Insurance
Company as of December 31, 1999 and 1998, and the related statements of
operations and comprehensive income, stockholder's equity, and cash flows for
each of the years in the three-year period ended December 31, 1999. 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.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Paragon Life Insurance Company
as of December 31, 1999 and 1998, and the results of its operations and its
cash flows for each of the years in the three-year period ended December 31,
1999, in conformity with generally accepted accounting principles.

March 10, 2000

KPMG LLP. KPMG LLP, a U.S. limited liability partnership, is a member of KPMG
International, a Swiss association.

F-1
<PAGE>

PARAGON LIFE INSURANCE COMPANY

Balance Sheets
December 31, 1999 and 1998
(in thousands of dollars)

<TABLE>
<CAPTION>
1999 1998
-------- -------
<S> <C> <C>
Assets
Fixed maturities, available
for sale................... $ 81,421 83,384
Policy loans................ 16,954 14,135
Cash and cash equivalents... 10,591 7,439
-------- -------
Total cash and invested
assets................. 108,966 104,958
-------- -------
Reinsurance recoverables.... 1,314 1,170
Deposits relating to
reinsured policyholder
account balances........... 7,020 6,688
Accrued investment income... 1,853 1,545
Deferred policy acquisition
costs...................... 24,357 20,602
Fixed assets and leasehold
improvements, net.......... 1,031 4,504
Other assets................ 262 105
Separate account assets..... 255,190 168,222
-------- -------
Total assets............ $399,993 307,794
======== =======
Liabilities and
Stockholder's Equity
Policyholder account
balances................... 101,665 93,334
Policy and contract claims.. 1,691 1,672
Federal income taxes
payable.................... 1,007 281
Other liabilities and
accrued expenses........... 3,734 3,943
Payable to affiliates....... 3,803 2,062
Due to separate account..... 192 183
Deferred tax liability...... 3,070 5,591
Separate account
liabilities................ 255,126 168,222
-------- -------
Total liabilities....... $370,288 275,288
-------- -------
Stockholder's equity:
Common stock, par value
$25; 100,000 shares
authorized;
82,000 shares issued and
outstanding.............. 2,050 2,050
Additional paid-in
capital.................. 17,950 17,950
Accumulated other
comprehensive (loss)
income................... (2,748) 2,809
Retained earnings......... 12,453 9,697
-------- -------
Total stockholder's
equity................. $ 29,705 32,506
-------- -------
Total liabilities and
stockholder's equity... $399,993 307,794
======== =======
</TABLE>

See accompanying notes to financial statements.

F-2
<PAGE>

PARAGON LIFE INSURANCE COMPANY

Statements of Operations and Comprehensive Income
Years ended December 31, 1999, 1998 and 1997
(in thousands of dollars)

<TABLE>
<CAPTION>
1999 1998 1997
------- ------ ------
<S> <C> <C> <C>
Revenues:
Policy contract charges............................... $24,577 20,437 16,417
Net investment income................................. 7,726 6,983 6,288
Commissions and expense allowances on reinsurance
ceded................................................ 292 124 10
Net realized investment gains......................... 57 53 69
------- ------ ------
Total revenues...................................... 32,652 27,597 22,784
======= ====== ======
Benefits and expenses:
Policy benefits....................................... 4,616 4,774 3,876
Interest credited to policyholder account balances.... 5,524 5,228 4,738
Commissions, net of capitalized costs................. 445 167 227
General and administration expenses, net of
capitalized costs.................................... 11,394 9,042 7,743
Policy administration system expenses................. 4,787 469 --
Amortization of deferred policy acquisition costs..... 1,631 1,150 424
------- ------ ------
Total benefits and expenses......................... 28,397 20,830 17,008
======= ====== ======
Income before federal income tax expense............ 4,255 6,766 5,775
Federal income tax expense.............................. 1,499 2,368 1,885
------- ------ ------
Net income.............................................. $ 2,756 4,398 3,890
Other comprehensive (loss) income....................... (5,557) 851 1,636
------- ------ ------
Comprehensive (loss) income............................. $(2,801) 5,249 5,526
======= ====== ======
</TABLE>

See accompanying notes to financial statements.

F-3
<PAGE>

PARAGON LIFE INSURANCE COMPANY

Statements of Stockholder's Equity
Years ended December 31, 1999, 1998, and 1997
(in thousands of dollars)

<TABLE>
<CAPTION>
Accumulated
Additional other Total
Common paid-in comprehensive Retained stockholder's
Stock capital income earnings equity
------ ---------- ------------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31,
1996................... $2,050 17,950 322 1,409 21,731
Net income............ -- -- -- 3,890 3,890
Other comprehensive
income............... -- -- 1,636 -- 1,636
------ ------ ------ ------ ------
Balance at December 31,
1997................... $2,050 17,950 1,958 5,299 27,257
Net income............ -- -- -- 4,398 4,398
Other comprehensive
income............... -- -- 851 -- 851
------ ------ ------ ------ ------
Balance at December 31,
1998................... $2,050 17,950 2,809 9,697 32,506
Net income............ -- -- -- 2,756 2,756
Other comprehensive
loss................. -- -- (5,557) -- (5,557)
------ ------ ------ ------ ------
Balance at December 31,
1999................... $2,050 17,950 (2,748) 12,453 29,705
====== ====== ====== ====== ======
</TABLE>

See accompanying notes to financial statements.

F-4
<PAGE>

PARAGON LIFE INSURANCE COMPANY

Statements of Cash Flows
Years ended December 31, 1999, 1998 and 1997
(in thousands of dollars)

<TABLE>
<CAPTION>
1999 1998 1997
-------- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income....................................... $ 2,756 4,398 3,890
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Change in:
Reinsurance recoverables..................... (144) 563 (892)
Deposits relating to reinsured policyholder
account balances............................ (332) (272) (342)
Accrued investment income.................... (308) (168) (79)
Federal income tax payable................... 726 118 (648)
Other assets................................. 3,316 (1,821) (1,280)
Policy and contract claims................... 19 587 (23)
Other liabilities and accrued expenses....... (209) 457 782
Payable to affiliates........................ 1,741 442 (669)
Company ownership of separate account........ (64) -- --
Due to separate account...................... 9 122 (34)
Deferred tax expense........................... 469 740 732
Policy acquisition costs deferred.............. (4,185) (3,808) (2,972)
Amortization of deferred policy acquisition
costs......................................... 1,631 1,150 424
Interest credited to policyholder accounts..... 5,524 5,228 4,738
Net gain on sales and calls of fixed
maturities.................................... (57) (53) (69)
-------- ------- -------
Net cash provided by operating activities.......... 10,892 7,683 3,558
-------- ------- -------
Cash flows from investing activities:
Purchase of fixed maturities..................... (12,423) (14,915) (12,557)
Sale or maturity of fixed maturities............. 4,695 8,632 5,255
Increase in policy loans, net.................... (2,819) (2,648) (1,923)
-------- ------- -------
Net cash used in investing activities (10,547) (8,931) (9,225)
-------- ------- -------
Cash flows from financing activities:
Net policyholder account deposits................ 2,807 2,954 2,294
-------- ------- -------
Net increase (decrease) in cash and cash
equivalents....................................... 3,152 1,706 (3,373)
Cash and cash equivalents at beginning of year..... 7,439 5,733 9,106
-------- ------- -------
Cash and cash equivalents at end of year........... $ 10,591 7,439 5,733
-------- ------- -------
Income taxes paid.................................. $ (346) (1,460) (1,801)
======== ======= =======
</TABLE>

See accompanying notes to financial statements.

F-5
<PAGE>

PARAGON LIFE INSURANCE COMPANY

Notes to Financial Statements

(1) Summary of Significant Accounting Policies

Paragon Life Insurance Company (Paragon or the Company) is a wholly owned
subsidiary of General American Life Insurance Company (General American or the
Parent). Paragon markets universal life and variable universal life insurance
products through the sponsorship of major companies and organizations. Paragon
is licensed to do business in the District of Columbia and all states except
New York.

General American has guaranteed that Paragon will have sufficient funds to
meet all of its contractual obligations. In the event a policyholder presents a
legitimate claim for payment on a Paragon insurance policy, General American
will pay such claim directly to the policyholder if Paragon is unable to make
such payment. The guarantee agreement is binding on General American, its
successor or assignee and shall cease only if the guarantee is assigned to an
organization having a financial rating from Standard & Poor's equal to or
better than General American's rating.

The accompanying financial statements are prepared on the basis of generally
accepted accounting principles. The preparation of financial statements
requires the use of estimates by management which affect the amounts reflected
in the financial statements. Actual results could differ from those estimates.
Accounts that the Company deems to be sensitive to changes in estimates include
deferred policy acquisition costs and contract claims.

The significant accounting policies of the Company are as follows:

(a) Recognition of Policy Revenue and Related Expenses

Revenues for universal life products consist of policy charges for the cost
of insurance, administration and surrender charges during the period. Revenues
for variable universal life products also include policy charges for mortality
and expense risks assumed by Paragon. Policy benefits and expenses include
interest credited to policy account balances on universal life products and
death benefit payments made in excess of policy account balances.

Policy acquisition costs, such as commissions and certain costs of policy
issuance and underwriting, are deferred and amortized in relation to the
present value of expected gross profits over the estimated life of the
policies.

(b) Invested Assets

Investment securities are accounted for at fair value. At December 31, 1999
and 1998, fixed maturity securities are classified as available-for-sale and
are carried at fair value with the unrealized gain or loss, net of taxes, being
reflected as accumulated other comprehensive income, a separate component of
stockholder's equity. Policy loans are valued at aggregate unpaid balances.

Realized gains or losses on the sale of securities are determined on the
basis of specific identification and include the impact of any related
amortization of premiums or accretion of discounts which is generally computed
consistent with the interest method.

Amortization of the premium or discount on mortgage-backed securities is
recognized using a level-yield method which considers the estimated timing and
amount of prepayments of underlying mortgage loans. Actual prepayment
experience is periodically reviewed and effective yields are recalculated when
differences arise between the prepayments originally anticipated and the actual
prepayments received and currently anticipated. When such differences occur,
the net investment in the mortgage-backed security is adjusted to the amount
that would have existed had the new effective yield been applied since the
acquisition of the security with a corresponding charge or credit to interest
income.

F-6
<PAGE>

PARGON LIFE INSURANCE COMPANY

Notes to Financial Statements--(Continued)

Policyholder account balances are equal to the policyholder account value
before deduction of any surrender charges. The policyholder account value
represents an accumulation of gross premium payments plus credited interest
less expense and mortality charges and withdrawals. These expense charges are
recognized in income as earned. Certain variable life policies allow
policyholders to exchange accumulated assets from the variable rate separate
accounts to a fixed-interest general account policy. The fixed-interest general
account guaranteed minimum crediting rates of 4% in 1999, 1998 and 1997. The
actual crediting rate ranged from 6.1% to 6.5% in 1999, and was 6.5% in 1998
and 1997.

(d) Federal Income Taxes

The Company establishes deferred taxes under the asset and liability method,
and deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.

The Company files its federal income tax return on a consolidated basis with
its Parent and other subsidiaries. In accordance with a tax allocation
agreement between Paragon and General American, taxes are computed as if
Paragon was filing its own income tax return, and tax expense (benefit) is paid
to, or received from, General American.

(e) Reinsurance

Balances resulting from agreements which transfer funds relating to
policyholder account balances have been accounted for as deposits. Other
reinsurance activities are accounted for consistent with terms of the risk
transfer reinsurance contracts. Premiums for reinsurance ceded to other
companies have been reported as a reduction of policy contract charges. Amounts
applicable to reinsurance ceded for future policy benefits and claim
liabilities have been reported as assets for these items, and commissions and
expense allowances received in connection with reinsurance ceded have been
accounted for in income as earned. Reinsurance does not relieve the Company
from its primary responsibility to meet claim obligations.

(f) Deferred Policy Acquisition Costs

The costs of acquiring new business which vary with, and are primarily
related to, the production of new business have been deferred to the extent
that such costs are deemed recoverable from future gross profits. Such costs
include commissions, premium taxes, as well as certain costs of policy issuance
and underwriting. Deferred policy acquisition costs are adjusted for the impact
on estimated gross margins of net unrealized gains and losses on investment
securities. The estimates of expected gross margins are evaluated regularly and
are revised if actual experience or other evidence indicates that revision is
appropriate. Upon revision, total amortization recorded to date is adjusted by
a charge or credit to income.

(g) Separate Account Business

The assets and liabilities of the separate accounts represent segregated
funds administered and invested by the Company for purposes of funding variable
life insurance contracts for the exclusive benefit of variable life insurance
contract holders. The Company charges the separate accounts for risks it
assumes in issuing a policy and retains varying amounts of withdrawal charges
to cover expenses in the event of early withdrawals by contract holders. The
assets and liabilities of the separate account are carried at fair value.

F-7
<PAGE>

PARGON LIFE INSURANCE COMPANY

Notes to Financial Statements--(Continued)

(h) Fair Value of Financial Instruments

Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. These
estimates do not reflect any premium or discount that could result from
offering for sale at one time the Company's entire holdings of a particular
financial instrument. Although fair value estimates are calculated using
assumptions that management believes are appropriate, changes in assumption
could significantly affect the estimates and such estimates should be used with
care. The following assumptions were used to estimate the fair value of each
class of financial instrument for which it was practicable to estimate fair
value:

Fixed maturities--Fixed maturities are valued using quoted market prices,
if available. If quoted market prices are not available, fair value is
estimated using quoted market prices of similar securities.

Policy loans--Policy loans are carried at their unpaid balances which
approximates fair value.

Separate account assets and liabilities--The separate account assets are
carried at fair value as determined by quoted market prices. Accordingly,
the carrying value of separate account liabilities is equal to their fair
value since it represents the contractholders' interest in the separate
account assets.

Cash and cash equivalents--The carrying amount is a reasonable estimate
of fair value.

(i) Cash and Cash Equivalents

For purposes of reporting cash flows, cash and cash equivalents represent
demand deposits and highly liquid short-term investments, which include U.S.
Treasury bills, commercial paper, and repurchase agreements with original or
remaining maturities of 90 days or less when purchased.

(j) Subsequent Event

(i) On January 6, 2000, the Company's ultimate parent, GenAmerica
Corporation, was purchased by Metropolitan Life Insurance Company.

(ii) Subsequent to December 31, 1999 a significant customer notified
Paragon of its intent to terminate its group contract, effective April 30,
2000. This group represents 29% and 8% of Paragon's policies inforce and
separate account assets, as of December 31, 1999.

(2) Investments

The amortized cost and estimated fair value of fixed maturities at December
31, 1999 and 1998 are as follows (000's):

<TABLE>
<CAPTION>
1999
-----------------------------------------
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
U.S. Treasury securities........ $ 8,728 53 (162) 8,619
Corporate securities............ 70,312 276 (4,830) 65,758
Mortgage-backed securities...... 6,911 36 (394) 6,553
Asset-backed securities......... 500 -- (9) 491
-------- --- ------ ------
$ 86,451 365 (5,395) 81,421
======== === ====== ======
</TABLE>

F-8
<PAGE>

PARGON LIFE INSURANCE COMPANY

Notes to Financial Statements--(Continued)

<TABLE>
<CAPTION>
1998
-----------------------------------------
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
U.S. Treasury securities........ $ 6,705 267 -- 6,972
Corporate securities............ 64,607 4,481 (208) 68,880
Mortgage-backed securities...... 6,854 193 (25) 7,022
Asset-backed securities......... 500 10 -- 510
------- ----- ---- ------
$78,666 4,951 (233) 83,384
======= ===== ==== ======
</TABLE>

The amortized cost and estimated fair value of fixed maturities at December
31, 1999, by contractual maturity, are shown below (000's). Expected maturities
may differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.

<TABLE>
<CAPTION>
Estimated
Amortized Fair
cost value
--------- ---------
<S> <C> <C>
Due in one year or less............................... $ 471 480
Due after one year through five years................. 22,034 21,893
Due after five years through ten years................ 8,853 8,317
Due after ten years through twenty years.............. 48,182 44,178
Mortgage-backed securities............................ 6,911 6,553
-------- ------
$ 86,451 81,421
======== ======
</TABLE>

Proceeds from sales of fixed maturities during 1999, 1998 and 1997 were
$4,695,414, $4,068,639 and $1,328,585 respectively. Gross gains of $56,686,
$53,180 and $68,876 were realized on those sales in 1999, 1998 and 1997,
respectively.

The sources of net investment income follow (000s):

<TABLE>
<CAPTION>
1999 1998 1997
------- ----- -----
<S> <C> <C> <C>
Fixed Maturities...................................... $ 6,077 5,603 4,941
Short-term investments................................ 486 535 608
Policy loans and other................................ 1,244 924 807
------- ----- -----
$ 7,807 7,062 6,356
Investment expenses................................... (81) (79) (68)
------- ----- -----
Net investment income............................. $ 7,726 6,983 6,288
======= ===== =====
</TABLE>

A summary of the components of the net unrealized appreciation (depreciation)
on invested assets carried at fair value is as follows (in 000's):

<TABLE>
<CAPTION>
1999 1998 1997
------- ------ ------
<S> <C> <C> <C>
Unrealized appreciation (depreciation):
Fixed maturities available-for-sale............ $(5,030) 4,717 3,373
Deferred policy acquisition costs.............. 803 (396) (361)
Deferred income taxes............................ 1,479 (1,512) (1,054)
------- ------ ------
Net unrealized appreciation (depreciation)....... $(2,748) 2,809 1,958
======= ====== ======
</TABLE>

The Company has fixed maturities on deposit with various state insurance
departments with an amortized cost of approximately $4,082,871 and $4,120,850
at December 31, 1999 and 1998 respectively.

F-9
<PAGE>

PARGON LIFE INSURANCE COMPANY

Notes to Financial Statements--(Continued)

(3) Reinsurance

The Company reinsures certain risks with other insurance companies above a
maximum retention amount (currently $50,000) to help reduce the loss on any
single policy.

Premiums and related reinsurance amounts for the years ended December 31,
1999, 1998 and 1997 as they relate to transactions with affiliates are
summarized as follows (000's):

<TABLE>
<CAPTION>
1999 1998 1997
------- ------ ------
<S> <C> <C> <C>
Reinsurance transactions with affiliates:
Premiums for reinsurance ceded.................... $16,869 14,723 13,001
Policy benefits ceded............................. 16,823 17,071 14,070
Commissions and expenses ceded.................... 292 123 195
Reinsurance recoverables.......................... 1,268 1,109 1,661
</TABLE>

Ceded premiums and benefits to nonaffiliates for 1999, 1998 and 1997 were
insignificant.

(4) Deferred Policy Acquisition Costs

A summary of the policy acquisition costs deferred and amortized is as
follows (000's):

<TABLE>
<CAPTION>
1999 1998 1997
------- ------ ------
<S> <C> <C> <C>
Balance at beginning of year.................... $20,602 17,980 15,776
Policy acquisition costs deferred............... 4,185 3,808 2,972
Policy acquisition costs amortized.............. (1,631) (1,150) (424)
Deferred policy acquisition costs relating to
change in unrealized (gain) loss on investments
available for sale............................. 1,201 (36) (344)
------- ------ ------
Balance at end of year.......................... $24,357 20,602 17,980
======= ====== ======
</TABLE>

(5) Administration System Write-off

In 1999 Paragon expensed $4,787,275 relating to the termination of a system
development project for policy administration. The one-time write-off in 1999
of previously capitalized amounts was $3,963,450 and other costs incurred in
1999 relating to the project were $823,825. Other costs incurred and expensed
in 1998 and 1997 were $468,794 and $0, respectively.

(6) Federal Income Taxes

The Company is taxed as a life insurance company. A summary of Federal income
tax expense is as follows (000s):

<TABLE>
<CAPTION>
1999 1998 1997
------- ----- -----
<S> <C> <C> <C>
Current tax expense................................... $ 1,030 1,628 1,153
Deferred tax expense.................................. 469 740 732
------- ----- -----
Federal income tax expense............................ $ 1,499 2,368 1,885
======= ===== =====
</TABLE>

F-10
<PAGE>

PARGON LIFE INSURANCE COMPANY

Notes to Financial Statements--(Continued)

A reconciliation of the Company's "expected" federal income tax expense,
computed by applying the federal U.S. corporate tax rate of 35% to income from
operations before federal income tax, is as follows (000s):

<TABLE>
<CAPTION>
1999 1998 1997
------- ----- -----
<S> <C> <C> <C>
Computed "expected" tax expense...................... $ 1,489 2,368 2,022
Other, net........................................... 10 0 (137)
------- ----- -----
Federal income tax expense........................... $ 1,499 2,368 1,885
======= ===== =====
</TABLE>

The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities at December 31, 1999, 1998 and
1997 are presented below (000's):

<TABLE>
<CAPTION>
1999 1998 1997
------- ----- -----
<S> <C> <C> <C>
Deferred tax assets:
Unearned reinsurance allowances..................... $ 194 218 217
Policy and contract liabilities..................... 583 709 1,031
Tax capitalization of acquisition costs............. 2,559 2,147 1,755
Other, net.......................................... 359 58 76
Unrealized Loss on investments, net................. 1,479 -- --
------- ----- -----
Total deferred tax assets......................... $ 5,174 3,132 3,079
======= ===== =====
Deferred tax liabilities:
Unrealized gain on investments, net................. $ -- 1,512 1,054
Deferred policy acquisition costs................... 8,244 7,211 6,419
------- ----- -----
Total deferred tax liabilities.................... $ 8,244 8,723 7,473
------- ----- -----
Net deferred tax liabilities...................... $ 3,070 5,591 4,394
======= ===== =====
</TABLE>

The Company believes that a valuation allowance with respect to the
realization of the total gross deferred tax asset is not necessary. In
assessing the realization of deferred tax assets, the Company considers whether
it is more likely than not that the deferred tax assets will be realized. The
ultimate realization of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which those temporary differences
become deductible. The Company files a consolidated tax return with its Parent.
Realization of the gross tax asset will not be dependent solely on the
Company's ability to generate its own taxable income. General American has a
proven history of earnings and it appears more likely than not that the
Company's gross deferred tax asset will ultimately be fully realized.

(7) Related-Party Transactions

Paragon purchases certain administrative services from General American.
Charges for services performed are based upon personnel and other costs
involved in providing such service. Charges for services during 1999, 1998 and
1997 were $2,247,302, $1,513,433 and $1,348,198, respectively. See Note 3 for
reinsurance transactions with affiliates.

(8) Pension Plan

Associates of Paragon participate in a non-contributory multi-employer
defined benefit pension plan jointly sponsored by Paragon and General American.
The benefits are based on years of service and compensation level. No pension
expense was recognized in 1999, 1998 or 1997 due to overfunding of the plan.

F-11
<PAGE>

PARGON LIFE INSURANCE COMPANY

Notes to Financial Statements--(Continued)

In addition, Paragon has adopted an associate incentive plan applicable to
full-time salaried associates with at least one year of service. Contributions
to the plan are determined annually by General American and are based on
salaries of eligible associates. Full vesting occurs after five years of
continuous service. Total expenses to the Company for the incentive plan were
$0, $188,316 and $198,972 for 1999, 1998 and 1997, respectively.

As a result of the Metropolitan Life Insurance purchase, Paragon implemented
a new bonus program covering all associates employed from October 1, 1999
through March 31, 2000 with at least 1000 hours of service during 1999. Total
expense to the Company for this program was $422,700 in 1999.

Paragon provides for certain health care and life insurance benefits for
retired employees. The Company accounts for these benefits in accordance with
SFAS No. 106 -- Employer's Accounting for Postretirement Benefits Other Than
Pensions. The amounts involved are not material.

(9) Statutory Financial Information

The Company is subject to financial statement filing requirements of the
State of Missouri Department of Insurance, its state of domicile, as well as
the states in which it transacts business. Such financial statements, generally
referred to as statutory financial statements, are prepared on a basis of
accounting which varies in some respects from generally accepted accounting
principles (GAAP). Statutory accounting principles include: (1) charging of
policy acquisition costs to income as incurred; (2) establishment of policy and
contract liabilities computed using required valuation standards which may vary
in methodology utilized; (3) nonprovision of deferred federal income taxes
resulting from temporary differences between financial reporting and tax bases
of assets and liabilities; (4) recognition of statutory liabilities for asset
impairments and yield stabilization on fixed maturity dispositions prior to
maturity with asset valuation reserves based on statutory determined formulae
and interest stabilization reserves designed to level yields over their
original purchase maturities; (5) valuation of investments in fixed maturities
at amortized cost; (6) net presentation of reinsurance balances; (7)
presentation of indirect cash flows; (8) exclusion of comprehensive income
disclosures; and (9) recognition of deposits and withdrawals on universal life
policies as revenues and expenses.

The stockholder's equity (surplus) and net income of the Company at December
31, 1999, 1998 and 1997, as determined using statutory accounting practices, is
summarized as follows (000's):

<TABLE>
<CAPTION>
1999 1998 1997
------- ------ ------
<S> <C> <C> <C>
Statutory surplus as reported to regulatory
authorities...................................... $13,545 10,500 10,725
Net income as reported to regulatory authorities.. $ 300 1,596 1,397
</TABLE>

(10) Dividend Restrictions

Dividend payments by Paragon are restricted by state insurance laws as to the
amount that may be paid without prior notice or approval of the Missouri
Department of Insurance. The maximum amount of dividends which can be paid
without prior approval of the insurance commissioner is limited to the maximum
of (1) 10% of statutory surplus or (2) net gain from operations. The maximum
dividend distribution that can be paid by Paragon during 1999 without prior
notice or approval is $300,406. Paragon did not pay dividends in 1999, 1998 or
1997.

(11) Risk-Based Capital

The insurance departments of various states, including the Company's
domiciliary state of Missouri, impose risk-based capital (RBC) requirements on
insurance enterprises. The RBC calculation serves as a

F-12
<PAGE>

PARGON LIFE INSURANCE COMPANY

Notes to Financial Statements--(Continued)
benchmark for the regulation of life insurance companies by state insurance
regulators. The requirements apply various weighted factors to financial
balances or activity levels based on their perceived degree of risk.

The RBC guidelines define specific capital levels where action by the Company
or regulators is required based on the ratio of a company's actual total
adjusted capital to control levels determined by the RBC formula. At December
31, 1999, the Company's actual total adjusted capital was in excess of minimum
levels which would require action by the Company or regulatory authorities
under the RBC formula.

(12) Commitments and Contingencies

The Company leases certain of its facilities and equipment under
noncancellable leases the majority of which expires March 2001. The future
minimum lease obligations under the terms of the leases are summarized as
follows (000s):

<TABLE>
<S> <C>
Year ended December 31:
2000............................................................ $ 750
2001............................................................ 321
2002............................................................ 130
2003............................................................ 99
-------
$ 1,300
=======
</TABLE>

Rent expense totaled $507,512, $489,999, and $433,864 in 1999, 1998 and 1997,
respectively.

(13) Comprehensive Income

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income", effective for years beginning after December 15, 1997. SFAS No. 130
establishes standards for reporting and display of comprehensive income and its
components (revenues, expenses, gains and losses) in a full set of general-
purpose financial statements. The most significant items of comprehensive
income are net income and changes in unrealized gains and losses on securities.
The adoption of SFAS No. 130 does not affect results of operations or financial
position, but affects their presentation and disclosure. The Company has
adopted SFAS No. 130 as of January 1, 1998, and the following summaries present
the components of the Company's comprehensive income, other than net income,
for the periods ending December 31, 1999, 1998 and 1997 (000s):

<TABLE>
<CAPTION>
1999
-------------------------------
Tax
Before-Tax (Expense) Net-of-Tax
Amount Benefit Amount
---------- -------- ----------
<S> <C> <C> <C>
Unrealized holding losses arising during
period.................................. $(8,492) 2,972 (5,520)
Less: reclassification adjustment for
gains realized in net income............ (57) 20 (37)
------- ----- ------
Other comprehensive loss................. (8,549) 2,992 (5,557)
======= ===== ======
</TABLE>

F-13
<PAGE>

PARGON LIFE INSURANCE COMPANY

Notes to Financial Statements--(Continued)

<TABLE>
<CAPTION>
1998
-------------------------------
Tax
Before-Tax (Expense) Net-of-Tax
Amount Benefit Amount
---------- -------- ----------
<S> <C> <C> <C>
Unrealized holding gains arising during
period.................................. $1,361 (476) 885
Less: reclassification adjustment for
gains realized in net income............ (53) 19 (34)
------ ---- ---
Other comprehensive income............... 1,308 (457) 851
====== ==== ===
</TABLE>

<TABLE>
<CAPTION>
1997
-------------------------------
Tax
Before-Tax (Expense) Net-of-Tax
Amount Benefit Amount
---------- -------- ----------
<S> <C> <C> <C>
Unrealized holding gains arising during
period.................................. $2,585 (904) 1,681
Less: reclassification adjustment for
gains realized in net income............ (69) 24 (45)
------ ---- -----
Other comprehensive income............... 2,516 (880) 1,636
====== ==== =====
</TABLE>

F-14
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Paragon Life Insurance Company and
Policyholders of Separate Account B's Scudder Divisions:

We have audited the accompanying statements of net assets, including the
schedule of investments, of the Money Market, International, Capital Growth,
Balanced, Bond, Growth & Income and Global Discovery Divisions of Paragon
Separate Account B as of December 31, 1999, and related statements of
operations and changes in net assets for each of the periods in the three year
period then ended. These financial statements are the responsibility of the
management of Paragon Separate Account B. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of investments owned at December 31, 1999 by
correspondence with the Scudder Variable Life Investment Fund. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Money Market,
International, Capital Growth, Balanced, Bond, Growth & Income and Global
Discovery Divisions of Paragon Separate Account B as of December 31, 1999, and
the results of their operations and changes in their net assets for each of the
periods in the three year period then ended, in conformity with generally
accepted accounting principles.

March 10, 2000

KPMG LLP. KPMG LLP, a U.S. limited liability partnership, is a member of KPMG
International, a Swiss association.

F-15
<PAGE>

PARAGON SEPARATE ACCOUNT B

STATEMENTS OF NET ASSETS
December 31, 1999

<TABLE>
<CAPTION>
Money Capital Growth & Global
Market International Growth Balanced Bond Income Discovery
Division Division Division Division Division Division Division
-------- ------------- --------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Assets:
Investments in Scudder
Investments, at
Market Value (See
Schedule of
Investments)......... $107,458 976,038 2,249,701 983,502 209,666 476,350 18,386
Receivable from
(payable to) Paragon
Life Insurance
Company.............. -- 55 83 55 -- 84 --
-------- ------- --------- ------- ------- ------- ------
Total Net Assets.... $107,458 976,093 2,249,784 983,557 209,666 476,434 18,386
======== ======= ========= ======= ======= ======= ======
Net Assets, represent-
ing:
Equity of Contract
Owners............... $107,409 975,679 2,248,803 983,119 209,571 476,222 18,378
Equity of Paragon Life
Insurance Company.... 49 414 981 438 95 212 8
-------- ------- --------- ------- ------- ------- ------
$107,458 976,093 2,249,784 983,557 209,666 476,434 18,386
======== ======= ========= ======= ======= ======= ======
Total Units Held........ 85,564 37,559 55,141 44,991 23,315 33,437 1,387
Net Asset Value Per
Unit................... $ 1.26 25.98 40.78 21.85 8.99 14.24 13.25
Cost of Investments..... $107,458 627,557 1,447,076 775,896 218,557 470,926 12,184
======== ======= ========= ======= ======= ======= ======
</TABLE>

See Accompanying Notes to Financial Statements.

F-16
<PAGE>

PARAGON SEPARATE ACCOUNT B

STATEMENTS OF OPERATIONS

For the Years Ended December 31, 1999, 1998, and 1997, except for the Global
Discovery Division
which is for the period from May 15, 1998 (Inception) to December 31, 1998.

<TABLE>
<CAPTION>
Money Market Division International Division Capital Growth Division Balanced Division
---------------------- ------------------------ ----------------------------- ----------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997 1999 1998 1997
------- ------ ------ ------- ------- ------ --------- --------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment Income:
Dividend Income... $ 4,524 2,514 1,697 3,862 9,586 6,239 4,505 10,625 67,231 10,818 16,634 12,268
Expenses:
Mortality and
Expense Charge.... 730 364 260 5,713 4,279 3,814 14,587 10,303 8,396 6,948 4,734 3,712
------- ------ ------ ------- ------- ------ --------- --------- ------- ------- ------- ------
Net Investment
Income
(Expense)....... 3,794 2,150 1,437 (1,851) 5,307 2,425 (10,082) 322 58,835 3,870 11,900 8,556
Net Realized Gain
on Investments
Realized Gain
from
Distributions..... -- -- -- 54,461 63,044 3,268 159,059 67,200 2,366 54,670 26,776 20,984
Proceeds from
Sales............. 18,828 11,296 18,673 156,952 112,597 68,547 294,883 264,342 149,231 165,754 83,851 70,741
Cost of
Investments Sold.. 18,828 11,296 18,673 132,987 100,354 56,471 220,294 202,151 104,692 136,484 69,758 56,070
------- ------ ------ ------- ------- ------ --------- --------- ------- ------- ------- ------
Net Realized
Gain on
Investments..... -- -- -- 78,426 75,287 15,344 233,648 129,391 46,905 83,940 40,869 35,655
Net Unrealized Gain
(Loss) on
Investments:
Unrealized Gain
(Loss) Beginning
of Year........... -- -- -- 86,528 78,522 59,971 457,526 316,515 120,746 173,652 97,262 43,162
Unrealized Gain
(Loss) End of
Year.............. -- -- -- 348,481 86,528 78,522 802,625 457,526 316,515 207,606 173,652 97,262
------- ------ ------ ------- ------- ------ --------- --------- ------- ------- ------- ------
Net Unrealized
Gain (Loss) on
Investments....... -- -- -- 261,953 8,006 18,551 345,099 141,011 195,769 33,954 76,390 54,100
------- ------ ------ ------- ------- ------ --------- --------- ------- ------- ------- ------
Net Gain (Loss)
on Investments.. -- -- -- 340,379 83,293 33,895 578,747 270,402 242,674 117,894 117,259 89,755
------- ------ ------ ------- ------- ------ --------- --------- ------- ------- ------- ------
Increase (Decrease)
in Net Assets
Resulting from
Operations......... $ 3,794 2,150 1,437 338,528 88,600 36,320 568,665 270,724 301,509 121,764 129,159 98,311
======= ====== ====== ======= ======= ====== ========= ========= ======= ======= ======= ======
<CAPTION>
Growth & Income Global
Bond Division Division Discovery Division
---------------------- ------------------------ --------------------
1999 1998 1997 1999 1998 1997 1999 1998
------- ------ ------ ------- ------- ------ --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment Income:
Dividend Income... $ 7,739 8,740 5,950 4,300 6,710 3,833 -- --
Expenses:
Mortality and
Expense Charge.... 1,585 1,121 930 3,390 2,254 1,275 58 1
------- ------ ------ ------- ------- ------ --------- ---------
Net Investment
Income
(Expense)....... 6,154 7,619 5,020 910 4,456 2,558 (58) (1)
Net Realized Gain
on Investments
Realized Gain
from
Distributions..... 773 481 1,659 24,411 15,633 3,309 18
Proceeds from
Sales............. 32,355 30,061 27,553 106,367 67,098 26,569 1,402 52
Cost of
Investments Sold.. 33,369 30,206 24,606 102,472 62,590 22,348 1,237 51
------- ------ ------ ------- ------- ------ --------- ---------
Net Realized
Gain on
Investments..... (241) 336 4,606 28,306 20,141 7,530 183 1
Net Unrealized Gain
(Loss) on
Investments:
Unrealized Gain
(Loss) Beginning
of Year........... 535 35 51 20,860 37,619 7,630 59 --
Unrealized Gain
(Loss) End of
Year.............. (8,891) 535 35 5,424 20,860 37,619 6,202 59
------- ------ ------ ------- ------- ------ --------- ---------
Net Unrealized
Gain (Loss) on
Investments....... (9,426) 500 (16) (15,436) (16,759) 29,989 6,143 59
------- ------ ------ ------- ------- ------ --------- ---------
Net Gain (Loss)
on Investments.. (9,667) 836 4,590 12,870 3,382 37,519 6,326 60
------- ------ ------ ------- ------- ------ --------- ---------
Increase (Decrease)
in Net Assets
Resulting from
Operations......... $(3,513) 8,455 9,610 13,780 7,838 40,077 6,268 59
======= ====== ====== ======= ======= ====== ========= =========
</TABLE>
See Accompanying Notes to Financial Statements.

F-17
<PAGE>

PARAGON SEPARATE ACCOUNT B

STATEMENTS OF CHANGES IN NET ASSETS

For the Years ended December 31, 1999, 1998, and 1997, except for the Global
Discovery Division which
is for the period from May 15, 1998 (inception) to December 31, 1998.

<TABLE>
<CAPTION>
Money Market Division International Division Capital Growth Division
------------------------ ------------------------ -------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
-------- ------- ------- ------- ------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operations:
Net Investment Income
(Expense)............. $ 3,794 2,150 1,437 (1,851) 5,307 2,425 (10,082) 322 58,835
Net Realized Gain
(Loss) on Investments. -- -- -- 78,426 75,287 15,344 233,648 129,391 46,905
Net Unrealized Gain
(Loss) on Investments. -- -- -- 261,953 8,006 18,551 345,099 141,011 195,769
-------- ------- ------- ------- ------- ------- --------- --------- ---------
Increase (Decrease)
in Net Assets Re-
sulting from
Operations.......... 3,794 2,150 1,437 338,528 88,600 36,320 568,665 270,724 301,509
Net Deposits into
Separate Account... 26,053 42,677 5,480 31,554 5,924 73,456 115,249 75,940 140,956
-------- ------- ------- ------- ------- ------- --------- --------- ---------
Increase in Net
Assets............ 29,847 44,827 6,917 370,082 94,524 109,776 683,914 346,664 442,465
Net Assets, Beginning
of Year............... 77,611 32,784 25,867 606,011 511,487 401,711 1,565,870 1,219,206 776,741
-------- ------- ------- ------- ------- ------- --------- --------- ---------
Net Assets, End of
Year.................. $107,458 77,611 32,784 976,093 606,011 511,487 2,249,784 1,565,870 1,219,206
======== ======= ======= ======= ======= ======= ========= ========= =========
<CAPTION>
Global
Balanced Division Bond Division Growth & Income Division Discovery
------------------------ ------------------------ ------------------------------- ------------
1999 1998 1997 1999 1998 1997 1999 1998 1997 1999 1998
-------- ------- ------- ------- ------- ------- --------- --------- --------- ------ ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operations:
Net Investment Income
(Expense)............. $ 3,870 11,900 8,556 6,154 7,619 5,020 910 4,456 2,558 (58) (1)
Net Realized Gain
(Loss) on Investments. 83,940 40,869 35,655 (241) 336 4,606 28,306 20,141 7,530 183 1
Net Unrealized Gain
(Loss) on Investments. 33,954 76,390 54,100 (9,426) 500 (16) (15,436) (16,759) 29,989 6,143 59
-------- ------- ------- ------- ------- ------- --------- --------- --------- ------ ---
Increase (Decrease)
in Net Assets Re-
sulting from
Operations.......... 121,764 129,159 98,311 (3,513) 8,455 9,610 13,780 7,838 40,077 6,268 59
Net Deposits into
Separate Account... 101,725 93,743 69,393 35,257 41,324 14,364 104,619 131,034 97,894 11,545 514
-------- ------- ------- ------- ------- ------- --------- --------- --------- ------ ---
Increase in Net
Assets............ 223,489 222,902 167,704 31,744 49,779 23,974 118,399 138,872 137,971 17,813 573
Net Assets, Beginning
of Year............... 760,068 537,166 369,462 177,922 128,143 104,169 358,035 219,163 81,192 573 --
-------- ------- ------- ------- ------- ------- --------- --------- --------- ------ ---
Net Assets, End of
Year.................. $983,557 760,068 537,166 209,666 177,922 128,143 476,434 358,035 219,163 18,386 573
======== ======= ======= ======= ======= ======= ========= ========= ========= ====== ===
</TABLE>

See Accompanying Notes to Financial Statements.

F-18
<PAGE>

PARAGON SEPARATE ACCOUNT B
Notes to Financial Statements

December 31, 1999

(1) Organization

Paragon Life Insurance Company (Paragon) established Paragon Separate Account
B on January 4, 1991. Paragon Separate Account B (the Separate Account)
commenced operations on March 3, 1994 and is registered under the Investment
Company Act of 1940 as a unit investment trust. The Division options included
herein commenced operations on March 3, 1994. The Separate Account receives and
invests net premiums for flexible premium group variable life insurance
policies that are issued by Paragon. The Separate Account is divided into seven
Divisions, which invest exclusively in shares of a single fund of Scudder
Variable Life Investment Fund (Scudder), an open-end, diversified management
investment company. These funds are the Money Market, International, Capital
Growth, Balanced, Bond, Growth and Income and Global Discovery (the Divisions).
Policyholders have the option of directing their premium payments into any or
all of the Divisions.

(2) Significant Accounting Policies

The following is a summary of significant accounting policies followed by the
Separate Account in the preparation of its financial statements. The policies
are in conformity with generally accepted accounting principles.

Investments

The Separate Account's investments in the Funds of Scudder are valued daily
based on the net asset values of the respective fund shares held. The average
cost method is used in determining the cost of shares sold on withdrawals by
the Separate Account. Share transactions are recorded consistent with trade
date accounting. All dividends received are immediately reinvested on the ex-
dividend date.

Federal Income Taxes

The operations of the Separate Account are treated as part of Paragon for
income tax purposes. Under existing Federal income tax law, capital gains from
sales of investments of the Separate Account are not taxable. Therefore, no
Federal income tax has been provided.

Use of Estimates

The preparation of financial statements requires management to make estimates
and assumptions with respect to amounts reported in the financial statements.
Actual results could differ from those estimates.

(3) Policy Charges

Charges are deducted from the policies and the Separate Account to compensate
Paragon for providing the insurance benefits set forth in the contracts and any
additional benefits added by rider, administering the policies, incurring
expenses in distributing the policies, and assuming certain risks in connection
with the policy.

Premium Expense Charge

F-19
<PAGE>

PARAGON SEPARATE ACCOUNT B

Notes to Financial Statements--(Continued)
assuming certain risks in connection with the policies. In addition, some
polices have a premium tax assessment equal to 2% or 2.25% to reimburse Paragon
for premium taxes incurred. The premium payment less premium expense and
premium tax charges equals the net premium that is invested in the underlying
separate account.

Monthly Expense Charge

Paragon has responsibility for the administration of the policies and the
Separate Account. As reimbursement for expenses related to the acquisition and
maintenance of each policy and the Separate Account, Paragon assesses a monthly
administration charge to each policy. This charge, which varies due to the size
of the group, has a maximum of $6.00 per month during the first 12 policy
months and $3.50 per month thereafter.

Cost of Insurance

The cost of insurance is deducted on each monthly anniversary for the
following policy month. Because the cost of insurance depends upon a number of
variables, the cost varies for each policy month. The cost of insurance is
determined separately for the initial face amount and for any subsequent
increase in face amount. Paragon determines the monthly cost of insurance
charge by multiplying the applicable cost of insurance rate or rates by the net
amount at risk for each policy month.

Optional Rider Benefits Charge

The optional rider benefits charge is a monthly deduction for any additional
benefits provided by policy riders.

Surrender or Contingent Deferred Sales Charge

During the first policy year, certain policies include a provision for a
charge upon surrender or lapse of the policy, a requested decrease in face
amount, or a partial withdrawal that causes the face amount to decrease. The
amount assessed under the policy terms, if any, depends upon the cost
associated with distributing the particular policies. The amount of any charge
depends on a number of factors, including whether the event is a full surrender
or lapse or only a decrease in face amount, the amount of premiums received by
Paragon, and the policy year in which the surrender or other event takes place.

Mortality and Expense Charge

In addition to the above contract charges, a daily charge against the
operations of each division is made for the mortality and expense risks assumed
by Paragon. Paragon deducts a daily charge from the Separate Account at the
rate of .0020471% of the net assets of each division of the Separate Account
which equals an annual rate of .75% of those net assets. The mortality risk
assumed by Paragon is that insureds may die sooner than anticipated and that,
therefore, Paragon will pay an aggregate amount of death benefits greater than
anticipated. The expense risk assumed is that expenses incurred in issuing and
administering the policy will exceed the amounts realized from the
administrative charges assessed against the policy.

F-20
<PAGE>

PARAGON SEPARATE ACCOUNT B

Notes to Financial Statements--(Continued)

(4) Purchases and Sales of Scudder Investment Series Shares

For the years ended December 31, 1999, 1998, and 1997 except for the Global
Discovery Division which is for the period from May 15, 1998 (Inception) to
December 31, 1998; purchases and proceeds from sales of Scudder Variable Life
Investment Funds were as follows:

<TABLE>
<CAPTION>
Money Market Division International Division Capital Growth Division
--------------------- ----------------------- -----------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
------- ------ ------ ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Purchases............... $44,371 53,364 23,916 185,087 111,520 138,552 407,432 317,123 282,658
Sales................... $18,828 11,296 18,673 156,952 112,597 68,547 294,883 264,342 149,231
======= ====== ====== ======= ======= ======= ======= ======= =======
</TABLE>

<TABLE>
<CAPTION>
Growth & Income Global
Balanced Division Bond Division Division Discovery
------------------------ -------------------- ----------------------- -----------
1999 1998 1997 1999 1998 1997 1999 1998 1997 1999 1998
-------- ------- ------- ------ ------ ------ ------- ------- ------- ------ ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Purchases............... $274,510 158,435 136,801 66,448 69,750 41,077 208,443 194,789 123,344 12,889 565
Sales................... $165,754 83,851 70,741 32,355 30,061 27,553 106,367 67,098 26,569 1,402 52
======== ======= ======= ====== ====== ====== ======= ======= ======= ====== ===
</TABLE>

(5) Accumulation of Unit Activity

The following is a reconciliation of the accumulation of unit activity for
the years ended December 31, 1999, 1998, and 1997, except for the Global
Discovery Division which is for the period from May 15, 1998 (inception) to
December 31, 1998.

<TABLE>
<CAPTION>
Money Market International Capital Growth
Division Division Division
-------------------- -------------------- --------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Increase in Units
Deposits............... 35,974 45,369 21,325 10,022 7,107 10,046 12,248 11,935 13,559
Withdrawals............ 14,831 9,370 16,319 8,240 6,829 4,720 8,642 9,447 6,577
------ ------ ------ ------ ------ ------ ------ ------ ------
Net Increase in
Units............... 21,143 35,999 5,006 1,782 278 5,326 3,606 2,488 6,982
Outstanding Units,
Beginning of Year...... 64,421 28,422 23,416 35,777 35,499 30,173 51,535 49,047 42,065
------ ------ ------ ------ ------ ------ ------ ------ ------
Outstanding Units, End
of Year................ 85,564 64,421 28,422 37,559 35,777 35,499 55,141 51,535 49,047
====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>

<TABLE>
<CAPTION>
Global
Growth & Income Discovery
Balanced Division Bond Division Division Division
-------------------- -------------------- -------------------- ----------
1999 1998 1997 1999 1998 1997 1999 1998 1997 1999 1998
------ ------ ------ ------ ------ ------ ------ ------ ------ ----- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Increase in Units
Deposits............... 13,201 10,163 10,116 7,282 7,938 5,071 14,411 14,262 11,243 1,460 78
Withdrawals............ 8,020 4,734 4,939 3,425 3,295 3,293 7,439 4,975 2,275 144 7
------ ------ ------ ------ ------ ------ ------ ------ ------ ----- ---
Net Increase in
Units............... 5,181 5,429 5,177 3,857 4,643 1,778 6,972 9,287 8,968 1,316 71
Outstanding Units,
Beginning of Year...... 39,810 34,381 29,204 19,458 14,815 13,037 26,465 17,178 8,210 71 --
------ ------ ------ ------ ------ ------ ------ ------ ------ ----- ---
Outstanding Units, End
of Year................ 44,991 39,810 34,381 23,315 19,458 14,815 33,437 26,465 17,178 1,387 71
====== ====== ====== ====== ====== ====== ====== ====== ====== ===== ===
</TABLE>

F-21
<PAGE>

PARAGON SEPARATE ACCOUNT B

Notes to Financial Statements--(Continued)
(6) Reconciliation of Gross and Net Deposits into the Separate Account

Deposits into the Separate Account purchase shares of Scudder Variable Life
Investment Fund. Net deposits represent the amount available for investment in
such shares after deduction of premium expense charges, monthly expense
charges, cost of insurance and the cost of optional benefits added by rider.
The following is a summary of net deposits made for the years ended December
31, 1999, 1998, and 1997, except for the Global Discovery Division which is for
the period from May 15, 1998 (inception) to December 31, 1998.

<TABLE>
<CAPTION>
Money Market Division International Division Capital Growth Division
-------------------------- ------------------------- ---------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
-------- ------- ------- ------- ------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Gross Deposits.. $ 33,424 25,225 18,433 176,515 164,286 172,592 431,496 377,928 334,899
Surrenders and
Withdrawals.......... (4,670) (505) (13,596) (82,647) (84,896) (30,987) (170,285) (150,589) (56,497)
Transfers Between
Funds and General
Account.............. 9,057 25,891 8,319 (8,662) (15,319) (12,712) 1,787 (101) (1,888)
-------- ------- ------- ------- ------- ------- -------- -------- -------
Total Gross Deposits
net of Surrenders,
Withdrawals, and
Transfers........... 37,811 50,611 13,156 85,206 64,071 128,893 262,998 227,238 276,514
Deductions:
Premium Expense
Charges............. 981 740 543 5,186 4,819 5,084 12,684 11,085 9,865
Monthly Expense
Charges............. 779 497 433 3,504 3,685 4,050 9,764 9,690 7,859
Cost of Insurance
and Optional
Benefits............ 9,998 6,697 6,700 44,962 49,643 46,303 125,301 130,523 117,834
-------- ------- ------- ------- ------- ------- -------- -------- -------
Total Deductions... 11,758 7,934 7,676 53,652 58,147 55,437 147,749 151,298 135,558
-------- ------- ------- ------- ------- ------- -------- -------- -------
Net Deposits from
Policyholders........ $ 26,053 42,677 5,480 31,554 5,924 73,456 115,249 75,940 140,956
======== ======= ======= ======= ======= ======= ======== ======== =======
<CAPTION>
Global
Balanced Division Bond Division Growth & Income Division Discovery
-------------------------- ------------------------- --------------------------- ------------
1999 1998 1997 1999 1998 1997 1999 1998 1997 1999 1998
-------- ------- ------- ------- ------- ------- -------- -------- ------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Gross Deposits.. $279,270 208,733 168,771 73,305 79,806 52,193 233,644 209,544 129,485 13,335 1,239
Surrenders and
Withdrawals.......... (97,872) (28,227) (34,296) (8,447) (4,783) (9,875) (36,802) (17,789) (7,167) -- (11)
Transfers Between
Funds and General
Account.............. 15,106 (14,287) (2,412) (8,709) (12,203) (9,318) (27,875) 1,021 15,123 715 --
-------- ------- ------- ------- ------- ------- -------- -------- ------- ------ -----
Total Gross Deposits
net of Surrenders,
Withdrawals, and
Transfers........... 196,504 166,219 132,063 56,149 62,820 33,000 168,967 192,776 137,441 14,050 1,228
Deductions:
Premium Expense
Charges............. 8,207 6,122 4,971 2,152 2,341 1,537 6,865 6,146 3,814 393 36
Monthly Expense
Charges............. 6,259 4,586 3,961 1,355 1,324 1,225 4,156 3,842 3,039 153 47
Cost of Insurance
and Optional
Benefits............ 80,313 61,768 53,738 17,385 17,831 15,874 53,327 51,754 32,694 1,959 631
-------- ------- ------- ------- ------- ------- -------- -------- ------- ------ -----
Total Deductions... 94,779 72,476 62,670 20,892 21,496 18,636 64,348 61,742 39,547 2,505 714
-------- ------- ------- ------- ------- ------- -------- -------- ------- ------ -----
Net Deposits from
Policyholders........ $101,725 93,743 69,393 35,257 41,324 14,364 104,619 131,034 97,894 11,545 514
======== ======= ======= ======= ======= ======= ======== ======== ======= ====== =====
</TABLE>

F-22
<PAGE>

PARAGON SEPARATE ACCOUNT B

Notes to Financial Statements--(Continued)

(7) Subsequent Event

On January 6, 2000, Paragon Life Insurance Co.'s ultimate parent, GenAmerica
Corporation, was purchased by Metropolitan Life Insurance Company.

F-23
<PAGE>

PARAGON SEPARATE ACCOUNT B

SCHEDULE OF INVESTMENTS

December 31, 1999

<TABLE>
<CAPTION>
Number
of Market
Shares Value Cost
------- ---------- ----------
<S> <C> <C> <C>
Scudder Variable Insurance Series:
Money Market Division.......................... 107,458 $ 107,458 $ 107,458
International Division......................... 47,988 $ 976,038 $ 627,557
Capital Growth Division........................ 77,232 $2,249,701 $1,447,076
Balanced Division.............................. 61,049 $ 983,502 $ 775,896
Bond Division.................................. 32,306 $ 209,666 $ 218,557
Growth & Income Division....................... 43,463 $ 476,350 $ 470,926
Global Discovery............................... 1,395 $ 18,386 $ 12,184
</TABLE>

See Accompanying Independent Auditor's Report.

F-24
<PAGE>

APPENDIX A

Illustrations of Death Benefits and Cash Values

The following tables illustrate how the Cash Value and Death Benefit of a
Policy change with the investment experience of a Division of the Separate
Account. The tables show how the Cash Value and Death Benefit of a Policy
issued to an Insured of a given age and at a given premium would vary over time
if the investment return on the assets held in each Division of the Separate
Account were a uniform, gross, after-tax annual rate of 0%, 6% or 12%. In
addition, the Cash Values and Death Benefits would be different from those
shown if the gross annual investment rates of return averaged 0%, 6%, and 12%
over a period of years, but fluctuated above and below those averages for
individual Policy years.

The tables illustrate a Policy issued to an Insured, age 45, in an Executive
Program issued as a Group Contract Policy. This assumes the maximum monthly
administrative charge. If a particular Policy has different sales or
administrative charges or if a particular group is larger or smaller or has a
different gender mix, the Cash Values and Death Benefits would vary from those
shown in the tables.

The Cash Value column under the "Guaranteed" heading shows the accumulated
value of the premiums paid reflecting deduction of the charges described above
and monthly charges for the cost of insurance based on the guaranteed rate
which is 125% of the maximum allowed under the 1980 Commissioners Standard
Ordinary Mortality Table C. The "Cash Value" column under the "Current" heading
shows the accumulated value of the premiums paid reflecting deduction of the
charges described above and monthly charges for the cost of insurance at the
current level for an Executive Program, which is less than or equal to 125% of
the maximum allowed by the 1980 Commissioners Standard Ordinary Mortality Table
C. The illustrations of Death Benefits reflect the above assumptions. The Death
Benefits also vary between tables depending upon whether Level Type (Option A)
or Increasing Type (Option B) Death Benefits are illustrated.

The amounts shown for the Cash Value and Death Benefit reflect the fact that
the investment rate of return is lower than the gross after-tax return on the
assets held in a Division of the Separate Account. The charges include a
maximum .90% charge for mortality and expense risk, an assumed combined
investment advisory fee (representing the average of the fees incurred by the
Funds in which the Divisions invest) and the Funds' expenses (based on the
average of the actual expenses incurred in fiscal year 1999) of .890%. These
charges take into account expense reimbursement arrangements expected to be in
place for 2000 for some of the Funds. In the absence of the reimbursement
arrangements for some of the Funds, the charges would have totaled .634% and
.657%, respectively. See the respective Fund prospectus for details. After
deduction for these amounts with expense reimbursement, the illustrated gross
annual investment rates of return of 0%, 6% and 12% correspond to approximate
net annual rates of -1.790%, 4.210%, and 10.210%, respectively.

The hypothetical values shown in the tables reflect all fees and charges under
the Policy, including the premium expense charge, the premium tax charge, and
all components of the monthly deduction. They do not reflect any charges for
federal income taxes against the Separate Account, since the Company is not
currently making any such charges. However, such charges may be made in the
future and, in that event, the gross annual investment rate of return of the
divisions of the Separate Account would have to exceed 0%, 6%, and 12% by an
amount sufficient to cover the tax charges in order to produce the Death
Benefit and Cash Value illustrated. (See "Federal Tax Matters.") Additionally,
the hypothetical values shown in the tables assume that the Policy for which
values are illustrated is not deemed an individual policy under OBRA, and
therefore the values do not reflect the additional 1% premium expense charge
for the Company's increased federal tax liabilities.

The tables illustrate the Policy values that would result based upon the
investment rates of return if premiums are paid as indicated, and if no Policy
Loans have been made. The tables are also based on the assumptions that the
Owner has not requested an increase or decrease in the Face Amount, that no
partial withdrawals have been made, that no transfer charges were incurred, and
that no optional riders have been requested.

Upon request, the Company will provide a comparable illustration based upon the
proposed Insured's age, group size and gender mix, the Face Amount and premium
requested and the proposed frequency of premium payments.

A-1
<PAGE>

FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE

FACE AMOUNT OF COVERAGE: $500,000 AGE 45
DEATH BENEFIT OPTION: A ANNUAL PREMIUM:
PREMIUM EXPENSE CHARGE: 1.00% $6,000.00
PREMIUM TAX: 2.00% (Monthly Premium:
$500.00)

<TABLE>
<CAPTION>
FOR SEPARATE ACCOUNT B--A HYPOTHETICAL GROSS
ANNUAL RATE OF RETURN AT 0.00% (NET RATE AT -
1.790%)
--------------------------------------------------------------------
GUARANTEED* CURRENT**
------------------------------- -------------------------------
PREM CASH DEATH CASH DEATH
YR AT 5.00% VALUE BENEFIT VALUE BENEFIT
--- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
1 $ 6,161 $ 3,045 $500,000 $ 4,874 $500,000
2 12,630 5,882 500,000 9,576 500,000
3 19,423 8,468 500,000 14,145 500,000
4 26,555 10,797 500,000 18,515 500,000
5 34,045 12,844 500,000 22,698 500,000
6 41,908 14,593 500,000 26,698 500,000
7 50,165 16,014 500,000 30,521 500,000
8 58,834 17,065 500,000 34,110 500,000
9 67,937 17,712 500,000 37,531 500,000
10 77,496 17,923 500,000 40,728 500,000
11 87,532 17,693 500,000 43,648 500,000
12 98,070 16,987 500,000 46,357 500,000
13 109,134 15,803 500,000 48,805 500,000
14 120,752 14,109 500,000 50,940 500,000
15 132,951 11,853 500,000 52,768 500,000
16 145,760 8,972 500,000 54,295 500,000
17 159,209 5,353 500,000 55,468 500,000
18 173,331 860 500,000 56,234 500,000
19 188,159 0 0 56,604 500,000
20 203,728 0 0 56,524 500,000
25 294,060 0 0 46,474 500,000
30 409,348 0 0 7,369 500,000
</TABLE>
- --------
*These values reflect investment results using guaranteed cost of insurance
rates.
**These values reflect investment results using current cost of insurance
rates.

The hypothetical investment rate of return shown above is illustrative only,
and should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Policy
Owner, and the investment results for the Funds. The Cash Value and Death
Benefit for a Policy would be different from those shown if the actual rates of
return averaged the rate shown above over a period of years, but also
fluctuated above or below that average for individual years. No representation
can be made by the Company, Walnut Street Securities, the investment management
company, or any representative thereof, that this hypothetical rate of return
can be achieved for any one year, or sustained over any period of time.

Illustrated values shown above are as of the end of the years indicated and
assume any additional premiums shown are received monthly on the Policy
Anniversary and further assume there is no Policy Indebtedness outstanding.

A-2
<PAGE>

FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE

FACE AMOUNT OF COVERAGE: $500,000 AGE 45
DEATH BENEFIT OPTION: A ANNUAL PREMIUM:
PREMIUM EXPENSE CHARGE: 1.00% $6,000.00
PREMIUM TAX: 2.00% (Monthly Premium:
$500.00)

<TABLE>
<CAPTION>
FOR SEPARATE ACCOUNT B--A HYPOTHETICAL GROSS
ANNUAL RATE OF RETURN AT 6.00% (NET RATE AT
4.210%)
---------------------------------------------------------------------
GUARANTEED* CURRENT**
------------------------------- --------------------------------
PREM CASH DEATH CASH DEATH
YR AT 5.00% VALUE BENEFIT VALUE BENEFIT
--- -------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
1 $ 6,161 $ 3,144 $500,000 $ 5,033 $500,000
2 12,630 6,264 500,000 10,191 500,000
3 19,423 9,311 500,000 15,518 500,000
4 26,555 12,272 500,000 20,950 500,000
5 34,045 15,116 500,000 26,502 500,000
6 41,908 17,818 500,000 32,182 500,000
7 50,165 20,337 500,000 37,998 500,000
8 58,834 22,620 500,000 43,897 500,000
9 67,937 24,619 500,000 49,950 500,000
10 77,496 26,286 500,000 56,106 500,000
11 87,532 27,596 500,000 62,316 500,000
12 98,070 28,496 500,000 68,647 500,000
13 109,134 28,960 500,000 75,057 500,000
14 120,752 28,935 500,000 81,500 500,000
15 132,951 28,341 500,000 87,986 500,000
16 145,760 27,085 500,000 94,526 500,000
17 159,209 25,019 500,000 101,076 500,000
18 173,331 21,961 500,000 107,595 500,000
19 188,159 17,716 500,000 114,097 500,000
20 203,728 12,071 500,000 120,542 500,000
25 294,060 0 0 149,741 500,000
30 409,348 0 0 164,235 500,000
</TABLE>
- --------
*These values reflect investment results using guaranteed cost of insurance
rates.
**These values reflect investment results using current cost of insurance
rates.

A-3
<PAGE>

FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE

FACE AMOUNT OF COVERAGE: $500,000 AGE: 45
DEATH BENEFIT OPTION: A ANNUAL PREMIUM:
PREMIUM EXPENSE CHARGE: 1.00% $6,000.00
PREMIUM TAX: 2.00% (Monthly Premium:
$500.00)

<TABLE>
<CAPTION>
FOR SEPARATE ACCOUNT B--A HYPOTHETICAL GROSS
ANNUAL RATE OF RETURN AT 12.00% (NET RATE AT
10.210%)
---------------------------------------------------------------------
GUARANTEED* CURRENT**
------------------------------- --------------------------------
PREM CASH DEATH CASH DEATH
YR AT 5.00% VALUE BENEFIT VALUE BENEFIT
--- -------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
1 $ 6,161 $ 3,242 $500,000 $ 5,190 $500,000
2 12,630 6,655 500,000 10,821 500,000
3 19,423 10,208 500,000 16,977 500,000
4 26,555 13,907 500,000 23,643 500,000
5 34,045 17,743 500,000 30,882 500,000
6 41,908 21,710 500,000 38,756 500,000
7 50,165 25,791 500,000 47,338 500,000
8 58,834 29,957 500,000 56,644 500,000
9 67,937 34,183 500,000 66,820 500,000
10 77,496 38,447 500,000 77,903 500,000
11 87,532 42,750 500,000 89,942 500,000
12 98,070 47,070 500,000 103,109 500,000
13 109,134 51,414 500,000 117,485 500,000
14 120,752 55,765 500,000 133,166 500,000
15 132,951 60,082 500,000 150,313 500,000
16 145,760 64,318 500,000 169,112 500,000
17 159,209 68,375 500,000 189,723 500,000
18 173,331 72,130 500,000 212,342 500,000
19 188,159 75,444 500,000 237,239 500,000
20 203,728 78,173 500,000 264,684 500,000
25 294,060 77,940 500,000 453,351 525,887
30 409,348 21,483 500,000 763,920 817,395
</TABLE>
- --------
*These values reflect investment results using guaranteed cost of insurance
rates.
**These values reflect investment results using current cost of insurance
rates.

A-4
<PAGE>

FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE

FACE AMOUNT OF COVERAGE: $500,000 AGE: 45
DEATH BENEFIT OPTION: B ANNUAL PREMIUM:
PREMIUM EXPENSE CHARGE: 1.00% $12,000.00
PREMIUM TAX: 2.00% (Monthly Premium:
$1,000.00)

<TABLE>
<CAPTION>
FOR SEPARATE ACCOUNT B--A HYPOTHETICAL GROSS
ANNUAL RATE OF RETURN AT 0.00% (NET RATE AT -
1.790%)
---------------------------------------------------------------------
GUARANTEED* CURRENT**
------------------------------- --------------------------------
PREM CASH DEATH CASH DEATH
YR AT 5.00% VALUE BENEFIT VALUE BENEFIT
--- -------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
1 $ 12,322 $ 8,798 $508,798 $ 10,633 $510,633
2 25,261 17,268 517,268 20,981 520,981
3 38,846 25,368 525,368 31,085 531,085
4 53,111 33,092 533,092 40,878 540,878
5 68,090 40,417 540,417 50,371 550,371
6 83,817 47,328 547,328 59,571 559,571
7 100,330 53,796 553,796 68,481 568,481
8 117,669 59,782 559,782 77,044 577,044
9 135,875 65,252 565,252 85,328 585,328
10 154,992 70,182 570,182 93,276 593,276
11 175,064 74,568 574,568 100,827 600,827
12 196,140 78,384 578,384 108,053 608,053
13 218,269 81,636 581,636 114,903 614,903
14 241,505 84,304 584,304 121,316 621,316
15 265,903 86,344 586,344 127,302 627,302
16 291,521 87,709 587,709 132,867 632,867
17 318,419 88,305 588,305 137,954 637,954
18 346,663 88,021 588,021 142,507 642,507
19 376,319 86,749 586,749 146,542 646,542
20 407,457 84,393 584,393 150,002 650,002
25 588,120 54,750 554,750 155,817 655,817
30 818,697 0 0 131,300 631,300
</TABLE>
- --------
*These values reflect investment results using guaranteed cost of insurance
rates.
**These values reflect investment results using current cost of insurance
rates.

A-5
<PAGE>

FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE

FACE AMOUNT OF COVERAGE: $500,000 AGE: 45
DEATH BENEFIT OPTION: B ANNUAL PREMIUM:
PREMIUM EXPENSE CHARGE: 1.00% $12,000.00
PREMIUM TAX: 2.00% (Monthly Premium:
$1,000.00)

<TABLE>
<CAPTION>
FOR SEPARATE ACCOUNT B--A HYPOTHETICAL GROSS
ANNUAL RATE OF RETURN AT 6.00% (NET RATE AT 4.210%)
-------------------------------------------------------------------
GUARANTEED* CURRENT**
-------------------------------- -------------------------------
PREM CASH DEATH CASH DEATH
YR AT 5.00% VALUE BENEFIT VALUE BENEFIT
--- -------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
1 $ 12,322 $ 9,086 $ 509,086 $ 10,980 $ 510,980
2 25,261 18,378 518,378 22,326 522,326
3 38,846 27,835 527,835 34,088 534,088
4 53,111 37,453 537,453 46,211 546,211
5 68,090 47,207 547,207 58,716 558,716
6 83,817 57,078 557,078 71,620 571,620
7 100,330 67,036 567,036 84,938 584,938
8 117,669 77,035 577,035 98,622 598,622
9 135,875 87,033 587,033 112,755 612,755
10 154,992 96,995 596,995 127,287 627,287
11 175,064 106,907 606,907 142,168 642,168
12 196,140 116,730 616,730 157,482 657,482
13 218,269 126,454 626,454 173,183 673,183
14 241,505 136,044 636,044 189,223 689,223
15 265,903 145,441 645,441 205,615 705,615
16 291,521 154,575 654,575 222,375 722,375
17 318,419 163,324 663,324 239,450 739,450
18 346,663 171,546 671,546 256,787 756,787
19 376,319 179,090 679,090 274,404 774,404
20 407,457 185,810 685,810 292,244 792,244
25 588,120 203,314 703,314 381,673 881,673
30 818,697 174,009 674,009 457,425 957,425
</TABLE>
- --------
*These values reflect investment results using guaranteed cost of insurance
rates.
**These values reflect investment results using current cost of insurance
rates.

A-6
<PAGE>

FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE

FACE AMOUNT OF COVERAGE: $500,000 AGE: 45
DEATH BENEFIT OPTION: B ANNUAL PREMIUM:
PREMIUM EXPENSE CHARGE: 1.00% $12,000.00
PREMIUM TAX: 2.00% (Monthly Premium:
$1,000.00)

<TABLE>
<CAPTION>
FOR SEPARATE ACCOUNT B--A HYPOTHETICAL GROSS
ANNUAL RATE OF RETURN AT 12.00% (NET RATE AT 10.210%)
------------------------------------------------------------------
GUARANTEED* CURRENT**
------------------------------ ---------------------------------
PREM CASH DEATH CASH DEATH
YR AT 5.00% VALUE BENEFIT VALUE BENEFIT
--- -------- ---------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
1 $ 12,322 $ 9,369 $ 509,369 $ 11,322 $ 511,322
2 25,261 19,512 519,512 23,700 523,700
3 38,846 30,458 530,458 37,279 537,279
4 53,111 42,277 542,277 52,105 552,105
5 68,090 55,025 555,025 68,314 568,314
6 83,817 68,773 568,773 86,045 586,045
7 100,330 83,585 583,585 105,454 605,454
8 117,669 99,519 599,519 126,644 626,644
9 135,875 116,647 616,647 149,866 649,866
10 154,992 135,052 635,052 175,258 675,258
11 175,064 154,853 654,853 202,972 702,972
12 196,140 176,153 676,153 233,315 733,315
13 218,269 199,102 699,102 266,493 766,493
14 241,505 223,835 723,835 302,725 802,725
15 265,903 250,478 750,478 342,325 842,325
16 291,521 279,165 779,165 385,636 885,636
17 318,419 309,991 809,991 432,969 932,969
18 346,663 343,042 843,042 484,666 984,666
19 376,319 378,416 878,416 541,178 1,041,178
20 407,457 416,231 916,231 602,930 1,102,930
25 588,120 648,905 1,148,905 1,007,307 1,507,307
30 818,697 969,509 1,469,509 1,626,060 2,126,060
</TABLE>
- --------
*These values reflect investment results using guaranteed cost of insurance
rates.
**These values reflect investment results using current cost of insurance
rates.

A-7
<PAGE>

Morgan Stanley Dean Witter Variable
Investment Series
[Paragon Logo]
. GROUP AND INDIVIDUAL
FLEXIBLE PREMIUM VARIABLE LIFE
INSURANCE POLICIES

Prospectus dated May 1, 2000

50450

<PAGE>

GROUP AND INDIVIDUAL FLEXIBLE PREMIUM
VARIABLE LIFE INSURANCE POLICIES
ISSUED BY
PARAGON LIFE INSURANCE COMPANY
100 South Brentwood
St. Louis, MO 63105
(314) 862-2211

The Owner may allocate net premiums to one or more of the Divisions of
Separate Account B (the "Separate Account"). The Policy value will vary to
reflect the investment experience of the Divisions selected by the Owner.
Depending on the death benefit option elected, portions of the death benefit
may also vary. The Owner bears the entire investment risk under the Policies;
there is no minimum guaranteed value.

Each of the 13 Divisions of the Separate Account will invest solely in one of
the corresponding Funds managed by Morgan Stanley Dean Witter Advisors Inc.:

FUND FUND
- ----------------------------

Money Market Portfolio Global Dividend Growth Portfolio
Quality Income Plus Portfolio European Growth Portfolio
High Yield Portfolio Pacific Growth Portfolio
Utilities Portfolio Equity Portfolio
Income Builder Portfolio Competitive Edge "Best Ideas"
Dividend Growth Portfolio Portfolio
Capital Growth Portfolio
Strategist Portfolio

The date of this Prospectus is May 1, 2000.

1
<PAGE>

Please read this Prospectus carefully and keep it. A full description of the
Funds is contained in the prospectus for each Fund, which must accompany this
Prospectus.

It may not be a good decision to purchase a Policy as a replacement for
another type of life insurance or as a means to obtain additional insurance
protection if the purchaser already owns another flexible premium variable life
insurance policy.

2
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary.................................................................. 4
The Company The Separate Account, and The Funds.......................... 10
The Company
The Separate Account
The Funds
Addition, Deletion, or Substitution of Investments
Payment and Allocation of Premiums....................................... 14
Issuance of a Policy
Premiums
Allocation of Net Premiums and Cash Value
Policy Lapse and Reinstatement
Policy Benefits.......................................................... 18
Death Benefit
Cash Value
Policy Rights and Privileges............................................. 24
Exercising Rights and Privileges Under the Policies
Loans
Surrender and Partial Withdrawals
Transfers
Right to Examine Policy
Conversion Right to a Fixed Benefit Policy
Eligibility Change Conversion
Payment of Benefits at Maturity
Payment of Policy Benefits
Charges and Deductions................................................... 28
Sales Charges
Premium Tax Charge
Monthly Deduction
Partial Withdrawal Transaction Charge
Separate Account Charges
General Matters Relating to the Policy................................... 32
Distribution of the Policies............................................. 35
General Provisions of the Group Contract................................. 35
Federal Tax Matters...................................................... 37
Safekeeping of the Separate Account's Assets............................. 39
Voting Rights............................................................ 39
State Regulation of the Company.......................................... 40
Management of the Company................................................ 41
Legal Matters............................................................ 42
Legal Proceedings........................................................ 42
Experts.................................................................. 42
Additional Information................................................... 42
Definitions.............................................................. 42
Financial Statements..................................................... F-1
Appendix A............................................................... A-1
</TABLE>

The Policies are not available in all states.

3
<PAGE>

SUMMARY OF THE POLICY

The Policy

The Policies (either an Individual Policy or a Certificate) described in this
Prospectus are designed for use in employer-sponsored insurance programs and
are issued in three situations.

. First--Policies in the form of Certificates are issued pursuant to Group
Contracts entered into between the Company and Contractholders (see
"General Provisions of the Group Contract");

. Second--Individual Policies can be issued in connection with employer-
sponsored insurance programs where Group Contracts are not issued; and

The Insured under a Policy is usually an employee of the Contractholder or
sponsoring employer or the employee's spouse. An Executive Program Policy is
issued with a maximum Face Amount in excess of $500,000 under a Group Contract
or an employer sponsored insurance program. Generally, only an employee is
eligible to be an Insured under an Executive Program Policy. If there is
sufficient Cash Surrender Value, Individual Insurance under a Group Contract or
other employer-sponsored insurance program will continue should the Group
Contract or other program cease or the employee's employment end (see "Payment
and Allocation of Premiums--Issuance of a Policy").

On behalf of Owners, the Contractholder will make planned premium payments
under the Group Contract equal to an amount authorized by employees to be
deducted from their wages. In addition, Owners may pay additional premiums. A
similar procedure will apply when an Individual Policy is issued in connection
with an employer-sponsored program.

Right to Examine Policy

The Separate Account

4
<PAGE>

Premiums

Death Benefit

. Under the "Level Type" death benefit, the death benefit is the Face
Amount of the Policy or, if greater, the applicable percentage of Cash
Value; and

. Under the "Increasing Type" death benefit, the death benefit is the Face
Amount of the Policy plus the Cash Value or, if greater, the applicable
percentage of Cash Value.

So long as a Policy remains in force, the minimum death benefit under either
option will be at least equal to the current Face Amount. (See "Policy
Benefits--Death Benefit.")

The minimum initial Face Amount is generally $25,000 under the Company's
current rules. Executive Program Policies generally have a minimum Face Amount
of $100,000. The maximum Face Amount is generally $500,000. However, we may
establish a higher maximum Face Amount for Executive Program Policies. The
Owner may generally change the Face Amount (subject to the minimum and maximum
amounts applicable to his or her Policy) and the death benefit option, but in
certain cases evidence of insurability may be required. (See "Policy Benefits--
Death Benefit.")

Riders

Additional insurance benefits offered under the Policy by rider may include a
children's insurance rider, an accelerated death benefit settlement option
rider, an accidental death benefit rider, and a waiver of monthly deductions
rider. Some Group Contracts and employer-sponsored insurance programs may not
provide each of the additional benefits described above. Generally, Executive
Program Policies only have the acceleration of death benefits rider. (See
"General Matters Relating to the Policy--Additional Insurance Benefits.") We
will deduct the cost of these additional insurance benefits from Cash Value as
part of the monthly deduction. (See "Charges and Deductions--Monthly
Deduction.")

5
<PAGE>

Cash Value

Charges and Deductions

Sales Charges. Generally, there are no sales charges under a Policy. However, a
front-end charge will be imposed on Policies that are deemed to be individual
Policies under the Omnibus Budget Reconciliation Act of 1990 ("OBRA"). The
additional charge, which is for federal income taxes measured by premiums, is
equal to 1% of each premium payment, and compensates the Company for a
significantly higher corporate income tax liability resulting from changes made
to the Internal Revenue Code by OBRA.

Premium Tax Charge. We deduct a charge of 2.25% to cover state premium taxes
from premiums paid. (See "Charges and Deductions--Premium Tax Charge.")

Monthly Deduction. We make a monthly deduction from the Policy's Cash Value in
the Separate Account. The monthly deduction includes the following:

. Cost of Insurance Charge. We deduct a cost of insurance charge calculated
on each Monthly Anniversary. We determine monthly cost of insurance rates
based upon expectations as to future mortality experience. For a
discussion of the factors affecting the rate class of the Insured (see
"Charges and Deductions--Monthly Deduction--Cost of Insurance.")

. A charge for any additional insurance benefits provided by a rider.

Separate Account Charges.

. Federal Taxes. No charges are currently made for federal or state income
taxes. (See "Federal Tax Matters.")

6
<PAGE>

<TABLE>
<CAPTION>
Management Other
Fees Expenses
(after fee (after
waiver reimbursement Total
as as Annual
Fund applicable) applicable) Expenses
---- ---------- ------------- --------
<S> <C> <C> <C>
Money Market Portfolio................ 0.50% 0.02% 0.52%
Quality Income Plus Portfolio......... 0.50% 0.02% 0.52%
High Yield Portfolio.................. 0.50% 0.03% 0.53%
Utilities Portfolio................... 0.64% 0.03% 0.67%
Income Builder Portfolio.............. 0.75% 0.06% 0.81%
Dividend Growth Portfolio............. 0.51% 0.01% 0.52%
Capital Growth Portfolio.............. 0.65% 0.07% 0.72%
Global Dividend Growth Portfolio...... 0.75% 0.08% 0.83%
European Growth Portfolio............. 0.95% 0.09% 1.04%
Pacific Growth Portfolio.............. 0.95% 0.47% 1.42%
Equity Portfolio...................... 0.49% 0.02% 0.51%
Competitive Edge "Best Ideas"
Portfolio............................ 0.44% 0.12% 0.56%
Strategist Portfolio.................. 0.50% 0.02% 0.52%
</TABLE>

Policy Loans

Surrender and Partial Withdrawals

7
<PAGE>

Conversion Right

Eligibility Change Conversion

Illustrations

Policy Tax Compliance

A Policy may be treated as a "modified endowment contract." If the Policy is a
modified endowment contract, it will affect the tax advantages offered under
the Policy. (See "Federal Tax Matters.")

Specialized Uses of the Policy

8
<PAGE>

purchasing a Policy for a specialized purpose a purchaser should consider
whether the long-term nature of the Policy is consistent with the purpose for
which it is being considered. Using a Policy for a specialized purpose may have
tax consequences. (See "Federal Tax Matters.")

Questions

If you have any questions, you may write or call the Company at 100 South
Brentwood, St. Louis, MO 63105, (314) 862-2211.

9
<PAGE>

THE COMPANY AND THE SEPARATE ACCOUNT

The Company

Ratings. We may from time to time publish in advertisements, sales literature,
and reports to Owners or Contractholders, the ratings and other information
assigned to us by one or more independent rating organizations such as A. M.
Best Company, Standard & Poor's, and Duff & Phelps. The purpose of the ratings
our financial strength and/or claims paying ability and should not be
considered as bearing on the investment performance of assets held in the
Separate Account. Each year the A. M. Best Company reviews the financial status
of thousands of insurers, culminating in the assignment of Best's ratings.
These ratings reflect Best's current opinion of the relative financial strength
and operating performance of an insurance company in comparison to the norms of
the life/health insurance industry. In addition, the claims paying ability of
the Company as measured by Standard & Poor's Insurance Ratings Services or Duff
& Phelps may be referred to in advertisements or sales literature or in reports
to Owners or Contractholders. These ratings are opinions of an operating
insurance company's financial capacity to meet the obligations of its insurance
policies in accordance with their terms. These ratings do not reflect the
investment performance of the Separate Account or the degree of risk associated
with an investment in the Separate Account.

10
<PAGE>

The Separate Account

We established Separate Account B (the "Separate Account") as a separate
investment account on January 4, 1993 under Missouri law. The Separate Account
receives and invests the net premiums paid under the Policies. In addition, the
Separate Account receives and invests net premiums for other flexible premium
variable life insurance policies issued by us.

The Funds

The Separate Account invests in shares of Morgan Stanley Dean Witter Variable
Investment Series (referred to as the "Fund"), a series-type mutual fund
registered with the SEC as open-end, diversified management investment company.
Only the funds described in this section of the prospectus are currently
available as investment choices of the policies even though additional Funds
may be described in the prospectus for the Morgan Stanley Dean Witter Variable
Investment Series. The assets of each Portfolio used by the Policies are held
separate from the assets of the other Portfolios, and each Portfolio has
investment objectives and policies which are generally different from those of
the other Portfolios. The income or losses of one Portfolio generally have no
effect on the investment performance of any other Portfolios.

Investment Results. The investment objectives and policies of certain
Portfolios are similar to the investment objectives and policies of other
portfolios that may be managed by the same investment adviser or manager. The
investment results of the Portfolios may differ from the results of these other
portfolios. There can be no guarantee, and no representation is made, that the
investment results of any of the Portfolios will be comparable to the
investment results of any other portfolio, even if the other portfolio has the
same investment adviser or manager.

The following summarizes the investment policies of each Portfolio:

Money Market Portfolio

The Money Market Portfolio seeks high current income, preservation of capital
and liquidity.

Quality Income Plus Portfolio

The Quality Income Plus Portfolio seeks as a primary objective to provide a
high level of current income by investing primarily in U.S. Government
securities and other fixed-income securities. As a secondary objective, the
Portfolio seeks capital appreciation but only when consistent with its primary
objective.

11
<PAGE>

High Yield Portfolio

The High Yield Portfolio seeks as a primary objective to provide a high level
of current income by investing in a diversified portfolio consisting
principally of fixed-income securities, which may include both non-convertible
and convertible debt securities and preferred stocks. As a secondary objective,
the Portfolio will seek capital appreciation, but only when consistent with its
primary objective.

Utilities Portfolio

The Utilities Portfolio seeks both capital appreciation and current income.

Income Builder Portfolio

The Income Builder Portfolio seeks as a primary objective reasonable income.
Growth of capital is a secondary objective.

Dividend Growth Portfolio

The Dividend Growth Portfolio seeks to provide reasonable current income and
long-term growth of income and capital.

Capital Growth Portfolio

The Capital Growth Portfolio seeks long-term capital growth.

Global Dividend Growth Portfolio

The Global Dividend Growth Portfolio seeks to provide reasonable current income
and long-term growth of income and capital.

European Growth Portfolio (European Portfolio)

The European Growth Portfolio seeks to maximize the capital appreciation of its
investments.

Pacific Growth Portfolio

The Pacific Growth Portfolio seeks to maximize the capital appreciation of its
investments.

Equity Portfolio

The Equity Portfolio seeks as a primary objective growth of capital through
investments in common stocks of companies believed by the Investment Manager to
have potential for superior growth. As a secondary objective the Equity
Portfolio seeks income but only when consistent with its primary objective.

Competitive Edge "Best Ideas" Portfolio

The Competitive Edge "Best Ideas" Portfolio seeks long-term capital growth.

Strategist Portfolio

The Strategist Portfolio seeks high total investment return through a fully
managed investment policy utilizing equity, fixed-income and money market
securities, and the writing of covered call and put options.

There is no assurance that any of the Funds will achieve its stated objective.
More detailed information, including a description of risks, is in the
prospectus for the Funds, which must preceede this Prospectus and which should
be read carefully. Please also refer to the "Annual Expenses of the Funds".

12
<PAGE>

Addition, Deletion, or Substitution of Investments.

We reserve the right, subject to compliance with applicable law, to make
additions to, deletions from, or substitutions for the shares of the Funds that
are held by the Separate Account or that the Separate Account may purchase. We
reserve the right to (1) eliminate the shares of any of the Funds and (2)
substitute shares of another fund if the shares of a Fund are no longer
available for investment, or further investment in any Fund becomes
inappropriate in view of the purposes of the Separate Account. We will not
substitute any shares without notice to the Owner and prior approval of the
SEC, to the extent required by the 1940 Act or other applicable law, as
required

We also reserve the right to establish additional Divisions of the Separate
Account. We will establish new Divisions when marketing needs or investment
confitions warrant. Any new Division will be made available to existing Owners
on a basis to be determined by the Company. To the extent approved by the SEC,
we may also:

.Eliminate or combine one or more Divisions;

.Substitute one Division for another Division; or

.Transfer assets between Divisions if marketing, tax, or investment
conditions warrant.

We may make changes in the Policy by appropriate endorsement in the event of a
substitution or change. We will notify all Owners of any such changes.

If we deem it to be in the best interests of persons having voting rights under
the Policy, and to the extent any necessary SEC approvals or Owner votes are
obtained, the Separate Account may be:

(a) operated as a management company under the 1940 Act;

(b) deregistered under that Act in the event such registration is no longer
required; or

To the extent permitted by applicable law, we may transfer the assets of the
Separate Account associated with the Policy to another separate account.

13
<PAGE>

PAYMENT AND ALLOCATION OF PREMIUMS

Issuance of a Policy

Individual Policies, rather than Certificates, will be issued

(1) to independent contractors of the employer;

(2) to persons who wish to continue coverage after a Group Contract has
terminated;

(3) to persons who wish to continue coverage after they no longer are
employed by the Group Contractholder;

(4) if state law restrictions make issuance of a Group Contract
impracticable; or

(5) if the employer chooses to use an employer-sponsored insurance program
that does not involve a Group Contract.

In addition, the Contractholder may require that an employee must be employed
by the employer as of a certain date or for a certain period of time. We will
set forth this date or time period in the Group Contract specifications pages.
Employees of any Associated Companies of the Contractholder will be considered
employees of the Contractholder. We may also allow an individual who is an
independent contractor working primarily for the sponsoring employer to be
considered an eligible employee. An independent contractor may receive an
Individual Policy rather than a Certificate depending upon state law applicable
to the contracts. An employee may include a partner in a partnership if the
employer is a partnership.

Guaranteed Issue. Other than in Executive Programs, we will issue the Policy
and any children's insurance rider applied for by the employee pursuant to our
guaranteed issue procedure. We offer the guaranteed issue procedure only when
an employee is given the opportunity to purdchase a Policy for the first time.
Under this procedure the employee is required to answer qualifying questions in
the application for Individual Insurance, but is not required to submit to a
medical or paramedical examination. The maximum Face Amount that an

14
<PAGE>

employee can generally apply for under the guaranteed issue procedure
("Guaranteed Issue Amount") is three times the employee's salary up to a
ceiling that is based on the number of eligible employees under a Group
Contract or other employer-sponsored insurance program. We may offer guaranteed
issue with Executive Programs depending upon the number of eligible employees
or if other existing insurance coverage is cancelled.

Simplified Underwriting. The employee must submit to a simplified underwriting
procedure requiring the employee to respond satisfactorily to certain health
questions in the application:

. where the Face Amount exceeds the guaranteed issue limits;

. where the Policy has been offered previously to the employee;

. where the guaranteed issue requirements set forth in the application for
Individual Insurance are not met; or

. in connection with certain programs that may be offered without guaranteed
issue

A blood test may be required. This requirement is generally applicable only to
Executive Programs.

Acceptance of an application is always subject to our underwriting rules, and
we reserve the right to reject an application for any reason.

. the appropriate application for Individual Insurance is signed;

. the initial premium has been paid prior to the Insured's death;

. the Insured is eligible for it; and

. the information in the application is determined to be acceptable to the
Company.

Interim Insurance. Interim Insurance in the amount of insurance applied for may
be available prior to the issuance of a Policy which is being underwritten on a
guaranteed issue basis up to the Guaranteed Issue Amount. If available, interim
insurance will start as of the date of the application. Interim insurance ends
on the earliest of the following dates:

. the date insurance begins on the Policy applied for;

. the date a Policy other than the Policy applied for is offered to the
applicant;

. the date the Company notifies the applicant that the application for any
proposed Insured is declined;

. 60 days from the date of application; or

. termination of employment with the Contractholder or sponsoring employer.

15
<PAGE>

Premiums

The initial premium is due on the Issue Date, and usually will be paid by the
Contractholder or employer on behalf of the Owner. The Company requires that
the initial premium for a Policy be at least equal to one-twelfth (1/12) of the
planned annual premium for the Policy set forth in the specifications pages.
The planned annual premium is an amount specified for each Policy based on the
requested initial Face Amount, the Issue Age of the Insured and the charges
under the Policy. (See "Charges and Deductions.") The Owner is not required to
pay premiums equal to the planned annual premium.

We will apply premiums paid by a Contractholder or sponsoring employer or
designated payor to a Policy as of the Valuation Date we receive the prmeiums.
Premiums will be "received" on a Valuation Date when we receive supporting
documentation necessary for us to determine the amount of premium per Policy
and the cash premium.

Continuance of Insurance. Failure of the Contractholder to pay the planned
premium payments authorized by its employees may cause the Group Contract to
terminate. (See "General Provisions of the Group Contract-- Termination.")
Provided that there is sufficient Cash Surrender Value to prevent the Policy
from lapsing, the Individual Insurance provided will automatically continue in
the event of Group Contract termination. (See "Policy Rights and Privileges--
Eligibility Change Conversion.") Individual Insurance will also continue if the
employee's employment with the Contractholder or sponsoring employer
terminates. In either circumstance, an Owner of an Individual Policy (or a
Certificate converted by amendment to an Individual Policy) will establish a
new schedule of planned premiums. The new schedule will have the same planned
annual premium, and the payment intervals will be no more frequent than
quarterly.

16
<PAGE>

agree) and no further premiums will be accepted until allowed by the current
maximum premium limitations prescribed by Federal tax law. See "Federal Tax
Matters" for a further explanation of premium limitations.

Section 7702A creates an additional premium limitation, which, if exceeded, can
change the tax status of a Policy to that of a "modified endowment contract." A
modified endowment contract is a life insurance contract, from which
withdrawals are treated (for tax purposes) (1)as a distribution of any taxable
income under the contract, and (2) as a distribution of nontaxable investment
in the contract. Also, such withdrawals may be subject to a 10% federal income
tax penalty. We have adopted administrative steps designed to notify an Owner
when we believe that a premium payment will cause a Policy to become a modified
endowment contract. Owner will be given a limited amount of time to request
that the premium be reversed in order to avoid the Policy's classification as a
modified endowment contract. (See "Federal Tax Matters.")

Allocation of Net Premiums and Cash Value

Net Premiums. The net premium equals:
(1) the premium paid; less

(2) the premium expense charge;

(3) any charge to compensate us for anticipated higher corporate income taxes
resulting from the sale of a Policy; and

(4) the premium tax charge. (See "Charges and Deductions--Sales Charges.")

The Policy's Cash Value also may be transferred between the Divisions of the
Separate Account. (See "Policy Rights and Privileges--Transfers.")

Policy Lapse and Reinstatement

Lapse. Unlike conventional life insurance policies, the failure to make a
premium payment following the initial premium payment will not itself cause a
Policy to lapse. However, a Policy can lapse even if planned premiums have been
paid. Lapse will occur only when the Cash Surrender Value is insufficient to
cover the monthly deduction, and a grace period expires without a sufficient
payment being made. (See also "General Provisions of the Group Contract--Grace
Period--Termination.") Thus, the payment of premiums in any amount does not
guarantee that the Policy will remain in force until the Maturity Date.

17
<PAGE>

requirements, the amount of the premium required to keep the Policy in force
will be the amount of the current monthly deduction. (See "Charges and
Deductions.") If the Company does not receive the required amount within the
grace period, the Policy will lapse and terminate without Cash Value. If the
Insured dies during the grace period, any overdue monthly deductions will be
deducted from the death benefit payable.

. Evidence of the insurability of the Insured satisfactory to us
(including evidence of insurability of any person covered by a rider to
reinstate the rider).

. Payment or reinstatement of any Indebtedness. Any Indebtedness
reinstated will cause a Cash Value of an equal amount also to be
reinstated.

The effective date of reinstatement will be the date of our approval of the
application for reinstatement. There will be a full monthly deduction for the
Policy Month that includes that date.

POLICY BENEFITS

Death Benefit

18
<PAGE>

Option A. Under Option A, the death benefit is:

(1) the current Face Amount of the Policy or, if greater,

(2) the applicable percentage of Cash Value on the date of death.

APPLICABLE PERCENTAGE TABLE

<TABLE>
<CAPTION>
Applicable
Attained Age Percentage
---------------------------------- ----------
<S> <C>
40................................ 250%
41................................ 243
42................................ 236
43................................ 229
44................................ 222
45................................ 215
46................................ 209
47................................ 203
48................................ 197
49................................ 191
50................................ 185
51................................ 178
52................................ 171
53................................ 164
54................................ 157
55................................ 150
56................................ 146
57................................ 142
58................................ 138
59................................ 134
60................................ 130
61................................ 128
62................................ 126
63................................ 124
64................................ 122
65................................ 120
66................................ 119
67................................ 118
68................................ 117
69................................ 116
70................................ 115
71................................ 113
72................................ 111
73................................ 109
74................................ 107
</TABLE>

19
<PAGE>

<TABLE>
<CAPTION>
Applicable
Attained Age Percentage
---------------------------------- ----------
<S> <C>
75 to 90.......................... 105%
91................................ 104
92................................ 103
93................................ 102
94................................ 101
95 or older....................... 100
</TABLE>

Option B. Under Option B, the death benefit is equal to:

(1) the current Face Amount plus the Cash Value of the Policy or, if
greater,
(2) the applicable percentage of the Cash Value on the date of death. The
applicable percentage is the same as under Option A.

Under Option B, the amount of the death benefit will always vary as the Cash
Value varies (but will never be less than the Face Amount).

If the death benefit option is changed from Option B to Option A, the Face
Amount after the change will equal the Face Amount before the change plus the
Cash Value on the effective date of change.

20
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charge. (See "Charges and Deductions--Monthly Deduction--Cost of Insurance.")
In addition, a change in Face Amount may have federal income tax consequences.
(See "Federal Tax Matters.")

(1) The Face Amount provided by the most recent increase;