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Registration Number 33-60442
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-effective Amendment No. 11
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 14
AMERICAN NATIONAL VARIABLE ANNUITY SEPARATE ACCOUNT
(Exact Name of Registrant)
AMERICAN NATIONAL INSURANCE COMPANY
(Exact Name of Depositor)
One Moody Plaza
Galveston, Texas 77550
(Address of Depositor's Principal Executive Offices)
(409) 763-4661
(Depositor's Telephone Number, including Area Code)
Rex Hemme Jerry L. Adams
Vice President, Actuary Greer, Herz & Adams, L.L.P.
American National Insurance Company With copy to: One Moody Plaza
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One Moody Plaza
Galveston, Texas 77550
Galveston, Texas 77550
(Name and Address of Agent for Service)
Declaration Required by Rule 24f-2(a)(1): An indefinite number of securities of
the Registrant has been registered under the Securities Act of 1933 pursuant to
Rule 24f-2 under the Investment Company Act of 1940. Notice required by Rule
24f-2(b)(1) has been filed in the Office of the Securities and Exchange
Commission on March 30, 2000 for the Registrant's fiscal year ending
December 31, 1999.
It is proposed that this filing will become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[x] on May 1, 2000 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(i) of Rule 485
[ ] on (date) pursuant to paragraph (a)(i) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a)(ii) of rule 485
[ ] on (date) pursuant to paragraph (a)(ii) of rule 485
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
Title of Securities Being Registered: Variable Annuity Contracts
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INVESTRAC GOLD VARIABLE ANNUITY CONTRACTS
ISSUED BY AMERICAN NATIONAL INSURANCE COMPANY
HOME OFFICE ONE MOODY PLAZA GALVESTON TX 77550-7999
PROSPECTUS MAY 1, 2000 1-800-306-2959
This prospectus describes
. flexible purchase payment deferred annuity contracts
. a single purchase payment immediate annuity contract
You can allocate your contract value to American National Variable Annuity
Separate Account, which reflects the investment performance of mutual fund
portfolios selected by you, and of our Fixed Account which earns a guaranteed
minimum rate. At this time, you can allocate your contract value to the
following mutual fund portfolios:
AMERICAN NATIONAL FUND FIDELITY FUNDS
. Money Market Portfolio . Money Market Portfolio
. Growth Portfolio . Equity-Income Portfolio
. Balanced Portfolio . High Income Portfolio
. Equity Income Portfolio . Growth Portfolio
. High Yield Bond Portfolio . Overseas Portfolio
. International Stock Portfolio . Contrafund Portfolio
. Small-Cap/Mid-Cap Portfolio . Asset Manager: Growth Portfolio
. Government Bond Portfolio . Investment Grade Bond Portfolio
. Asset Manager Portfolio
T. ROWE PRICE FUNDS . Index 500 Portfolio
. Equity Income Portfolio . Balanced Portfolio
. Mid-Cap Growth Portfolio . Growth and Income Portfolio
. International Stock Portfolio . Mid Cap Portfolio
. Growth Opportunities Portfolio
This prospectus contains information that you should know before purchasing a
contract. Additional information about the contracts is contained in a Statement
of Additional Information ("SAI") filed with the Securities and Exchange
Commission ("SEC"), which is incorporated by reference into this prospectus. You
may obtain a free copy of the SAI, which is dated the same date as this
prospectus, by writing or calling us at our home office. The table of contents
of the SAI is on page 54 of this prospectus. The SEC maintains an internet web
site (http://www.sec.gov) that contains material incorporated by reference into
this prospectus, SAI and other information regarding companies that file
electronically with the SEC.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
INTERESTS IN THE CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY ANY BANK, NOR ARE THE CONTRACTS FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
THE CONTRACTS INVOLVE INVESTMENT RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL. FOR
A FULL DESCRIPTION OF THE AMERICAN NATIONAL FUND, T. ROWE PRICE FUNDS AND
FIDELITY FUNDS, THEIR INVESTMENT POLICIES AND RESTRICTIONS, RISKS, CHARGES AND
EXPENSES AND OTHER ASPECTS OF THEIR OPERATION, SEE THEIR PROSPECTUSES.
Please read this prospectus carefully and keep it for future reference.
Form 5774 Rev. 5-00
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TABLE OF CONTENTS
Glossary........................................................... 4
Introduction....................................................... 6
What is the Purpose of the Contracts?............................ 6
What are my Investment Options?.................................. 6
How Do I Purchase a Contract?.................................... 6
How Do I Allocate Purchase Payments?............................. 7
Can I Transfer Amounts Between the Investment Alternatives?...... 7
What are the Death Benefits Under the Contracts?................. 7
Can I Get My Money If I Need It?................................. 7
How Can I Receive Annuity Payments?.............................. 8
What are the Charges and Deductions Under the Contract?.......... 8
What are the Tax Consequences Associated with the Contract?...... 8
If I Have Questions, Where Can I Go?............................. 9
Contractowner Transaction Expenses................................. 10
Expenses Before the Annuity Date.................................. 10
Sales Load as a Percentage of Purchase Payments.................. 10
Deferred Sales Load ("Surrender Charge")......................... 10
Expenses During the Annuity Period............................... 16
Accumulation Unit Values........................................... 20
Contracts.......................................................... 23
Types of Contracts............................................... 23
Contract Application and Purchase Payments....................... 23
Allocation of Purchase Payments.................................. 24
Crediting of Accumulation Units.................................. 24
Allocation of Charges and Other Deductions to the Subaccounts
and the Fixed Account........................................... 24
Determining Accumulation Unit Values............................. 24
Transfers Before Annuity Date.................................... 25
Charges and Deductions............................................. 26
Charges and Deductions Before Annuity Date........................ 26
Charges and Deductions During the Annuity Period................. 28
Exceptions to Charges............................................ 28
Distributions Under the Contract................................... 29
Distributions Before the Annuity Date............................. 29
Surrenders....................................................... 29
Policy Loans in Qualified Deferred Annuity Contracts............. 30
Death Benefit Before Annuity Date................................ 32
Distribution During the Annuity Period........................... 34
Election of Annuity Date and Form of Annuity..................... 34
Allocation of Benefits........................................... 34
Annuity Options.................................................. 34
Value of Variable Annuity Payments: Assumed Investment Rates..... 36
Annuity Provisions............................................... 36
The Company, Separate Account, Funds, and Fixed Account............ 37
American National Insurance Company.............................. 37
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The Separate Account............................................. 37
The Funds........................................................ 38
Changes in Investment Options.................................... 42
Fixed Account...................................................... 43
Federal Tax Matters................................................ 44
Introduction..................................................... 44
Tax Status of the Contracts...................................... 44
Taxation of Annuities in General................................. 44
Withdrawals...................................................... 44
Penalty Tax...................................................... 45
Annuity Payments................................................. 45
Taxation of Death Benefit Proceeds............................... 45
Transfers or Assignments of a Contract........................... 46
Required Distributions........................................... 46
Withholding...................................................... 46
Multiple Contracts............................................... 46
Exchanges........................................................ 46
Taxation of Qualified Contracts.................................. 46
Distribution from Qualified Contracts............................ 47
Possible Changes in Taxation..................................... 49
All Contracts.................................................... 49
Performance........................................................ 50
Distributor of Contracts........................................... 51
Legal Matters...................................................... 51
Legal Proceedings.................................................. 51
Experts............................................................ 52
Additional Information............................................. 52
Financial Statements............................................... 53
Table of Contents of Statement of Additional Information........... 54
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GLOSSARY
Accumulation Period. The time between the date Accumulation Units are first
purchased by us and the earliest of (1) the Annuity Date; (2) the date the
Contract is surrendered; or (3) the date of the Contractowner's death.
Accumulation Unit. A unit used by us to calculate a Contract's value during the
Accumulation Period.
Accumulation Value. The sum of (1) the value of your Accumulation Units; (2)
value in the Fixed Account; and (3) contract value which secures policy loans.
American National Fund. American National Investment Accounts, Inc.
Annuitant. The person or persons who will receive annuity payments involving
life contingencies.
Annuity Date. The date annuity payments begin.
Annuity Period. The time during which annuity payments are made.
Annuity Unit. A unit used by us to calculate the dollar amount of annuity
payments.
Company ("we", "our" or "us" ). American National Insurance Company.
Contract. A contract described in this Prospectus.
Contractowner ("You" or "Your"). Unless changed by notice to us, the
Contractowner is as stated in the application.
Contract Anniversary. An anniversary of the date the Contract was issued.
Contract Year. A one-year period commencing on either the date of issue or a
Contract Anniversary.
Deferred Annuity Contract. A Contract in which annuity payments commence at some
future date.
Eligible Portfolio. A Portfolio which corresponds to a subaccount.
Fidelity Funds. Variable Insurance Products Fund and Variable Insurance Products
Fund II and Variable Insurance Products Fund III.
Fixed Account. A part of our General Account which will accumulate interest at a
fixed rate.
General Account. All of our assets except those segregated in separate accounts.
Immediate Annuity. A Contract which provides immediate annuity payments.
Non-Qualified Contract. A Contract issued in connection with a retirement plan
that does not receive favorable tax treatment under the Internal Revenue Code.
Portfolio. A series of a mutual fund designed to meet specified investment
objectives.
Purchase Payment. A payment made to us during the Accumulation Period less any
premium tax charges.
Qualified Contract. A Contract issued in connection with a retirement plan that
receives favorable tax treatment under the Internal Revenue Code.
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T. Rowe Price Funds. T. Rowe Price Equity Series, Inc. and T. Rowe Price
International Series, Inc.
Valuation Date. Each day the New York Stock Exchange ("NYSE") is open for
regular trading. A redemption, transfer or purchase can be made only on days
that American National is open. American National will be open on every day of
the NYSE is open except for the day after Thanksgiving and the Friday before
Christmas Eve.
Valuation Period. The close of business on any Valuation Date to the close of
business on another.
Variable Annuity. An annuity with payments that vary in dollar amount.
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INTRODUCTION
What is the Purpose of the Contracts?
The Contracts allow you to accumulate funds, on a tax-deferred basis, at rates
that will increase or decline in value based on the performance of investments
you choose. You should use the Contracts for retirement planning or other long-
term goals.
What are my Investment Options?
You can invest your Purchase Payments in one or more of the following
subaccounts of the Separate Account, each of which invests exclusively in shares
of a corresponding Eligible Portfolio:
. American National Money Market . Fidelity High Income
. American National Growth . Fidelity Growth
. American National Balanced . Fidelity Overseas
. American National Equity Income . Fidelity Contrafund
. American National High Yield Bond . Fidelity Asset Manager: Growth
. American National International Stock . Fidelity Growth Opportunities
. American National Small-Cap/Mid-Cap . Fidelity Growth and Income
. American National Government Bond . Fidelity Balanced
. Fidelity Investment Grade Bond . Fidelity Mid Cap Growth
. Fidelity Asset Manager . T. Rowe Price Equity Income
. Fidelity Index 500 . T. Rowe Price Mid-Cap Growth
. Fidelity Money Market . T. Rowe Price International Stock
. Fidelity Equity-Income
Each such subaccount and corresponding Eligible Portfolio has its own investment
objective. Some of the Eligible Portfolios have similar investment objectives.
(See "The Funds" beginning on page 38.) There is no assurance that Eligible
Portfolios will achieve their investment objectives. Accordingly, you could
lose some or all of your Contract value.
You can also invest in our Fixed Account.
HOW DO I PURCHASE A CONTRACT?
You can purchase a Contract by completing an application and paying the minimum
Purchase Payment to our home office. The minimum and maximum amounts of Purchase
Payments vary depending upon the type of Contract purchased. (See "Contract
Application and Purchase Payments," page 23.)
For a limited time, usually ten days after you receive your Contract, you can
return the Contract to our home office and receive a refund. (See "Contract
Application and Purchase Payments" on page 23.)
The contracts are not available in some states. You should rely only on the
information contained or incorporated by reference in this prospectus. We have
not authorized anyone to provide you with information that is different.
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HOW DO I ALLOCATE PURCHASE PAYMENTS?
You can allocate your Purchase Payments among the 25 currently available
subaccounts and the Fixed Account. You cannot allocate less than 10% of a
Purchase Payment to any one investment option.
CAN I TRANSFER AMOUNTS BETWEEN THE INVESTMENT ALTERNATIVES?
You can make transfers between subaccounts and to our Fixed Account at any time.
Transfers from our Fixed Account before the Annuity Date are limited. (See
"Transfers Before Annuity Date" on page 25 for additional limitations.)
Transfers from our Fixed Account after the Annuity Date are not permitted. (See
"Allocation of Benefits" on page 34 for additional limitations.)
Before the Annuity Date, the first twelve transfers each Contract Year among the
subaccounts or the Fixed Account are free. Additional transfers will be subject
to a $10.00 exchange fee. Transfers after the Annuity Date are unlimited and
free.
You should periodically review your allocations among the subaccounts and the
Fixed Account to make sure they fit your current situation and financial goals.
You can make allocation changes in writing or during our normal business hours
by telephone if a telephone authorization form is on file with us. We will
employ reasonable procedures to confirm that telephone instructions are genuine.
If we follow those procedures, we will not be liable for losses due to
unauthorized or fraudulent instructions. We may be liable for such losses if we
do not follow those procedures.
WHAT ARE THE DEATH BENEFITS UNDER THE CONTRACTS?
If you or the Annuitant die before the Annuity Date, the death benefit for
Deferred Annuity Contracts will be at least the amount of the Accumulation Value
less policy debt on the date notice of death is received at our home office. The
death benefit may be more. (See "Death Benefit Before Annuity Date" on page 32.)
Policy debt is the amount of all unpaid policy loans plus accrued interest.
For the Immediate Annuity Contract, and after the Annuity Date for Deferred
Annuity Contracts, death benefits, if any, depend upon the annuity option
selected. (See "Annuity Options" at page 34.)
CAN I GET MY MONEY IF I NEED IT?
By written request to us, you can withdraw all or part of your Accumulation
Value at any time before the Annuity Date. Such withdrawal may be subject to a
Surrender Charge, an IRS penalty tax and income tax. If your contract was
purchased in connection with a retirement plan, such withdrawal may also be
subject to plan restrictions. Withdrawals from Contracts qualified under Section
403(b) of the Internal Revenue Code may be restricted. (See "Taxation of
Qualified Contracts" under "Federal Tax Matters" at page 46.)
You can also make policy loans in Qualified Deferred Annuity Contracts. (See
"Policy Loans in Qualified Deferred Annuity Contracts" on page 30.)
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HOW CAN I RECEIVE ANNUITY PAYMENTS?
You can choose from a number of annuity payment options, which include
. monthly payments for a number of years
. payments for life
. payments made jointly
You can also choose to receive your Annuity Payments on a fixed or variable
basis. Variable payments will increase or decrease based on the investment
performance of the Eligible Portfolios and the declared rate paid by us on our
Fixed Account. (See "Annuity Options," page 34.)
WHAT ARE THE CHARGES AND DEDUCTIONS UNDER THE CONTRACT?
We do not currently deduct a sales charge when you purchase your Contract. We
may deduct a surrender charge up to 7% of Purchase Payments withdrawn. We also
charge a daily distribution expense charge to cover sales or distribution
expenses not covered by surrender charges. Such expense charge equals, on an
annual basis, 0.05% of the Contract's daily Accumulation Value.
You will also be charged an annual contract fee of $25 on Non-Qualified
Contracts and $30 on Qualified Contracts.
We charge a daily amount equal, on an annual basis, a mortality risk fee of .80%
and an expense risk fee of .45% of the Contract's daily Accumulation Value to
meet our death benefit obligations and to pay on expenses not covered by the
annual contract fee.
We also charge a daily administration fee equal, on an annual basis, to 0.10% of
the Contract's daily Accumulation Value.
Additional charges may be made by us for premium taxes when incurred.
WHAT ARE THE TAX CONSEQUENCES ASSOCIATED WITH THE CONTRACTS?
You are generally required to pay taxes on amounts earned in a Non-Qualified
Contract when they are withdrawn. When you take distributions or withdrawals
from a deferred contract, taxable earning are considered to be paid out first,
followed by the investment in the Contract. All or a portion of each annuity
payment you receive under a Non-Qualified Contract will be taxable.
Distributions from a Contract are taxed as ordinary income. You may owe a 10%
federal income tax pealty for distributions or withdrawals taken before
age 59 1/2.
You generally are required to pay taxes on all amounts withdrawn from a
Qualified Contract. Restrictions and penalties may apply to withdrawals from a
Qualified Contract. (See "Federal Tax Matters," page 44.)
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IF I HAVE QUESTIONS, WHERE CAN I GO?
If you have any questions about the Contracts, you can contact your registered
representative or write us at One Moody Plaza, Galveston, Texas 77550-7999 or
call us at 1-800-306-2959.
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CONTRACTOWNER TRANSACTION EXPENSES
EXPENSES BEFORE THE ANNUITY DATE
The following table summarizes the charges we will make prior to the
Annuity Date. The table also summarizes the fees and expenses of the Eligible
Portfolios. You should consider this information with the information under the
heading "Charges and Deductions Before Annuity Date" on page 26.
SALES LOAD AS A PERCENTAGE OF PURCHASE PAYMENTS 0%
DEFERRED SALES LOAD ("SURRENDER CHARGE")
[ ] Free Withdrawal Amount
In any Contract Year, you can withdraw the greater of (1) 10% of your
Accumulation Value or (2) your Accumulation Value less total Purchase
Payments free (the "Free Withdrawal Amount"). The portion of a withdrawal
in excess of the Free Withdrawal Amount is a withdrawal of Purchase
Payments and is subject to a Surrender Charge.
When you make a withdrawal, we will divide such withdrawal by your
Accumulation Value and convert such results into a percentage. We will
reduce the first part of the formula for calculating the Free Withdrawal
Amount (i.e., the 10% of Accumulation Value) by that percentage and will
use the reduced percentage in the formula for calculating the Free
Withdrawal Amount for additional withdrawals in that same Contract Year.
. Calculation of Surrender Charges
Surrender Charges vary depending on the number of Contract Years since the
Purchase Payment being withdrawn was paid, on a first paid, first withdrawn
basis. The Surrender Charge will be deducted from your Accumulation Value,
if sufficient. If your Accumulation Value is not sufficient, your
withdrawal will be reduced accordingly. Surrender Charges will be a
percentage of each Purchase Payment or portion thereof withdrawn as
illustrated in the following table:
CONTRACT YEARS SINCE
PURCHASE APPLICABLE SURRENDER CHARGE
PAYMENT AS A
MADE PERCENTAGE
- -------------------------------------------------------------------------------
1 7.0
2 7.0
3 6.0
4 5.0
5 4.0
6 3.0
7 2.0
8 and thereafter 0.0
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NON-QUALIFIED QUALIFIED
DEFERRED DEFERRED
ANNUITY ANNUITY
- --------------------------------------------------------------------------------
EXCHANGE FEE $ 10 $ 10
(THERE IS NO EXCHANGE FEE FOR
THE FIRST 12 TRANSFERS)
ANNUAL CONTRACT FEE $ 25 $ 30
SEPARATE ACCOUNT ANNUAL EXPENSES
(AS PERCENTAGE OF AVERAGE NET ASSETS)
Mortality Risk Fees 0.80% 0.80%
Expense Risk Fees 0.45% 0.45%
Administrative Asset Fees 0.10% 0.10%
Distribution Expense Charge 0.05% 0.05%
Total Separate Account Annual Expenses 1.40% 1.40%
NON-QUALIFIED QUALIFIED
DEFERRED DEFERRED
ANNUITY ANNUITY
- --------------------------------------------------------------------------------
AMERICAN NATIONAL MONEY MARKET PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees after reimbursement * ** 0.09% 0.09%
Other Expenses 0.78% 0.78%
Total Portfolio Annual Expenses 0.87% 0.87%
* Without reimbursement, management fees would have been 0.50% and the total
portfolio annual expense would have been 1.37%.
AMERICAN NATIONAL GROWTH PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees after reimbursement * ** 0.43% 0.43%
Other Expenses 0.44% 0.44%
Total Portfolio Annual Expenses 0.87% 0.87%
Without reimbursement, management fees would have been 0.50% and the total
portfolio annual expense would have been 1.01%.
AMERICAN NATIONAL BALANCED PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees after reimbursement * ** 0.26% 0.26%
Other Expenses 0.64% 0.64%
Total Portfolio Annual Expenses 0.90% 0.90%
Without reimbursement, management fees would have been 0.50% and the total
portfolio annual expense would have been 1.24%.
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AMERICAN NATIONAL EQUITY INCOME PORTFOLIO ANNUAL EXPENSES
Management Fees after reimbursement * ** 0.49% 0.49%
Other Expenses 0.44% 0.44%
Total Portfolio Annual Expenses 0.93% 0.93%
* Without reimbursement, management fees would have been 0.50% and the total
portfolio annual expense would have been 0.99%.
AMERICAN NATIONAL HIGH YIELD BOND PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 0.55% 0.55%
Other Expenses 0.30% 0.30%
Total Portfolio Annual Expenses 0.85% 0.85%
AMERICAN NATIONAL INTERNATIONAL STOCK PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 0.75% 0.75%
Other Expenses 0.35% 0.35%
Total Portfolio Annual Expenses 1.10% 1.10%
AMERICAN NATIONAL SMALL-CAP/MID-CAP PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 1.25% 1.25%
Other Expenses 0.25% 0.25%
Total Portfolio Annual Expenses 1.50% 1.50%
AMERICAN NATIONAL GOVERNMENT BOND PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 0.50% 0.50%
Other Expenses 0.30% 0.30%
Total Portfolio Annual Expenses 0.80% 0.80%
** Under its Administrative Service Agreement with the American National Fund,
Securities Management and Research, Inc. ("SM&R"), the American National Fund's
Investment Adviser and Manager, has agreed to pay (or to reimburse each
Portfolio for) each Portfolio's expenses (including the advisory fee and
administrative service fee paid to SM&R, but exclusive of interest, commissions
and other expenses incidental to portfolio transactions) in excess of 1.50% per
year of such Portfolio's average daily net assets. In addition, SM&R has entered
into a separate undertaking with the American National Fund effective May 1,
1994 until April 30, 2001, pursuant to which SM&R has agreed to reimburse the
American National Money Market Portfolio and the American National Growth
Portfolio for expenses in excess of .87%; the American National Balanced
Portfolio for expenses in excess of .90% and the American National Equity Income
Portfolio for expenses in excess of .93%, of each of such Portfolios' average
daily net assets during such period. SM&R is under no obligation to renew this
undertaking for any Portfolio at the end of such period.
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FIDELITY INVESTMENT GRADE BOND PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 0.43% 0.43%
Other Expenses 0.11% 0.11%
Total Portfolio Annual Expenses 0.54% 0.54%
FIDELITY ASSET MANAGER PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 0.53% 0.53%
Other Expenses after reimbursement 0.10% 0.10%
Total Portfolio Annual Expenses* 0.63% 0.63%
FIDELITY INDEX 500 PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 0.24% 0.24%
Other Expenses 0.04% 0.04%
Total Portfolio Annual Expenses** 0.28% 0.28%
FIDELITY MONEY MARKET PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 0.18% 0.18%
Other Expenses 0.09% 0.09%
Total Portfolio Annual Expenses 0.27% 0.27%
FIDELITY EQUITY-INCOME PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 0.48% 0.48%
Other Expenses after reimbursement 0.09% 0.09%
Total Portfolio Annual Expenses* 0.57% 0.57%
FIDELITY HIGH INCOME PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 0.58% 0.58%
Other Expenses after reimbursement 0.11% 0.11%
Total Portfolio Annual Expenses 0.69% 0.69%
FIDELITY GROWTH PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 0.58% 0.58%
Other Expenses after reimbursement 0.08% 0.08%
Total Portfolio Annual Expenses* 0.66% 0.66%
FIDELITY OVERSEAS PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 0.73% 0.73%
Other Expenses after reimbursement 0.18% 0.18%
Total Portfolio Annual Expenses* 0.91% 0.91%
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FIDELITY CONTRAFUND PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 0.58% 0.58%
Other Expenses after reimbursement 0.09% 0.09%
Total Portfolio Annual Expenses* 0.67% 0.67%
FIDELITY ASSET MANAGER: GROWTH PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 0.58% 0.58%
Other Expenses after reimbursement 0.13% 0.13%
Total Portfolio Annual Expenses* 0.71% 0.71%
FIDELITY BALANCED PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 0.43% 0.43%
Other Expenses after reimbursement 0.14% 0.14%
Total Portfolio Annual Expenses* 0.57% 0.57%
FIDELITY GROWTH AND INCOME PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 0.48% 0.48%
Other Expenses after reimbursement 0.12% 0.12%
Total Portfolio Annual Expenses* 0.60% 0.60%
FIDELITY GROWTH OPPORTUNITIES PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 0.58% 0.58%
Other Expenses after reimbursement 0.11% 0.11%
Total Portfolio Annual Expenses* 0.69% 0.69%
FIDELITY MID CAP PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 0.57% 0.57%
Other Expenses after reimbursement 0.40% 0.40%
Total Portfolio Annual Expenses** 0.97% 0.97%
*A portion of the brokerage commissions that certain funds pay was used to
reduce fund expenses. In addition, through arrangements with certain funds', or
FMR on behalf of certain funds,' custodian, credits realized as a result of
uninvested cash balances were used to reduce a portion of each applicable fund's
expenses. With these reductions, the total operating expenses presented in the
table would have been .57% for Equity-Income Portfolio, 66% for Growth
Portfolio, 91% for Overseas Portfolio, .63% for Asset Manager Portfolio, .67%
for Contrafund Portfolio, .71% for Asset Manager: Growth Portfolio, .57% for
Balanced Portfolio, .69% for Growth Opportunities Portfolio, and .60% for Growth
& Income Portfolio.
**FMR agreed to reimburse a portion of Index 500 Portfolio's and Mid Cap
Portfolio's expenses during the period. Without this reimbursement, the
Portfolios' management fee,
14
<PAGE>
other expenses and total expenses would have been .24%, .10%, .34% and .57%,
2.77% and 3.34%, respectively.
T. ROWE PRICE EQUITY INCOME PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 0.85% 0.85%
Other Expenses 0.00% 0.00%
Total Portfolio Annual Expenses* 0.85% 0.85%
T. ROWE PRICE MID-CAP GROWTH PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 0.85% 0.85%
Other Expenses 0.00% 0.00%
Total Portfolio Annual Expenses* 0.85% 0.85%
T. ROWE PRICE INTERNATIONAL STOCK PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 1.05% 1.05%
Other Expenses 0.00% 0.00%
Total Portfolio Annual Expenses* 1.05% 1.05%
**T. Rowe Price Equity Income and Mid-Cap Growth Portfolios pay T. Rowe Price an
annual all-inclusive fee of 0.85% based on such portfolio's average daily net
assets. The T. Rowe Price International Stock Portfolio pays Rowe-Price-Fleming
International, Inc. an annual all-inclusive fee of 1.05% based on such
portfolio's average daily net assets. These fees pay for investment management
services and other operating costs of the portfolios.
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<PAGE>
EXPENSES DURING THE ANNUITY PERIOD
During the Annuity Period, we will charge the Separate Account a mortality risk
fee of .80% and expense risk fee of .45%. We will also charge the Separate
Account with the expenses of the Eligible Portfolios shown on previous pages in
which you have invested. At the time you purchase the Immediate Annuity
Contract, you will be charged a $100 Contract fee. No other fees or expenses are
charged against the Contracts during the Annuity Period.
EXAMPLE: NON-QUALIFIED DEFERRED ANNUITY CONTRACT
If you surrender your Deferred Annuity Contract at the end of the applicable
time period:
You would pay the following expenses on a $1,000 investment, assuming 5% annual
return on assets:
1 3 5 10
FUND YEAR YEARS YEARS YEARS
- --------------------------------------------------------------------------------
American National Money Market Portfolio $87 $127 $157 $251
American National Growth Portfolio $87 $127 $157 $251
American National Balanced Portfolio $87 $128 $158 $254
American National Equity Income Portfolio $87 $129 $160 $257
American National High Yield Bond Portfolio $90 $138 $176 $290
American National International Stock
Portfolio $90 $138 $176 $290
American National Small-Cap/Mid-Cap
Portfolio $95 $152 $200 $337
American National Government Bond Portfolio $86 $123 $151 $239
Fidelity Investment Grade Bond Portfolio $84 $117 $140 $217
Fidelity Asset Manager Portfolio $85 $120 $145 $226
Fidelity Index 500 Portfolio $81 $110 $127 $189
Fidelity Money Market Portfolio $81 $110 $126 $188
Fidelity Equity-Income Portfolio $84 $118 $142 $220
Fidelity High Income Portfolio $85 $122 $148 $233
Fidelity Growth Portfolio $85 $121 $146 $230
Fidelity Overseas Portfolio $87 $128 $159 $255
Fidelity Contrafund Portfolio $85 $121 $147 $231
Fidelity Asset Manager: Growth Portfolio $85 $122 $149 $235
Fidelity Balanced Portfolio $84 $118 $142 $220
Fidelity Growth and Income Portfolio $84 $119 $143 $223
Fidelity Growth Opportunities Portfolio $85 $122 $148 $233
Fidelity Mid Cap Portfolio $88 $130 $162 $262
T. Rowe Price Equity Income Portfolio $87 $126 $156 $249
T. Rowe Price Mid-Cap Growth Portfolio $87 $126 $156 $249
T. Rowe Price International Stock Portfolio $89 $132 $166 $270
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<PAGE>
If you do not surrender your Deferred Annuity Contract or annuitize your
Deferred Annuity Contract:
You would pay the following expenses on a $1,000 investment, assuming 5% annual
return on assets:
1 3 5 10
FUND YEAR YEARS YEARS YEARS
- --------------------------------------------------------------------------------
American National Money Market Portfolio $22 $68 $117 $251
American National Growth Portfolio $22 $68 $117 $251
American National Balanced Portfolio $22 $69 $118 $254
American National Equity Income Portfolio $23 $70 $120 $257
American National High Yield Bond Portfolio $26 $80 $136 $290
American National International Stock Portfolio $26 $80 $136 $290
American National Small-Cap/Mid-Cap Portfolio $31 $95 $161 $337
American National Government Bond Portfolio $21 $65 $111 $239
Fidelity Investment Grade Bond Portfolio $19 $58 $100 $217
Fidelity Asset Manager Portfolio $20 $61 $105 $226
Fidelity Index 500 Portfolio $16 $50 $ 87 $189
Fidelity Money Market Portfolio $16 $50 $ 86 $188
Fidelity Equity-Income Portfolio $19 $59 $102 $220
Fidelity High Income Portfolio $20 $63 $108 $233
Fidelity Growth Portfolio $20 $62 $106 $230
Fidelity Overseas Portfolio $23 $69 $119 $255
Fidelity Contrafund Portfolio $20 $62 $107 $231
Fidelity Asset Manager: Growth Portfolio $21 $63 $109 $235
Fidelity Balanced Portfolio $19 $59 $102 $220
Fidelity Growth and Income Portfolio $19 $60 $103 $223
Fidelity Growth Opportunities Portfolio $20 $63 $108 $233
Fidelity Mid Cap Portfolio $23 $71 $122 $262
T. Rowe Price Equity Income Portfolio $22 $68 $116 $249
T. Rowe Price Mid-Cap Growth Portfolio $22 $68 $116 $249
T. Rowe Price International Stock Portfolio $24 $74 $126 $270
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<PAGE>
EXAMPLE: QUALIFIED DEFERRED ANNUITY CONTRACT
If you surrender your Deferred Annuity Contract at the end of the applicable
time period:
You would pay the following expenses on a $1,000 investment, assuming 5% annual
return on assets:
1 3 5 10
FUND YEAR YEARS YEARS YEARS
- --------------------------------------------------------------------------------
American National Money Market Portfolio $87 $129 $160 $257
American National Growth Portfolio $87 $129 $160 $257
American National Balanced Portfolio $88 $129 $161 $260
American National Equity Income Portfolio $88 $130 $163 $263
American National High Yield Bond Portfolio $91 $139 $179 $295
American National International Stock Portfolio $91 $139 $179 $295
American National Small-Cap/Mid-Cap Portfolio $96 $153 $203 $343
American National Government Bond Portfolio $86 $125 $154 $245
Fidelity Investment Grade Bond Portfolio $84 $119 $143 $223
Fidelity Asset Manager Portfolio $85 $122 $148 $232
Fidelity Index 500 Portfolio $82 $112 $130 $195
Fidelity Money Market Portfolio $82 $111 $129 $194
Fidelity Equity-Income Portfolio $85 $120 $145 $226
Fidelity High Income Portfolio $86 $123 $151 $239
Fidelity Growth Portfolio $85 $123 $149 $235
Fidelity Overseas Portfolio $88 $130 $162 $261
Fidelity Contrafund Portfolio $86 $123 $150 $237
Fidelity Asset Manager: Growth Portfolio $86 $124 $152 $241
Fidelity Balanced Portfolio $85 $120 $145 $226
Fidelity Growth and Income Portfolio $85 $121 $146 $229
Fidelity Growth Opportunities Portfolio $86 $123 $151 $239
Fidelity Mid Cap Portfolio $88 $131 $165 $267
T. Rowe Price Equity Income Portfolio $87 $128 $159 $255
T. Rowe Price Mid-Cap Growth Portfolio $87 $128 $159 $255
T. Rowe Price International Stock Portfolio $89 $134 $169 $275
18
<PAGE>
If you do not surrender your Deferred Annuity Contract or annuitize your
Deferred Annuity Contract:
You would pay the following expenses on a $1,000 investment, assuming 5% annual
return on assets:
1 3 5 10
FUND YEAR YEARS YEARS YEARS
- --------------------------------------------------------------------------------
American National Money Market Portfolio $23 $70 $120 $257
American National Growth Portfolio $23 $70 $120 $257
American National Balanced Portfolio $23 $71 $121 $260
American National Equity Income Portfolio $23 $72 $123 $263
American National High Yield Bond Portfolio $26 $81 $139 $295
American National International Stock Portfolio $26 $81 $139 $295
American National Small-Cap/Mid-Cap Portfolio $31 $96 $163 $343
American National Government Bond Portfolio $21 $66 $114 $245
Fidelity Investment Grade Bond Portfolio $19 $60 $103 $223
Fidelity Asset Manager Portfolio $20 $63 $108 $232
Fidelity Index 500 Portfolio $17 $52 $ 90 $195
Fidelity Money Market Portfolio $17 $52 $ 89 $194
Fidelity Equity-Income Portfolio $20 $61 $105 $226
Fidelity High Income Portfolio $21 $64 $111 $239
Fidelity Growth Portfolio $21 $64 $109 $235
Fidelity Overseas Portfolio $23 $71 $122 $261
Fidelity Contrafund Portfolio $21 $64 $110 $237
Fidelity Asset Manager: Growth Portfolio $21 $65 $112 $241
Fidelity Balanced Portfolio $20 $61 $105 $226
Fidelity Growth and Income Portfolio $20 $62 $106 $229
Fidelity Growth Opportunities Portfolio $21 $64 $111 $239
Fidelity Mid Cap Portfolio $24 $73 $125 $267
T. Rowe Price Equity Income Portfolio $22 $69 $119 $255
T. Rowe Price Mid-Cap Growth Portfolio $22 $69 $119 $255
T. Rowe Price International Stock Portfolio $24 $75 $129 $275
You should not consider the examples as representative of past or future
expenses. The examples do not include the deduction of any state premium taxes
assessed.
The purpose of the preceding table is to assist you in understanding the various
costs and expenses that you will bear directly or indirectly. The table
reflects expenses of the Separate Account and the Eligible Portfolios. The
expenses shown above for the Eligible Portfolios are assessed at the underlying
fund level and are not direct charges against the Separate Account's assets or
reductions from Accumulation Value. These expenses are taken into consideration
in computing each portfolio's net asset value, which is the share price used to
calculate the value of an Accumulation Unit. Actual expenses may be more or
less than shown. As required by the Securities and Exchange Commission, the
example assumes a 5% annual rate of return. This hypothetical rate of return is
not intended to be representative of past or future performance of an Eligible
Portfolio. Annual Contract fees are deducted pro rata from each subaccount and
our Fixed Account. For a more complete description of the various costs and
expenses of the American National Fund, the Fidelity Funds and the T. Rowe Price
Funds, see their Prospectuses.
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<PAGE>
ACCUMULATION UNIT VALUES
The value of an Accumulation Unit outstanding throughout the period and the
number of Accumulation Units outstanding for each subaccount are shown below.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------
Individual contracts in the accumulation period 1999 1998 1997
----------- ---------- -----------
<S> <C> <C> <C>
American National Growth Portfolio
Accumulation unit value at beginning of period $ 2.026 $ 1.731 $ 1.456
Accumulation unit value at end of period $ 2.297 $ 2.026 $ 1.731
Number of accumulation units outstanding at end of period 2,015,376 1,996,018 1,622,115
AMERICAN NATIONAL MONEY MARKET PORTFOLIO
Accumulation unit value at beginning of period $ 1.137 $ 1.101 $ 1.066
Accumulation unit value at end of period $ 1.170 $ 1.137 $ 1.101
Number of accumulation units outstanding at end of period 213,611 170,623 195,843
AMERICAN NATIONAL BALANCED PORTFOLIO
Accumulation unit value at beginning of period $ 1.689 $ 1.469 $ 1.254
Accumulation unit value at end of period $ 1.799 $ 1.689 $ 1.469
Number of accumulation units outstanding at end of period 890,629 948,987 558,223
AMERICAN NATIONAL EQUITY INCOME PORTFOLIO
Accumulation unit value at beginning of period $ 2.011 $ 1.758 $ 1.458
Accumulation unit value at end of period $ 2.322 $ 2.011 $ 1.758
Number of accumulation units outstanding at end of period 2,578,359 2,650,679 1,937,161
FIDELITY INVESTMENT GRADE BOND
Accumulation unit value at beginning of period $ 1.357 $ 1.263 $ 1.176
Accumulation unit value at end of period $ 1.325 $ 1.357 $ 1.263
Number of accumulation units outstanding at end of period 711,878 353,787 93,192
FIDELITY ASSET MANAGER
Accumulation unit value at beginning of period $ 1.724 $ 1.518 $ 1.278
Accumulation unit value at end of period $ 1.889 $ 1.724 $ 1.518
Number of accumulation units outstanding at end of period 765,953 721,338 602,425
</TABLE>
20
<PAGE>
<TABLE>
<S> <C> <C> <C>
FIDELITY INDEX 500
Accumulation unit value at beginning of period $ 2.727 $ 2.154 $ 1.649
Accumulation unit value at end of period $ 3.242 $ 2.727 $ 2.154
Number of accumulation units outstanding at end of period 2,527,478 2,288,624 1,753,242
FIDELITY MONEY MARKET
Accumulation unit value at beginning of period $ 1.172 $ 1.127 $ 1.087
Accumulation unit value at end of period $ 1.216 $ 1.172 $ 1.127
Number of accumulation units outstanding at end of period 536,318 518,157 774,056
FIDELITY EQUITY INCOME FUND
Accumulation unit value at beginning of period $ 2.054 $ 1.869 $ 1.482
Accumulation unit value at end of period $ 2.154 $ 2.054 $ 1.869
Number of accumulation units outstanding at end of period 2,016,674 2,141,973 1,805,034
FIDELITY HIGH INCOME FUND
Accumulation unit value at beginning of period $ 1.460 $ 1.546 $ 1.334
Accumulation unit value at end of period $ 1.558 $ 1.460 $ 1.546
Number of accumulation units outstanding at end of period 321,774 390,295 365,784
FIDELITY GROWTH
Accumulation unit value at beginning of period $ 2.532 $ 1.840 $ 1.513
Accumulation unit value at end of period $ 3.432 $ 2.532 $ 1.840
Number of accumulation units outstanding at end of period 1,679,378 1,515,237 1,263,215
FIDELITY OVERSEAS
Accumulation unit value at beginning of period $ 1.427 $ 1.283 $ 1.167
Accumulation unit value at end of period $ 2.008 $ 1.427 $ 1.283
Number of accumulation units outstanding at end of period 309,080 287,821 233,047
FIDELITY CONTRA FUND
Accumulation unit value at beginning of period $ 2.126 $ 1.657 $ 1.355
Accumulation unit value at end of period $ 2.607 $ 2.126 $ 1.657
Number of accumulation units outstanding at end of period 1,120,743 1,048,709 748,156
FIDELITY ASSET MANAGER GROWTH
Accumulation unit value at beginning of period $ 1.725 $ 1.487 $ 1.207
Accumulation unit value at end of period $ 1.961 $ 1.725 $ 1.487
Number of accumulation units outstanding at end of period 386,395 449,243 441,436
</TABLE>
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<PAGE>
FIDELITY BALANCED
Accumulation unit value at beginning of period $0.000
Accumulation unit value at end of period $1.004
Number of accumulation units outstanding at
end of period 50,828
Individual contracts in the accumulation period 1999
FIDELITY GROWTH OPPORTUNITIES
Accumulation unit value at beginning of period $0.000
Accumulation unit value at end of period $0.984
Number of accumulation units outstanding at end of period 4,092
FIDELITY GROWTH & INCOME
Accumulation unit value at beginning of period $0.000
Accumulation unit value at end of period $1.019
Number of accumulation units outstanding at end of period 18,264
FIDELITY MID CAP GROWTH
Accumulation unit value at beginning of period $0.000
Accumulation unit value at end of period $1.215
Number of accumulation units outstanding at end of period 3,005
T. ROWE PRICE EQUITY INCOME
Accumulation unit value at beginning of period $0.000
Accumulation unit value at end of period $0.939
Number of accumulation units outstanding at end of period 1,759
T. ROWE PRICE INTERNATIONAL STOCK
Accumulation unit value at beginning of period $0.000
Accumulation unit value at end of period $1.080
Number of accumulation units outstanding at end of period 29
T. ROWE PRICE MID-CAP GROWTH
Accumulation unit value at beginning of period $0.000
Accumulation unit value at end of period $1.144
Number of accumulation units outstanding at end of period 722
22
<PAGE>
CONTRACTS
TYPES OF CONTRACTS
This Prospectus offers the following two types of Contracts:
. DEFERRED ANNUITY CONTRACT - Provides for annuity payments to commence at a
future date. You can choose to vary your Purchase Payments or pay a single
Purchase Payment. Deferred annuity contracts can be either Qualified or Non-
Qualified.
. IMMEDIATE ANNUITY CONTRACT - Provides for annuity payments to commence
immediately. You can only purchase this type of Contract by making a single
Purchase Payment.
CONTRACT APPLICATION AND PURCHASE PAYMENTS
To purchase a Contract, you must complete an application and send the minimum
Purchase Payment to our home office. (See "Allocation of Purchase Payments",
page 24.) If your application cannot be processed within five days after
receipt, we will return your payment. We will credit your initial Purchase
Payment to the Contract within two business days after a completed application
is received at our home office.
You have a "free look" period during which you can return the Contract to our
home office and get a refund. The refund will equal the greater of (1) all of
your Purchase Payments or (2) Accumulation Value plus charges deducted by us
during such period. The "free look" period is established by state law and
generally runs ten days after you receive a Contract. We require that Purchase
Payments received by us during the 15-day period after the Date of Issue be
allocated to the Fidelity Money Market Portfolio. Thereafter, amounts allocated
to such subaccount and Purchase Payments paid are allocated as directed by you.
No Surrender Charges are assessed on refunds.
Unless changed by us, Deferred Annuity Contracts require the following minimum
Purchase Payments:
. Flexible Purchase Payment Deferred Annuity Contracts - $100 minimum initial
and subsequent Purchase Payments
. Single Purchase Payment Deferred Annuity Contracts - $5,000 minimum single
payment
. Immediate Annuity Contracts - $2,000 minimum initial investment
Without our approval, the maximum Purchase Payment under a Deferred Annuity
Contract is $1,000,000.
You can make Purchase Payments in a Flexible Purchase Payment Deferred Annuity
Contract at such intervals as you desire. You can change the frequency of your
Purchase Payments. If you stop making Purchase Payments, you may resume such
payments at any time before the Annuity Date.
23
<PAGE>
The number of changes permitted and the maximum payments allowed under the
Internal Revenue Code for Qualified Contracts vary depending on the type of
Plan. Failure to comply with those limitations may subject the Contract to
adverse tax treatment.
ALLOCATION OF PURCHASE PAYMENTS
After the "free look" period, your Purchase Payments will be allocated to the
subaccounts and the Fixed Account according to your instructions in the
application. You can change these allocations at any time by written
instruction to our home office or by telephone, if a properly completed
telephone transfer authorization form is on file with us.
CREDITING OF ACCUMULATION UNITS
Before the Annuity Date, Purchase Payments will be used to purchase Accumulation
Units in subaccounts and be allocated to the Fixed Account as you have
instructed. We will determine the number of Accumulation Units purchased by
dividing the dollar amount of the Purchase Payment allocated to a subaccount by
the Accumulation Unit value for that subaccount computed following such
allocation.
ALLOCATION OF CHARGES AND OTHER DEDUCTIONS TO THE SUBACCOUNTS AND THE FIXED
ACCOUNT
Unless you allocated differently, deductions from the subaccounts and the Fixed
Account will be made, pro rata, to the extent necessary for us to
. collect charges
. pay surrender value
. secure policy loans
. provide benefits
We will immediately reinvest dividends and capital gain distributions received
from an Eligible Portfolio at net asset value in shares of that Eligible
Portfolio.
DETERMINING ACCUMULATION UNIT VALUES
The Accumulation Unit value of each subaccount reflects the investment
performance of that subaccount. We calculate Accumulation Unit value on each
Valuation Date by:
. multiplying the per share net asset value of the corresponding Eligible
Portfolio by the number of shares held by the subaccount, after the purchase
or redemption of any shares on the Valuation Date;
. subtracting a charge for the administrative fee, distribution expense charge
and the mortality and expense risk fee for that subaccount; and
. dividing by the number of units held in the subaccount on the Valuation Date,
before the purchase or redemption of any units on that date.
We will calculate the Accumulation Unit Value for each subaccount at the end of
each Valuation Period. Investment performance of the Eligible Portfolios will
increase or decrease the Accumulation Unit Value for each subaccount, the
Eligible Portfolio expenses and the deduction of certain charges by us affect
the Accumulation Unit Value for each subaccount.
24
<PAGE>
TRANSFERS BEFORE ANNUITY DATE
You can make transfers among the subaccounts and the Fixed Account subject to
the following restrictions:
. Transfers from subaccounts must be at least $250 or the balance of the
subaccount if less.
. A subaccount must have a balance of at least $100 after a transfer.
. Transfers from the Fixed Account can only be made during the first thirty
(30) days of each Contract Year and cannot exceed the greater of (1) 25% of
the amount in the Fixed Account or (2) $1,000.
. The first twelve (12) transfers in a Contract Year are free. A $10.00 fee
will be deducted from the amount transferred for each additional transfer.
(See "Exchange Fee," page 27.)
We will make transfers and determine values on the later of (1) the date
designated in your request or (2) the end of the Valuation Period in which your
transfer request is received.
Transfers resulting from policy loans will not be subject to a transfer charge.
In addition, such policy loans will not be counted for purposes of the
limitation on the number of free transfers allowed in each Contract Year.
We may revoke or modify the transfer privilege. For a discussion of transfers
after the Annuity Date, see "Allocation of Benefits" at page 34.
25
<PAGE>
CHARGES AND DEDUCTIONS
CHARGES AND DEDUCTIONS BEFORE ANNUITY DATE
SURRENDER CHARGE
Since no sales charge is deducted from your Purchase Payments, a Surrender
Charge may be imposed on withdrawals to cover expenses of distributing the
Contracts. (See "Deferred Sales Load [`Surrender Charge'] on page 10.)
When you make a withdrawal, we will divide such withdrawal by your Accumulation
Value and convert such result into a percentage. Assume you have $40,000
Accumulation Value, $38,000 of which represents total Purchase Payments and
$2,000 of which represents Accumulation Value less total Purchase Payments.
. Example 1 - Assume you want to withdraw $7,000. You can withdraw the
greater of (1) 10% of your $40,000 Accumulation Value or (2) Accumulation
Value minus total Purchase Payments with no Surrender Charge. Since 10% of
your Accumulation Value, $4,000, is greater than Accumulation Value minus
total Purchase Payments, $2,000, your Free Withdrawal Amount will be your
$4,000. Accordingly, $4,000 of your withdrawal will be free of surrender
charge. The remaining $3,000 is a withdrawal of Purchase Payments and will be
subject to a Surrender Charge.
. Example 2 - Assume you have made a $3,000 withdrawal and want to make an
additional $5,000 withdrawal in the same Contract Year. The first withdrawal
would have been free because it was less than the Free Withdrawal Amount.
However, such withdrawal would have utilized a portion of the Free Withdrawal
Amount available in that Contract Year. The first part of the formula for
calculating the Free Withdrawal Amount will be reduced by 7.5%, which is the
percentage the first surrender was of your Accumulation Value at that time.
If there have been no additional Purchase Payments or increases in the amount
by which your Accumulation Value exceeds your total Purchase Payments since
the first withdrawal, the Free Withdrawal Amount for the second withdrawal
will be the greater of (1) 2.5% of your Accumulation Value, which is $925.00
or (2) Accumulation Value minus total Purchase Payments, which is zero (0).
Accordingly, $925 of your second withdrawal will be free of surrender charge.
The remaining $4,075 will be a withdrawal of Purchase Payments and will be
subject to a Surrender Charge.
OTHER CHARGES
Your Contract is subject to certain other charges:
[ ] Administrative Charges
. An annual contract fee charged at the end of each Contract Year. The fee
for Non-Qualified Deferred Annuity Contracts is $25. The fee for
Qualified Deferred Annuity Contracts is $30. If a Contract is fully
surrendered, a pro rata portion of the fee will be deducted.
26
<PAGE>
. An administrative asset fee charged daily in Deferred Annuity Contracts
at an annual rate of 0.10%.
These fees are designed to reimburse us for the cost of administration and are
not intended to produce a profit.
. Premium Taxes
Premium taxes (which presently range from 0% to 3.5%) will be deducted if
assessed.
. Mortality and Expense Risk Fee
Annuity payments will not decrease because of adverse mortality experience of
annuitants as a class or increases in our actual expenses over expense
charges. We assume the risks that Annuitants as a class may live longer than
expected (requiring a greater number of annuity payments) and that fees may
not be sufficient to cover our actual costs. In assuming these risks, we agree
to make annuity payments to the Annuitant or other payee for as long as he or
she may live. In addition, we are at risk for the death benefits payable under
the Contracts, to the extent that the death benefit exceeds the Accumulation
Value.
For our promises to accept these risks, a 0.80% per annum Mortality Risk Fee
and a 0.45% per annum Expense Risk Fee will be assessed daily against the
Separate Account. Although we could realize a gain or a loss from such fees
depending on the mortality experienced and expenses actually incurred, we
expect to profit from this charge. We may use such profit for any proper
purpose, including distribution expenses.
. Distribution Expense Charge
A distribution expense charge is assessed daily to each subaccount to
partially compensate us for the risk that surrender charges may be
insufficient to cover the costs of distributing the Contracts. The
distribution expense charge is 0.05% annually. If the distribution expense
charge is insufficient to cover the actual expenses, we will bear the loss or
use any gain or profit available from other charges to cover such loss. If the
charge is more than sufficient, the excess will be a profit to us.
. Charges for Taxes
None at present. We may, however, make a charge in the future if income or
gains within the Separate Account incur federal, state or local taxes or if
our tax treatment changes. Charges for such taxes, if any, would be deducted
from the Separate Account and the Fixed Account. We would not realize a profit
on such charges.
. Exchange Fee
A $10.00 exchange fee is charged for transfers among the subaccounts and Fixed
Account after twelve transfers per Contract Year. Such fee compensates us for
the costs of effecting the transfers. We do not expect to make a profit from
the exchange fee. The exchange fee will be deducted from the amount
transferred. No fee is imposed on transfers as a result of policy loans. There
is no charge for one transfer from the Fixed Account permitted each contract
year.
27
<PAGE>
DEDUCTION OF FEES
Deductions for annual fees will be prorated among the subaccounts and the Fixed
Account.
CHARGES AND DEDUCTIONS DURING THE ANNUITY PERIOD
During the Annuity Period, we will charge:
. A mortality risk fee of .80% and expense risk fee of .45% against the
Separate Account
. Expenses of the Eligible Portfolios in which you have invested, as shown in
the tables on page 9
. If you purchase an Immediate Annuity contract, a $100 Contract fee at the
time of purchase
No other fees or expenses are charged against the Contracts during the Annuity
Period.
EXCEPTIONS TO CHARGES
We may reduce charges in sales to a trustee, employer or similar entity if we
determine that such sales reduce sales or administrative expenses. We may also
reduce charges in sales to directors, officers and bona fide full-time employees
(and their spouses and minor children) of SM&R and the Company.
28
<PAGE>
DISTRIBUTIONS UNDER THE CONTRACT
DISTRIBUTIONS BEFORE ANNUITY DATE
SURRENDERS
You can surrender your Contract, in whole or in part, before the Annuity Date
subject to the following limitations:
. If a partial surrender would leave less than $250 Accumulation Value, the
Contract must be fully surrendered.
. A partial surrender request should specify the allocation of that surrender
among the subaccounts and the Fixed Account. If not specified, we will
prorate the surrender among the subaccounts and the Fixed Account. Surrender
Charges will be deducted from the Accumulation Value remaining after a
partial surrender.
The Accumulation Unit value for Surrenders will be the applicable
Accumulation Unit value determined on the Valuation Date following receipt by
us at our home office of your surrender request.
Accumulation Value available for full or partial surrenders can be determined
by:
. multiplying the number of Accumulation Units for each subaccount times the
Accumulation Unit Value;
. adding any Accumulation Value in the Fixed Account; and
. deducting policy debt, prorata annual administrative fees and any surrender
charge.
We expect to pay surrenders within seven days of receipt of your written request
in proper form. We may delay payment of a partial surrender from the Fixed
Account for up to six (6) months.
Unless you provide us a written election not to have federal and state income
taxes withheld, we are required by law to withhold such taxes from the taxable
portion of any surrender, and to remit that amount to the federal and/or state
government.
SYSTEMATIC WITHDRAWAL PROGRAM
Under the Systematic Withdrawal Program, you can instruct us to make payments of
a predetermined dollar amount of Accumulation Value from one or more subaccounts
and the Fixed Account monthly, quarterly, semi-annually or annually. The minimum
systematic withdrawal payment is $100. The minimum systematic withdrawal from a
subaccount or the Fixed Account is $50. Systematic withdrawals can be started at
anytime. We must receive written notification from you specifying the amount,
frequency and timing of payment. You can specify the subaccount from which
systematic withdrawals will be made. If you do not specify, withdrawals will be
taken prorata from each subaccount. Surrender Charges will apply.
Because distributions may be taxable, you should consult your tax adviser before
requesting systematic withdrawals. (See "Federal Tax Matters," page 44.)
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Under the Systematic Withdrawal Program, you can participate in the Minimum
Distributions Program by instructing us to calculate and make minimum
distributions required if the Contract is used with a qualified plan. (See
"Taxation of Qualified Contracts," page 46.) We will determine the amount
required to be distributed based on information you provide and choices you
make. To participate in the Minimum Distributions Program, you must notify us
of such election in writing in the calendar year during which you attain age
70 1/2. The Minimum Distributions Program is subject to all rules applicable to
the Systematic Withdrawal Program. In addition, certain rules apply only to the
Minimum Distributions Program. Numerous special tax rules apply to
Contractowners whose Contracts are used with a qualified plan. You should
consult a tax advisor before electing to participate in the Minimum
Distributions Program.
POLICY LOANS IN QUALIFIED DEFERRED ANNUITY CONTRACTS
Policy loans are allowed on Qualified Deferred Annuity Contracts unless
considered as taxable distributions under federal law. After the first year,
you may borrow from us using the Qualified Contract as the security for the
loan. Policy loans are subject to the following:
[ ] Policy Loan Amount
. cannot be less than $2,500
. cannot exceed the lesser of:
- 50% of Accumulation Value less surrender; or
- $50,000.00.
[ ] Loan Interest
charged daily, not to exceed 8% annual rate
. due at the end of each Contract Year or when the policy loan is repaid,
if earlier.
. interest not paid when due will become part of the policy loan and will
accrue interest charges.
[ ] Effect of Policy Loans
Accumulation Value equal to the policy loan will be transferred from the
Separate Account and the Fixed Account to our General Account as security
for the policy debt. Such amount will earn interest at an annual rate not
less than 3.0% which will be credited at the end of the Contract Year. The
Accumulation Value securing the policy debt will be allocated among the
subaccounts and the Fixed Account in accordance with your instructions when
the policy loan is requested. The minimum amount that can remain in a
subaccount or the Fixed Account after a policy loan is $100. If you do not
give us allocation instructions, or if your instructions conflict with this
minimum requirement, the allocation will be prorata among the subaccounts
and the Fixed Account. We will transfer Accumulation Value from the
subaccounts and the Fixed Account to secure loan interest which is not paid
in any Contract Year. (Refer to "Deduction of Fees" on page 28.)
A policy loan will permanently affect the Accumulation Value of a Contract
even if the policy loan is repaid. The effect could be favorable or
unfavorable depending on
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whether the investment performance of the subaccount(s) selected by you (or
by us if you do not make an allocation) is less or greater than the
interest rate credited to the Accumulation Value held in the General
Account to secure policy debt. In comparison to a Contract under which no
policy loan was made, the Accumulation Value will be lower if the General
Account interest rate is less than the investment performance of the
subaccount(s), and greater if the General Account interest rate is higher
than the investment performance of the subaccount(s).
We will allocate interest earned on amounts held in the General Account to
the subaccounts and the Fixed Account on each Contract Anniversary in the
same proportion that Purchase Payments are being allocated to those
subaccounts and the Fixed Account. Upon repayment of policy debt, the
portion of the repayment allocated in accordance with the repayment of
indebtedness provision will be transferred to the Accumulation Value in
that subaccount or the Fixed Account.
We expect to fund policy loans within seven days after receipt of your
written request in proper form. You can only have one loan outstanding at
any time. Policy loans may have tax consequences. (See "Federal Tax
Matters," page 44.)
[ ] POLICY DEBT
The Contract will terminate and have no value if the amount of unpaid
loans, plus accrued interest, ever equal or exceed the Accumulation Value
less Surrender Charges. The effective date of termination will be 31 days
after we have mailed notice of termination to your last known address and
you have not paid policy debt at least equal to the excess over the
surrender amount.
If any death benefit proceeds or annuity benefits become due and payable
when a policy loan is outstanding, we will reduce proceeds by the policy
debt.
[ ] POLICY LOAN REPAYMENT
. You must repay Policy loans, other than "Home Loans," on or before the
fifth anniversary of the policy loan.
. You must repay Policy loans in a lump sum payment or, at our discretion,
in installments. All policy loan payments must be at least $10.00.
. Policy debt, other than a "Home Loan," unpaid after the fifth anniversary
of the policy loan will be deemed a distribution of the Contract
proceeds. The Contract will be reduced by the amount of any such balance.
(See "Taxation of Annuities in General" on page 44.)
"Home Loan" means any policy loan for the purpose of acquiring,
constructing, reconstructing or substantially rehabilitating a dwelling
unit for use by you (as defined in Section 267(c) of the Internal Revenue
Code) as a principal place of residence for a reasonable period of time.
You may repay "Home Loans" over a period of time not to exceed 15 years,
with level installment payments made not less frequently than quarterly.
Policy loans are not allowed on Non-Qualified Deferred Annuity Contracts
because of adverse tax consequences.
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DEATH BENEFIT BEFORE ANNUITY DATE
If you or the Annuitant die before the Annuity Date, we will pay a death benefit
equal to the greater of:
. Accumulation Value less policy debt; or
. The minimum guaranteed death benefit less policy debt.
We recalculate the "minimum guaranteed death benefit" of your Contract each time
you make a partial surrender and at the end of each six Contract Years. During
the first six Contract Years, the minimum guaranteed death benefit will equal
all Purchase Payments made less reductions to reflect partial surrenders, if
any, during such period. In subsequent six Contract Year periods, the minimum
guaranteed death benefit will equal the greater of:
1. the Accumulation Value at the end of the preceding six Contract Year period;
or
2. the minimum guaranteed death benefit at the end of the preceding six Contract
Year period, plus Purchase Payments made and minus reductions to reflect
partial surrenders, if any, after such date.
A reduction in the minimum guaranteed death benefit is made each time you make a
partial surrender. The reduction is calculated by dividing the minimum
guaranteed death benefit immediately prior to a partial surrender by the
Accumulation Value on the same date and multiplying such amount times the amount
of the partial surrender.
Example 1 - Assume you have made $4,000 in total Purchase Payments during the
first six Contract Year period and have made no partial surrenders. Your
minimum guaranteed death benefit at the end of the first six Contract Year
period would be $4,000.
Example 2 - Assume you make a $2,000 partial surrender in the third Contract
Year of the first six Contract Year period, at which time you have made $4,000
in total Purchase Payments, and your Contract's Accumulation Value is $8,000.
Your minimum guaranteed death benefit would be recalculated and reduced at the
time of such partial surrender. The amount of such reduction would be $1,000
which is calculated by:
. dividing the minimum guaranteed death benefit immediately prior to the
partial surrender ($4,000) by Accumulation Value at that time ($8,000); and
. multiplying such amount ($4,000 divided by $8,000 or .5) times the amount
of the partial surrender ($2,000).
Your minimum guaranteed death benefit prior to the partial surrender ($4,000)
would be reduced by the amount necessary to reflect the partial surrender
($1,000) which would result in a new minimum guaranteed death benefit of $3,000.
Example 3 - Assume you make a $4,000 partial surrender in the second Contract
Year of the second six Contract Year period. Assume further that you have made
$1,000 in total Purchase Payments since the end of the first six Contract Year
period; that your Contract Accumulation Value is $10,000 and that the minimum
guaranteed death benefit at the end of the first six Contract Year period is
$8,000. Your minimum guaranteed death benefit would be recalculated and reduced
at the time of such partial surrender. The amount of such reduction would be
$3,600 which is calculated by
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. dividing the minimum guaranteed death benefit immediately prior to the partial
surrender ($9,000) ($8,000 for the minimum guaranteed death benefit at the end
of the last six Contract Year period plus $1,000 in Purchase Payments made
since the end of the last six Contract Year period) by Accumulation Value at
that time ($10,000); and
. multiplying such amount ($9,000 divided by $10,000 or .9) times the amount
of the partial surrender ($4,000).
Your minimum guaranteed death benefit prior to the partial surrender ($9,000)
would be reduced by the amount necessary to reflect the partial surrender
($3,600) which would result in a new minimum guaranteed death benefit of $5,400.
We expect to pay the death benefit in a lump sum to the beneficiary named in the
Contract within seven business days of receipt of proof of death in proper form.
In lieu of payment in a lump sum, you can elect that the death benefit be
applied under one of the annuity options described on page 34. If you do not
make such election, the beneficiary can do so. The person selecting the annuity
option settlement may also designate contingent beneficiaries to receive any
amounts due after death of the first beneficiary. The manner in which annuity
payments to the beneficiary are determined and may vary are described below
under "Distributions During the Annuity Period," on page 34.
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DISTRIBUTIONS DURING THE ANNUITY PERIOD
All or part of any amount payable at the Annuity Date for Deferred Annuity
Contracts may be applied to any of the Annuity Options. We will discharge in a
single sum any liability under an assignment of the Contract and any applicable
federal, state, municipal or other taxes, fees or assessments based or
predicated on the Purchase Payments which have not otherwise been deducted or
offset. The remaining amount is the net sum payable. The minimum amount that we
will apply to an Annuity Option is $2,000. Our consent is required for any
payment to a corporation, association, partnership, or trustee.
ELECTION OF ANNUITY DATE AND FORM OF ANNUITY
. Non-Qualified Contracts - Annuity Date and form of annuity are elected in the
application. A Contract cannot be purchased after the Annuitant's age 85 and
annuity payments must begin not later than Annuitant's age 95.
. Qualified Contracts - Annuity Date and form of annuity are elected in the
application. A Contract cannot be purchased after age 70 and annuity payments
must begin not later than April 1st of the calendar year following the
calendar year in which the Annuitant reaches 70/1//2 or retires.
If you have not elected an Annuity Date, we may automatically begin payments at
age 95 under Option 2, Life Annuity with 120 monthly payments certain. (See
"Federal Tax Matters" on page 44.)
Once an Annuity Payment is made, the Annuity Option cannot be changed to another
Annuity Option.
ALLOCATION OF BENEFITS
Unless you elect to the contrary, the Accumulation Units of each subaccount will
be changed to Annuity Units and applied to provide a Variable Annuity based on
that subaccount.
In lieu of this allocation, you may elect to transfer your Accumulation Units to
either one or more Eligible Portfolios or to the Fixed Account. After the
Annuity Date, you can only make twelve transfers among subaccounts each Contract
year. You can transfer Annuity Units of one subaccount to Annuity Units of
another subaccount and to the Fixed Account at any time other than during the
five-day interval before and including any annuity payment date.
No election can be made unless such election would produce an initial annuity
payment of at least $20.
ANNUITY OPTIONS
The following annuity options are available.
. Option 1 - Life Annuity - monthly payments during the lifetime of an
individual, ceasing with the last annuity payment due prior to the death of
the individual. This option offers the maximum level of monthly annuity
payments since there is no provision for a minimum number of annuity payments
or a death benefit for beneficiaries. It would be possible under this option
for an individual to receive only
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one annuity payment if death occurred before the due date of the second
annuity payment, two if death occurred before the third annuity payment date,
etc.
. Option 2 - Life Annuity with ten or 20 Years Certain - monthly payments during
the lifetime of an individual with payments made for a period certain of not
less than ten or 20 years, as elected. The annuity payments will be continued
to a designated beneficiary until the end of the period certain.
. Option 3 - Unit Refund Life Annuity - monthly payments during the lifetime of
an individual with annuity payments made for a period certain not less than
the number of months determined by dividing (1) the amount applied under this
option by (2) the amount of the first monthly annuity payment. This option
guarantees that the Annuity Units, but not the dollar value applied under a
Variable Annuity payout, will be repaid to the Annuitant or his beneficiary.
. Option 4 - Joint and Survivor Annuity - monthly payments during the joint
lifetime of an individual and another named individual and thereafter during
the lifetime of the survivor, ceasing with the last annuity payment due before
the survivor's death. It would be possible under this option for only one
annuity payment to be made if both individuals under the option died before
the second annuity payment date, or only two annuity payments if both died
before the third annuity payment date, etc.
. Option 5 - Installment Payments, Fixed Period - monthly payments for a
specified number of years not exceeding 20. The amount of each Variable
Annuity payment will be determined by multiplying the Annuity Unit value on
the day the annuity payment is made by the number of Annuity Units applied
under this Option divided by the number of remaining monthly annuity payments.
. Option 6 - Equal Installment Payments, Fixed Amount - monthly installments
(not less than $6.25 per $1,000 applied) until the amount applied, adjusted
daily by the investment results, is exhausted. The final annuity payment will
be the remaining sum left with us.
. Option 7 - Deposit Option - The amount due may be left on deposit with us for
placement in our Fixed Account with interest not less than 3.0% per annum.
Interest will be paid annually, semiannually, quarterly or monthly as elected.
This option may not be available under certain Qualified Contracts.
. Option 8 - IRC Age Recalculation - payment based upon the Annuitant's life
expectancy, or the joint life expectancies of the Annuitant and a beneficiary,
at the Annuitant's attained age (and the beneficiary's attained or adjusted
age, if applicable), each year as computed in reference to actuarial tables
prescribed by the U. S. Treasury Secretary, until the amount applied, adjusted
daily by the investment results, is exhausted.
. Other Annuity Forms - May be agreed upon.
Any amount remaining under Option 5, 6 or 7 may be withdrawn as a lump sum or,
if that amount is at least $2,000, may be applied under any one of the first
four Options. The lump sum payment requested will be paid within seven days of
receipt of the request at our home office based on the value computed on the
next Valuation Date after receipt of the request.
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If the beneficiary dies while receiving annuity payments certain under Option 2,
3, 5, 6 or 8 above, the present value of minimum guaranteed payments will be
paid in a lump sum to the estate of the beneficiary.
VALUE OF VARIABLE ANNUITY PAYMENTS:
ASSUMED INVESTMENT RATES
The annuity tables in the Contract used to calculate the annuity payments are
based on an "assumed investment rate" of 3.0%. If the actual investment
performance of the particular subaccount selected is such that the net
investment return is 3.0% per annum, the annuity payments will remain constant.
If the actual net investment return exceeds 3.0%, the annuity payments will
increase. If the actual net investment return is less than 3.0%, the annuity
payments will decline.
Annuity payments will be greater for shorter guaranteed periods than for longer
guaranteed periods. Annuity payments will be greater for life annuities than
for joint and survivor annuities, because the life annuities are expected to be
made for a shorter period.
At your election, where state law permits, an Immediate Annuity Contract may
provide annuity benefits based on an assumed investment rate other than 3.0%.
The annuity rates for Immediate Annuity Contracts are available upon request to
us.
ANNUITY PROVISIONS
We determine non-qualified life contingent annuity payments based on the
mortality table (1983 Table "a" with Projection scale G, and 3.0% interest)
which generally reflects the age and sex of the Annuitant and the type of
annuity option selected. The annuity payment will also vary with the investment
performance of Eligible Portfolios you choose.
We determine qualified life contingent annuity payments based on the mortality
table [1983 Table "a" (female) projected to 1993, and 3.0% interest] which
generally reflects the age of the Annuitant and type of annuity option selected
and will vary with the investment performance of Eligible Portfolios you
choose. The attained age at settlement will be adjusted downward by one year
for each full five-year period that has lapsed since January 1, 1993.
Payment of surrender amounts, policy loans and benefits payable in connection
with death, annuity payments and transfers may be postponed whenever: (1) the
NYSE is closed other than customary week-end and holiday closings, or trading on
the NYSE is restricted as determined by the SEC; (2) the SEC by order permits
postponement for the protection of the Contractowners; 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.
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THE COMPANY, SEPARATE ACCOUNT, FUNDS, AND FIXED ACCOUNT
AMERICAN NATIONAL INSURANCE COMPANY
The Company is a stock life insurance company chartered in 1905 in the State of
Texas. We write individual and group life and accident and health insurance and
annuities. Our home office is located in the American National Insurance
Building, One Moody Plaza, Galveston, Texas 77550-7999. The Moody Foundation, a
charitable foundation, owns approximately 23.7% and the Libbie S. Moody Trust, a
private trust, owns approximately 37.6% of our common stock.
We are regulated by the Texas Department of Insurance and are subject to the
insurance laws and regulations of other states where we operate. Each year, we
file a National Association of Insurance Commissioners convention blank with the
Texas Department of Insurance. Such convention blank covers our operations and
reports on our financial condition and the Separate Account's financial
condition as of December 31 of the preceding year. Periodically, the Texas
Department of Insurance examines and certifies the adequacy of the Separate
Account's and our liabilities and reserves. A full examination of our
operations is also conducted periodically by the National Association of
Insurance Commissioners.
Obligations under the Contracts are our obligations.
THE SEPARATE ACCOUNT
We established the Separate Account under Texas law on July 30, 1991. The
Separate Account's assets are held exclusively for the benefit of persons
entitled to payments under variable annuity contracts issued by us . We are the
legal holder of the Separate Account's assets and will cause the total market
value of such assets to be at least equal to the Separate Account's reserve and
other contract liabilities. Such assets are held separate and apart from our
General Account assets. We maintain records of all purchases and redemptions of
shares of Eligible Portfolios by each of the subaccounts. Liabilities arising
out of any other business we conduct cannot be charged against the assets of the
Separate Account. Income, as well as both realized and unrealized gains or
losses from the Separate Account's assets, is credited to or charged against the
Separate Account without regard to income, gains or losses arising out of other
business that we conduct. However, if the Separate Account's assets exceed its
liabilities, the excess is available to cover the liabilities of our General
Account.
The Separate Account is registered with the Securities and Exchange Commission
("SEC") as a unit investment trust, which is a type of investment company. Such
registration does not involve any SEC supervision of management or investment
policies or practices. There are currently twenty-one subaccounts within the
Separate Account available to Contractowners and each invests only in a
corresponding Eligible Portfolio.
Since we are the legal holder of the Eligible Portfolio shares in the Separate
Account, we have the right to vote such shares at shareholders' meetings. To
the extent required by law, we will vote in accordance with instructions from
Contractowners. The number of votes for which a Contractowner has the right to
provide instructions will be determined
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as of the record date selected by the Board of Directors of the American
National Fund, the Fidelity Funds and the T. Rowe Price Funds. We will furnish
you proper forms, materials and reports to enable you to give us instructions if
you choose.
The number of shares of an Eligible Portfolio for which you can give
instructions is determined by dividing the Accumulation Value held in the
corresponding subaccount by the net asset value of one share in such Eligible
Portfolio. Fractional shares will be counted. Shares of an Eligible Portfolio
held in a subaccount for which you have not given timely instructions and other
shares held in a subaccount will be voted by us in the same proportion as those
shares in that subaccount for which timely instructions are received. Voting
instructions to abstain will be applied on a pro rata basis to reduce the votes
eligible to be cast. Should applicable federal securities laws or regulations
permit, we may vote shares of the Eligible Portfolios in our own right.
The Separate Account is not the only separate account that invests in the
Eligible Portfolios. Other separate accounts, including those funding other
variable annuity contracts, variable life policies and other insurance contracts
and retirement plans, invest in some of the Eligible Portfolios. We do not
believe this results in any disadvantages to you. However, there is a
theoretical possibility that a material conflict of interest could arise with
owners of variable life insurance policies funded by the Separate Account and
owners of other variable annuity contracts whose values are allocated to other
separate accounts investing in the Eligible Portfolios. There is also a
theoretical possibility that a material conflict could arise between the
interests of Contractowners or owners of other contracts and the retirement
plans which invest in the Eligible Portfolios or their participants. If a
material conflict arises, we will take any necessary steps, including removing
the Eligible Portfolio from the Separate Account, to resolve the matter. The
Board of Directors of each Eligible Portfolio will monitor events in order to
identify any material conflicts that may arise and determine what action, if
any, to take in response to those events or conflicts. See the accompanying
prospectuses for the Eligible Portfolios for more information.
THE FUNDS
Each subaccount invests in shares of a corresponding Eligible Portfolio of the
American National Fund, the Fidelity Funds and the T. Rowe Price Funds. The
investment objectives and policies of each Eligible Portfolio are summarized
below. You will be notified of and have an opportunity to instruct us how to
vote on any proposed material change in the investment policy of any Eligible
Portfolio in which you have an interest.
[ ] The American National Fund - currently has the following series or
portfolios, each of which is an Eligible Portfolio:
. AMERICAN NATIONAL GROWTH PORTFOLIO ... seeks to achieve capital
appreciation.
. AMERICAN NATIONAL EQUITY INCOME PORTFOLIO ... seeks to achieve growth of
capital and/or current income.
. AMERICAN NATIONAL BALANCED PORTFOLIO ... seeks to conserve principal,
produce reasonable current income and achieve long-term capital
appreciation.
. AMERICAN NATIONAL MONEY MARKET PORTFOLIO ... seeks the highest income
consistent with preserving capital and maintenance of liquidity.
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. AMERICAN NATIONAL GOVERNMENT BOND PORTFOLIO ... seeks to provide as high a
level of current income, liquidity, and safety of principal as is
consistent with prudent investment risks through investment in a portfolio
consisting primarily of securities issued or guaranteed by the U.S.
Government, its agencies, or instrumentalities.
. AMERICAN NATIONAL SMALL-CAP/MID-CAP PORTFOLIO ... seeks to provide long-
term capital growth by investing primarily in stocks of small to medium-
sized companies.
. AMERICAN NATIONAL HIGH YIELD BOND PORTFOLIO ... seeks to provide a high
level of current income. As a secondary investment objective, the fund
seeks capital appreciation.
. AMERICAN NATIONAL INTERNATIONAL STOCK PORTFOLIO ... seeks to obtain long-
term growth of capital through investments primarily in the equity
securities of established, non-U.S. companies.
Securities Management and Research, Inc. ("SM&R") is the American National
Fund's investment adviser. SM&R also provides investment advisory and portfolio
management services to us and to other clients. SM&R maintains a staff of
experienced investment personnel and related support facilities.
[ ] The Fidelity Funds - currently have the following series or portfolios, each
of which is an Eligible Portfolio:
. FIDELITY INVESTMENT GRADE BOND PORTFOLIO ... seeks as high a level of
current income as is consistent with the preservation of capital. The
portfolio normally invests in U. S. dollar-denominated investment-grade
bonds. The portfolio is managed to have similar overall interest rate risk
to the Lehman Brothers Aggregate Bond Index.
. FIDELITY EQUITY INCOME PORTFOLIO ... seeks reasonable income, while also
considering the potential for capital appreciation. The portfolio seeks a
yield which exceeds the composite yield on the securities comprising the
S&P 500. The portfolio normally invests at least 65% of its total assets
in income-producing equity securities. It may also invest in other types
of equity securities and debt securities, including lower-quality debt
securities.
. FIDELITY HIGH INCOME PORTFOLIO ... seeks a high level of current income
while also considering growth of capital. The portfolio normally invests
at least 65% of its total assets in income-producing debt securities,
preferred stocks and convertible securities, with an emphasis on lower-
quality debt securities. Many lower-quality debt securities are subject to
legal or contractual restrictions on resale to the general public. The
portfolio may also invest in non-income producing securities, including
defaulted securities and common stocks. The portfolio currently intends to
limit common stocks to 10% of the portfolio's assets.
. FIDELITY GROWTH PORTFOLIO ... seeks capital appreciation. The portfolio
normally invests primarily in common stocks, of companies believed to have
above-average growth potential.
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. FIDELITY OVERSEAS PORTFOLIO ... seeks long term growth of capital. The
portfolio normally invests at least 65% of its total assets in foreign
securities, primarily common stocks. The portfolio normally diversifies
its investments across different countries and regions.
. FIDELITY MONEY MARKET PORTFOLIO ... seeks as high a level of current
income as is consistent with the preservation of capital and liquidity.
The portfolio will invest in U.S. dollar denominated money market
securities of domestic and foreign issuers, including U.S. government
securities and repurchase agreements.
. FIDELITY ASSET MANAGER PORTFOLIO ... seeks high total return with reduced
risk over the long-term by allocating its assets among stocks, bonds and
short-term instruments.
. FIDELITY INDEX 500 PORTFOLIO ... seeks investment results that correspond
to the total return of common stocks publicly traded in the United States,
as represented by the S&P 500. The portfolio normally invests at least 80%
of its assets in common stocks included in the S&P 500. The portfolio
seeks the achieve a 98% or better correlation between its total return and
the total return of the index.
. FIDELITY CONTRAFUND PORTFOLIO ... seeks long-term capital appreciation.
The portfolio normally invests primarily in common stocks. The portfolio
invests in securities of companies whose value the portfolio believes is
not fully recognized by the public.
. FIDELITY ASSET MANAGER: GROWTH PORTFOLIO ... seeks to maximize total
return by allocating its assets among stocks, bonds, short-term
instruments, and other investments.
. FIDELITY GROWTH OPPORTUNITIES PORTFOLIO ... seeks to provide capital
growth. The portfolio normally invests its assets primarily in common
stocks. The portfolio may also invest in other types of securities,
including bonds which may be lower-quality debt securities.
. FIDELITY GROWTH AND INCOME PORTFOLIO ... seeks high total return through a
combination of current income and capital appreciation. The portfolio
normally invests a majority of its assets in common stocks with a focus on
those that pay dividends and show potential for capital appreciation. It
may also invest in bonds, including lower-quality debt securities, as well
as stocks that are not currently paying dividends, but offer prospects for
future income or capital appreciation.
. FIDELITY BALANCED PORTFOLIO ... seeks both income and growth of capital.
The portfolio maintains a balance between stocks and bonds, but will
always invest at least 25% of the fund's total assets in fixed-income
senior securities, including debt securities and preferred stock.
. FIDELITY MID CAP GROWTH PORTFOLIO ... seeks long-term growth of capital.
The portfolio normally invests primarily in common stocks. At least 65% of
the portfolio's total assets will be invested in securities of companies
with medium market capitalizations.
The Fidelity Management & Research Company ("FMR") is the Fidelity Funds'
investment adviser. FMR provides a number of mutual funds and other clients
with
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investment research and portfolio management services. FMR maintains a large
staff of experienced investment personnel and a full complement of related
support facilities.
[ ] The T. Rowe Price Funds - currently have the following series or portfolios,
all of which are Eligible Portfolios:
. T. ROWE PRICE EQUITY INCOME PORTFOLIO ... seeks to provide substantial
dividend income as well as long-term growth of capital through investments
in common stocks of established companies. The portfolio will normally
invest at least 65% of its assets in the common stocks of well-established
companies paying above-average dividends.
. T. ROWE PRICE MID-CAP GROWTH PORTFOLIO ... seeks to achieve long term
capital appreciation by investing in mid-cap stocks with potential for
above-average earnings growth. The portfolio will invest at least 65% of
its assets in diversified portfolio of common stocks of mid-cap companies
whose earnings are expected to grow at a faster rate than the average
company. The portfolio considers "mid-cap companies" as companies with
market capitalizations (number of shares outstanding multiplied by share
price) between $300 million and $5 billion. Most of the portfolio's assets
will be invested in U. S. common stocks.
. T. ROWE PRICE INTERNATIONAL STOCK PORTFOLIO ... seeks to provide long-term
growth of capital through investments primarily in common stocks of
established non-U.S. companies. The portfolio expects to invest
substantially all of the portfolio's assets (with a minimum of 65%) in
established companies beyond U.S. borders. The portfolio's focus will
typically be on large and, to a lesser extent, medium-sized companies.
T. Rowe Price Associates, Inc. is responsible for selection and management of
the portfolio investments of T. Rowe Price Equity Securities and T. Rowe Price
Fixed Income Securities. Rowe Price-Fleming International, Inc., a joint
venture between T. Rowe Price Associates, Inc. and Robert Fleming Holdings
Limited, is responsible for selection and management of the portfolio
investments of T. Rowe Price International Series.
THE ACCOMPANYING PROSPECTUSES SHOULD BE READ IN CONJUNCTION WITH THIS PROSPECTUS
BEFORE INVESTING AND CONTAIN A FULL DESCRIPTION OF THE AMERICAN NATIONAL FUND,
THE FIDELITY FUNDS AND THE T. ROWE PRICE FUNDS, THEIR INVESTMENT POLICIES AND
RESTRICTIONS, RISKS, CHARGES AND EXPENSES AND OTHER ASPECTS OF THEIR OPERATION.
We have arrangements to provide services to certain Eligible Portfolios for
which the advisor or distributor of such portfolios pays us fees. The fees are
based upon an annual percentage of the average aggregate net amount invested by
us in such Eligible Portfolios. Some advisors or distributors pay us higher
fees than others.
The Eligible Portfolios and the mutual funds of which they are a part are sold
only to registered separate accounts of insurance companies offering variable
annuity and variable life insurance contracts and, in some cases, to certain
qualified pension and retirement plans. The Eligible Portfolios and mutual funds
are not sold to the general public and should not be mistaken for other mutual
funds offered by the same sponsor or that have similar names.
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CHANGES IN INVESTMENT OPTIONS
We may establish additional subaccounts which would invest in portfolios of
other mutual funds chosen by us. We may also, from time to time, discontinue
the availability of existing subaccounts. If we do, we may, by appropriate
endorsement, make such changes to the Contract as we believe are necessary or
appropriate. In addition, if a subaccount is discontinued, we may redeem
shares in the corresponding Eligible Portfolio and substitute shares of another
mutual fund. We will not do so, or make other changes, without prior notice to
you and without complying with other applicable laws. Such laws may require
approval by the SEC and the Texas Department of Insurance.
If we deem it to be in your best interest, and subject to any required
approvals, we may combine the Separate Account with another of our separate
accounts.
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FIXED ACCOUNT
Before the Annuity Date, you can allocate all or a portion of your Purchase
Payment to the Fixed Account. Subject to certain limitations, you can also
transfer Accumulation Value from the subaccounts to the Fixed Account. Transfers
from the Fixed Account to the subaccounts are restricted. (See "Transfers Before
Annuity Date," page 25.)
We guarantee that we will credit interest to the Fixed Account at an effective
annual rate of at least 3.0% compounded daily. We may, at our discretion,
declare higher interest rate(s) for amounts allocated or transferred to the
Fixed Account.
Purchase Payments allocated to and transfers from a subaccount to the Fixed
Account are placed in our General Account. We have sole discretion regarding
the investment of and bear the investment risk with respect to the assets in our
General Account. You bear the risk that the declared rate will fall to a lower
rate after the expiration of a declared rate period. Because of exemptive and
exclusionary provisions, interests in the General Account have not been
registered under the Securities Act of 1933 (the "`33 Act") and the General
Account has not been registered as an investment company under the Investment
Company Act of 1940 (the "`40 Act"). Accordingly, neither the General Account
nor any interest therein is generally subject to the provisions of the `33 Act
or `40 Act. We understand that the staff of the SEC has not reviewed the
disclosures in this Prospectus relating to the Fixed Account portion of the
Contract. However, disclosures regarding the Fixed Account portion of the
Contract may be subject to generally applicable provisions of the federal
securities laws regarding the accuracy and completeness of statements made in
prospectuses.
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FEDERAL TAX MATTERS
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT TAX ADVICE.
INTRODUCTION
The following summary describes some of the federal income tax rules that apply
to a Contract. This summary is not complete and does not cover all tax
situations. Special tax rules, not discussed here, may apply to certain
individuals. This discussion is not tax advice. You should consult a competent
tax adviser for more complete information. This discussion is based upon our
understanding of the present federal income tax laws. We do not know if these
laws will change or how the Internal Revenue Service (the "IRS") will interpret
them. Moreover, the discussion below does not consider any applicable state or
other tax laws. We have included additional discussion regarding taxes in the
Statement of Additional Information.
TAX STATUS OF THE CONTRACTS
The following discussion assumes that the Contract will qualify as annuity
contracts for federal income tax purposes. The Statement of Additional
Information explains the requirements for qualifying as an annuity contract.
TAXATION OF ANNUITIES IN GENERAL
If you are a natural person, you generally will not be taxed on increases in the
Accumulation Value until you receive payments under the Contract. Any
distribution of payments, including a full or partial surrender of a Contract,
may subject you to income tax. If you assign or pledge (or agree to assign or
pledge) any portion of a Contract's Accumulation Value, this generally will be
considered a distribution of payments to you and may be taxable.
Corporations, partnerships, trusts, and other entities that own a Contract
generally must include in income increases in the excess of the Accumulation
Value over the investment in the contract. There are some exceptions to this
rule and such a prospective Contractowner should discuss these with a tax
adviser.
The "investment in the contract" generally equals the amount, if any, of
Purchase Payments paid with after-tax dollars (that is, purchase payments that
were not excluded from the individual's gross income).
The following discussion applies to Contracts owned by natural persons.
WITHDRAWALS
If you make a partial surrender from a Non-Qualified Contract (including
Systematic Withdrawals), the amount received will be taxed as ordinary income,
up to an amount equal to the excess (if any) of the Accumulation Value
immediately before the distribution over the investment in the Contract at that
time. In the case of a full surrender under a Non-Qualified Contract, the
amount received generally will be taxable as ordinary income to the extent it
exceeds the investment in the Contract.
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PENALTY TAX
For all distributions from Non-Qualified Contracts, there is a federal penalty
tax equal to 10% of the amount treated as taxable income. However, in general,
there is no penalty tax on distributions:
. made after the taxpayer reaches age 591/2;
. made as a result of the death of the Contractowner;
. attributable to the taxpayer becoming disabled; or
. made as part of a series of substantially equal periodic payments for the
life, or life expectancy, of the taxpayer.
There are other exceptions and special rules may apply to the exceptions listed
above. You should consult a tax adviser with regard to exceptions from the
penalty tax.
ANNUITY PAYMENTS
Although the tax consequences may vary depending on the annuity payment method
elected under the contract, generally only the portion of the annuity payment
that represents the amount by which the Accumulation Value exceeds the
investment in the contract will be taxed.
. For variable annuity payments, in general the taxable portion of each annuity
payment is determined by a formula which establishes a specific non-taxable
dollar amount of each annuity payment. This dollar amount is determined by
dividing the investment in the contract by the total number of expected
annuity payments.
. For fixed annuity payments, in general there is no tax on the portion of each
annuity payment which reflects the ratio that the investment in the contract
bears to the total expected value of annuity payments for the term of the
payments; however, the remainder of each annuity payment is taxable.
In all cases, after the investment in the Contract is recovered, the full amount
of any additional annuity payments is taxable.
TAXATION OF DEATH BENEFIT PROCEEDS
Amounts may be distributed from a Contract because of your death or the death of
the Annuitant. Generally, such amounts are taxable to the recipient as follows:
. if distributed in a lump sum, they are taxed in the same manner as a full
surrender of the Contract; or
. if distributed under an annuity option, they are taxed in the same way as
annuity payments, as described above.
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TRANSFERS OR ASSIGNMENTS OF A CONTRACT
A transfer or assignment of a Contract, the designation of certain Annuitants,
or the selection of certain Annuity Dates may result in tax consequences that
are not discussed herein. You should consult a tax advisor as to the tax
consequences of any such transaction.
REQUIRED DISTRIBUTIONS
In order to be treated as an annuity contract for federal income tax purposes,
the Code requires any non-qualified annuity contract to contain certain
provisions concerning how an interest in the contract is distributed on the
owner's death. The Non-Qualified Contracts contain provisions that are intended
to comply with these Code requirements, although no regulations interpreting
these requirements have yet been issued. We may modify the Contracts if
necessary to assure that they comply with the applicable requirements when such
requirements are clarified by regulation or otherwise.
WITHHOLDING
Annuity distributions generally are subject to withholding for the recipient's
federal income tax liability. Recipients can generally elect, however, not to
have tax withheld from distributions. Withholding is mandatory for certain
Qualified Contracts.
MULTIPLE CONTRACTS
All non-qualified, deferred annuity contracts that are issued by us (or our
affiliates) to the same owner during any calendar year are treated as one
annuity contract for purposes of determining the amount includible in income
when a taxable distribution occurs. In addition, there may be other situations
in which the U.S. Treasury Department may conclude that it would be appropriate
to aggregate two or more annuity contracts purchased by the same owner (it has
authority to issue regulations on aggregating multiple contracts). Accordingly,
you should consult a tax advisor before purchasing more than one annuity
contract.
EXCHANGES
Section 1035 of the Internal Revenue Code (the "Code") provides generally for
tax-free exchanges of one annuity contract for another. A number of special
rules and procedures apply to section 1035 exchanges. Anyone wishing to take
advantage of section 1035 should consult a tax advisor.
TAXATION OF QUALIFIED CONTRACTS
The Qualified Contracts are designed for retirement plans that qualify for
special income tax treatment under Sections 401(a), 403(b), 408, (408A) or 457
of the Code. Certain requirements apply to the purchase of a Qualified Contract
and to distributions therefrom in order for you to receive favorable tax
treatment. The following discussion assumes that Qualified Contracts qualify
for the intended special federal income tax treatment.
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The tax rules applicable to participants in these qualified plans vary according
to the type of plan and the terms and conditions of the plan itself. In
general, adverse tax consequences may result from:
. contributions made in excess of specified limits;
. distributions received prior to age 591/2 (subject to certain exceptions);
. distributions that do not conform to specified commencement and minimum
distribution rules;
. aggregate distributions in excess of a specified annual amount; and
. contributions or distributions made in other circumstances.
The terms and conditions of the retirement plans may limit the rights otherwise
available to you under a Qualified Contract. You are responsible for
determining that contributions, distributions and other transactions with
respect to a Qualified Contract comply with applicable law. If you are
considering purchasing an annuity contract for use with any qualified retirement
plan, you should get legal and tax advice.
DISTRIBUTIONS FROM QUALIFIED CONTRACTS
Annuity payments from Qualified Contracts are generally taxed in the same manner
as under a Non-Qualified Contract. When a withdrawal from a Qualified Contract
occurs, all or some of the amount received is taxable. For Qualified Contracts,
the investment in the contract can be zero; in that case, the full amount of all
distributions would be taxable. Distributions from certain qualified plans are
generally subject to mandatory withholding.
For qualified plans under Sections 401(a), 403(b), and 457, the Code requires
that distributions generally must begin by the later of April 1 of the calendar
year following the calendar year in which the Contractowner (or plan
participant): (a) reaches age 701/2; or (b) retires. Distributions must be made
in a specified form and manner. If the participant is a "5 percent owner" (as
defined in the Code), distributions generally must begin no later than April 1
of the calendar year following the calendar year in which the policy owner (or
plan participant) reaches age 701/2. For Individual Retirement Annuities (IRAs)
described in Section 408 of the Code, distributions generally must begin no
later than April 1 of the calendar year following the calendar year in which the
policy owner (or plan participant) reaches age 701/2.
CORPORATE AND SELF-EMPLOYED PENSION AND PROFIT SHARING PLANS
Section 401(a) of the Code permits employers to establish retirement plans for
employees and permits self-employed individuals to establish retirement plans
for themselves and their employees. Adverse tax or other legal consequences to
the plan, to the Plan Participant, or to both may result if this Contract is
purchased by a 401(a) plan and later assigned or transferred to any individual.
Employers intending to use the Contract with such plans should consult a tax
advisor.
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TAX SHELTERED ANNUITIES
Under Code Section 403(b), public school systems and certain tax-exempt
organizations may purchase annuity contracts for their employees. Generally,
payments to Section 403(b) annuity contracts will be excluded from the gross
income of the employee, subject to certain limitations. However, these payments
may be subject to FICA (Social Security) taxes. Under Section 403(b) annuity
contracts, the following amounts may only be distributed upon death of the
employee, attainment of age 591/2, separation from service, disability, or
financial hardship:
(a) elective contributions made in years beginning after December 31, 1988;
(b) earnings on those contributions; and
(c) earnings in such years on amounts held as of the last year beginning
before January 1, 1989.
In addition, income attributable to elective contributions may not be
distributed in the case of hardship.
INDIVIDUAL RETIREMENT ANNUITIES
Section 408 of the Code permits certain eligible individuals to contribute to an
individual retirement program known as an "Individual Retirement Annuity" or
"IRA." Section 408 of the Code limits the amount which may be contributed to an
IRA each year to the lesser of $2,000 or 100% of the Contractowner's adjusted
gross income. These contributions may be deductible in whole or in part
depending on the individual's income. The limit on the amount contributed to an
IRA does not apply to distributions from certain other types of qualified plans
that are "rolled over" on a tax-deferred basis into an IRA. Amounts in the IRA
(other than non-deductible contributions) are taxed when distributed from the
IRA. Distributions prior to age 591/2 (unless certain exceptions apply) are
subject to a 10% penalty tax.
[Roth IRAs. Effective January 1, 1998, section 408A of the Code permits certain
eligible individuals to contribute to a Roth IRA. Contributions to a Roth IRA,
which are subject to certain limitations, are not deductible, and must be made
in cash or as a rollover or transfer from another IRA. A rollover from or
conversion of an IRA to a Roth IRA may be subject to tax, and other special
rules may apply. Distributions from a Roth IRA generally are not taxed, except
that, once aggregate distributions exceed contributions to the Roth IRA, income
tax and a 10% penalty tax may apply to distributions made (1) before age 591/2
(subject to certain exceptions) or (2) during the five taxable years starting
with the year in which the first contribution is made to the Roth IRA.]
SIMPLE INDIVIDUAL RETIREMENT ANNUITIES
Certain small employers may establish SIMPLE plans (Savings Incentive Match
Plans) as provided by Section 408(p) of the Code. Under these plans employees
may defer a percentage of compensation of up to certain dollar amount. The
sponsoring employer is required to make a matching contribution. Distributions
from a SIMPLE plan are subject to the same restrictions that apply to IRA
distributions and are taxed as ordinary income. Subject to certain exceptions,
distributions prior to age 59 1/2 are subject to a 10% penalty
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tax, which increases to 25% if the distribution occurs during the first two
years the employee participates in the plan.
DEFERRED COMPENSATION PLANS
Section 457 of the Code provides for certain deferred compensation plans
available with respect to service for state governments, local governments,
political subdivisions, agencies, instrumentalities and certain affiliates of
such entities, and tax-exempt organizations. These plans are subject to various
restrictions on contributions and distributions. Under non-governmental plans,
all amounts are subject to the claims of general creditors of the employer and
depending on the terms of the particular plan, the employer may be entitled to
draw on deferred amounts for purposes unrelated to its Section 457 plan
obligations. In general, distributions from a deferred compensation plan are
prohibited unless made after the Plan Participant attains age 70 1/2, separates
from service, dies, or suffers an unforeseeable financial emergency.
Distributions under these plans are taxable as ordinary income in the year paid
or made available. Adverse tax consequences may result from certain
distributions that do not conform to applicable commencement and minimum
distribution rules.
POSSIBLE CHANGES IN TAXATION
Although the likelihood of legislative change is uncertain, there is always the
possibility that the tax treatment of the contract could change by legislation
or other means (such as U.S. Treasury Department regulations, Internal Revenue
Service revenue rulings, and judicial decisions). It is possible that any
change could be retroactive (that is, effective prior to the date of the
change). You should consult a tax advisor regarding such developments and their
effect on the Contract.
ALL CONTRACTS
As noted above, the foregoing comments about the federal tax consequences under
the Contracts are not exhaustive, and special rules may apply with respect to
other tax situations not discussed in this prospectus. Further, the federal
income tax consequences discussed herein reflect our understanding of current
law, and the law may change. Federal estate and state and local estate,
inheritance and other tax consequences of ownership or receipt of distributions
under a Contract depend on the individual circumstances of each Contractowner or
recipient of a distribution. A tax adviser should be consulted for further
information.
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PERFORMANCE
Performance information for the subaccounts may appear in reports and
advertising to current and prospective Contractowners. The performance
information is based on historical investment experience of the subaccounts and
the Eligible Portfolios and does not indicate or represent future performance.
Total returns are based on the overall dollar or percentage change in value of a
hypothetical investment. Total return quotations reflect changes in Eligible
Portfolio share prices, the automatic reinvestment by the Separate Account of
all distributions and the deduction of applicable annuity charges (including any
contingent deferred sales charges that would apply if a Contractowner
surrendered the Contract at the end of the period indicated). Quotations of
total return may also be shown that do not take into account certain contractual
charges such as a contingent deferred sales load. The total return percentage
will be higher under this method than under the standard method described above.
A cumulative total return reflects performance over a stated period of time. An
average annual total return reflects the hypothetical annually compounded return
that would have produced the same cumulative total return if the performance had
been constant over the entire period. Because average annual total returns tend
to smooth out variations in a subaccount's returns, you should recognize that
they are not the same as actual year-by-year results.
Some subaccounts may also advertise yield. These measures reflect the income
generated by an investment in the subaccount over a specified period of time.
This income is annualized and shown as a percentage. Yields do not take into
account capital gains or losses or the contingent deferred sales load.
The Fidelity Money Market subaccount and the American National Money Market
subaccount may advertise their current and effective yield. Current yield
reflects the income generated by an investment in the subaccount over a 7-day
period. Effective yield is calculated in a similar manner except that income
earned is assumed to be reinvested. The Fidelity Investment Grade Bond and the
Fidelity High Income subaccounts may advertise a 30-day yield which reflects the
income generated by an investment in the subaccount over a 30-day period.
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DISTRIBUTOR OF CONTRACTS
Securities Management and Research, Inc. ("SM&R"), 2450 South Shore Boulevard,
Suite 400, League City, Texas 77573, our wholly-owned subsidiary, is the
principal underwriter of the Contracts. SM&R was organized under the laws of
the State of Florida in 1964; is a registered broker/dealer; and is a member of
the National Association of Securities Dealers.
SM&R's registered representatives selling Contracts receive commissions from
SM&R. After issuance of the Contract, broker-dealers will receive commissions
aggregating up to 8.0% of the Purchase Payments. In addition, after the first
Contract Year, broker-dealers who have distribution agreements with us may
receive an annual commission of up to 0.25% of the Contract's Accumulation
Value.
LEGAL MATTERS
Various matters of Texas law pertaining to the Contract, including the validity
of the Contract and our right to issue the Contracts under Texas insurance law,
have been reviewed by Greer, Herz and Adams, LLP, General Counsel.
LEGAL PROCEEDINGS
The Company and its affiliates, like other life insurance companies, are
involved in lawsuits, including class action lawsuits. In some class action and
other lawsuits involving insurers, substantial damages have been sought and
material settlement payments have been made. Although the outcome of any
litigation cannot be predicted with certainty, we believe at the present time no
lawsuits are pending or threatened that are reasonably likely to have a material
adverse impact on the Separate Account or us.
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EXPERTS
The consolidated financial statements of American National Insurance Company and
subsidiaries as of December 31, 1999 and 1999 and for the years then ended, and
the statements of net assets of American National Variable Annuity Separate
Account as of December 31, 1999 and the related statements of operations for the
year then ended, and the statements of changes in net assets for each of the two
years in the period then ended, included in this prospectus and elsewhere in the
registration statement, have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said reports.
ADDITIONAL INFORMATION
A registration statement describing the Contracts has been filed with the
Securities and Exchange Commission under the '33 Act. This Prospectus does not
contain all information in the registration statement, to which reference is
made for further information concerning us, the Separate Account and the
Contracts offered hereby. Statements contained in this Prospectus as to the
terms of the Contracts and other legal instruments are summaries. For a complete
statement of such terms, reference is made to such instruments as filed.
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FINANCIAL STATEMENTS
Our financial statements should be considered only as bearing on our ability to
meet our obligations under the Contracts. They should not be considered as
bearing on the investment performance of the assets held in the Separate
Account. The financial statements can be found in the Statement of Additional
Information.
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TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
Page
The Contracts.................................................. 3
Valuation of Accumulation Units................................ 3
Computation of Variable Annuity Payments....................... 3
Annuity Unit Value............................................. 4
Summary........................................................ 4
Exceptions to Charges.......................................... 5
Termination of Contracts....................................... 5
Group Unallocated Contracts.................................... 6
Additional Federal Tax Matters................................. 7
Limits on Subsequent Purchase Payments (Under the Internal
Revenue Code)................................................ 7
Taxation of American National.................................. 7
Tax Status of the Contracts.................................... 8
Diversification Requirement.................................... 8
Required Distributions......................................... 8
Assignment..................................................... 9
Distribution of the Contracts.................................. 10
Records and Reports............................................ 10
Performance.................................................... 11
Total Return................................................... 11
Yields......................................................... 12
State Law Differences.......................................... 13
Separate Account............................................... 13
Termination of Participating Agreements........................ 14
Financial Statements........................................... 17
Financials..................................................... 18
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[Logo of American National}
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INVESTRAC GOLD Variable Annuity Contracts
Issued by American National Insurance Company
Home Office One Moody Plaza Galveston TX 77550-7999
Prospectus May 1, 2000 1-800-306-2959
This prospectus describes a group unallocated variable annuity contract.
You can allot contract value to American National Variable Annuity Separate
Account, which reflects the investment performance of mutual fund portfolios
selected by you, or our Fixed Account which earns a guaranteed minimum rate. At
this time, you can allot your contract value to the following mutual fund
portfolios:
American National Fund . Growth Portfolio
. Growth Portfolio . Overseas Portfolio
. Equity Income Portfolio . Money Market Portfolio
. Balanced Portfolio . Investment Grade Bond Portfolio
. Money Market Portfolio . Asset Manager Portfolio
Fidelity Funds . Index 500 Portfolio
. Equity Income Portfolio . Contrafund Portfolio
. High Income Portfolio . Asset Manager: Growth Portfolio
This prospectus contains information that you should know before purchasing a
contract. Additional information about the contract is contained in a Statement
of Additional Information ("SAI") filed with the Securities and Exchange
Commission, ("SEC") which is incorporated by reference into this Prospectus. You
may obtain a free copy of the SAI, which is dated the same date as this
prospectus, by writing or calling us at our home office. The table of contents
of the SAI is on page 31 of this prospectus. The SEC maintains an internet
website (http://www.sec.gov) that contains material incorporated by reference
into this prospectus, SAI and other information regarding companies that file
electronically with the SEC.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
Interests in the Contract are not deposits or obligations of, or guaranteed or
endorsed by any bank, nor is the Contract federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other agency.
The Contract involves investment risk, including possible loss of principal.
For a full description of the American National Fund and Fidelity Funds, their
investment policies and restrictions, risks, charges and expenses and other
aspects of their operation, see their prospectuses.
Please read this prospectus carefully and keep it for future reference.
Form 1005 *1005* Rev. 5-00
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Page
Glossary......................................................... 4
Introduction..................................................... 5
What is the Purpose of the Contract?........................... 5
What are the Investment Options?............................... 5
How Do I Purchase a Contract?.................................. 5
How Do I Allot Purchase Payments?.............................. 6
Can I Transfer Amounts Between
the Investment Alternatives?.................................. 6
Can I Make Withdrawals?........................................ 6
Is an Annuity Available?....................................... 6
What are the Charges and Deductions
Under the Contract?........................................... 6
What are the Tax Consequences Associated with the Contract?.... 7
If I Have Questions, Where Can I Go?........................... 7
Contractowner Transaction Expenses............................... 8
Sales Load as a Percentage of Purchase Payments................ 8
Deferred Sales Load ("Surrender Charges")...................... 8
Accumulation Unit Values......................................... 13
Contract......................................................... 15
Type of Contract............................................... 15
Contract Application and Purchase Payments..................... 15
Allocation of Purchase Payments................................ 15
Crediting of Accumulation Units................................ 15
Determining Accumulation Unit Values........................... 16
Transfers...................................................... 16
Charges and Deductions........................................... 17
Surrender Charge............................................... 17
Other Charges.................................................. 17
Deduction of Fees.............................................. 18
Exceptions to Charges.......................................... 18
Distributions Under the Contract................................. 19
Surrenders..................................................... 19
Annuity Payments................................................. 20
Annuity Options................................................ 20
Annuity Provisions............................................. 21
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
The Company, Separate Account, Funds
and Fixed Account............................................... 22
American National Insurance Company............................. 22
The Separate Account............................................ 22
The Funds....................................................... 23
Changes in Investment Options................................... 25
Fixed Account................................................... 25
Federal Tax Matters.............................................. 27
Introduction.................................................... 27
Taxation of Annuities in General................................ 27
Qualified Contracts............................................. 27
Performance...................................................... 28
Distributor of the Contract...................................... 29
Legal Matters.................................................... 29
Legal Proceedings................................................ 29
Experts.......................................................... 29
Additional Information........................................... 29
Financial Statements............................................. 31
Table of Contents of Statement
of Additional Information....................................... 31
</TABLE>
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GLOSSARY
Accumulation Period. The time between the date Accumulation Units are first
purchased by us and the date the Contract is surrendered.
Accumulation Unit. A unit used by us to calculate a Contract's value during the
Accumulation Period.
Accumulation Value. The sum of (1) the value of your Accumulation Units and (2)
value in the Fixed Account.
American National Fund. American National Investment Accounts, Inc.
Company ("we", "our" or "us" ). American National Insurance Company.
Contract The contract described in this Prospectus.
Contractowner ("You"). Unless changed by notice to us, the Contractowner is the
entity stated in the application.
Contract Anniversary. An anniversary of the date the Contract was issued.
Contract Year. A one-year period commencing on either the date of issue or a
Contract Anniversary.
Deferred Annuity Contract. A Contract in which annuity payments commence at some
future date.
Eligible Portfolio. A Portfolio which corresponds to a subaccount.
Fidelity Funds. Variable Insurance Products Fund and Variable Insurance Products
Fund II.
Fixed Account. A part of our General Account which will accumulate interest at a
fixed rate.
General Account. All of our assets except those segregated in separate accounts.
Group Unallocated Contract. A contract in which all Accumulation Units are
credited to one accumulation account.
Non-Qualified Contract. A Contract issued in connection with a retirement plan
that does not receive favorable tax treatment under the Internal Revenue Code.
Plan. A document or agreement defining retirement or other benefits and those
eligible to receive them. A Plan is not a part of a Contract and we are not a
party to a Plan.
Portfolio. A series of a mutual fund designed to meet specified investment
objectives.
Purchase Payment. A payment made to us less any premium tax charges.
Qualified Contract. A Contract issued in connection with a retirement plan that
receives favorable tax treatment under the Internal Revenue Code.
Valuation Date. Each day the New York Stock Exchange ("NYSE") is open for
regular trading. A redemption, transfer or purchase can be made only on days
that American National is open. American National will be open on each day the
NYSE is open except for the day after Thanksgiving and the Friday before
Christmas Eve.
Valuation Period. The close of business on one Valuation Date to the close of
business on another.
4
<PAGE>
INTRODUCTION
What is the Purpose of the Contract?
The Contract allows the accumulation of funds, on a tax-deferred basis, at rates
that will increase or decline in value based on the performance of investments
you choose.
What are the Investment Options?
You can invest Purchase Payments in one or more of the following subaccounts of
the Separate Account, each of which invests exclusively in shares of a
corresponding Eligible Portfolio:
. American National Money Market
. American National Balanced
. American National Equity Income
. American National Growth
. Fidelity Investment Grade Bond
. Fidelity Asset Manager
. Fidelity Index 500
. Fidelity Money Market
. Fidelity Equity-Income
. Fidelity High Income
. Fidelity Growth
. Fidelity Overseas
. Fidelity Contrafund
. Fidelity Asset Manager: Growth
Each such subaccount and corresponding Eligible Portfolio has its own investment
objective (See "The Funds" at page 23). There is no assurance that Eligible
Portfolios will achieve their investment objectives. Accordingly, you could lose
some or all of the Contract value.
You can also invest in our Fixed Account.
How Do I Purchase a Contract?
You can purchase a Contract by completing an application and paying the minimum
Purchase Payment to our home office. You must make at least a $2,000 minimum
initial Purchase Payment and at least $100 subsequent Purchase Payments. We may
change these amounts.
Without our prior approval, the maximum Purchase Payment under a Contract is
$1,000,000.
For a limited time, usually ten days after you receive the Contract, you can
return the Contract to our home office and receive a refund. (See "Contract
Application and Purchase Payments" on page 15.)
The contract is not available in some states. You should rely only on the
information contained or incorporated by reference in this prospectus. We have
not authorized anyone to provide you with information that is different.
5
<PAGE>
How Do I Allot Purchase Payments?
You can allot Purchase Payments among the 14 currently available subaccounts and
the Fixed Account. You cannot allot less than 10% of a Purchase Payment to any
one investment option.
Can I Transfer Amounts Between the Investment Alternatives?
You can make transfers between subaccounts and to our Fixed Account at any time.
Transfers from our Fixed Account are limited. (See "Transfers" on page 16 for
additional limitations.)
The first twelve transfers each Contract Year among the subaccounts or to the
Fixed Account are free. Additional transfers will be subject to a $10.00
exchange fee.
You should periodically review allocations among the subaccounts and the Fixed
Account to make sure they fit the current situation and financial goals.
You can make allotment changes in writing or during our normal business hours by
telephone if a telephone authorization form is on file with us. We will employ
reasonable procedures to confirm that telephone instructions are genuine. If we
follow those procedures, we will not be liable for losses due to unauthorized or
fraudulent instructions. We may be liable for such losses if we do not follow
those procedures.
Can I Make Withdrawals?
By written request to us, you can withdraw all or part of the Accumulation Value
at any time. Such withdrawal may be subject to a Surrender Charge, an IRS
penalty tax and income tax. Such withdrawal may also be subject to Plan
restrictions.
Is An Annuity Available?
You can select from a number of annuity options, either fixed or variable, each
of which provides a different level and number of annuity payments. The annuity
options include payments
. for the life of a Plan Participant
. for the life of a Plan Participant, with a guarantee that such payments will
continue for at least 10 or 20 years
. made jointly to a Plan Participant and another named individual with a right
of survivorship.
(See "Annuity Options," page 20).
What are the Charges and Deductions Under the Contract?
We do not currently deduct a sales charge when you purchase a Contract. We may
deduct a surrender charge up to 4% of Purchase Payments withdrawn. We also
charge a daily administrative asset fee. Such expense charge equals, on an
annual basis, 0.10% of the Contract's daily Accumulation Value.
6
<PAGE>
We charge a daily amount equal, on an annual basis, a mortality risk fee of .40%
and an expense risk fee of .45% of the Contract's daily Accumulation Value to
meet our death benefit obligations and to pay expenses.
Additional charges may be made by us for premium taxes when incurred.
What are the Tax Consequences Associated With the Contract?
You are generally required to pay taxes on amounts earned in a Non-Qualified
Contract only when they are withdrawn. When you take distributions or
withdrawals from a deferred Contract, taxable earnings are considered to be paid
out first, followed by the investment in the Contract. All or a portion of each
annuity payment you receive under a Non-Qualified Contract will be taxable.
Distributions from a Contract are taxed as ordinary income. You may owe a 10%
federal income tax penalty for distributions or withdrawals taken before age
59 1/2.
You generally are required to pay taxes on all amounts withdrawn from a
Qualified Contract. Restrictions and penalties may apply to withdrawals from a
Qualified Contract.
If I Have Questions, Where Can I Go?
If you or the plan administrator have any questions about the Contract, you or
the plan administrator can contact your registered representative or write us at
One Moody Plaza, Galveston, Texas 77550-7999. You can call us at 1-800-306-2959.
7
<PAGE>
CONTRACT OWNER TRANSACTION EXPENSES
The following table summarizes the charges we will make. The table also
summarizes the fees and expenses of the Eligible Portfolios. You should consider
this information with the information under the heading "Charges and Deductions"
on page 17.
Sales Load as a Percentage of Purchase Payments 0%
Deferred Sales Load ("Surrender Charge")
Contract Years Applicable Surrender Charge
as a
Percentage of
Each Withdrawal
- -------------------------------------------------------------------------------
1 4.0
2 3.5
3 3.0
4 2.5
5 2.0
6 1.5
7 1.0
8 and thereafter 0.0
Exchange Fee $ 10
(there is no exchange fee for
the first twelve transfers)
Annual Contract Fee $ 0
Separate Account Annual Expenses
(as a percent of average net assets)
Mortality Risk Fee 0.40%
Expense Risk Fee 0.45%
Administrative Asset Fee 0.10%
Total Separate Account Annual Expense 0.95%
American National Money Market Portfolio Annual Expenses
(as a percentage of average net assets)
Management Fees after reimbursement* 0.09%
Other Expenses 0.78%
Total Portfolio Annual Expense 0.87%
*Without reimbursement the management fees would have been 0.50% and the total
portfolio annual expense would have been 1.28%.
American National Growth Portfolio Annual Expenses
(as a percentage of average net assets)
Management Fees after reimbursement* 0.43%
Other Expenses 0.44%
Total Portfolio Annual Expenses 0.87%
*Without reimbursement the management fees would have been 0.50% and the total
portfolio annual expense would have been 0.94%.
8
<PAGE>
American National Balanced Portfolio Annual Expenses
(as a percentage of average net assets)
Management Fees after reimbursement* 0.26%
Other Expenses 0.64%
Total Portfolio Annual Expenses 0.90%
*Without reimbursement the management fees would have been 0.50% and the total
portfolio annual expense would have been 1.14%.
American National Equity Income Portfolio Annual Expenses
(as a percentage of average net assets)
Management Fees after reimbursement* 0.49%
Other Expenses 0.44%
Total Portfolio Annual Expenses 0.93%
*Without reimbursement the management fees would have been 0.50% and the total
portfolio annual expense would have been 0.94%.
**Under its Administrative Service Agreement with the Fund, Securities
Management and Research, Inc. ("SM&R"), the Fund's Investment Adviser and
Manager, has agreed to pay (or to reimburse each Portfolio for) each Portfolio's
expenses (including the advisory fee and administrative service fee paid to
SM&R, but exclusive of interest, commissions and other expenses incidental to
portfolio transactions) in excess of 1.50% per year of such Portfolio's average
daily net assets. In addition, SM&R has entered into a separate undertaking with
the Fund effective May 1, 1994 until April 30, 2001, pursuant to which SM&R has
agreed to reimburse the American National Money Market Portfolio and the
American National Growth Portfolio for expenses in excess of .87%; the American
National Balanced Portfolio for expenses in excess of 0.90% and the American
National Equity Income Portfolio for expenses in excess of .93%, of each of such
Portfolios' average daily net assets during such period. SM&R is under no
obligation to renew this undertaking for any Portfolio at the end of such
period.
Fidelity Investment Grade Bond Portfolio Annual Expenses
(as a percentage of average net assets)
Management Fees 0.43%
Other Expenses 0.11%
Total Portfolio Annual Expenses 0.54%
Fidelity Asset Manager Portfolio Annual Expenses
(as a percentage of average net assets)
Management Fees 0.53%
Other Expenses after reimbursement 0.10%
Total Portfolio Annual Expenses* 0.63%
Fidelity Index 500 Portfolio Annual Expenses
(as a percentage of average net assets)
Management Fees 0.24%
Other Expenses 0.04%
Total Portfolio Annual Expenses** 0.28%
9
<PAGE>
Fidelity Money Market Portfolio Annual Expenses
(as a percentage of average net assets)
Management Fees 0.18%
Other Expenses 0.09%
Total Portfolio Annual Expenses 0.27%
Fidelity Equity-Income Portfolio Annual Expenses
(as a percentage of average net assets)
Management Fees 0.48%
Other Expenses after reimbursement 0.09%
Total Portfolio Annual Expenses* 0.57%
Fidelity High Income Portfolio Annual Expenses
(as a percentage of average net assets)
Management Fees 0.58%
Other Expenses after reimbursement 0.11%
Total Portfolio Annual Expenses 0.69%
Fidelity Growth Portfolio Annual Expenses
(as a percentage of average net assets)
Management Fees 0.58%
Other Expenses after reimbursement 0.08%
Total Portfolio Annual Expenses* 0.66%
Fidelity Overseas Portfolio Annual Expenses
(as a percentage of average net assets)
Management Fees 0.73%
Other Expenses after reimbursement 0.18%
Total Portfolio Annual Expenses* 0.91%
Fidelity Contrafund Portfolio Annual Expenses
(as a percentage of average net assets)
Management Fees 0.58%
Other Expenses after reimbursement 0.09%
Total Portfolio Annual Expenses* 0.67%
Fidelity Asset Manager: Growth Portfolio Annual Expenses
(as a percentage of average net assets)
Management Fees 0.58%
Other Expenses after reimbursement 0.13%
Total Portfolio Annual Expenses* 0.71%
*A portion of the brokerage commissions that certain funds pay was used to
reduce fund expenses. In addition, through arrangements with certain funds', or
FMR on behalf of certain funds,' custodian, credits realized as a result of
uninvested cash balances were used to reduce a portion of each applicable fund's
expenses. With these reductions, the total operating expenses presented in the
table would have been .57% for Equity-Income Portfolio, 66% for Growth
Portfolio, 91% for Overseas Portfolio, .63% for Asset Manager Portfolio, .67%
for Contrafund Portfolio, .71% for Asset Manager: Growth Portfolio.
10
<PAGE>
**FMR agreed to reimburse a portion of Index 500 Portfolio's expenses during the
period. Without this reimbursement, the Portfolio's management fee, other
expenses and total expenses would have been .24%, .10% and .34%.
Example: Group Unallocated Contract
If you surrender your Group Unallocated Contract at the end of the applicable
time period:
You would pay the following expenses on a $1,000 investment, assuming 5% annual
return on assets:
<TABLE>
<CAPTION>
Fund 1 Year 3 Years 5 Years 10 Years
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
American National Money Market Portfolio $62 $ 98 $136 $245
American National Growth Portfolio $62 98 136 245
American National Balanced Portfolio $62 99 138 248
American National Equity Income Portfolio $62 100 139 251
Fidelity Investment Grade Bond Portfolio $58 88 120 211
Fidelity Asset Manager Portfolio $59 91 124 220
Fidelity Index 500 Portfolio $56 80 106 182
Fidelity Money Market Portfolio $55 80 106 181
Fidelity Equity-Income Portfolio $58 89 121 214
Fidelity High Income Portfolio $60 93 127 226
Fidelity Growth Portfolio $59 92 126 223
Fidelity Overseas Portfolio $62 99 138 249
Fidelity Contrafund Portfolio $59 92 126 224
Fidelity Asset Manager: Growth Portfolio $60 93 128 229
If you do not surrender your Group Unallocated Contract:
You would pay the following expenses on a $1,000 investment, assuming 5% annual return on
assets:
Fund 1 Year 3 Years 5 Years 10 Years
- ----------------------------------------------------------------------------------------------
American National Money Market Portfolio $22 $ 66 $114 $245
American National Growth Portfolio $22 66 114 245
American National Balanced Portfolio $22 67 115 248
American National Equity Income Portfolio $22 68 117 251
Fidelity Investment Grade Bond Portfoliio $18 56 97 211
Fidelity Asset Manager Portfolio $19 59 102 220
Fidelity Index 500 Portfolio $16 48 83 182
Fidelity Money Market Portfolio $15 48 83 181
Fidelity Equity-Income Portfolio $18 57 99 214
Fidelity High Income Portfolio $20 61 105 226
Fidelity Growth Portfolio $19 60 103 223
Fidelity Overseas Portfolio $22 68 116 249
Fidelity Contrafund Portfolio $19 60 104 224
Fidelity Asset Manager: Growth Portfolio $20 62 106 229
</TABLE>
You should not consider the examples as representative of past or future
expenses. The examples do not include the deduction of any state premium taxes
assessed.
11
<PAGE>
The purpose of the preceding table is to assist you in understanding the various
costs and expenses the Contract will bear directly or indirectly. The table
reflects expenses of the Separate Account and the Eligible Portfolios. The
expenses shown above for the Eligible Portfolios are assessed at the underlying
fund level and are not direct charges against the Separate Account's assets or
reductions from Accumulation Value. These expenses are taken into consideration
in computing each portfolio's net asset value, which is the share price used to
calculate the value of an Accumulation Unit. Actual expenses may be more or less
than shown. As required by the Securities and Exchange Commission, the example
assumes a 5% annual rate of return. This hypothetical rate of return is not
intended to be representative of past or future performance of an Eligible
Portfolio. Annual Contract fees are deducted pro rata from each subaccount and
our Fixed Account. For a more complete description of the various costs and
expenses of the American National Fund and the Fidelity Funds, see their
Prospectuses.
12
<PAGE>
ACCUMULATION UNIT VALUES
The value of an Accumulation Unit outstanding throughout the period and the
number of Accumulation Units outstanding for each subaccount are shown below.
(For an accumulation unit outstanding throughout the period)
Year Ended December 31,
Group contracts in the accumulation period 1999 1998 1997
American National Growth Portfolio
Accumulation unit value at beginning of period $ 2.302 $ 1.968 $ 1.558
Accumulation unit value at end of period $ 2.605 $ 2.302 $ 1.968
Number of accumulation units outstanding at
end of period
3,291 2,746 17,443
American National Money Market Portfolio
Accumulation unit value at beginning of period $ 0.000 $ 0.000 $ 1.387
Accumulation unit value at end of period $ 0.000 $ 0.000 $ 0.000
Number of accumulation units outstanding at
end of period -- -- --
American National Balanced Portfolio
Accumulation unit value at beginning of period $ 1.729 $ 1.504 $ 1.369
Accumulation unit value at end of period $ 1.848 $ 1.729 $ 1.504
Number of accumulation units outstanding at
end of period 3,659 3,400 3,587
American National Equity Income Portfolio
Accumulation unit value at beginning of period $ 2.178 $ 1.903 $ 2.466
Accumulation unit value at end of period $ 2.510 $ 2.178 $ 1.903
Number of accumulation units outstanding at
end of period 500 454 465
Fidelity Investment Grade Bond
Accumulation unit value at beginning of period $ 1.378 $ 1.283 $ 1.185
Accumulation unit value at end of period $ 1.352 $ 1.378 $ 1.283
Number of accumulation units outstanding at
end of period 4,934 5,606 13,768
Fidelity Asset Manager
Accumulation unit value at beginning of period $ 1.798 $ 1.583 $ 1.318
Accumulation unit value at end of period $ 1.973 $ 1.798 $ 1.583
Number of accumulation units outstanding at
end of period 104,346 92,333 78,051
Fidelity Index 500
Accumulation unit value at beginning of period $ 3.148 $ 2.487 $ 1.777
Accumulation unit value at end of period $ 3.741 $ 3.148 $ 2.487
Number of accumulation units outstanding at
end of period 3,150 2,704 11,675
Fidelity Money Market
Accumulation unit value at beginning of period $ 1.242 $ 1.196 $ 1.109
Accumulation unit value at end of period $ 1.291 $ 1.242 $ 1.196
Number of accumulation units outstanding at
end of period 8,217 7,631 10,040
13
<PAGE>
Fidelity Equity Income Fund
Accumulation unit value at beginning of period $ 2.176 $ 1.980 $ 1.535
Accumulation unit value at end of period $ 2.274 $ 2.176 $ 1.980
Number of accumulation units outstanding at
end of period 93,417 85,638 77,128
Fidelity High Income Fund
Accumulation unit value at beginning of period $ 1.545 $ 1.635 $ 1.415
Accumulation unit value at end of period $ 1.651 $ 1.545 $ 1.635
Number of accumulation units outstanding at
end of period 6,316 5,792 8,122
Fidelity Growth
Accumulation unit value at beginning of period $ 2.743 $ 1.994 $ 1.587
Accumulation unit value at end of period $ 3.710 $ 2.743 $ 1.994
Number of accumulation units outstanding at
end of period 10,985 13,476 28,010
Fidelity Overseas
Accumulation unit value at beginning of period $ 1.468 $ 1.319 $ 1.196
Accumulation unit value at end of period $ 2.064 $ 1.468 $ 1.319
Number of accumulation units outstanding at
end of period 59,499 52,812 43,013
Fidelity ContraFund
Accumulation unit value at beginning of period $ 2.255 $ 1.757 $ 1.455
Accumulation unit value at end of period $ 2.755 $ 2.255 $ 1.757
Number of accumulation units outstanding at
end of period 4,749 5,704 9,016
Fidelity Asset Manager Growth
Accumulation unit value at beginning of period $ 1.774 $ 1.530 $ 1.222
Accumulation unit value at end of period $ 2.015 $ 1.774 $ 1.530
Number of accumulation units outstanding at
end of period 1,678 1,886 9,295
a June 10, 1996 (the first date the subaccount received a transfer or had a
purchase payment allotted)
b June 25, 1996 (the first date the subaccount received a transfer or had a
purchase payment allotted)
c July 30, 1996 (the first date the subaccount received a transfer or had a
purchase payment allotted)
14
<PAGE>
CONTRACT
Type of Contract
This Prospectus offers a group unallocated variable annuity contract, which is a
form of Deferred Annuity Contract.
Contract Application and Purchase Payments
To purchase a Contract, you must complete an application and send the minimum
Purchase Payment to our home office. (See "Allocation of Purchase Payments",
page 15.) If the application cannot be processed within five days after receipt,
we will return your payment. We will credit your initial Purchase Payment to the
Contract within two business days after a completed application is received at
our home office.
You have a "free look" period during which you can return the Contract to our
home office and get a refund. The refund will equal the greater of (1) all of
your Purchase Payments or (2) Accumulation Value plus charges deducted by us
during such period. The "free look" period is established by state law and
generally runs ten days after you receive a Contract. The "free look" period is
not based on the date a Plan Participant receives a Contract. Therefore, the
"free look" period may have expired before a Plan Participant makes his or her
initial contribution to a Plan. We require that Purchase Payments received by us
during the 15 day period after the Date of Issue be allotted to the Fidelity
Money Market Portfolio. Thereafter, amounts allotted to such subaccount and
Purchase Payments paid are allotted as directed by you. No Surrender Charges are
assessed on refunds.
Allocation of Purchase Payments
After the "free look" period, Purchase Payments will be allotted to the
subaccounts and the Fixed Account according to instructions in the application.
You can change these allocations at any time by written instruction to our home
office or by telephone, if a properly completed telephone transfer authorization
form is on file with us.
Crediting of Accumulation Units
Purchase Payments will be used to purchase Accumulation Units in subaccounts and
be allotted to the Fixed Account as the Contractowner has instructed. We will
determine the number of Accumulation Units purchased by dividing the dollar
amount of the Purchase Payment allotted to a subaccount by the Accumulation Unit
value for that subaccount computed following such allocation. Purchase Payments
are not credited until actually received by us. A Plan Participant's
contribution to a Plan will not be credited until the Contractowner forwards
such contribution to us.
15
<PAGE>
Determining Accumulation Unit Values
The Accumulation Unit value of each subaccount reflects the investment
performance of that subaccount. We calculate Accumulation Unit value on each
Valuation Date by:
. multiplying the per share net asset value of the corresponding Eligible
Portfolio by the number of shares held by the subaccount, after the purchase
or redemption of any shares on the Valuation Date;
. subtracting a charge for the administrative fee, distribution expense charge
and the mortality and expense risk fee for that subaccount; and
. dividing by the number of units held in the subaccount on the Valuation Date,
before the purchase or redemption of any units on that date.
We will calculate the Accumulation Unit Value for each subaccount at the end of
each Valuation Period. Investment performance of the Eligible Portfolios, their
expenses and the deduction of certain charges by us affect the Accumulation Unit
value for each subaccount.
Transfers
You can make transfers among the subaccounts and the Fixed Account subject to
the following restrictions:
. Transfers from subaccounts must be at least $250, or the balance of the
subaccount, if less.
. A subaccount must have a balance of at least $100 after a transfer.
. Only one transfer from the Fixed Account can be made, and such transfer must
be made during the first thirty (30) days of each Contract Year and cannot
exceed the greater of (1) 25% of the amount in the Fixed Account or (2)
$1,000.
. The first twelve (12) transfers in a Contract Year are free. A $10.00 fee
will be deducted from the amount transferred for each additional transfer.
(See "Exchange Fee," page 17.)
We will make transfers and determine values on the later of (1) the date
designated in your request or (2) the end of the Valuation Period in which your
transfer request is received.
We may revoke or modify the transfer privilege.
16
<PAGE>
CHARGES AND DEDUCTIONS
Surrender Charge
Since no sales charge is deducted from Purchase Payments, a Surrender Charge may
be imposed on withdrawals to cover expenses of distributing the Contracts at a
rate of no more than 4% over the first seven Contract Years. (See "Deferred
Sales Load (`Surrender Charge')" on page 8).
Other Charges
The Contract is subject to certain other charges:
. Administrative Charges
. An administrative asset fee charged daily at an annual rate of 0.10%. This
fee is designed to reimburse us for the cost of administration and is not
intended to produce a profit.
. Premium Taxes
Premium taxes (which presently range from 0% to 3.5%) will be deducted if
assessed.
. Mortality and Expense Risk Fee
Annuity payments will not decrease because of adverse mortality experience of
Plan Participants as a class or increases in our actual expenses over expense
charges. We as ssume the risks that Plan Participants as a class may live
longer than expected (requiring a greater number of annuity payments) and that
fees may not be sufficient to cover our actual costs. In assuming these risks,
we agree to continue annuity payments under life contingent annuity options
determined in accordance with the annuity tables and other provisions of the
Contract, to the Plan Participant or other payee for life. In addition, we are
at risk for the death benefits payable under the Contract, to the extent that
the death benefit exceeds the Accumulation Value.
For our promises to accept these risks, we will charge a per annum mortality
risk fee of .40% and an expense risk fee of .45% will be assessed daily
against the Separate Account. Although we could realize a gain or a loss from
such fees depending on the mortality experienced and expenses actually
incurred, we expect to profit from this charge. We may use such profit for any
proper purpose, including distribution expenses.
. Charges for Taxes
None at present. We may, however, make a charge in the future if income or
gains within the Separate Account incur federal, state or local taxes or if
our tax treatment changes. Charges for such taxes, if any, would be deducted
from the Separate Account and the Fixed Account. We would not realize a profit
on such charges.
. Exchange Fee
A $10.00 exchange fee is charged for transfers among the subaccounts and to
the Fixed Account after twelve transfers per Contract Year. Such fee
compensates us for the costs of effecting the transfers. We do not expect to
make a profit from the exchange
17
<PAGE>
fee. The exchange fee will be deducted from the amount transferred. There is
no charge for the one transfer from the Fixed Account permitted each Contract
Year.
Deduction of Fees
Deductions for annual fees will be prorated among the subaccounts and the Fixed
Account.
Exceptions to Charges
We may reduce charges in sales to a trustee, employer or similar entity if we
determine that such sales reduce sales or administrative expenses.
18
<PAGE>
DISTRIBUTIONS UNDER THE CONTRACT
Surrenders
If permitted by the Plan for which the Contract was purchased, the Contractowner
may surrender the Contract, in whole or in part, subject to the following
limitations:
. If a partial surrender would leave less than $250 Accumulation Value, the
Contract must be fully surrendered.
. A partial surrender request should specify the allocation of that surrender
among the subaccounts and the Fixed Account. If not specified, we will
prorate the surrender among the subaccounts and the Fixed Account. Surrender
Charges will be deducted from the Accumulation Value remaining after a
partial surrender.
The Accumulation Unit value for Surrenders will be the applicable Accumulation
Unit value determined on the Valuation Date following receipt by us at our home
office of your surrender request.
Accumulation Value available for full or partial surrenders can be determined
by:
. multiplying the number of Accumulation Units for each subaccount times the
Accumulation Unit value
. adding any Accumulation Value in the Fixed Account; and
. deducting prorata annual administrative fees and any surrender charge
We expect to pay surrenders within seven days of receipt of your written request
in proper form. We may delay payment of a partial surrender from the Fixed
Account for up to six (6) months.
Unless you provide us a written election not to have federal and state income
taxes withheld, we are required by law to withhold such taxes from the taxable
portion of any surrender, and to remit that amount to the federal and/or state
government.
19
<PAGE>
ANNUITY PAYMENTS
The Contractowner can apply all or part of the Accumulation Value to any of the
annuity options described below. Such Accumulation Value will be transferred to
the Fixed Account and annuity payments will be based upon the annuity option
selected. Payments will be to the Plan Participant designated by the
Contractowner.
Annuity Options
The following annuity options are available to Contractowners. The Plans will
specify which of these options are available to individual Plan Participants.
. Option 1 - Life Annuity -- monthly payments during the lifetime of an
individual, ceasing with the last annuity payment due before the individual's
death. This option offers the maximum level of monthly annuity payments since
there is no provision for a minimum number of annuity payments or a death
benefit for beneficiaries. It would be possible under this option for an
individual to receive only one annuity payment if death occurred before the
due date of the second annuity payment, two if death occurred before the
third annuity payment date, etc.
. Option 2 - Life Annuity with ten or 20 Years Certain -- monthly payments
during the lifetime of an individual with payments made for a period certain
of not less than ten or 20 years, as elected. The annuity payments will be
continued to a designated beneficiary until the end of the period certain.
. Option 3 - Joint and Survivor Annuity -- monthly payments during the joint
lifetime of an individual and another named individual and thereafter during
the lifetime of the survivor, ceasing with the last annuity payment due
before the survivor's death. It would be possible under this option for only
one annuity payment to be made if both individuals under the option died
before the second annuity payment date, or only two annuity payments if both
died before the third annuity payment date, etc.
. Option 4 - Deposit Option -- The amount due may be left on deposit with us
for placement in our Fixed Account with interest not less than 3.0% per
annum. Interest will be paid annually, semiannually, quarterly or monthly as
elected. This option may not be available under certain Qualified Contracts.
Any amount remaining under Option 4 may be withdrawn as a lump sum or, if
that amount is at least $2,000, may be applied under any one of the first
three Options. The lump sum payment requested will be paid within seven days
of receipt of the request at our home office based on the value computed on
the next Valuation Date after receipt of the request.
. Option 5 - IRC Age Recalculation -- payment based upon the Annuitant's life
expectancy, or the joint life expectancies of the Annuitant and a
beneficiary, at the Annuitant's attained age (and the beneficiary's attained
or adjusted age, if applicable), each year as computed in reference to
actuarial tables prescribed by the U.S. Treasury Secretary, until the amount
applied, adjusted daily by the investment results, is exhausted.
. Other Annuity Forms -- May be agreed upon.
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If a beneficiary dies while receiving annuity payments certain under Option 2, 3
or 5 above, the present value of minimum guaranteed payments will be paid in a
lump sum to the estate of the beneficiary.
Annuity Provisions
We determine qualified life contingent annuity payments based on the mortality
table [1983 Table "a" (female) projected to 1993, and 3.0% interest] which
generally reflects the age of the Plan Participant and type of annuity option
selected and will vary with the investment performance of Eligible Portfolios
you choose. The attained age at settlement will be adjusted downward by one year
for each full five-year period that has lapsed since January 1, 1993.
Payment of surrender amounts and transfers may be postponed whenever: (1) the
NYSE is closed other than customary week end and holiday closings, or trading on
the NYSE is restricted as determined by the SEC; (2) the SEC by order permits
postponement for the protection of the Contractowners; 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.
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THE COMPANY, SEPARATE ACCOUNT, FUNDS AND FIXED ACCOUNT
American National Insurance Company
The Company is a stock life insurance company chartered in 1905 in the State of
Texas. We write individual and group life, accident and health insurance and
annuities. Our home office is located in the American National Insurance
Building, One Moody Plaza, Galveston, Texas 77550-7999. The Moody Foundation, a
charitable foundation, owns approximately 23.7% and the Libbie S. Moody Trust, a
private trust, owns approximately 37.6% of our common stock.
We are regulated by the Texas Department of Insurance and are subject to the
insurance laws and regulations of other states where we operate. Each year, we
file a National Association of Insurance Commissioners convention blank with the
Texas Department of Insurance. Such convention blank covers our operations and
reports on our financial condition and the Separate Account's financial
condition as of December 31 of the preceding year. Periodically, the Texas
Department of Insurance examines and certifies the adequacy of the Separate
Account's and our liabilities and reserves. A full examination of our operations
is also conducted periodically by the National Association of Insurance
Commissioners.
Obligations under the Contract are our obligations.
The Separate Account
We established the Separate Account under Texas law on July 30, 1991. The
Separate Account's assets are held exclusively for the benefit of persons
entitled to payments under variable annuity contracts issued by us. We are the
legal holder of the Separate Account's assets and will cause the total market
value of such assets to be at least equal to the Separate Account's reserve and
other contract liabilities. Such assets are held separate and apart from our
General Account assets. We maintain records of all purchases and redemptions of
shares of Eligible Portfolios by each of the subaccounts. Liabilities arising
out of any other business we conduct cannot be charged against the assets of the
Separate Account. Income, as well as both realized and unrealized gains or
losses from the Separate Account's assets, is credited to or charged against the
Separate Account without regard to income, gains or losses arising out of other
business that we conduct. However, if the Separate Account's assets exceed its
liabilities, the excess is available to cover the liabilities of our General
Account.
The Separate Account is registered with the Securities and Exchange Commission
("SEC") as a unit investment trust, which is a type of investment company. Such
registration does not involve any SEC supervision of management or investment
policies or practices. There are currently fourteen subaccounts within the
Separate Account available to Contractowners and each invests only in a
corresponding Eligible Portfolio.
Since we are the legal holder of the Eligible Portfolio shares in the Separate
Account, we have the right to vote such shares at shareholders' meetings. To the
extent required by law, we will vote in accordance with instructions from
Contractowners. The number of votes for which a Contractowner has the right to
provide instructions will be determined
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as of the record date selected by the Board of Directors of the American
National Fund and the Fidelity Funds. We will furnish you proper forms,
materials and reports to enable you to give us instructions if you choose.
The number of shares of an Eligible Portfolio for which you can give
instructions is determined by dividing the Accumulation Value held in the
corresponding subaccount by the net asset value of one share in such Eligible
Portfolio. Fractional shares will be counted. Shares of an Eligible Portfolio
held in a subaccount for which you have not given timely instructions and other
shares held in a subaccount will be voted by us in the same proportion as those
shares in that subaccount for which timely instructions are received. Voting
instructions to abstain will be applied on a pro rata basis to reduce the votes
eligible to be cast. Should applicable federal securities laws or regulations
permit, we may vote shares of the Eligible Portfolios in our own right.
The Separate Account is not the only separate account that invests in the
Eligible Portfolios. Other separate accounts, including those funding other
variable annuity contracts, variable life policies and other insurance contracts
and retirement plans, invest in some of the Eligible Portfolios. We do not
believe this results in any disadvantages to you. However, there is a
theoretical possibility that a material conflict of interest could arise with
owners of variable life insurance policies funded by the Separate Account and
owners of other variable annuity contracts whose values are allotted to other
separate accounts investing in the Eligible Portfolios. There is also a
theoretical possibility that a material conflict could arise between the
interests of Contractowners or owners of other contracts and the retirement
plans which invest in the Eligible Portfolios or their participants. If a
material conflict arises, we will take any necessary steps, including removing
the Eligible Portfolio from the Separate Account, to resolve the matter. The
Board of Directors of each Eligible Portfolio will monitor events in order to
identify any material conflicts that may arise and determine what action, if
any, to take in response to those events or conflicts. See the accompanying
prospectuses for the Eligible Portfolios for more information.
The Funds
Each subaccount invests in shares of a corresponding Eligible Portfolio of the
American National Fund and the Fidelity Funds. The investment objectives and
policies of each Eligible Portfolio are summarized below. You will be notified
of and have an opportunity to instruct us how to vote on any proposed material
change in the investment policy of any Eligible Portfolio in which you have an
interest.
. The American National Fund - currently has the following series or portfolios,
each of which is an Eligible Portfolio:
. American National Money Market Portfolio ... seeks the highest current
income consistent with the preservation of capital and maintenance of
liquidity.
. American National Growth Portfolio ... seeks to achieve capital
appreciation.
. American National Balanced Portfolio ... seeks to conserve principal,
produce reasonable current income, and achieve long-term capital
appreciation.
. American National Equity Income Portfolio ... seeks to achieve growth of
capital and/or current income.
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Securities Management and Research, Inc. ("SM&R") is the American National
Fund's investment adviser. SM&R also provides investment advisory and portfolio
management services to us and to other clients. SM&R maintains a staff of
experienced investment personnel and related support facilities.
. The Fidelity Funds - currently have thirteen series or portfolios, the
following 10 of which are Eligible Portfolios:
. Fidelity Investment Grade Bond Portfolio ... seeks as high a level of
current income as is consistent with the preservation of capital. The
portfolio normally invests in U. S. dollar-denominated investment-grade
bonds. The portfolio is managed to have similar overall interest rate risk
to the Lehman Brothers Aggregate Bond Index.
. Fidelity Equity Income Portfolio ... seeks reasonable income, while also
considering the potential for capital appreciation. The portfolio seeks a
yield which exceeds the composite yield on the securities comprising the S&P
500. The portfolio normally invests at least 65% of its total assets in
income-producing equity securities. It may also invest in other types of
equity securities and debt securities, including lower-quality debt
securities.
. Fidelity High Income Portfolio ... seeks a high level of current income
while also considering growth of capital. The portfolio normally invests at
least 65% of its total assets in income-producing debt securities, preferred
stocks and convertible securities, with an emphasis on lower-quality debt
securities. Many lower-quality debt securities are subject to legal or
contractual restrictions on resale to the general public. The portfolio may
also invest in non-income producing securities, including defaulted
securities and common stocks. The portfolio currently intends to limit
common stocks to 10% of the portfolio's assets.
. Fidelity Growth Portfolio ... seeks capital appreciation. The portfolio
normally invests primarily in common stocks, of companies believed to have
above-average growth potential.
. Fidelity Overseas Portfolio ... seeks long term growth of capital. The
portfolio normally invests at least 65% of its total assets in foreign
securities, primarily common stocks. The portfolio normally diversifies its
investments across different countries and regions.
. Fidelity Money Market Portfolio ... seeks as high a level of current income
as is consistent with the preservation of capital and liquidity. The
portfolio will invest in U.S. dollar denominated money market securities of
domestic and foreign issuers, including U.S. government securities and
repurchase agreements.
. Fidelity Asset Manager Portfolio ... seeks high total return with reduced
risk over the long-term by allocating its assets among stocks, bonds and
short-term instruments.
. Fidelity Index 500 Portfolio ... seeks investment results that correspond to
the total return of common stocks publicly traded in the United States, as
represented by the S&P 500. The portfolio normally invests at least 80% of
its assets in common stocks included in the S&P 500. The portfolio seeks to
achieve a 98% or better correlation between its total return and the total
return of the index.
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. Fidelity Contrafund Portfolio ... seeks long-term capital appreciation. The
portfolio normally invests primarily in common stocks. The portfolio invests
in securities of companies whose value the portfolio believes is not fully
recognized by the public.
. Fidelity Asset Manager: Growth Portfolio ... seeks to maximize total return
by allocating its assets among stocks, bonds, short-term instruments, and
other investments.
The Fidelity Management & Research Company ("FMR") is the Fidelity Funds'
investment adviser. FMR provides a number of mutual funds and other clients with
investment research and portfolio management services. Fidelity Management &
Research (U.K.) Inc. and Fidelity Management & Research (Far East), wholly-owned
subsidiaries of FMR, provide research with respect to foreign securities. FMR
maintains a large staff of experienced investment personnel and a full
complement of related support facilities.
The accompanying prospectuses should be read in conjunction with this prospectus
before investing and contain a full description of the American National Fund
and the Fidelity Funds, their investment policies and restrictions, risks,
charges and expenses and other aspects of their operation.
We have arrangements to provide services to certain Eligible Portfolios for
which the advisor or distributor of such portfolios pays us fees. The fees are
based upon an annual percentage of the average aggregate net amount invested by
us in such Eligible Portfolios. Some advisors or distributors pay us higher fees
than others.
The Eligible Portfolios and the mutual funds of which they are a part are sold
only to registered separate accounts of insurance companies offering variable
annuity and variable life insurance contracts and, in some cases, to certain
qualified pension and retirement plans. The Eligible Portfolios and mutual funds
are not sold to the general public and should not be mistaken for other mutual
funds offered by the same sponsor or that have similar names.
Changes in Investment Options
We may establish additional subaccounts which would invest in portfolios of
other mutual funds chosen by us. We may also, from time to time, discontinue the
availability of existing subaccounts. If we do, we may, by appropriate
endorsement, make such changes to the Contract as we believe are necessary or
appropriate. In addition, if a subaccount is discontinued, we may redeem shares
in the corresponding Eligible Portfolio and substitute shares of another mutual
fund. We will not do so, or make other changes, without prior notice to you and
without complying with other applicable laws. Such laws may require approval by
the SEC and the Texas Department of Insurance.
If we deem it to be in your best interest, and subject to any required
approvals, we may combine the Separate Account with another of our separate
accounts.
Fixed Account
You can allot all or a portion of a Purchase Payment to the Fixed Account.
Subject to certain limitations, you can also transfer Accumulation Value from
the subaccounts to the
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Fixed Account. Transfers from the Fixed Account to the subaccounts are
restricted. (See "Transfers" on page 16).
We guarantee that we will credit interest to the Fixed Account at an effective
annual rate of at least 3.0% compounded daily. We may, at our discretion,
declare higher interest rate(s) for amounts allotted or transferred to the Fixed
Account.
Purchase Payments allotted to and transfers from a subaccount to the Fixed
Account are placed in our General Account. We have sole discretion regarding the
investment of and bear the investment risk with respect to the assets in our
General Account. You bear the risk that the declared rate will fall to a lower
rate after the expiration of a declared rate period. Because of exemptive and
exclusionary provisions, interests in the General Account have not been
registered under the Securities Act of 1933 (the "'33 Act") and the General
Account has not been registered as an investment company under the Investment
Company Act of 1940 (the "'40 Act"). Accordingly, neither the General Account
nor any interest therein is generally subject to the provisions of the '33 Act
or '40 Act. We understand that the staff of the SEC has not reviewed the
disclosures in this Prospectus relating to the Fixed Account portion of the
Contract. However, disclosures regarding the Fixed Account portion of the
Contract may be subject to generally applicable provisions of the federal
securities laws regarding the accuracy and completeness of statements made in
prospectuses.
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FEDERAL TAX MATTERS
Introduction
The following discussion is general in nature and is not intended as tax advice
for each Contractowner. It does not address the tax consequences resulting from
all situations in which a Contractowner may maintain such a Contract. Tax advice
should be sought from a competent source prior to purchase. The discussion below
is based on American National's understanding of the present federal tax law as
currently interpreted by the Internal Revenue Service. No representation is made
as to the continuation of present federal tax law or its current interpretation.
State tax law may also be applicable.
Taxation of Annuities in General
Since a Group Unallocated Contract is not purchased directly by individuals,
those portions of the Code relating to individual ownership are not applicable
to the Group Unallocated Contractowner. Certain provisions of Section 72 of the
Code would apply if the Contractowner is a corporation or is not a natural
person and the Contract is not maintained under a plan which has favorable tax
treatment under the Code.
The United States Treasury Department has adopted regulations under Section
817(h) of the Code which set standards of diversification for the investment
underlying the Contract, in order for the Contract to be treated as annuities
for income tax purposes. American National intends that these diversification
standards will be satisfied. American National reserves the right to amend the
Contract in any way necessary to maintain compliance with these standards.
Qualified Contracts
The Group Unallocated Contract is designed for use with several types of
qualifying Plans subject to Code sections 401 and 457. The tax rules applicable
to such qualified Plans vary according to the type of Plan and the terms and
conditions of the Plan itself. Participants in qualified Plans may include
business owners (both self-employed and stockholders) and their employees for
whom pension and profit sharing plans have been established and government
employees covered by a section 457 deferred compensation plan.
As a general rule, purchase payments made by or for participants in qualified
Plans are not subject to taxation at the time such payments are made in the
Contract. In their capacity as Plan trustees or administrators, Contractowners
are responsible for the communication of appropriate information about the
operation of the Plan and the tax consequences of distributing benefits.
Distribution of benefits and tax withholding thereon is the sole responsibility
of the Contractowner.
Due to the complexity of the tax rules associated with the sponsorship and
operation of qualified Plans, entities contemplating establishment of such Plans
should seek advice from competent sources with respect to the responsibilities
and obligations associated with such Plans.
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PERFORMANCE
Performance information for the subaccounts may appear in reports and
advertising to current and prospective Contractowners. The performance
information is based on historical investment experience of the subaccounts and
the Eligible Portfolios and does not indicate or represent future performance.
Total returns are based on the overall dollar or percentage change in value of a
hypothetical investment. Total return quotations reflect changes in Eligible
Portfolio share prices, the automatic reinvestment by the Separate Account of
all distributions and the deduction of applicable annuity charges (including any
contingent deferred sales charges that would apply if a Contractowner
surrendered the Contract at the end of the period indicated). Quotations of
total return may also be shown that do not take into account certain contractual
charges such as a contingent deferred sales load. The total return percentage
will be higher under this method than under the standard method described above.
A cumulative total return reflects performance over a stated period of time. An
average annual total return reflects the hypothetical annually compounded return
that would have produced the same cumulative total return if the performance had
been constant over the entire period. Because average annual total returns tend
to smooth out variations in a subaccount's returns, you should recognize that
they are not the same as actual year-by-year results.
Some subaccounts may also advertise yield. These measures reflect the income
generated by an investment in the subaccount over a specified period of time.
This income is annualized and shown as a percentage. Yields do not take into
account capital gains or losses or the contingent deferred sales load.
The Fidelity Money Market subaccount and the American National Money Market
subaccount may advertise their current and effective yield. Current yield
reflects the income generated by an investment in the subaccount over a 7-day
period. Effective yield is calculated in a similar manner except that income
earned is assumed to be reinvested. The Fidelity Investment Grade Bond and the
Fidelity High Income subaccounts may advertise a 30-day yield which reflects the
income generated by an investment in the subaccount over a 30-day period.
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DISTRIBUTOR OF THE CONTRACT
Securities Management and Research, Inc. ("SM&R"), 2450 South Shore Boulevard,
Suite 400, League City, Texas 77573, our wholly owned subsidiary, is the
principal underwriter of the Contract. SM&R was organized under the laws of the
State of Florida in 1964; is a registered broker/dealer; and is a member of the
National Association of Securities Dealers.
SM&R's registered representatives selling a Contract will receive commissions
from SM&R. After issuance of the Contract, broker-dealers will receive
commissions aggregating up to 6.1% of the Purchase Payments. In addition, after
the first Contract Year, broker-dealers who have distribution agreements with us
may receive an annual commission of up to 0.25% of the Contract's Accumulation
Value.
LEGAL MATTERS
Various matters of Texas law pertaining to the Contract, including the validity
of the Contract and our right to issue the Contract under Texas insurance law,
have been reviewed by Greer, Herz and Adams, LLP, General Counsel.
LEGAL PROCEEDINGS
The Company and its affiliates, like other life insurance companies, are
involved in lawsuits, including class action lawsuits. In some class action and
other lawsuits involving insurers, substantial damages have been sought and
material settlement payments have been made. Although the outcome of any
litigation cannot be predicted with certainty, we believe at the present time no
lawsuits are pending or threatened that are reasonably likely to have a material
adverse impact on the Separate Account or us.
EXPERTS
The consolidated financial statements of American National Insurance Company and
subsidiaries as of December 31, 1999 and 1998 and for the years then ended, and
the statements of net assets of American National Variable Annuity Separate
Account as of December 31, 1999 and the related statements of operations for the
year then ended, and the statements of changes in net assets for each of the two
years in the period then ended, included in this prospectus and elsewhere in the
registration statement, have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said reports.
ADDITIONAL INFORMATION
A registration statement describing the Contracts has been filed with the
Securities and Exchange Commission under the `33 Act. This Prospectus does not
contain all information in the registration statement, to which reference is
made for further information concerning us, the Separate Account and the
Contract offered hereby. Statements contained in this Prospectus as to the terms
of the Contract and other legal
29
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instruments are summaries. For a complete statement of such terms, reference is
made to such instruments as filed.
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FINANCIAL STATEMENTS
Our financial statements should be considered only as bearing on our ability to
meet our obligations under the Contracts. They should not be considered as
bearing on the investment performance of the assets held in the Separate
Account. The financial statements can be found in the Statement of Additional
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
Page
The Contract 3
Valuation of Accumulation Units 3
Computation of Variable Annuity Payments 3
Annuity Unit Value 4
Summary 4
Exceptions to Charges 5
Tax Matters 7
Assignment 9
Minimum Distributions Program 9
Distribution of the Contract 10
Records and Reports 10
Performance 11
Total Return 11
Other Total Return 11
Yields 12
State Law Differences 13
Separate Account 13
Termination of Participating Agreements 14
Financial Statements 17
Financials 18
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AMERICAN NATIONAL VARIABLE ANNUITY
STATEMENT OF ADDITIONAL INFORMATION
Issued by American National Insurance Company
Home Office One Moody Plaza Galveston TX 77550-7999
1-800-306-2959
Relating to the Prospectus dated May 1, 2000
Custodian
American National Insurance Company
One Moody Plaza
Galveston, Texas 77550-7999
Principal Distributor
Securities Management and Research, Inc.
2450 South Shore Boulevard, Suite 400
League City, Texas 77573
Independent Auditors
Arthur Andersen LLP
711 Louisiana, Suite 1300
Houston, Texas 77002-2786
This Statement of Additional Information is not a prospectus and should be read
only in conjunction with the prospectuses for the Contracts.
AMERICAN NATIONAL VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 2000
This State of Additional Information expands upon subjects discussed in the
current prospectuses for the Variable Annuity Contracts ("the Contracts")
offered by American National Insurance Company ("American National"). You may
obtain a copy of the prospectuses dated May 1, 2000, by calling 1-800-306-2959,
or writing to American National Insurance Company, One Moody Plaza, Galveston,
Texas 77550-7999. Terms used in the current prospectuses for the Contracts are
incorporated in this Statement.
Form 5774-SAI Rev. 5-00
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Page
The Contracts................................................. 3
Valuation of Accumulation Units............................... 3
Computation of Variable Annuity Payments...................... 3
Annuity Unit Value............................................ 4
Summary....................................................... 4
Exceptions to Charges......................................... 5
Termination of Contracts...................................... 5
Group Unallocated Contracts................................... 6
Additional Federal Tax Matters................................ 7
Limits on Subsequent Purchase Payments
(Under the Internal Revenue Code)............................. 7
Taxation of American National................................. 7
Tax Status of the Contracts................................... 8
Diversification Requirement................................... 8
Required Distributions........................................ 8
Assignment.................................................... 9
Distribution of the Contracts................................. 10
Records and Reports........................................... 10
Performance................................................... 11
Total Return.................................................. 11
Yields........................................................ 12
State Law Differences......................................... 13
Separate Account.............................................. 13
Termination of Participating Agreements....................... 14
Financial Statements.......................................... 17
Financials.................................................... 18
</TABLE>
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THE CONTRACTS
The following provides additional information about the Contracts which
supplements the description in the prospectus and which may be of interest to
some Contractowners.
VALUATION OF ACCUMULATION UNITS
The Accumulation Unit Value for a subaccount on any day is equal to (a) divided
by (b), where (a) is the net asset value of the corresponding Eligible Portfolio
of the underlying fund owned by each subaccount less any applicable deductions
and (b) is the number of Accumulation Units of that subaccount at the beginning
of that day.
COMPUTATION OF VARIABLE ANNUITY PAYMENTS
The amount of the first variable annuity payment to the Annuitant will depend on
the amount of his/her Accumulation Value applied to affect the variable annuity
as of the tenth day immediately preceding the date annuity payments commence,
the amount of any premium tax owed (if applicable), the annuity option
selected, and the age of the annuitant. The Contracts contain tables indicating
the dollar amount of the first annuity payment under annuity options 1, 2, 3,
and 4 for each $1,000 of Accumulation Value at various ages. These tables are
based upon the 1983 Table a (promulgated by the Society of Actuaries) and an
Assumed Investment Rate (the AIR) of 3.0% per annum.
In any subsequent month, the dollar amount of the variable annuity payment is
determined by multiplying the number of annuity units in the applicable
division(s) by the value of such annuity unit on the tenth day preceding the due
date of such payment. The annuity unit value will increase or decrease in
proportion to the net investment return of the division(s) underlying the
variable annuity since the date of the previous annuity payment, less an
adjustment to neutralize the 3.0% or other AIR referred to above.
Therefore, the dollar amount of variable annuity payments after the first will
vary with the amount by which the net investment return is greater or less than
the 3.0% (or other AIR) per annum. For example, assuming a 3.5% AIR, if an
Eligible Portfolio has a cumulative net investment return of 5% over a one year
period, the first annuity payment in the next year will be approximately 1.5
percentage points greater than the payment in the next year will be
approximately 1.5 percentage points greater than the payment on the same date in
the preceding year, and subsequent payments will continue to vary with the
investment experience of the eligible Portfolio.
If such net investment return is 1% over a one year period, the first annuity
payment in the next year will be approximately 2.5 percentage points less than
the payment on the same date in the preceding year, and subsequent payments will
continue to vary with the investment experience of the applicable division.
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ANNUITY UNIT VALUE
The value of an annuity is calculated at the same time that the value of an
Accumulation Unit is calculated and is based on the same values for shares of
Eligible Portfolios and other assets and liabilities. The following
illustrations show, by use of hypothetical examples, the method of determining
the annuity unit value and the amount of variable annuity payments.
Illustration: Calculation of Annuity Unit Value
Annuity at age 65: Life with 120 payments certain
1. Annuity unit value, beginning of period $ .980000
2. Net investment factor for Period 1.001046
3. Daily adjustment for 3.0% Assumed Investment Rate .999919
4. (2) x (3) 1.000965
5. Annuity unit value, end of period (1) x (4) $ .980946
Illustration: Annuity Payments
Annuity at age 65: Life with 120 payments certain
1. Number of accumulation units at annuity date 10,000.00
2. Accumulation Unit value
(10 days prior to date of first monthly payment) $ 1.800000
3. Accumulation Value of Contract (1) x (2) $ 18,000.00
4. First monthly annuity payment per
$1,000 of Accumulation Value $ 5.63
5. First monthly annuity payment (3) x (4) / 1,000 $ 101.34
6. Annuity Unit value
(10 days prior to date of first monthly payment) $ .980000
7. Number of annuity units (5) / (6) 103.48
8. Assume annuity unit value for second month equal to $ .997000
9. Second monthly annuity payment (7) x (8) $ 103.10
10. Assume annuity unit value for third month equal to $ 953000
11. Third monthly annuity payment (7) x (10) $ 98.55
SUMMARY
In conclusion, for a variable annuity the key element to pricing the annuity is
unknown; there is no interest rate guarantee made and interest credited will
depend upon actual future results. The technique used to overcome this obstacle
is the calculation of the premium for the annuity using an AIR. The initial
variable annuity payment is based upon this premium; subsequent payments will
increase or decrease
4
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depending upon the relationship between the AIR and the actual investment
performance of Eligible Portfolios to be passed to the annuitant. Suppose an
Eligible Portfolio showed a monthly return of 1% after the first month, the
participant's second monthly payment would be (assuming 30 days between
payments):
$100 x [1.01/(1.03)/30/365/]=$100.75
We have shown that the AIR methodology means that each payment date the value in
a participant's annuity is updated to reflect actual investment results to date,
but continued assumption of the AIR for the remainder of the Annuity Period.
EXCEPTIONS TO CHARGES
The surrender charges or other administration charges or deductions may be
reduced for sales of Contracts to a trustee, employer or similar entity
representing a group where such sales result in savings of sales or
administrative expenses. The entitlement to such a reduction in surrender
charges or other charges or deductions will be determined by American National
based on the following factors: (1) the size of the group; (2) the total amount
of purchase payments to be received from a group; (3) the purpose for which the
Contracts are being purchased; (4) the nature of the group for which the
Contracts are being purchased; and (5) any other circumstances of which American
National is not presently aware but that could result in reduced sales or
administrative expenses.
Directors, officers and bona fide full-time employees (and their spouses and
minor children) of Securities Management and Research, Inc. and American
National are permitted to purchase contracts with substantial reduction of
surrender charges or other administrative charges or deductions. No sales
commission will be paid on such contracts.
TERMINATION OF CONTRACTS
American National reserves the right to terminate any Group Unallocated Contract
under the following circumstances:
. the contract value is less than $2,000 after the end of the first contract
year, or $5,000 after the end of the third contract year;
. the Plan pursuant to which the Contract is issued is terminated for any
reason or becomes disqualified under Section 401 or 403 of the Internal
Revenue Code or
. for any reason after the eighth policy year.
American National may also terminate individual Contracts during the
Accumulation Period if certain conditions exist. These conditions are that
. no purchase payments have been received by American National for the
Contract for three full years;
. the Accumulation Value of the Contract is less than $200; and
5
<PAGE>
. the value of the Contract allocated to the Fixed Account, projected to the
maturity date, would produce installments of less than $20 per month using
contractual guarantees.
Termination of a Contract may have adverse tax consequences. (See the prospectus
at "Federal Tax Matters," page 45.)
GROUP UNALLOCATED CONTRACTS
Group Unallocated Contract is a contract between the Contractowner and American
National. Individual accounts are not established for Plan Participants unless
the one of the annuity payment options is selected.
6
<PAGE>
ADDITIONAL FEDERAL TAX MATTERS
LIMITS ON SUBSEQUENT PURCHASE PAYMENTS
(UNDER THE INTERNAL REVENUE CODE)
The amount of subsequent Purchase Payments may be increased or decreased on any
date, and submission of a Purchase Payment different from the previous Purchase
Payment will automatically effect such an increase or decrease. However, U.S.
Treasury Regulations currently permit only one change to a salary deduction
agreement in any taxable year for contracts issued to qualify under Section
403(b) of the Internal Revenue Code (the Code). Contracts issued under Section
408(b) of the Code provide that the maximum Purchase Payments for each
Participant for a taxable year shall be $2,000 or other such amount as may
become permissible under amended laws. Contracts issued to qualify under Section
408(k) of the Code provide that the maximum annual Purchase Payment by an
employer for each employee shall be the lesser of 25% of the employee's
compensation or $30,000 or such other amount as may become permissible under
amended law.
Contracts issued to qualify under Section 457 of the Code provide that the
maximum Purchase Payment in any taxable year shall be $7,500 for each
Participant or such other amount as may become permissible under amended law.
Such contracts further provide for an increase in Purchase Payments for one or
more of the Participant's last three taxable years ending before normal
retirement age in accordance with the provisions of the applicable Plan
agreement.
Purchase Payments pursuant to the salary deduction agreements to contracts
issued under Section 403(b), 408(k), 401(k) or 457 of the Code that are in
excess of $7,000 in a taxable year ($9,500 in the case of Section 403(b)
contracts and the lesser of $7,000 or /1/3/ of employee's compensation for 457)
may be subject to adverse tax treatment.
TAXATION OF AMERICAN NATIONAL
American National is taxed as a life insurance company under Part 1 of
Subchapter L of the Code. Since the Separate Account is not an entity separate
from American National and its operations form a part of American National, it
will not be taxed separately as a "regulated investment company" under
Subchapter M of the code. Investment income and realized net capital gains on
Separate Account assets are reinvested and are taken into account in determining
the contract values. As a result, such investment income and realized net
capital gains are automatically retained as part of the reserves under the
Contract. Under existing federal income tax law, American National believes that
the Separate Account's investment income and realized net capital gains should
not be taxed to the extent that such income and gains are retained as part of
the reserves under the Contract.
7
<PAGE>
TAX STATUS OF THE CONTRACTS
To comply with regulations under 817(h) of the Code, the investment of the
Separate Account must be "adequately diversified" in order for the Contracts to
qualify as annuity contracts under section 72 of the code. The Separate Account,
through the underlying funds, intends to comply with the diversification
requirements prescribed by the Treasury which affect how the Separate Account's
assets may be invested. American National will monitor compliance with this
requirement. Thus, American National believes that the Contracts will be treated
as annuity contracts for federal tax purposes.
DIVERSIFICATION REQUIREMENT
The Code requires that the investments underlying a separate account be
"adequately diversified" in order for an annuity contract to be treated as
annuity contracts for federal income tax purposes. We intend that the Separate
Account, through the Eligible Portfolios, will satisfy these diversification
requirements.
In certain circumstances, owners of variable annuity contracts may be considered
for federal income tax purposes to be the owners of the assets of the separate
account supporting their contracts due to their ability to exercise investment
control over those assets. When this is the case, the Contractowners would be
currently taxed on income and gains attributable to the Separate Account assets.
There is little guidance in this area, and some features of the Contracts, such
as the flexibility of a Contractowner to allocate premium payments and transfer
Accumulation Value, have not been explicitly addressed in published rulings.
While we believe that the Contracts do not give Contractowners investment
control over Separate Account assets, we reserve the right to modify the
Contracts as necessary to prevent a Contractowner from being treated as the
owner of the Separate Account assets supporting a Contract.
REQUIRED DISTRIBUTIONS
In order to be treated as an annuity contract for federal income tax purposes,
each non-qualified deferred annuity contract must provide that:
(1) if a Contractowner dies on or after the Annuity Date but before the entire
interest in the Contract has been distributed, the remaining interest in the
Contract will be distributed at least as rapidly as under the distribution
method that was used immediately before the Contractowner died; and
(2) if a Contractowner dies before the Annuity Date, the entire interest in the
Contract will be distributed within five years after the Contractowner dies.
These requirements are considered satisfied as to any portion of the
Contractowner's interest that is (1) payable as annuity payments which begin
within one year of the Contractowner's death, and (2) which are made over the
life of the Beneficiary or over a period not extending beyond the Beneficiary's
life expectancy.
If the Beneficiary is the surviving spouse of the Contractowner, the Contract
may be continued with the surviving spouse as the new Contractowner and no
distribution is required.
8
<PAGE>
Other rules may apply to Qualified Contracts.
ASSIGNMENT
The Contracts may be assigned by the Contractowner except when issued to plans
or trusts qualified under Section 403(b) or 408 of the Internal Revenue Code.
401(k) Contracts are not assignable.
9
<PAGE>
DISTRIBUTION OF THE CONTRACTS
Subject to arrangements with American National, the Contracts are sold as part
of a continuous offering by independent broker-dealers who are members of the
National Association of Security Dealers, Inc., and who become licensed to sell
variable annuities for American National. Pursuant to a Distribution and
Administrative Services Agreement, Securities Management and Research, Inc.
("SM&R") acts as the principal underwriter on behalf of American National for
distribution of the Contracts. Under the Agreement, SM&R is to sell Contracts
through registered representatives. In connection with these sales activities
SM&R is responsible for:
. compliance with the requirements of any applicable state broker-dealer
regulations and the Securities Exchange Act of 1934,
. keeping correct records and books of account in accordance with Rules 17a-3
and 17a-4 of the Securities Exchange Act,
. training agents of American National for the sale of Contracts, and
. forwarding all purchase payments under the Contracts directly to American
National.
SM&R is not entitled to any renumeration for its services as underwriter under
the Distribution and Administrative Services Agreement, however SM&R is entitled
to reimbursement for all reasonable expenses incurred in connection with its
duties as underwriter.
The sum of surrender charges under a Contract will never exceed 8.5% of Purchase
Payments.
RECORDS AND REPORTS
Reports concerning each Contract will be sent annually to each Contractowner.
Contractowners will additionally receive annual and semiannual reports
concerning the underlying funds and annual reports concerning the Separate
Account. Contractowners will also receive confirmations of receipt of purchase
payments, changes in allocation of purchase payments and transfer of
Accumulation Units and Annuity Units.
10
<PAGE>
PERFORMANCE
Performance information for any Subaccount may be compared, in reports and
advertising to:
. the Standard & Poor's 500 Composite Stock Price Index ("S & P 500"),
. Dow Jones Industrial Average ("DJIA"),
. Donoghue's Money Market Institutional Averages,
. other variable annuity separate accounts or other investment products tracked
by Lipper Analytical Services, Lehman-Brothers, Morningstar, or the Variable
Annuity Research and Data Service, widely used independent research firms
which rank mutual funds and other investment companies by overall
performance, investment objectives, and assets, or
. the Consumer Price Index (measure for inflation) to assess the real rate of
return from an investment in a contact.
Unmanaged indices may assume the reinvestment of dividends but generally do not
reflect deductions for annuity charges and investment management costs.
Total returns, yields and other performance information may be quoted
numerically or in a table, graph, or similar illustration. Reports and
advertising may also contain other information including:
. the ranking of any subaccount derived from rankings of variable annuity
separate accounts or other investment products tracked by Lipper Analytical
Series or by rating services, companies, publications or other persons who
rank separate accounts or other investment products on overall performance or
other criteria, and
. the effect of tax deferred compounding on a subaccount's investment returns,
or returns in general, which may be illustrated by graphs, charts, or
otherwise, and which may include a comparison, at various points in time, of
the return from an investment in a Contract (or returns in general) on a tax-
deferred basis (assuming one or more tax rates) with the return on a taxable
basis.
TOTAL RETURN
Total Return quoted in advertising reflects all aspects of a subaccount's
return, including the automatic reinvestment by the separate account of all
distributions and any change in the subaccount's value over the period. Average
annual returns are calculated by determining the growth or decline in value of a
hypothetical historical investment in the subaccount over a stated period, and
then calculating the annually compounded percentage rate that would have
produced the same result if the rate of growth or decline in value had been
constant over the period. For example, a cumulative return of 100% over ten
years would produce an average annual return of 7.18%, which is the steady rate
that would equal 100% growth on a compounded basis in ten years. While average
annual returns are a convenient means of comparing investment alternatives,
investors should realize that the subaccount's
11
<PAGE>
performance is not constant over time, but changes from year to year, and that
average annual returns represent averaged figures as opposed to the actual year-
to-year performance of a subaccount.
Average annual total returns are computed by finding the average annual
compounded rates of return over the periods shown that would equate the initial
amount invested to the withdrawal value, in accordance with the following
formula:
P(1+T)/n/ = ERV
where P is a hypothetical investment payment of $1,000, T is the average annual
total return, n is the number of years, and ERV is the withdrawal value at the
end of the periods shown. Since the Contract is intended as a long-term
product, the average annual total returns assume that no money was withdrawn
from the Contract prior to the end of the period.
In addition to average annual returns, the subaccounts may advertise unaveraged
or cumulative total returns reflecting the simple change in value of an
investment over a stated period.
From time to time, sales literature or advertisements may also quote average
annual total returns that reflect neither the annual contract fee nor the
Surrender Charge. These are calculated in exactly the same way as the average
annual total returns described above, except that the ending redeemable value of
the hypothetical account for the period is replaced with an ending value for the
period that does not take into account the annual contract fee and any charges
on amounts surrendered.
YIELDS
Some subaccounts may also advertise yields. Yields quoted in advertising reflect
the change in value of a hypothetical investment in the subaccount over a stated
period of time, not taking into account capital gains or losses. Yields are
annualized and stated as a percentage. Yields do not reflect the impact of any
contingent deferred sales load. Yields quoted in advertising may be based on
historical seven day periods. Current yield for the Fidelity Money Market
Subaccount and the American National Money Market Subaccount will reflect the
income generated by a Subaccount over a 7-day period. Current yield is
calculated by determining the net change, exclusive of capital changes, in the
value of a hypothetical account having one Accumulation Unit at the beginning of
the period and dividing the difference by the value of the account at the
beginning of the base period to obtain the base period return, and multiplying
the base period return by (365/7). The resulting yield figure will be carried to
the nearest hundredth of a percent. Effective yield for the Fidelity Money
Market Subaccount and the American National Money Market Subaccount is
calculated in a similar manner to current yield except that investment income is
assumed to be reinvested throughout the year at the 7-day rate. Effective yield
is obtained by taking the base period returns as computed above, and then
compounding the base period return by adding 1, raising the sum to a power equal
to (365/7) and subtracting one from the result, according to the formula
Effective Yield = [(Base Period Return +1)/365/7/] - 1. Since the reinvestment
of income is assumed in the calculation of effective yield, it will generally be
higher than current yield.
12
<PAGE>
A 30-day yield for bond subaccounts will reflect the income generated by a
subaccount over a 30-day period. Yield will be computed by dividing the net
investment income per Accumulation Unit earned during the period by the maximum
offering price per Accumulation Unit on the last day of the period, according to
the following formula:
Yield = 2[((a - b)/cd + 1)/6/-1]
where a = net investment income earned by the applicable portfolio, b = expenses
for the period including expenses charged to the contract owner accounts,
c = the average daily number of Accumulation Units outstanding during the
period, and d = the maximum offering price per Accumulation Unit on the last day
of the period.
STATE LAW DIFFERENCES
Differences in state laws may require American National to offer a Contract in
one or more states which is more favorable to a Contractowner than that offered
in other states.
SEPARATE ACCOUNT
The Separate Account will purchase and redeem shares of the Eligible Portfolios
at net asset value. The net asset value of a share is equal to the total assets
of the portfolio less the total liabilities of the portfolio divided by the
number of shares outstanding.
American National will redeem shares in the Eligible Portfolios as needed to:
. collect charges,
. pay the surrenders,
. secure Policy loans,
. provide benefits, or
. transfer assets from one subaccount to another, or to the Fixed Account.
Any dividend or capital gain distribution received from an Eligible Portfolio
will be reinvested immediately at net asset value in shares of that Eligible
Portfolio and retained as assets of the corresponding subaccount.
The Separate Account may include other subaccounts that are not available under
the Policy. American National may from time to time discontinue the
availability of some of the subaccounts. If the availability of a subaccount is
discontinued, American National may redeem any shares in the corresponding
Eligible Portfolio and substitute shares of another registered, open-end
management company.
American National may also establish additional subaccounts. Each new
subaccount would correspond to a portfolio of a registered, open-end management
company. American National would establish the terms upon which existing
Policyowners could purchase shares in such portfolios.
13
<PAGE>
If any of these substitutions or changes are made, American National may change
the Policy by sending an endorsement. American National may:
. operate the Separate Account as a management company,
. de-register the Separate Account if registration is no longer required,
. combine the Separate Account with other separate accounts,
. restrict or eliminate any voting rights associated with the Separate Account,
or
. transfer the assets of the Separate Account relating to the Contracts to
another separate account.
American National would, of course, not make any changes to the menu of Eligible
Portfolios or to the Separate Account without complying with applicable laws and
regulations. Such laws and regulations may require notice to and approval from
the Contractowners, the SEC and state insurance regulatory authorities.
TERMINATION OF PARTICIPATION AGREEMENTS
The participation agreements pursuant to which the Funds sell their shares to
the Variable Account contain varying provisions regarding termination. The
following generally summarizes those provisions:
14
<PAGE>
THE AMERICAN NATIONAL FUND
The participation agreement for the American National Fund provides for
termination:
. upon sixty days advance written notice by any party,
. by American National if any of the American National Fund's shares are not
reasonably available to meet the requirements of the Contracts,
. by American National if any of the shares of the American National Fund are
not registered, issued or sold in accordance with applicable state and/or
federal law or such law precludes use of such shares as the underlying
investment medium of the Contracts,
. by American National upon the requisite vote of the Contractowners having an
interest in a particular subaccount to substitute the shares of another
investment company for the corresponding American National Fund shares, and
. by American National upon institution of formal proceedings against the
Fund by the SEC.
THE FIDELITY FUNDS
All participation agreements for the Fidelity Funds provide for termination:
. upon sixty days advance written notice by any party;
. by American National with respect to any Fidelity Portfolio if American
National determines that shares of such Fidelity Portfolio are not reasonably
available to meet the requirements of the Contracts;
. by American National with respect to any Fidelity Portfolio if any of the
shares of such Fidelity Portfolio are not registered, issued, or sold in
accordance with applicable state or federal law or such law precludes the use
of such shares as the underlying investment media of the Contracts;
. by American National with respect to any Fidelity Portfolio if such Fidelity
Portfolio ceases to be qualified as a Regulated Investment Company under
Subchapter M of the Internal Revenue Code (the "Code"), or if American
National reasonably believes the Fidelity Funds may fail to so qualify;
. by American National with respect to any Fidelity Portfolio if such Fidelity
Portfolio fails to meet the diversification requirements specified in the
Fidelity participation agreement;
. by the Fidelity Funds or the underwriter, upon a determination by either,
that American National has suffered a material adverse change in its
business, operations, financial condition, or prospects, or is the subject of
material adverse publicity;
15
<PAGE>
. by American National upon a determination by American National that either
the Fidelity Funds or the underwriter has suffered a material adverse change
in its business, operations, financial condition, or prospects, or is the
subject of material adverse publicity;
. by the Fidelity Funds or the underwriter forty-five days after American
National gives the Fidelity Funds and the underwriter written notice of
American National's intention to make another investment company available as
a funding vehicle for the Contracts, if at the time such notice was given, no
other notice of termination of the Fidelity participation agreement was then
outstanding; or
. upon a determination that a material irreconcilable conflict exists between
the interests of the Contractowners and other investors in the Fidelity Funds
or between American National's interests in the Fidelity Funds and the
interests of other insurance companies invested in the Fidelity Funds.
THE T. ROWE PRICE FUNDS
This participation agreement provides for termination:
. upon six months advance written notice by any party;
. by American National with respect to any T. Rowe Price Portfolio if American
National determines that shares of such T. Rowe Price Portfolio are not
reasonably available to meet the requirements of the Contracts;
. by American National with respect to any T. Rowe Price Portfolio if any of
the shares of such T. Rowe Price Portfolio are not registered, issued, or
sold in accordance with applicable state or federal law or such law precludes
the use of such shares as the underlying investment media of the Contracts;
. by the T. Rowe Price Funds or the underwriter upon the institution of formal
proceedings against American National by the SEC, NASD, or any other
regulatory body regarding American National's duties under the T. Rowe Price
participation agreement or related to the sale of the Contracts, the
operation of the Separate Account, or the purchase of T. Rowe Price Funds
shares, if the T. Rowe Price Funds or the underwriter determines that such
proceedings will have a material adverse effect on American National's
ability to perform under the T. Rowe Price participation agreement;
. by American National upon the institution of formal proceedings against the
T. Rowe Price Funds or the underwriter by the SEC, NASD, or any other
regulatory body, if American National determines that such proceedings will
have a material adverse effect upon the ability of the T. Rowe Price Funds or
the underwriter to perform its obligations under the T. Rowe Price
participation agreement;
. by American National with respect to any T. Rowe Price Portfolio if such T.
Rowe Price Portfolio ceases to qualify as a Regulated Investment Company
under Subchapter M of the Code, or if American National reasonably believes
the T. Rowe Price Funds may fail to so qualify;
16
<PAGE>
. by American National with respect to any T. Rowe Price Portfolio if such T.
Rowe Price Portfolio fails to meet the diversification requirements specified
in the T. Rowe Price participation agreement, or American National reasonably
believes the T. Rowe Price Portfolio may fail to so comply;
. by the T. Rowe Price Funds or the underwriter, upon a determination by
either, that American National has suffered a material adverse change in its
business, operations, financial condition, or prospects, or is the subject of
material adverse publicity;
. by American National upon a determination by American National that either
the T. Rowe Price Funds or the underwriter has suffered a material adverse
change in its business, operations, financial condition, or prospects, or is
the subject of material adverse publicity;
. by the T. Rowe Price Funds or the underwriter sixty days after American
National gives the T. Rowe Price Funds and the underwriter written notice of
American National's intention to make another investment company available as
a funding vehicle for the Contracts if at the time such notice was given, no
other notice of termination of the T. Rowe Price participation agreement was
then outstanding; or
. upon a determination that a material irreconcilable conflict exists between
the Contractowners and other investors in the T. Rowe Price Funds or between
American National's interests in the T. Rowe Price Funds and interests of
other insurance companies invested in the T. Rowe Price Funds.
FINANCIAL STATEMENTS
The financial statement of American National should be considered only as
bearing on the ability of American National to meet its obligations under the
Contracts. They should not be considered as bearing on the investment
performance of the assets held in the Separate Account.
17
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Contract Owners of American National Variable
Annuity Separate Account:
We have audited the accompanying statements of net assets of the American
National Variable Annuity Separate Account (comprised of American National (AN)
Growth, AN Money Market, AN Balanced, AN Managed, Fidelity VIP II Asset Manager,
Fidelity VIP II Index 500, Fidelity VIP III Growth Opportunities, Fidelity
Contra Fund, Fidelity VIP Money Market, Fidelity VIP Equity Income Fund,
Fidelity VIP High Income Fund, Fidelity VIP Growth Fund, Fidelity VIP III
Balanced, Fidelity VIP III Growth & Income, Fidelity III Mid-Cap Growth)
(collectively, the Account) as of December 31,1999, and the related statements
of operations for the year then ended and the statements of changes in net
assets for each of the two years in the period then ended. These financial
statements are the responsibility of the Account's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31,1999 by correspondence with
the custodians. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Account as of December
31,1999 and the results of its operations and the changes in net assets for the
year then ended, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
April 21,2000
18
<PAGE>
<TABLE>
<CAPTION>
AMERICAN NATIONAL VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENTS OF NET ASSETS
December 31, 1999
(In thousands, except for number of shares)
<S> <C> <C> <C> <C>
AN
AN MONEY AN AN
GROWTH MARKET BALANCED EQUITY INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS:
Investment in shares of mutual funds, at market $ 4,638 $ 250 $ 1,671 $ 6,056
====================================================================================================================================
LIABILITIES:
Individual contract owner reserves $ 4,629 $ 250 $ 1,664 $ 6,055
Group contract owner reserves 9 0 7 1
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES $ 4,638 $ 250 $ 1,671 $ 6,056
====================================================================================================================================
INVESTMENT PORTFOLIO INFORMATION:
Number of shares 2,251,385 249,897 1,099,570 3,291,485
Cost $ 3,755 $ 250 $ 1,642 $ 5,383
====================================================================================================================================
AMERICAN NATIONAL VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENTS OF NET ASSETS
December 31, 1999
(In thousands, except for number of shares)
FIDELITY
VIP II FIDELITY FIDELITY FIDELITY
INVESTMENT VIP II VIP II VIP
GRADE ASSET INDEX MONEY
BOND MANAGER 500 MARKET
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS:
Investment in shares of mutual funds, at market $ 950 $ 1,653 $ 8,206 $ 663
====================================================================================================================================
LIABILITIES:
Individual contract owner reserves $ 943 $ 1,447 $ 8,194 $ 652
Group contract owner reserves 7 206 12 11
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES $ 950 $ 1,653 $ 8,206 $ 663
====================================================================================================================================
INVESTMENT PORTFOLIO INFORMATION:
Number of shares 78,096 88,556 49,016 662,587
Cost $ 974 $ 1,499 $ 6,015 $ 663
====================================================================================================================================
19
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERICAN NATIONAL VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENTS OF NET ASSETS
December 31, 1999
(In thousands, except for number of shares)
<S> <C> <C> <C> <C>
FIDELITY FIDELITY
VIP VIP FIDELITY FIDELITY
EQUITY HIGH VIP VIP
INCOME INCOME GROWTH OVERSEAS
FUND FUND FUND FUND
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS:
Investment in shares of mutual funds, at market $ 4,559 $ 542 $ 5,805 $ 788
====================================================================================================================================
LIABILITIES:
Individual contract owner reserves $ 4,345 $ 532 $ 5,764 $ 665
Group contract owner reserves 214 10 41 123
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES $ 4,559 $ 542 $ 5,805 $ 788
====================================================================================================================================
INVESTMENT PORTFOLIO INFORMATION:
Number of shares 177,310 47,929 105,682 28,723
Cost $ 4,236 $ 613 $ 4,016 $ 569
====================================================================================================================================
AMERICAN NATIONAL VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENTS OF NET ASSETS
December 31, 1999
(In thousands, except for number of shares)
FIDELITY FIDELITY
FIDELITY VIP II VIP III
VIP II ASSET FIDELITY GROWTH
CONTRA MANAGER VIP III OPPORT-
FUND GROWTH BALANCED UNITIES
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS:
Investment in shares of mutual funds, at market $ 3,002 $ 761 $ 51 $ 4
====================================================================================================================================
LIABILITIES:
Individual contract owner reserves $ 2,989 $ 758 $ 51 $ 4
Group contract owner reserves 13 3 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES $ 3,002 $ 761 $ 51 $ 4
====================================================================================================================================
INVESTMENT PORTFOLIO INFORMATION:
Number of shares 102,988 41,407 3,190 174
Cost $ 2,167 $ 672 $ 51 $ 7
====================================================================================================================================
20
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERICAN NATIONAL VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENTS OF NET ASSETS
December 31, 1999
(In thousands, except for number of shares)
<S> <C> <C> <C> <C>
FIDELITY
FIDELITY VIP III T. ROWE T. ROWE
VIP III MID PRICE PRICE
GROWTH & CAP EQUITY INTERNATIONAL
INCOME GROWTH INCOME STOCK
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS:
Investment in shares of mutual funds, at market $ 19 $ 4 $ 2 $ --
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Individual contract owner reserves $ 19 $ 4 $ 2 $ --
Group contract owner reserves 0 0 0 --
====================================================================================================================================
TOTAL LIABILITIES $ 19 $ 4 $ 2 $ --
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT PORTFOLIO INFORMATION:
Number of shares 1,076 239 88 2
Cost $ 18 $ 3 $ 2 $ --
====================================================================================================================================
AMERICAN NATIONAL VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENTS OF NET ASSETS
December 31, 1999
(In thousands, except for number of shares)
T. ROWE
PRICE
MID-CAP
GROWTH
- --------------------------------------------------------------------------
ASSETS:
Investment in shares of mutual funds, at market $ 1
==========================================================================
LIABILITIES:
Individual contract owner reserves $ 1
Group contract owner reserves 0
- --------------------------------------------------------------------------
TOTAL LIABILITIES $ 1
==========================================================================
INVESTMENT PORTFOLIO INFORMATION:
Number of shares 47
Cost $ 1
==========================================================================
21
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERICAN NATIONAL VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(In thousands)
AN
AN MONEY AN AN
GROWTH MARKET BALANCED EQUITY INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend from mutual funds $ 42 $ 9 $ 42 $ 78
EXPENSES
Charges to contract owners for assuming
mortality and expense risks (59) (3) (22) (77)
- ------------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) $ (17) $ 6 $ 20 $ 1
- ------------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Net realized gain on investments $ 165 $ -- $ 73 $ 185
Capital gains distributions from mutual 3 -- 96 514
funds
Net unrealized appreciation (depreciation)
of investments during the period 405 -- (82) 128
- -----------------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS $ 573 $ -- $ 87 $ 827
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 556 $ 6 $ 107 $ 828
====================================================================================================================================
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
AMERICAN NATIONAL VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(In thousands)
FIDELITY
VIP II FIDELITY FIDELITY
INVESTMENT VIP II FIDELITY VIP
GRADE ASSET VIP II MONEY
BOND MANAGER INDEX 500 MARKET
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend from mutual funds $ 20 $ 47 $ 62 $ 28
EXPENSES
Charges to contract owners for assuming
mortality and expense risks (12) (20) (97) (7)
- ----------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) $ 8 $ 27 $ (35) $ 21
- ----------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Net realized gain (loss) on investments $ (2) $ 19 $ 239 $ --
Capital gains distributions from mutual funds 6 60 42 --
Net unrealized appreciation (depreciation)
of investments during the period (33) 35 1,001 --
- ----------------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS $ (29) $ 114 $ 1,282 $ --
- ----------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ (21) $ 141 $ 1,247 $ 21
==================================================================================================================================
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
AMERICAN NATIONAL VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(In thousands)
FIDELITY FIDELITY
VIP VIP
EQUITY HIGH FIDELITY FIDELITY
INCOME INCOME VIP VIP
FUND FUND GROWTH OVERSEAS
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend from mutual funds $ 68 $ 57 $ 7 $ 8
EXPENSES
Charges to contract owners for assuming
mortality and expense risks (64) (7) (64) (7)
- ----------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) $ 4 $ 50 $ (57) $ 1
- ----------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Net realized gain (loss) on investments $ 183 $ (10) $ 331 $ 13
Capital gains distributions from mutual fund 150 2 435 13
Net unrealized appreciation (depreciation)
of investments during the period (129) (3) 773 188
- ----------------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS $ 204 $ (11) $ 1,539 $ 214
- ----------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 208 $ 39 $ 1,482 $ 215
==================================================================================================================================
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
AMERICAN NATIONAL VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(In thousands)
FIDELITY FIDELITY
FIDELITY VIP II VIP III
VIP II ASSET FIDELITY GROWTH
CONTRA MANAGER VIP III OPPORT-
FUND GROWTH BALANCED UNITIES
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend from mutual funds $ 11 $ 19 $ -- $ --
EXPENSES
Charges to contract owners for assuming
mortality and expense risks (32) (10) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) $ (21) $ 9 $ -- $ --
- ----------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Net realized gain on investments $ 59 $ 14 $ -- $ 3
Capital gains distributions from mutual funds 80 31 -- --
Net unrealized appreciation (depreciation)
of investments during the period 414 39 -- (3)
- ----------------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS $ 553 $ 84 $ -- $ --
- ----------------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 532 $ 93 $ -- $ --
===================================================================================================================================
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
AMERICAN NATIONAL VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(In thousands)
FIDELITY
FIDELITY VIP III T. ROWE T. ROWE
VIP III MID PRICE PRICE
GROWTH & CAP EQUITY INTERNATIONAL
INCOME GROWTH INCOME STOCK
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend from mutual funds $ -- $ -- $ -- $ --
EXPENSES
Charges to contract owners for assuming
mortality and expense risks -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) $ -- $ -- $ -- $ --
- --------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Net realized gain (loss) on investments $ -- $ -- $ -- $ --
Capital gains distributions from mutual funds -- -- -- --
Net unrealized appreciation
of investments during the period 1 1 -- --
- --------------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS $ 1 $ 1 $ -- $ --
- --------------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 1 $ 1 $ -- $ --
================================================================================================================================
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
AMERICAN NATIONAL VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENTS OF OPERATIONS
For the year ended December 31, 1999
(In thousands)
<S> <C>
T. ROWE
PRICE
MID-CAP
GROWTH
- --------------------------------------------------------------
INVESTMENT INCOME
Dividend from mutual funds $ --
EXPENSES
Charges to contract owners for assuming
mortality and expense risks --
- --------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) $ --
- --------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Net realized gain (loss) on investments $ --
Capital gains distributions from mutual --
funds
Net unrealized appreciation
(depreciation) of investments during the period --
- --------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS $ --
- --------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ --
===============================================================================
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
AMERICAN NATIONAL VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
(In thousands except for unit information)
For the year ended December 31:
AN GROWTH PORTFOLIO AN MONEY MARKET PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------
Operations:
<S> <C> <C> <C> <C>
Net investment income (loss) $ (17) $ (14) $ 6 $ 42
Net realized gain on investments 165 99 -- --
Capital gains distributions from mutual funds 3 129 -- --
Net unrealized appreciation (depreciation)
of investments during the year 405 310 -- --
- ------------------------------------------------------------------------------------------------------------------------------
Increase in net assets
resulting from operations $ 556 $ 524 $ 6 $ 42
- ------------------------------------------------------------------------------------------------------------------------------
From policy related transactions:
Purchase payments and other transfers $ 384 $ 967 $ 74 $ (54)
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees (351) (285) (24) (10)
- ------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets resulting from
policy related transactions $ 33 $ 682 $ 50 $ (64)
- ------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets $ 589 $ 1,206 $ 56 $ (22)
Net assets, beginning of period $ 4,049 $ 2,843 $ 194 $ 216
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period $ 4,638 $ 4,049 $ 250 $ 194
===============================================================================================================================
Change in units outstanding:
Deferred contracts in the accumulation period
Individual contract owners
Accumulation units beginning of year 1,996,018 1,622,115 170,623 195,843
Purchase payments 324,094 700,246 146,078 61,955
Policy withdrawals and charges (304,736) (326,343) (103,090) (87,175)
- ------------------------------------------------------------------------------------------------------------------------------
Accumulation units end of year 2,015,376 1,996,018 213,611 170,623
===============================================================================================================================
Accumulation unit value $ 2.297 $ 2.026 $ 1.170 $ 1.137
- ------------------------------------------------------------------------------------------------------------------------------
Group contract owners
Accumulation units beginning of year 2,746 17,443 -- --
Purchase payments 730 (31,544) -- --
Policy withdrawals and charges (185) 16,847 -- --
-----------------------------------------------------------------------------------------------------------------------------
Accumulation units end of year 3,291 2,746 -- --
===============================================================================================================================
Accumulation unit value $ 2.618 $ 2.302 $ -- $ --
- ------------------------------------------------------------------------------------------------------------------------------
Deferred individual annuity contract in the annuity
period
Accumulation units beginning of year -- -- -- --
Purchase payments -- -- -- --
Policy withdrawals and charges -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
Accumulation units end of year -- -- -- --
===============================================================================================================================
Accumulation unit value $ -- $ -- $ -- $ --
- ------------------------------------------------------------------------------------------------------------------------------
AN BALANCED PORTFOLIO AN EQUITY INCOME PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------
Operations:
<S> <C> <C> <C> <C>
Net investment income (loss) $ 20 $ 22 $ 1 $ (1)
Net realized gain on investments 73 22 185 132
Capital gains distributions from mutual funds 96 37 514 93
Net unrealized appreciation (depreciation)
of investments during the year (82) 77 128 333
- ------------------------------------------------------------------------------------------------------------------------------
Increase in net assets
resulting from operations $ 107 $ 158 $ 828 $ 557
- ------------------------------------------------------------------------------------------------------------------------------
From policy related transactions:
Purchase payments and other transfers $ 41 $ 732 $ 406 $ 1,850
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees (146) (102) (569) (481)
- ------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets resulting from
policy related transactions $ (105) $ 630 $ (163) $ 1,369
- ------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets $ 2 $ 788 $ 665 $ 1,926
Net assets, beginning of period $ 1,669 $ 881 $ 5,391 $ 3,465
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period $ 1,671 $ 1,669 $ 6,056 $ 5,391
===============================================================================================================================
Change in units outstanding:
Deferred contracts in the accumulation period
Individual contract owners
Accumulation units beginning of year 948,987 558,223 2,650,679 1,937,161
Purchase payments 170,876 400,515 250,080 1,067,368
Policy withdrawals and charges (229,234) (9,751) (322,400) (353,850)
- ------------------------------------------------------------------------------------------------------------------------------
Accumulation units end of year 890,629 948,987 2,578,359 2,650,679
===============================================================================================================================
Accumulation unit value $ 1.799 $ 1.689 $ 2.322 $ 2.011
- ------------------------------------------------------------------------------------------------------------------------------
Group contract owners
Accumulation units beginning of year 3,400 3,587 454 465
Purchase payments 465 (9,286) 75 (446)
Policy withdrawals and charges (206) 9,099 (29) 435
- ------------------------------------------------------------------------------------------------------------------------------
Accumulation units end of year 3,659 3,400 500 454
===============================================================================================================================
Accumulation unit value $ 1.848 $ 1.729 $ 2.523 $ 2.178
- ------------------------------------------------------------------------------------------------------------------------------
Deferred individual annuity contract in the annuity
period
Accumulation units beginning of year 35,967 37,684 30,362 31,811
Purchase payments -- -- -- --
Policy withdrawals and charges (1,518) (1,717) (1,282) (1,449)
- ------------------------------------------------------------------------------------------------------------------------------
Accumulation units end of year 34,449 35,967 29,080 30,362
===============================================================================================================================
Accumulation unit value $ 1.799 $ 1.689 $ 2.322 $ 2.011
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
AMERICAN NATIONAL VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
(In thousands except for unit information)
For the year ended December 31:
FIDELITY VIPII
INVESTMENT GRADE BOND FIDELITY VIPII ASSET MANAGER
- ------------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------
Operations:
<S> <C> <C> <C> <C>
Net investment income (loss) $ 8 $ 4 $ 27 $ 16
Net realized gain (loss) on investments (2) 6 19 27
Capital gains distributions from mutual funds 6 1 60 100
Net unrealized appreciation (depreciation)
of investments during the year (33) 7 35 10
- ------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
resulting from operations $ (21) $ 18 $ 141 $ 153
- ------------------------------------------------------------------------------------------------------------------------------
From policy related transactions:
Purchase payments and other transfers $ 528 $ 359 $ 1274 $ 327
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees (45) (24) (25) (108)
- ------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets resulting from
policy related transactions $ 483 $ 335 $ 102 $ 219
- ------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets $ 462 $ 353 $ 243 $ 372
Net assets, beginning of period $ 488 $ 135 $ 1,410 $ 1,038
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period $ 950 $ 488 $ 1,653 $ 1,410
==============================================================================================================================
Change in units outstanding:
Deferred contracts in the accumulation period
Individual contract owners
Accumulation units beginning of year 353,787 93,192 721,338 602,425
Purchase payments 417,237 444,221 114,800 102,638
Policy withdrawals and charges (59,146) (183,626) (70,185) 16,275
- ------------------------------------------------------------------------------------------------------------------------------
Accumulation units end of year 711,878 353,787 765,953 721,338
==============================================================================================================================
Accumulation unit value $ 1.325 $ 1.357 $ 1.889 $ 1.724
- ------------------------------------------------------------------------------------------------------------------------------
Group contract owners
Accumulation units beginning of year 5,606 13,768 92,333 78,051
Purchase payments 264 (26,636) 11,404 18,783
Policy withdrawals and charges (936) 18,474 609 (4,501)
==============================================================================================================================
Accumulation units end of year 4,934 5,606 104,346 92,333
- ------------------------------------------------------------------------------------------------------------------------------
Accumulation unit value $ 1.349 $ 1.378 $ 1.976 $ 1.798
- ------------------------------------------------------------------------------------------------------------------------------
Deferred individual annuity contract in the annuity
period
Accumulation units beginning of year -- -- -- --
Purchase payments -- -- -- --
Policy withdrawals and charges -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
Accumulation units end of year -- -- -- --
==============================================================================================================================
Accumulation unit value $ -- $ -- $ -- $ --
- ------------------------------------------------------------------------------------------------------------------------------
FIDELITY VIPII INDEX 500 FIDELITY VIP MONEY MARKET
- ------------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------
Operations:
<S> <C> <C> <C> <C>
Net investment income (loss) $ (35) $ (26) $ 21 $ 24
Net realized gain (loss) on investments 239 317 -- --
Capital gains distributions from mutual funds 42 112 -- --
Net unrealized appreciation (depreciation)
of investments during the year 1,001 827 -- --
- ------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
resulting from operations $ 1,247 $ 1,230 $ 21 $ 24
- ------------------------------------------------------------------------------------------------------------------------------
From policy related transactions:
Purchase payments and other transfers $ 1,311 $ 1,481 $ 59 $ (234)
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees (602) (267) (34) (57)
- ------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets resulting from
policy related transactions $ 709 $ 1,214 $ 25 $ (291)
- ------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets $ 1,956 $ 2,444 $ 46 $ (267)
Net assets, beginning of period $ 6,250 $ 3,806 $ 617 $ 884
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period $ 8,206 $ 6,250 $ 663 $ 617
==============================================================================================================================
Change in units outstanding:
Deferred contracts in the accumulation period
Individual contract owners
Accumulation units beginning of year 2,288,624 1,753,242 518,157 774,056
Purchase payments 534,747 865,596 2,362,575 5,541,357
Policy withdrawals and charges (295,893) (330,214) (2,344,414) (5,797,256)
- ------------------------------------------------------------------------------------------------------------------------------
Accumulation units end of year 2,527,478 2,288,624 536,318 518,157
==============================================================================================================================
Accumulation unit value $ 3.242 $ 2.727 $ 1.216 $ 1.172
- ------------------------------------------------------------------------------------------------------------------------------
Group contract owners
Accumulation units beginning of year 2,704 11,675 7,631 10,040
Purchase payments 623 (20,802) 1,048 (31,572)
Policy withdrawals and charges (177) 11,8319 (462) 29,163
==============================================================================================================================
Accumulation units end of year 3,150 2,704 8,217 7,631
- ------------------------------------------------------------------------------------------------------------------------------
Accumulation unit value $ 3.752 $ 3.148 $ 1.291 $ 1.242
- ------------------------------------------------------------------------------------------------------------------------------
Deferred individual annuity contract in the annuity
period
Accumulation units beginning of year -- -- -- --
Purchase payments -- -- -- --
Policy withdrawals and charges -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
Accumulation units end of year -- -- -- --
==============================================================================================================================
Accumulation unit value $ -- $ -- $ -- $ --
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
AMERICAN NATIONAL VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
(In thousands except for unit information)
For the year ended December 31:
FIDELITY VIP FIDELITY VIP
EQUITY INCOME FUND HIGH INCOME FUND
- ---------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------
Operations:
<S> <C> <C> <C> <C>
Net investment income (loss) $ 4 $ (7) $ 50 $ 35
Net realized gain (loss) on investments 183 98 (10) 5
Capital gains distributions from mutual funds 150 182 2 28
Net unrealized appreciation (depreciation)
of investments during the year (129) 101 (3) (108)
- ---------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
resulting from operations $ 208 $ 374 $ 39 $ (40)
- ---------------------------------------------------------------------------------------------------------------------------
From policy related transactions:
Purchase payments and other transfers $ 199 $ 950 $ (81) $ 70
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees (435) (264) (25) (33)
- ---------------------------------------------------------------------------------------------------------------------------
Increase in net assets resulting from
policy related transactions $ (236) $ 686 $ (106) $ 37
- ---------------------------------------------------------------------------------------------------------------------------
Total increase in net assets $ (28) $ 1,060 $ (67) $ (3)
Net assets, beginning of period $ 4,587 $ 3,527 $ 609 $ 612
- ---------------------------------------------------------------------------------------------------------------------------
Net assets, end of period $ 4,559 $ 4,587 $ 542 $ 609
===========================================================================================================================
Change in units outstanding:
Deferred contracts in the accumulation period
Individual contract owners
Accumulation units beginning of year 2,141,973 1,805,034 390,295 365,784
Purchase payments 292,855 648,749 26,274 495
Policy withdrawals and charges (418,154) (311,810) (94,795) 24,016
- ---------------------------------------------------------------------------------------------------------------------------
Accumulation units end of year 2,016,674 2,141,973 321,774 390,295
===========================================================================================================================
Accumulation unit value $ 2.154 $ 2.054 $ 1.558 $ 1.460
- ---------------------------------------------------------------------------------------------------------------------------
Group contract owners
Accumulation units beginning of year 85,638 77,128 5,792 8,122
Purchase payments 9,612 (4,697) 879 (22,661)
Policy withdrawals and charges (1,833) 13,207 (355) 20,331
- ---------------------------------------------------------------------------------------------------------------------------
Accumulation units end of year 93,417 85,638 6,316 5,792
===========================================================================================================================
Accumulation unit value $ 2.289 $ 2.176 $ 1.653 $ 1.545
- ---------------------------------------------------------------------------------------------------------------------------
Deferred individual annuity contract in the annuity
period
Accumulation units beginning of year -- -- 20,365 21,337
Purchase payments -- -- -- --
Policy withdrawals and charges -- -- (860) (972)
===========================================================================================================================
Accumulation units end of year -- -- 19,505 20,365
===========================================================================================================================
Accumulation unit value $ -- $ -- $ 1.558 $ 1.460
- ---------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP GROWTH FIDELITY VIP OVERSEAS
- ---------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------
Operations:
<S> <C> <C> <C> <C>
Net investment income (loss) $ (57) $ (30) $ 1 $ 2
Net realized gain (loss) on investments 331 63 13 3
Capital gains distributions from mutual funds 435 326 13 26
Net unrealized appreciation (depreciation)
of investments during the year 773 638 188 18
- ---------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
resulting from operations $ 1,482 $ 997 $ 215 $ 49
- ---------------------------------------------------------------------------------------------------------------------------
From policy related transactions:
Purchase payments and other transfers $ 1,007 $ 705 $ 106 $ 120
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees (558) (209) (54) (35)
- ---------------------------------------------------------------------------------------------------------------------------
Increase in net assets resulting from
policy related transactions $ 449 $ 496 $ 52 $ 85
- ---------------------------------------------------------------------------------------------------------------------------
Total increase in net assets $ 1,931 $ 1,493 $ 267 $ 134
Net assets, beginning of period $ 3,874 $ 2,381 $ 521 $ 387
- ---------------------------------------------------------------------------------------------------------------------------
Net assets, end of period $ 5,805 $ 3,874 $ 788 $ 521
===========================================================================================================================
Change in units outstanding:
Deferred contracts in the accumulation period
Individual contract owners
Accumulation units beginning of year 1,515,237 1,263,215 287,821 233,047
Purchase payments 479,203 337,316 91,781 87,376
Policy withdrawals and charges (315,062) (85,294) (70,522) (32,602)
- ---------------------------------------------------------------------------------------------------------------------------
Accumulation units end of year 1,679,378 1,515,237 309,080 287,821
===========================================================================================================================
Accumulation unit value $ 3.432 $ 2.532 $ 2.008 $ 1.427
- ---------------------------------------------------------------------------------------------------------------------------
Group contract owners
Accumulation units beginning of year 13,476 28,010 52,812 43,013
Purchase payments 715 (52,683) 6,768 8,344
Policy withdrawals and charges (3,206) 38,149 (81) 1,455
- ---------------------------------------------------------------------------------------------------------------------------
Accumulation units end of year 10,985 13,476 59,499 52,812
===========================================================================================================================
Accumulation unit value $ 3.729 $ 2.743 $ 2.072 $ 1.468
- ---------------------------------------------------------------------------------------------------------------------------
Deferred individual annuity contract in the annuity
period
Accumulation units beginning of year -- -- 22,930 24,025
Purchase payments -- -- -- --
Policy withdrawals and charges -- -- (967) (1,095)
===========================================================================================================================
Accumulation units end of year -- -- 21,963 22,930
===========================================================================================================================
Accumulation unit value $ -- $ -- $ 2.008 $ 1.427
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
AMERICAN NATIONAL VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
(In thousands except for unit information)
For the year ended December 31:
FIDELITY VIP II ASSET
FIDELITY VIP II CONTRA FUND MANAGER GROWTH
- ---------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------
Operations:
<S> <C> <C> <C> <C>
Net investment income (loss) $ (21) $ (15) $ 9 $ 5
Net realized gain (loss) on investments 59 110 14 (16)
Capital gains distributions from mutual funds 80 80 31 71
Net unrealized appreciation (depreciation)
of investments during the year 414 343 39 31
- ---------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
resulting from operations $ 532 $ 518 $ 93 $ 91
- ---------------------------------------------------------------------------------------------------------------------------
From policy related transactions:
Purchase payments and other transfers $ 412 $ 685 $ (43) $ 89
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees (242) (206) (67) (73)
- ---------------------------------------------------------------------------------------------------------------------------
Increase in net assets resulting from
policy related transactions $ 170 $ 479 $ (110) $ 16
- ---------------------------------------------------------------------------------------------------------------------------
Total increase in net assets $ 702 $ 997 $ (17) $ 107
Net assets, beginning of period $ 2,300 $ 1,303 $ 778 $ 671
- ---------------------------------------------------------------------------------------------------------------------------
Net assets, end of period $ 3,002 $ 2,300 $ 761 $ 778
===========================================================================================================================
Change in units outstanding:
Deferred contracts in the accumulation period
Individual contract owners
Accumulation units beginning of year 1,048,709 748,156 449,243 441,436
Purchase payments 252,531 558,438 112,215 314,604
Policy withdrawals and charges (180,497) (257,885) (175,063) (306,797)
- ---------------------------------------------------------------------------------------------------------------------------
Accumulation units end of year 1,120,743 1,048,709 386,395 449,243
===========================================================================================================================
Accumulation unit value $ 2.607 $ 2.126 $ 1.961 $ 1.725
- ---------------------------------------------------------------------------------------------------------------------------
Group contract owners
Accumulation units beginning of year 5,704 9,016 1,886 9,295
Purchase payments 738 (17,695) 89 (21,477)
Policy withdrawals and charges (1,693) 14,383 (297) 14,068
- ---------------------------------------------------------------------------------------------------------------------------
Accumulation units end of year 4,749 5,704 1,678 1,886
===========================================================================================================================
Accumulation unit value $ 2.772 $ 2.255 $ 2.023 $ 1.774
- ---------------------------------------------------------------------------------------------------------------------------
Deferred individual annuity contract in the annuity
period
Accumulation units beginning of year 27,004 28,293 -- --
Purchase payments -- -- -- --
Policy withdrawals and charges (1,141) (1,289) -- --
===========================================================================================================================
Accumulation units end of year 25,863 27,004 -- --
===========================================================================================================================
Accumulation unit value $ 2.607 $ 2.126 $ -- $ --
- ---------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP III GROWTH
BALANCED OPPORTUNITIES
- ------------------------------------------------------------------------------------------------------
1999 1998
- ------------------------------------------------------------------------------------------------------
Operations:
<S> <C> <C>
Net investment income (loss) $ -- $ --
Net realized gain (loss) on investments -- 3
Capital gains distributions from mutual funds -- --
Net unrealized appreciation (depreciation)
of investments during the year -- (3)
- ------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
resulting from operations $ -- $ --
- ------------------------------------------------------------------------------------------------------
From policy related transactions:
Purchase payments and other transfers $ 51 $ 4
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees -- --
- ------------------------------------------------------------------------------------------------------
Increase in net assets resulting from
policy related transactions $ 51 $ 4
- ------------------------------------------------------------------------------------------------------
Total increase in net assets $ -- $ --
Net assets, beginning of period $ -- $ --
- ------------------------------------------------------------------------------------------------------
Net assets, end of period $ 51 $ 4
======================================================================================================
Change in units outstanding:
Deferred contracts in the accumulation period
Individual contract owners
Accumulation units beginning of year -- --
Purchase payments 50,828 4,127
Policy withdrawals and charges -- (35)
- ------------------------------------------------------------------------------------------------------
Accumulation units end of year 50,828 4,092
======================================================================================================
Accumulation unit value $ 1.004 $ 0.984
- ------------------------------------------------------------------------------------------------------
Group contract owners
Accumulation units beginning of year -- --
Purchase payments -- --
Policy withdrawals and charges -- --
- ------------------------------------------------------------------------------------------------------
Accumulation units end of year -- --
======================================================================================================
Accumulation unit value $ $
- ------------------------------------------------------------------------------------------------------
Deferred individual annuity contract in the annuity
period
Accumulation units beginning of year -- --
Purchase payments -- --
Policy withdrawals and charges -- --
======================================================================================================
Accumulation units end of year -- --
======================================================================================================
Accumulation unit value $ -- $ --
- ------------------------------------------------------------------------------------------------------
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
AMERICAN NATIONAL VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
(In thousands except for unit information)
For the year ended December 31:
T. ROWE T. ROWE T. ROWE
FIDELITY VIP III FIDELITY VIP III PRICE PRICE PRICE
GROWTH & MID CAP EQUITY INTERNATIONAL MID-CAP
INCOME GROWTH INCOME STOCK GROWTH
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1999 1999 1999 1999
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operations:
Net investment income (loss) $ -- $ -- $ -- $ -- $ --
Net realized gain (loss) on investments -- -- -- -- --
Capital gains distributions from mutual
funds -- -- -- -- --
Net unrealized appreciation of
investments during the year 1 1 -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Increase in net assets
resulting from operations $ 1 $ 1 $ -- $ -- $ --
- ------------------------------------------------------------------------------------------------------------------------------------
From policy related transactions:
Purchase payments and other transfers $ 18 $ 3 $ 2 $ (2) $ 1
Surrenders of accumulation units by
terminations, withdrawals, and
maintenance fees -- -- -- 2 --
- ------------------------------------------------------------------------------------------------------------------------------------
Increase in net assets resulting from
policy related transactions $ 18 $ 3 $ 2 $ -- $ 1
- ------------------------------------------------------------------------------------------------------------------------------------
Total increase in net assets $ -- $ -- $ -- $ -- $ --
Net assets, beginning of period $ -- $ -- $ -- $ -- $ --
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period $ 19 $ 4 $ 2 $ -- $ 1
====================================================================================================================================
Change in units outstanding:
Deferred contracts in the accumulation
period
Individual contract owners
Accumulation units beginning of year -- -- -- -- --
Purchase payments 18,326 3,005 1,759 1,553 1,016
Policy withdrawals and charges (62) -- -- (1,524) (294)
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation units end of year 18,264 3,005 1,759 29 722
====================================================================================================================================
Accumulation unit value $ 1.019 $ 1.215 $ 0.939 $ 1.080 $ 1.144
====================================================================================================================================
Group contract owners
Accumulation units beginning of year -- -- -- -- --
Purchase payments -- -- -- -- --
Policy withdrawals and charges -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation units end of year -- -- -- -- --
====================================================================================================================================
Accumulation unit value $ -- $ -- $ -- $ -- $ --
- ------------------------------------------------------------------------------------------------------------------------------------
Deferred individual annuity contract in the
annuity period
Accumulation units beginning of year -- -- -- -- --
Purchase payments -- -- -- -- --
Policy withdrawals and charges -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation units end of year -- -- -- -- --
====================================================================================================================================
Accumulation unit value $ -- $ -- $ -- $ -- $ --
====================================================================================================================================
</TABLE>
32
<PAGE>
AMERICAN NATIONAL VARIABLE ANNUITY SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General ... American National Variable Annuity Separate Account (Separate
Account) was established on July 30,1991 under Texas law as a separate
investment account of American National Insurance Company (the Sponsor). The
Separate Account began operations on April 20, 1994. The assets of the Separate
Account are segregated from the Sponsor's other assets and are used only to
support variable annuity products issued by the Sponsor. The Separate Account
is registered under the Investment Company Act of 1940, as amended, as a unit
investment trust.
These financial statements report the results of the subaccounts for the
Investrac Gold Variable Annuity product. There are currently 21 subaccounts
within the Separate Account. Each of the subaccounts is invested only in a
corresponding portfolio of the American National (AN) Funds, the Fidelity Funds
or the T. Rowe Price Funds. The American National Funds were organized and are
managed for a fee by Securities Management & Research, Inc. (SM&R) which is a
wholly-owned subsidiary of the Sponsor.
BASIS OF PRESENTATION ... The financial statements of the Separate Account have
been prepared on an accrual basis in accordance with generally accepted
accounting principles.
INVESTMENTS ... Investments in shares of the separate investment portfolios are
stated at market value which is the net asset value per share as determined by
the respective portfolios. Investment transactions are accounted for on the
trade date. Realized gains and losses on investments are determined on the
basis of identified cost. Capital gain distributions and Dividends from mutual
funds are recorded and reinvested upon receipt.
FEDERAL TAXES ... The operations of the Separate Account form a part of, and are
taxed with, the operations of the Sponsor. Under the Internal Revenue Code, all
ordinary income and capital gains allocated to the contract owners are not taxed
to the Sponsor. As a result, the net asset values of the subaccounts are not
affected by federal income taxes on distributions received by the subaccounts.
Accordingly, no provision for income taxes is required in the accompanying
financial statements.
USE OF ESTIMATES ... The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities as of
the date of the financial statements and the reported amounts of income and
expenses during the period. Operating results in the future could vary from the
amounts derived from management's estimates.
33
<PAGE>
(2) SECURITY PURCHASES AND SALES
For the year ended December 31, 1999, the aggregate cost of purchases (including
reinvestment of dividend distributions) and proceeds from sales of investments
in the mutual fund portfolios were as follows (in thousands):
<TABLE>
<CAPTION>
Purchases Sales
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
AN Growth Portfolio $ 615 $ 596
AN Money Market Portfolio 183 127
AN Balanced Portfolio 417 406
AN Equity Income Portfolio 1,107 756
Fidelity VIP II Investment Grade Bond 610 81
Fidelity VIP II Asset Manager 319 130
Fidelity VIP II Index 500 1,472 757
Fidelity VIP Money Market 2,276 2,231
Fidelity VIP Equity Income Fund 890 973
Fidelity VIP High Income Fund 91 145
Fidelity VIP Growth 1,741 915
Fidelity VIP Overseas 136 69
Fidelity VIP II Contrafund 664 434
Fidelity VIP II Asset Manager Growth 234 304
Fidelity VIP III Balanced 51 --
Fidelity VIP III Growth Opportunities 4 --
Fidelity VIP III Growth & Income 18 --
Fidelity VIP III Mid Cap Growth 3 --
T. Rowe Price Equity Income 2 --
T. Rowe Price International Stock Income 2 2
T. Rowe Price Mid-Cap Growth 1 --
- ------------------------------------------------------------------------------------------------
Totals $ 10,836 $ 7,926
</TABLE>
(3) POLICY CHARGES AND DEDUCTIONS
Mortality and Expense Risk Charges ... Mortality risk and expense risk charges,
at an effective annual rate of 1.25%, are assessed daily against the Separate
Account's net asset value for both qualified and non-qualified Flexible Purchase
Payment Annuity Contracts. These charges are assessed at a rate of 0.85% for
the Group Unallocated Deferred Annuity Contracts. This fee is assessed during
both the accumulation period and the annuity period.
MONTHLY ADMINISTRATIVE CHARGES ... American National's administrative charges
consist of an annual contract fee and a daily administrative asset fee. The
annual contract fee is $25 for non-qualified Flexible Purchase Payment Annuity
Contracts and $30 for all qualified Flexible Purchase Payment Annuity Contracts.
At the time of full surrender, the annual contract fee will be deducted on a pro
rata basis. Immediate Annuity Contracts have a one time contract fee of $100
when the single purchase payment is paid. The Group Unallocated Deferred
Annuity Contracts have no annual contract fee. The administrative asset fee is
0.10% annually for all contracts. These charges are deducted through
termination of units of interest from applicable contract owners' accounts.
SURRENDER CHARGE ... On withdrawals of that portion of the accumulation value
representing purchase payments, a surrender charge is imposed based upon the
number of years since the year in which the purchase payments withdrawn were
paid, on a first paid, first withdrawn basis. For Flexible Purchase Payment
Deferred Annuities in the first policy year, the surrender charge is a maximum
of 7% of the purchase payment withdrawn and grades down to zero in the eighth
contract year after the purchase payment being withdrawn was made. For Group
Unallocated Deferred Annuity Contracts the surrender charge is a maximum of 4%
and grades down to zero in the eighth policy year.
TRANSFER CHARGE ... A $10 transfer charge is imposed after the first twelve
transfers in any one policy year for transfers made among the subaccounts.
34
<PAGE>
PREMIUM CHARGES ... Premium taxes for certain jurisdictions are deducted from
premiums paid at rates ranging form zero to 3.5%. American National's current
practice is to deduct any state imposed premium tax from Purchase Payments. If
a state only imposes premium taxes upon annuitization, American National will
deduct these taxes from the contract value upon annuitization.
DISTRIBUTION EXPENSE CHARGE ... A distribution expense is assessed daily to each
Subaccount. The distribution expense charge is 0.25% annually for Flexible
Purchase Payment Deferred Annuity Contracts. Group Unallocated Deferred Annuity
Contracts do not incur a distribution expense charge. The sum of all surrender
charges and the distribution expense charges assessed will at no time exceed
9.0% of all Purchase Payments paid.
35
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors,
American National Insurance Company
We have audited the accompanying consolidated statements of financial position
of American National Insurance Company and subsidiaries (the Company) as of
December 31, 1999 and 1998, and the related consolidated statements of income,
changes in stockholders' equity and cash flows for the years then ended. These
consolidated financial statements (pages 37 through 66) are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of American National
Insurance Company and subsidiaries as of December 31, 1999 and 1998, and the
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
February 11, 2000
36
<PAGE>
<TABLE>
<CAPTION>
AMERICAN NATIONAL INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<S> <C> <C>
(In thousands, except for per share data)
- ---------------------------------------------------------------------------------------------------------------------------
1999 1998
--------------------------------------------------------------------------------------------------------------------------
PREMIUMS AND OTHER REVENUE
Premiums
Life................................................................................. $ 300,326 $ 295,207
Annuity.............................................................................. 41,704 45,079
Accident and health.................................................................. 396,072 393,602
Property and casualty................................................................ 392,576 354,820
Other policy revenues................................................................... 100,258 105,041
Net investment income................................................................... 473,949 475,242
Gain from sale of investments........................................................... 149,061 49,768
Other income............................................................................ 35,668 25,906
-------------------------------------------------------------------------------------------------------------------------
Total revenues....................................................................... 1,889,614 1,744,665
-------------------------------------------------------------------------------------------------------------------------
BENEFITS AND EXPENSES
Death and other benefits:
Life................................................................................. 218,109 217,122
Annuity.............................................................................. 45,464 41,888
Accident and health.................................................................. 290,846 289,553
Property and casualty................................................................ 311,723 280,036
Increase (decrease) in liability for future policy benefits:
Life................................................................................. 15,546 13,304
Annuity.............................................................................. 9,748 21,831
Accident and health.................................................................. 4,787 (262)
Interest credited to policy account balances............................................ 117,411 126,914
Commissions for acquiring and servicing policies........................................ 264,808 247,015
Other operating costs and expenses...................................................... 210,877 199,294
Increase (decrease) in deferred policy acquisition costs, net of amortization........... (2,188) 9,795
Taxes, licenses and fees................................................................ 33,744 32,334
-------------------------------------------------------------------------------------------------------------------------
Total benefits and expenses.......................................................... 1,520,875 1,478,824
-------------------------------------------------------------------------------------------------------------------------
INCOME FROM OPERATIONS BEFORE EQUITY IN EARNINGS OF
UNCONSOLIDATED AFFILIATES AND FEDERAL INCOME TAXES...................................... 368,739 265,841
EQUITY IN EARNINGS OF UNCONSOLIDATED AFFILIATES........................................... 19,942 8,048
- --------------------------------------------------------------------------------------------------------------------------
GAIN FROM OPERATIONS BEFORE FEDERAL INCOME TAXES.......................................... 388,681 273,889
PROVISION (BENEFIT) FOR FEDERAL INCOME TAXES
Current................................................................................. 132,128 77,707
Deferred................................................................................ (10,060) (1,216)
- --------------------------------------------------------------------------------------------------------------------------
NET INCOME................................................................................ $ 266,613 $ 197,398
==========================================================================================================================
NET INCOME PER COMMON SHARE - BASIC AND DILUTED........................................... $ 10.07 $ 7.45
==========================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
37
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(In thousands)
- --------------------------------------------------------------------------------------------------------------------------
DECEMBER 31,
- --------------------------------------------------------------------------------------------------------------------------
1999 1998
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, other than investments in unconsolidated affiliates
Debt securities:
Bonds held-to-maturity, at amortized cost.......................................... $ 3,636,786 $ 3,565,974
Bonds available-for-sale, at market................................................ 838,161 720,818
Marketable equity securities, at market:
Preferred stocks................................................................... 39,752 41,664
Common stocks...................................................................... 963,337 1,051,926
Mortgage loans on real estate........................................................ 1,033,330 1,025,683
Policy loans......................................................................... 293,287 296,109
Investment real estate, net of
accumulated depreciation of $110,658 and $109,415................................... 251,529 238,714
Short-term investments............................................................... 95,352 90,368
Other invested assets................................................................ 102,001 112,207
- --------------------------------------------------------------------------------------------------------------------------
Total investments.................................................................. 7,253,535 7,143,463
Cash.................................................................................... 14,376 22,228
Investments in unconsolidated affiliates................................................ 119,372 120,098
Accrued investment income............................................................... 110,161 104,405
Reinsurance ceded receivables........................................................... 104,216 65,667
Prepaid reinsurance premiums............................................................ 194,969 171,116
Premiums due and other receivables...................................................... 96,703 91,518
Deferred policy acquisition costs....................................................... 758,796 731,703
Property and equipment, net............................................................. 50,132 40,860
Other assets............................................................................ 103,443 94,302
Separate account assets................................................................. 284,823 230,292
- --------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS....................................................................... $ 9,090,526 $ 8,815,652
==========================================================================================================================
LIABILITIES
Policyholder funds
Future policy benefits:
Life............................................................................... $ 1,872,066 $ 1,853,759
Annuity............................................................................ 186,650 175,637
Accident and health................................................................ 64,901 60,113
Policy account balances.............................................................. 2,283,428 2,324,310
Policy and contract claims........................................................... 403,984 359,953
Other policyholder funds............................................................. 557,103 510,130
- --------------------------------------------------------------------------------------------------------------------------
Total policyholder liabilities..................................................... 5,368,132 5,283,902
Current federal income taxes............................................................ 9,218 (20,515)
Deferred federal income taxes........................................................... 221,341 259,243
Other liabilities....................................................................... 143,866 148,118
Separate account liabilities............................................................ 284,823 230,292
- --------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES.................................................................. 6,027,380 5,901,040
- --------------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Capital stock........................................................................... 30,832 30,832
Additional paid-in capital.............................................................. 211 211
Accumulated other comprehensive income.................................................. 254,820 299,176
Retained earnings....................................................................... 2,880,010 2,687,120
Treasury stock, at cost................................................................. (102,727) (102,727)
- --------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY......................................................... 3,063,146 2,914,612
- --------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY......................................... $ 9,090,526 $ 8,815,652
==========================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
38
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In thousands, except for per share data)
- ---------------------------------------------------------------------------------------------------------------------------
ACCUMULATED
ADDITIONAL OTHER
CAPITAL PAID-IN COMPREHENSIVE RETAINED TREASURY
STOCK CAPITAL INCOME EARNINGS STOCK TOTAL
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
BALANCE DECEMBER 31, 1997 $ 30,832 $ 211 $ 215,883 $ 2,561,218 $ (102,727) $ 2,705,417
Comprehensive income
(net of taxes):
Net income 197,398 197,398
Change in unrealized gains
on marketable securities 83,293 83,293
- --------------------------------------------------------------------------------------------------------------------------
Comprehensive income 280,691
Dividends to stockholders
($2.70 per share) (71,496) (71,496)
- --------------------------------------------------------------------------------------------------------------------------
BALANCE DECEMBER 31, 1998 $ 30,832 $ 211 $ 299,176 $ 2,687,120 $ (102,727) $ 2,914,612
Comprehensive income
(net of taxes):
Net income 266,613 266,613
Change in unrealized gains
on marketable securities (44,328) (44,328)
Foreign exchange adjustments (28) (28)
- --------------------------------------------------------------------------------------------------------------------------
Comprehensive income 222,257
Dividends to stockholders
($2.78 per share) (73,723) (73,723)
- --------------------------------------------------------------------------------------------------------------------------
BALANCE DECEMBER 31, 1999 $ 30,832 $ 211 $ 254,820 $ 2,880,010 $ (102,727) $ 3,063,146
==========================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
39
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
- --------------------------------------------------------------------------------------------------------------------------
1999 1998
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income.......................................................................... $ 266,613 $ 197,398
Adjustments to reconcile net income to net cash provided by operating activities:
Increase in liabilities for policyholders' funds................................. 125,112 120,343
Charges to policy account balances............................................... (101,739) (105,111)
Interest credited to policy account balances..................................... 117,411 126,914
Deferral of policy acquisition costs............................................. (141,450) (140,707)
Amortization of deferred policy acquisition costs................................ 135,385 149,116
Deferred federal income tax benefit.............................................. (10,060) (1,216)
Depreciation..................................................................... 19,598 17,351
Accrual and amortization of discounts and premiums............................... (15,183) (13,993)
Gain from sale of investments.................................................... (149,061) (49,768)
Equity in earnings of unconsolidated affiliates.................................. (19,942) (8,048)
Increase in premiums receivable.................................................. (5,185) (7,243)
Increase in accrued investment income............................................ (5,756) (2,044)
Capitalization of interest on policy and mortgage loans.......................... (17,099) (15,365)
Other changes, net............................................................... (25,883) (98,634)
- --------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities...................................... 172,761 168,993
- --------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Proceeds from sale or maturity of investments:
Bonds............................................................................ 257,398 316,067
Stocks........................................................................... 374,615 247,951
Real estate...................................................................... 32,921 33,186
Other invested assets............................................................ 96,670 171
Principal payments received on:
Mortgage loans................................................................... 176,394 154,333
Policy loans..................................................................... 37,594 42,093
Purchases of investments:
Bonds............................................................................ (508,205) (373,401)
Stocks........................................................................... (160,465) (237,868)
Real estate...................................................................... (29,124) (7,462)
Mortgage loans................................................................... (146,513) (35,420)
Policy loans..................................................................... (22,461) (24,034)
Other invested assets............................................................ (137,683) (79,081)
Decrease (increase) in short-term investments, net.................................. (4,984) 36,418
Increase (decrease) in investment in unconsolidated affiliates, net................. 726 (19,210)
Increase in property and equipment, net............................................. (17,219) (14,188)
- --------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities............................ (50,336) 39,555
- --------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Policyholders' deposits to policy account balances.................................. 309,885 289,654
Policyholders' withdrawals from policy account balances............................. (366,439) (409,975)
Dividends to stockholders........................................................... (73,723) (71,496)
- --------------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities.......................................... (130,277) (191,817)
- --------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH....................................................... (7,852) 16,731
Cash:
Beginning of the year............................................................ 22,228 5,497
- --------------------------------------------------------------------------------------------------------------------------
End of the year.................................................................. $ 14,376 $ 22,228
==========================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
40
<PAGE>
(1) NATURE OF OPERATIONS
American National Insurance Company (American National) is a multiple line
insurance company offering a broad line of insurance coverages, including
individual and group life, health, and annuities; personal lines property and
casualty; and credit insurance. In addition, through its subsidiaries, American
National offers mutual funds and invests in real estate. The majority (99%) of
revenues is generated by the insurance business. With the exception of New York,
business is conducted in all states, as well as Puerto Rico, Guam and American
Samoa. American National is also authorized to sell its products to American
military personnel in Western Europe and, through subsidiaries, business is
conducted in Mexico. Various distribution systems are utilized, including home
service, multiple line ordinary, group brokerage, credit, independent third
party marketing organizations and direct sales to the public.
American National's insurance subsidiaries are American National Life Insurance
Company of Texas (ANTEX), Garden State Life Insurance Company, Standard Life and
Accident Insurance Company, American National Property and Casualty Company
(ANPAC), American National General Insurance Company (ANGIC), American National
Lloyds Insurance Company (ANPAC Lloyds) and American National de Mexico. The
major non-insurance subsidiaries are Securities Management and Research, Inc.,
Comprehensive Investment Services, Inc., Alternative Benefit Management, Inc.,
ANTAC, Inc. and ANREM Corporation. As part of its investment portfolio, American
National also owns interests in unconsolidated affiliates, primarily real estate
and equity fund joint ventures and partnerships.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION--The consolidated
financial statements include the accounts of American National Insurance Company
and its wholly owned subsidiaries. All significant intercompany transactions
have been eliminated in consolidation. Investments in unconsolidated affiliates
are shown at cost plus equity in undistributed earnings since the dates of
acquisition.
The consolidated financial statements have been prepared on the basis of
Generally Accepted Accounting Principles (GAAP) which, for the insurance
companies, differs from the basis of accounting followed in reporting to
insurance regulatory authorities. (See Note 14.)
Certain reclassifications have been made to the 1998 financial information to
conform to the 1999 presentation.
USE OF ESTIMATES--The preparation of financial statements in conformity with
Generally Accepted Accounting Principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from reported results using
those estimates.
RECENT ACCOUNTING PRONOUNCEMENTS
REPORTING COMPREHENSIVE INCOME--Effective January 1, 1998, American National
adopted FAS No. 130, "Reporting Comprehensive Income." This statement
establishes standards for presenting comprehensive income and its components
prominently in the financial statements.
American National has elected to display comprehensive income as part of the
consolidated statements of changes in stockholders' equity. Additional
information regarding the components of comprehensive income is reported in
Note 11.
DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION--Effective
January 1, 1998, American National adopted FAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." This statement establishes
standards for presenting information
41
<PAGE>
about operating segments in financial statements. The statement requires
disclosure of information on operating segments that are evaluated regularly by
the chief operating decision maker in deciding how to allocate resources and
assess performance. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. The adoption of
this standard had no effect on American National's financial position or results
from operations. The segment disclosures are presented in Note 13.
PENSION AND OTHER POSTRETIREMENT BENEFIT DISCLOSURES--As of December 31, 1998,
American National adopted FAS No. 132 "Employers' Disclosures about Pensions and
Other Postretirement Benefits." This statement establishes revised standards for
disclosures about pensions and other postretirement benefit plans. The adoption
of this new standard had no effect on American National's financial position or
results from operations. The retirement benefits disclosures are presented in
Note 15.
ACCOUNTING FOR DERIVATIVE INSTRUMENTS--FAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," as amended by FAS No. 137, is effective for
all quarters of all fiscal years beginning after June 15, 2000. This statement
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. The statement requires that entities recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value.
American National intends to adopt FAS No. 133, as amended, on January 1, 2001.
Management believes that the adoption of FAS No. 133 will not have a significant
effect on American National's financial position or results from operations.
INVESTMENTS
DEBT SECURITIES--Bonds that are intended to be held-to-maturity are carried at
amortized cost. The carrying value of these debt securities is expected to be
realized, due to American National's ability and intent to hold these securities
until maturity.
Bonds held as available-for-sale are carried at market.
PREFERRED STOCKS--All preferred stocks are classified as available-for-sale and
are carried at market.
COMMON STOCKS-- All common stocks are classified as available-for-sale and are
carried at market.
UNREALIZED GAINS--For all investments carried at market, the unrealized gains or
losses (differences between amortized cost and market value), net of applicable
federal income taxes, are reflected in stockholders' equity as a component of
accumulated other comprehensive income.
MORTGAGE LOANS--Mortgage loans on real estate are carried at amortized cost,
less allowance for valuation impairments.
The mortgage loan portfolio is closely monitored through the review of loan and
property information, such as debt service coverage, annual operating statements
and property inspection reports. This information is evaluated in light of
current economic conditions and other factors, such as geographic location and
property type. As a result of this review, impaired loans are identified and
valuation allowances are established. Impaired loans are loans where, based on
current information and events, it is probable that American National will be
unable to collect all amounts due according to the contractual terms of the loan
agreement.
POLICY LOANS--Policy loans are carried at cost.
42
<PAGE>
INVESTMENT REAL ESTATE--Investment real estate is carried at cost, less
allowance for depreciation and valuation impairments. Depreciation is measured
over the estimated useful lives of the properties (15 to 50 years) using
straight-line and accelerated methods.
American National's real estate portfolio is closely monitored through the
review of operating information and periodic inspections. This information is
evaluated in light of current economic conditions and other factors, such as
geographic location and property type. As a result of this review, if there is
any indication of an adverse change in the economic condition of a property, a
complete cash flow analysis is performed to determine whether or not an
impairment allowance is necessary. If a possible impairment is indicated, the
fair market value of the property is estimated using a variety of techniques,
including cash flow analysis, appraisals and comparison to the values of similar
properties. If the book value is greater than the estimated fair market value,
an impairment allowance is established.
SHORT-TERM INVESTMENTS--Short-term investments (primarily commercial paper) are
carried at amortized cost.
OTHER INVESTED ASSETS--Other invested assets are carried at cost, less allowance
for valuation impairments. Valuation allowances for other invested assets are
considered on an individual basis in accordance with the same procedures used
for investment real estate.
INVESTMENT VALUATION ALLOWANCES AND IMPAIRMENTS--Investment valuation allowances
are established for other than temporary impairments of mortgage loans, real
estate and other assets in accordance with the policies established for each
class of asset. The increase in the valuation allowances is reflected in current
period income as a realized loss.
Management believes that the valuation allowances are adequate. However, it is
possible that a significant change in economic conditions in the near term could
result in losses exceeding the amounts established.
CASH AND CASH EQUIVALENTS
American National considers cash on-hand and in-banks plus amounts invested in
money market funds as cash for purposes of the consolidated statements of cash
flows.
INVESTMENTS IN UNCONSOLIDATED AFFILIATES
These assets are primarily investments in real estate and equity fund joint
ventures, and are accounted for under the equity method of accounting.
PROPERTY AND EQUIPMENT
These assets consist of buildings occupied by the companies, electronic data
processing equipment, and furniture and equipment. These assets are carried at
cost, less accumulated depreciation. Depreciation is measured using straight-
line and accelerated methods over the estimated useful lives of the assets (3 to
50 years).
FOREIGN CURRENCIES
Assets and liabilities recorded in foreign currencies are translated at the
exchange rate on the balance sheet date. Revenue and expenses are translated at
average rates of exchange prevailing during the year. Translation adjustments
resulting from this process are charged or credited to other accumulated
comprehensive income.
INSURANCE SPECIFIC ASSETS AND LIABILITIES
DEFERRED POLICY ACQUISITION COSTS--Certain costs of acquiring new insurance
business have been deferred. For life, annuity and accident and health business,
such costs consist of inspection
43
<PAGE>
report and medical examination fees, commissions, related fringe benefit costs
and the cost of insurance in force gained through acquisitions. The amount of
commissions deferred includes first-year commissions and certain subsequent year
commissions that are in excess of ultimate level commission rates.
The deferred policy acquisition costs on traditional life and health products
are amortized with interest over the anticipated premium-paying period of the
related policies, in proportion to the ratio of annual premium revenue to be
received over the life of the policies. Expected premium revenue is estimated by
using the same mortality and withdrawal assumptions used in computing
liabilities for future policy benefits. The amount of deferred policy
acquisition costs is reduced by a provision for possible inflation of
maintenance and settlement expenses in the determination of such amounts by
means of grading interest rates.
Costs deferred on universal life, limited pay and investment type contracts are
amortized as a level percentage of the present value of anticipated gross
profits from investment yields, mortality, and surrender charges. The effect on
the deferred policy acquisition costs that would result from realization of
unrealized gains (losses) is recognized with an offset to accumulated other
comprehensive income in consolidated stockholders' equity as of the balance
sheet date. It is possible that a change in interest rates could have a
significant impact on the deferred policy acquisition costs calculated for these
contracts.
Deferred policy acquisition costs associated with property and casualty
insurance business consist principally of commissions, underwriting and issue
costs. These costs are amortized over the coverage period of the related
policies, in relation to premium revenue recognized.
FUTURE POLICY BENEFITS--For traditional products, liabilities for future policy
benefits have been provided on a net level premium method based on estimated
investment yields, withdrawals, mortality, and other assumptions that were
appropriate at the time that the policies were issued. Estimates used are based
on the companies' experience, as adjusted to provide for possible adverse
deviation. These estimates are periodically reviewed and compared with actual
experience. When it is determined that future expected experience differs
significantly from existing assumptions, the estimates are revised for current
and future policy issues.
Future policy benefits for universal life and investment-type contracts reflect
the current account value before applicable surrender charges. In the near term,
it is possible that a change in interest rates could have a significant impact
on the values calculated for these contracts.
RECOGNITION OF PREMIUM REVENUE AND POLICY BENEFITS
TRADITIONAL ORDINARY LIFE AND HEALTH--Life and accident and health premiums are
recognized as revenue when due. Benefits and expenses are associated with earned
premiums to result in recognition of profits over the life of the policy
contracts. This association is accomplished by means of the provision for
liabilities for future policy benefits and the amortization of deferred policy
acquisition costs.
ANNUITIES--Revenues from annuity contracts represent amounts assessed against
contract holders. Such assessments are principally surrender charges and, in the
case of variable annuities, administrative fees. Policy account balances for
annuities represent the premiums received plus accumulated interest less
applicable accumulated administrative fees. It is possible that a change in
interest rates could have a significant impact on the values calculated for
these contracts.
UNIVERSAL LIFE AND SINGLE PREMIUM WHOLE LIFE--Revenues from universal life
policies and single premium whole life policies represent amounts assessed
against policyholders. Included in such assessments are mortality charges,
surrender charges actually paid, and earned policy service fees. Policyholder
account balances consist of the premiums received plus credited interest, less
44
<PAGE>
accumulated policyholder assessments. Amounts included in expense represent
benefits in excess of account balances returned to policyholders.
PROPERTY AND CASUALTY--Property and casualty premiums are recognized as revenue
proportionately over the contract period. Policy benefits consist of actual
claims and the change in reserves for losses and loss adjustment expenses. The
reserves for losses and loss adjustment expenses are estimates of future
payments of reported and unreported claims and the related expenses with respect
to insured events that have occurred. These reserves are calculated using case
basis estimates for reported losses and experience for claims incurred but not
reported. These loss reserves are reported net of an allowance for salvage and
subrogation. Management believes that American National's reserves have been
appropriately calculated, based on available information as of December 31,
1999. However, it is possible that the ultimate liabilities may vary
significantly from these estimated amounts.
PARTICIPATING INSURANCE POLICIES--The allocation of dividends to participating
policyowners is based upon a comparison of experienced rates of mortality,
interest and expenses, as determined periodically for representative plans of
insurance, issue ages and policy durations, with the corresponding rates assumed
in the calculation of premiums. Participating business comprised approximately
2.6% of the life insurance in force at December 31, 1999 and 5.5% of life
premiums in 1999.
FEDERAL INCOME TAXES
American National and all but one of its subsidiaries will file a consolidated
life/non-life federal income tax return for 1999. Alternative Benefit
Management, Inc. files a separate return.
Deferred federal income tax assets and liabilities have been recognized to
reflect the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled.
SEPARATE ACCOUNT ASSETS AND LIABILITIES
The separate account assets and liabilities represent funds maintained to meet
the investment objectives of contract holders who bear the investment risk. The
investment income and investment gains and losses from these separate funds
accrue directly to the contract holders of the policies supported by the
separate accounts. The assets of each separate account are legally segregated
and are not subject to claims that arise out of any other business of American
National. The assets of these accounts are carried at market value. Deposits,
net investment income and realized investment gains and losses for these
accounts are excluded from revenues, and related liability increases are
excluded from benefits and expenses in this report.
45
<PAGE>
(3) INVESTMENTS
The amortized cost and estimated market values of investments in held-to-
maturity and available-for-sale securities are shown below (in thousands):
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
DECEMBER 31, 1999: COST GAINS LOSSES VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Debt securities
Bonds held-to-maturity:
U. S. Government and agencies........ $ 141,247 $ 286 $ (1,891) $ 139,642
States, and political subdivisions... 44,624 52 (3,858) 40,818
Foreign governments.................. 107,250 1,279 (636) 107,893
Public utilities..................... 1,126,456 4,833 (29,482) 1,101,807
All other corporate bonds............ 2,118,267 11,476 (70,222) 2,059,521
Mortgage-backed securities........... 98,942 3,570 (70) 102,442
- --------------------------------------------------------------------------------------------------------------------------
Total bonds held-to-maturity....... 3,636,786 21,496 (106,159) 3,552,123
- --------------------------------------------------------------------------------------------------------------------------
Bonds available-for-sale:
U. S. Government and agencies........ 54,506 -- (651) 53,855
States, and political subdivisions... 38,538 -- (3,836) 34,702
Foreign governments.................. 27,469 1,023 (15) 28,477
Public utilities..................... 184,126 1,728 (2,298) 183,556
All other corporate bonds............ 552,529 5,477 (20,435) 537,571
- --------------------------------------------------------------------------------------------------------------------------
Total bonds available-for-sale....... 857,168 8,228 (27,235) 838,161
- --------------------------------------------------------------------------------------------------------------------------
Total debt securities.................. 4,493,954 29,724 (133,394) 4,390,284
- --------------------------------------------------------------------------------------------------------------------------
Marketable equity securities:
Preferred stock...................... 39,145 1,287 (680) 39,752
Common stock......................... 551,064 413,522 (1,249) 963,337
- --------------------------------------------------------------------------------------------------------------------------
Total marketable equity securities... 590,209 414,809 (1,929) 1,003,089
- --------------------------------------------------------------------------------------------------------------------------
Total investments in securities............ $5,084,163 $444,533 $(135,323) $5,393,373
==========================================================================================================================
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
DECEMBER 31, 1998: COST GAINS LOSSES VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Debt securities
Bonds held-to-maturity:
U. S. Government and agencies........ $ 166,206 $ 5,503 $ -- $ 171,709
States, and political subdivisions... 39,427 692 (24) 40,095
Foreign governments.................. 106,924 9,436 -- 116,360
Public utilities..................... 1,210,677 73,784 (135) 1,284,326
All other corporate bonds............ 1,914,950 132,731 (491) 2,047,190
Mortgage-backed securities........... 127,790 8,344 (1) 136,133
- --------------------------------------------------------------------------------------------------------------------------
Total bonds held-to-maturity....... 3,565,974 230,490 (651) 3,795,813
- --------------------------------------------------------------------------------------------------------------------------
Bonds available-for-sale:
U. S. Government and agencies........ 71,579 1,368 -- 72,947
Foreign governments.................. 42,780 4,758 -- 47,538
Public utilities..................... 230,534 16,738 -- 247,272
All other corporate bonds............ 328,132 25,310 (381) 353,061
- --------------------------------------------------------------------------------------------------------------------------
Total bonds available-for-sale..... 673,025 48,174 (381) 720,818
- --------------------------------------------------------------------------------------------------------------------------
Total debt securities.................. 4,238,999 278,664 (1,032) 4,516,631
- --------------------------------------------------------------------------------------------------------------------------
Marketable equity securities:
Preferred stock...................... 39,264 2,427 (27) 41,664
Common stock......................... 619,197 473,099 (40,370) 1,051,926
- --------------------------------------------------------------------------------------------------------------------------
Total marketable equity securities... 658,461 475,526 (40,397) 1,093,590
- --------------------------------------------------------------------------------------------------------------------------
Total investments in securities............ $4,897,460 $754,190 $(41,429) $5,610,221
==========================================================================================================================
</TABLE>
DEBT SECURITIES--The amortized cost and estimated market value, by contractual
maturity of debt securities at December 31, 1999, are shown below (in
thousands). Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without call
or prepayment penalties.
<TABLE>
<CAPTION>
BONDS HELD-TO-MATURITY BONDS AVAILABLE-FOR-SALE
- --------------------------------------------------------------------------------------------------------------------------
ESTIMATED ESTIMATED
AMORTIZED MARKET AMORTIZED MARKET
COST VALUE COST VALUE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Due in one year or less.................. $ 56,902 $ 57,441 $ -- $ --
Due after one year through five years.... 963,942 958,745 319,676 322,278
Due after five years through ten years... 2,470,818 2,391,315 485,431 468,007
Due after ten years...................... 46,182 42,180 52,061 47,876
- --------------------------------------------------------------------------------------------------------------------------
3,537,844 3,449,681 857,168 838,161
Without single maturity date............. 98,942 102,442 -- --
- --------------------------------------------------------------------------------------------------------------------------
$3,636,786 $3,552,123 $857,168 $838,161
==========================================================================================================================
</TABLE>
Proceeds from sales of investments in securities classified as available-for-
sale (bonds and stocks) totaled $466,899,000 for 1999. Gross gains of
$148,762,000 and gross losses of $6,043,000 were realized on those sales.
Included in the proceeds from sales of available-for-sale securities are
$33,813,000 of proceeds from the sale of bonds that had been reclassified from
bonds held-to-maturity. The bonds had been reclassified due to evidence of a
significant deterioration in the issuer's creditworthiness. The net gain from
the sale of these bonds was $5,314,000.
Proceeds from sales of investments in securities classified as available-for-
sale (bonds and stocks) totaled $317,556,000 for 1998. Gross gains of
$71,935,000 and gross losses of $36,975,000 were realized on those sales.
Included in the proceeds from sales of available-for-sale securities are
$40,454,000 of proceeds from the sale of bonds that had been reclassified from
47
<PAGE>
bonds held-to-maturity. The bonds had been reclassified due to evidence of a
significant deterioration in the issuer's creditworthiness. The net gain from
the sale of these bonds was $1,073,000.
Bonds were called or otherwise redeemed by the issuers during 1999, which
resulted in proceeds of $163,596,000 from the disposal. Gross gains of $688,000
were realized on those disposals. Bonds were called by the issuers during 1998,
which resulted in proceeds of $89,205,000 from the disposal. Gross gains of
$747,000 were realized on those disposals.
All gains and losses were determined using specific identification of the
securities sold.
UNREALIZED GAINS ON SECURITIES--Unrealized gains on marketable equity securities
and bonds available-for-sale, presented in the stockholder's equity section of
the consolidated statements of financial position, are net of deferred tax
liabilities of $137,222,000 and $160,912,000 for 1999 and 1998, respectively.
The change in the net unrealized gains on investments for the years ended
December 31 are summarized as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Bonds available-for-sale............................ $ (66,800) $ 10,482
Preferred stocks.................................... (1,793) 969
Common stocks....................................... (20,456) 124,921
Amortization of deferred policy acquisition costs... 21,028 (8,229)
- --------------------------------------------------------------------------------------------------------------------------
(68,021) 128,143
Provision for federal income taxes.................. 23,693 (44,850)
- --------------------------------------------------------------------------------------------------------------------------
$ (44,328) $ 83,293
==========================================================================================================================
</TABLE>
MORTGAGE LOANS--In general, mortgage loans are secured by first liens on income-
producing real estate. The loans are expected to be repaid from the cash flows
or proceeds from the sale of real estate. American National generally allows a
maximum loan-to-collateral-value ratio of 75% to 90% on newly funded mortgage
loans. As of December 31, 1999, mortgage loans have both fixed rates from 5.75%
to 12.25% and variable rates from 6.39% to 10.25%. The majority of the mortgage
loan contracts require periodic payments of both principal and interest, and
have amortization periods of 5 to 33 years.
American National has investments in first lien mortgage loans on real estate
with carried values of $1,033,330,000 and $1,025,683,000 at December 31, 1999
and 1998, respectively. Problem loans, on which valuation allowances were
established, totaled $41,446,000 and $43,049,000 at December 31, 1999 and 1998,
respectively.
POLICY LOANS--All of the Company's policy loans carried interest rates ranging
from 5% to 8% at December 31, 1999.
48
<PAGE>
Investment income and realized gains (losses)--Investment income and realized
gains (losses) from disposals of investments, before federal income taxes, for
the years ended December 31 are summarized as follows (in thousands):
<TABLE>
<CAPTION>
GAINS (LOSSES) FROM
INVESTMENT INCOME DISPOSALS OF INVESTMENTS
- --------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Bonds......................................... $ 318,898 $ 317,481 $ (5,327) $ 2,614
Preferred stocks.............................. 2,599 2,584 (1,212) 1
Common stocks................................. 16,284 16,774 149,946 33,092
Mortgage loans................................ 98,111 97,871 1,206 1,248
Real estate................................... 65,027 80,138 6,417 1,338
Other invested assets......................... 36,819 29,123 2,793 (564)
Investment in unconsolidated affiliates....... -- -- -- 29
- --------------------------------------------------------------------------------------------------------------------------
537,738 543,971 153,823 37,758
Investment expenses........................... (63,789) (68,729) -- --
Decrease (increase) in valuation allowances... -- -- (4,762) 12,010
- --------------------------------------------------------------------------------------------------------------------------
$ 473,949 $ 475,242 $ 149,061 $ 49,768
==========================================================================================================================
</TABLE>
(4) OFF-BALANCE SHEET RISK AND CONCENTRATIONS OF CREDIT RISK ON INVESTMENTS
To ensure a well-diversified investment portfolio, American National employs a
strategy to invest funds at the highest possible rate of return commensurate
with sound and prudent underwriting practices.
BONDS:
American National's bond portfolio is of high investment quality and is
diversified. The bond portfolio distributed by quality rating at December 31 is
summarized as follows:
<TABLE>
<CAPTION>
1999 1998
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
AAA.................................................................................................... 8% 9%
AA..................................................................................................... 14% 14%
A...................................................................................................... 57% 55%
BBB and below.......................................................................................... 21% 22%
- --------------------------------------------------------------------------------------------------------------------------
100% 100%
==========================================================================================================================
</TABLE>
COMMON STOCK:
American National's stock portfolio by market sector distribution at December 31
is summarized as follows:
<TABLE>
<CAPTION>
1999 1998
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Basic materials........................................................................................ 4% 4%
Capital goods.......................................................................................... 7% 7%
Consumer goods......................................................................................... 20% 18%
Energy................................................................................................. 7% 5%
Finance................................................................................................ 10% 11%
Technology............................................................................................. 24% 16%
Health care............................................................................................ 10% 24%
Miscellaneous.......................................................................................... 12% 10%
Mutual funds........................................................................................... 6% 5%
- --------------------------------------------------------------------------------------------------------------------------
100% 100%
==========================================================================================================================
</TABLE>
49
<PAGE>
MORTGAGE LOANS AND INVESTMENT REAL ESTATE:
American National invests primarily in the commercial sector in areas that offer
the potential for property value appreciation. Generally, mortgage loans are
secured by first liens on income-producing real estate.
Mortgage loans and investment real estate by property type distribution at
December 31 are summarized as follows:
MORTGAGE INVESTMENT
LOANS REAL ESTATE
- --------------------------------------------------------------------------
1999 1998 1999 1998
- --------------------------------------------------------------------------
Office buildings.......................... 17% 21% 15% 19%
Shopping centers.......................... 52% 56% 42% 41%
Commercial................................ 4% 3% 5% 7%
Apartments................................ 1% 1% 3% 3%
Hotels/motels............................. 6% 3% 13% 16%
Industrial................................ 16% 13% 21% 13%
Other..................................... 4% 3% 1% 1%
- --------------------------------------------------------------------------
100% 100% 100% 100%
==========================================================================
American National has a diversified portfolio of mortgage loans and real estate
properties. Mortgage loans and real estate investments by geographic
distribution at December 31 are as follows:
MORTGAGE INVESTMENT
LOANS REAL ESTATE
- --------------------------------------------------------------------------
1999 1998 1999 1998
- --------------------------------------------------------------------------
New England............................... 9% 9% -- --
Middle Atlantic........................... 16% 13% -- --
East North Central........................ 10% 12% 18% 11%
West North Central........................ 3% 3% 17% 9%
South Atlantic............................ 19% 19% 7% 8%
East South Central........................ 1% 1% 13% 15%
West South Central........................ 25% 21% 36% 42%
Mountain.................................. 7% 9% 3% 7%
Pacific................................... 10% 13% 6% 8%
- --------------------------------------------------------------------------
100% 100% 100% 100%
==========================================================================
For discussion of other off-balance sheet risks, see Note 5.
(5) FAIR VALUE OF FINANCIAL INSTRUMENTS
Estimated market values of financial instruments have been determined using
available market information and appropriate valuation methodologies. However,
considerable judgment is required in developing the estimates of fair value.
Accordingly, these estimates are not necessarily indicative of the amounts that
could be realized in a current market exchange, or the amounts that may
ultimately be realized. The use of different market assumptions or estimating
methodologies could have a material effect on the estimated market values.
DEBT SECURITIES:
The estimated market values for bonds represent quoted market values from
published sources or bid prices obtained from securities dealers.
50
<PAGE>
MARKETABLE EQUITY SECURITIES:
Market values for preferred and common stocks represent quoted market prices
obtained from independent pricing services.
MORTGAGE LOANS:
The market value for mortgage loans is estimated using discounted cash flow
analyses based on interest rates currently being offered for comparable loans.
Loans with similar characteristics are aggregated for purposes of the analyses.
POLICY LOANS:
The carrying amount for policy loans approximates their market value.
SHORT-TERM INVESTMENTS:
The carrying amount for short-term investments approximates their market value.
INVESTMENT CONTRACTS:
The market value of investment contract liabilities is estimated using a
discounted cash flow model, assuming the companies' current interest rates on
new products. The carrying value for these contracts approximates their market
value.
INVESTMENT COMMITMENTS:
American National's investment commitments are all short-term in duration, and
the market value was not significant at December 31, 1999 or 1998.
VALUES:
The carrying amounts and estimated market values of financial instruments at
December 31 are as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998
- -----------------------------------------------------------------------------------------------
ESTIMATED ESTIMATED
CARRYING MARKET CARRYING MARKET
AMOUNT VALUE AMOUNT VALUE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial assets:
Bonds:
Held-to-maturity.............. $3,636,786 $3,552,123 $3,565,974 $3,795,813
Available-for-sale............ 838,161 838,161 720,818 720,818
Preferred stock................. 39,752 39,752 41,664 41,664
Common stock.................... 963,337 963,337 1,051,926 1,051,926
Mortgage loans on real estate... 1,033,330 1,044,146 1,025,683 1,158,033
Policy loans.................... 293,287 293,287 296,109 296,109
Short-term investments.......... 95,352 95,352 90,368 90,368
Financial liabilities:
Investment contracts............ 1,639,348 1,639,348 1,736,223 1,736,223
- -----------------------------------------------------------------------------------------------
</TABLE>
51
<PAGE>
(6) DEFERRED POLICY ACQUISITION COSTS
Deferred policy acquisition costs and premiums for the years ended December 31,
1999 and 1998, are summarized as follows (in thousands):
<TABLE>
<CAPTION>
LIFE ACCIDENT PROPERTY &
& ANNUITY & HEALTH CASUALTY TOTAL
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1997.............. $ 633,339 $ 105,174 $ 9,828 $ 748,341
- ------------------------------------------------------------------------------------------------------------
Additions.............................. 87,660 25,897 25,764 139,321
Amortization........................... (98,017) (26,940) (24,159) (149,116)
Effect of change in unrealized gains
on available-for-sale securities..... (8,229) -- -- (8,229)
------------------------------------------------------------------------------------------------------------
Net change............................... (18,586) (1,043) 1,605 (18,024)
Acquisitions............................. 782 604 -- 1,386
------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998.............. 615,535 104,735 11,433 731,703
- ------------------------------------------------------------------------------------------------------------
Additions.............................. 82,708 25,315 29,550 137,573
Amortization........................... (87,701) (21,263) (26,421) (135,385)
Effect of change in unrealized gains
on available-for-sale securities..... 21,028 -- -- 21,028
- ------------------------------------------------------------------------------------------------------------
Net change............................... 16,035 4,052 3,129 23,216
Acquisitions............................. 3,652 225 -- 3,877
------------------------------------------------------------------------------------------------------------
Balance at December 31, 1999.............. $ 635,222 $ 109,012 $ 14,562 $ 758,796
=============================================================================================================
1999 premiums............................. $ 342,030 $ 396,072 $ 392,576 $1,130,678
=============================================================================================================
1998 premiums............................ $ 340,286 $ 393,602 $ 354,820 $1,088,708
=============================================================================================================
</TABLE>
Commissions comprise the majority of the additions to deferred policy
acquisition costs for each year.
Acquisitions relate to the purchase of various insurance portfolios under
assumption reinsurance agreements.
52
<PAGE>
(7) FUTURE POLICY BENEFITS AND POLICY ACCOUNT BALANCES
LIFE INSURANCE:
Assumptions used in the calculation of future policy benefits or policy account
balances for individual life policies are as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF
FUTURE POLICY
POLICY ISSUE INTEREST BENEFITS
YEAR RATE SO VALUED
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ORDINARY--
1996-1999 7.5% for years 1 through 5, graded to 5.5% at the end of year 25, and level thereafter 3%
1981-1995 8% for years 1 through 5, graded to 6% at the end of year 25, and level thereafter 18%
1976-1981 7% for years 1 through 5, graded to 5% at the end of year 25, and level thereafter 15%
1972-1975 6% for years 1 through 5, graded to 4% at the end of year 25, and level thereafter 6%
1969-1971 6% for years 1 through 5, graded to 3.5% at the end of year 30, and level thereafter 5%
1962-1968 4.5% for years 1 through 5, graded to 3.5% at the end of year 15, and level thereafter 9%
1948-1961 4% for years 1 through 5,graded to 3.5% at the end of year 10, and level thereafter 9%
1947 and prior Statutory rates of 3% or 3.5% 1%
INDUSTRIAL--
1948-1967 4% for years 1 through 5, graded to 3.5% at the end of year 10, and level thereafter 4%
1947 and prior Statutory rates of 3% 4%
UNIVERSAL LIFE Future policy benefits for universal life are equal to the current account value 26%
- -------------------------------------------------------------------------------------------------------------------------
100%
=========================================================================================================================
</TABLE>
Future policy benefits for group life policies have been calculated using a
level interest rate of 4%. Mortality and withdrawal assumptions are based on
American National's experience.
ANNUITIES:
Fixed annuities included in future policy benefits are calculated using a level
interest rate of 6%. Policy account balances for interest-sensitive annuities
are equal to the current gross account balance. Mortality and withdrawal
assumptions are based on American National's experience.
HEALTH INSURANCE:
Interest assumptions used for future policy benefits on health policies are
calculated using a level interest rate of 6%. Morbidity and termination
assumptions are based on American National's experience.
53
<PAGE>
(8) LIABILITY FOR UNPAID CLAIMS AND CLAIM ADJUSTMENT EXPENSES
Activity in the liability for accident and health, and property and casualty
unpaid claims and claim adjustment expenses is summarized as follows (in
thousands):
1999 1998
- ---------------------------------------------------------------------------
Balance at January 1............................. $266,832 $247,564
Less reinsurance recoverables.................. 11 2,567
- ---------------------------------------------------------------------------
Net balance at January 1......................... 266,821 244,997
- ---------------------------------------------------------------------------
Incurred related to:
Current year................................... 654,222 598,379
Prior years.................................... (16,322) (6,324)
- ---------------------------------------------------------------------------
Total incurred................................... 637,900 592,055
- ---------------------------------------------------------------------------
Paid related to:
Current year................................... 457,279 411,352
Prior years.................................... 169,292 158,879
- ---------------------------------------------------------------------------
Total paid....................................... 626,571 570,231
- ---------------------------------------------------------------------------
Net balance at December 31....................... 278,150 266,821
Plus reinsurance recoverables.................. 3,988 11
- ---------------------------------------------------------------------------
Balance at December 31........................... $282,138 $266,832
===========================================================================
The balances at December 31 are included in policy and contract claims on the
consolidated statements of financial position.
(9) REINSURANCE
As is customary in the insurance industry, the companies reinsure portions of
certain insurance policies they write, thereby providing a greater
diversification of risk and managing exposure on larger risks. The maximum
amount that would be retained by one company (American National) would be
$700,000 individual life, $250,000 individual accidental death, $100,000 group
life and $125,000 credit life (total $1,175,000). If individual, group and
credit were in force in all companies at the same time, the maximum risk on any
one life could be $1,875,000.
The companies remain contingently liable with respect to any reinsurance ceded,
and would become actually liable if the assuming companies were unable to meet
their obligations under any reinsurance treaties.
To minimize its exposure to significant losses from reinsurer insolvencies, the
company evaluates the financial condition of its reinsurers and monitors
concentrations of credit risk arising from similar geographic regions,
activities, or economic characteristics of the reinsurers. At December 31, 1999,
amounts recoverable from reinsurers with a carrying value of $90,399,000 were
associated with various auto dealer credit insurance program reinsurers
domiciled in the Caribbean islands of Nevis or the Turks and Caicos Islands. The
company holds collateral related to these credit reinsurers totaling
$70,918,000. This collateral is in the form of custodial accounts controlled by
the company, which can be drawn on for amounts that remain unpaid for more than
120 days. American National believes that the failure of any single reinsurer to
meet its obligations would not have a significant effect on its financial
position or results of operations.
54
<PAGE>
Premiums, premium-related reinsurance amounts and reinsurance recoveries for the
years ended December 31 are summarized as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Direct premiums..................................... $ 1,268,129 $ 1,201,189
Reinsurance premiums assumed from other companies... 110,180 42,403
Reinsurance premiums ceded to other companies....... (247,631) (154,884)
- -------------------------------------------------------------------------------------------------
Net premiums........................................ 1,130,678 $ 1,088,708
=================================================================================================
Reinsurance recoveries.............................. $ 162,863 $ 88,240
=================================================================================================
</TABLE>
Life insurance in force and related reinsurance amounts at December 31 are
summarized as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Direct life insurance in force...................... $ 46,156,190 $ 44,134,974
Reinsurance risks assumed from other companies...... 797,059 713,200
- -------------------------------------------------------------------------------------------------
Total life insurance in force....................... 46,953,249 44,848,174
Reinsurance risks ceded to other companies.......... (9,629,707) (7,965,042)
- -------------------------------------------------------------------------------------------------
Net life insurance in force......................... $ 37,323,542 $ 36,883,132
=================================================================================================
</TABLE>
(10) FEDERAL INCOME TAXES
The federal income tax provisions vary from the amounts computed when applying
the statutory federal income tax rate. A reconciliation of the effective tax
rate of the companies to the statutory federal income tax rate follows (in
thousands, except percentages):
<TABLE>
<CAPTION>
1999 1998
- -------------------------------------------------------------------------------------------------
AMOUNT RATE AMOUNT RATE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Income tax on pre-tax income........ $ 136,038 35.00 % $ 95,861 35.00 %
Tax-exempt investment income........ (1,691) (0.44) (971) (0.35)
Dividend exclusion.................. (3,414) (0.88) (5,044) (1.84)
Exempted losses on sale of assets... (4,470) (1.15) (9,856) (3.60)
Miscellaneous tax credits, net...... (1,467) (0.38) (1,467) (0.54)
Other items, net.................... (2,928) (0.75) (2,032) (0.74)
- -------------------------------------------------------------------------------------------------
$ 122,068 31.40 % $ 76,491 27.93 %
=================================================================================================
</TABLE>
55
<PAGE>
The tax effects of temporary differences that gave rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 31, 1999 and
December 31, 1998 are as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998
- ------------------------------------------------------------------------------------------------------------
DEFERRED TAX ASSETS:
- --------------------
<S> <C> <C>
Investment in bonds, real estate and other invested assets,
principally due to investment valuation allowances............. $ 17,750 $ 10,656
Policyowner funds, principally due to policy reserve discount.... 87,650 78,279
Policyowner funds, principally due to unearned premium reserve... 11,219 10,020
Other assets..................................................... 4,689 2,649
------------------------------------------------------------------------------------------------------------
Total gross deferred tax assets.................................... 121,308 101,604
Less valuation allowance......................................... (3,000) (3,000)
------------------------------------------------------------------------------------------------------------
Net deferred tax assets............................................ $ 118,308 $ 98,604
------------------------------------------------------------------------------------------------------------
DEFERRED TAX LIABILITIES:
- -------------------------
Marketable equity securities, principally due to
net unrealized gains on stock.................................. $ (131,347) $ (151,396)
Investment in bonds, principally due to
accrual of discount on bonds................................... (20,941) (17,390)
Deferred policy acquisition costs, due to
difference between GAAP and tax................................ (184,217) (177,057)
Property, plant and equipment, principally due to
difference between GAAP and tax depreciation methods........... (3,144) (12,004)
------------------------------------------------------------------------------------------------------------
Net deferred tax liabilities....................................... (339,649) (357,847)
------------------------------------------------------------------------------------------------------------
Total deferred tax.................................................. $ (221,341) $ (259,243)
=============================================================================================================
</TABLE>
Management believes that a sufficient level of taxable income will be achieved
to utilize the net deferred tax assets.
Through 1983, under the provision of the Life Insurance Company Income Tax Act
of 1959, life insurance companies were permitted to defer from taxation a
portion of their income (within certain limitations) until and unless it is
distributed to stockholders, at which time it was taxed at regular corporate tax
rates. No provision for deferred federal income taxes applicable to such untaxed
income has been made, because management is of the opinion that no distributions
of such untaxed income (designated by federal law as "policyholders' surplus")
will be made in the foreseeable future. There was no change in the
"policyholders' surplus" between December 31, 1998 and December 31, 1999, and
the cumulative balance was approximately $63,000,000 at both dates.
Federal income taxes totaling approximately $108,060,000 and $111,465,000 were
paid to the Internal Revenue Service in 1999 and 1998, respectively. The statute
of limitations for the examination of federal income tax returns through 1995
for American National and its subsidiaries by the Internal Revenue Service has
expired. All prior year deficiencies have been paid or provided for, and
American National has filed appropriate claims for refunds through 1995. In the
opinion of management, adequate provision has been made for any tax deficiencies
that may be sustained.
56
<PAGE>
(11) COMPONENTS OF COMPREHENSIVE INCOME
The items included in comprehensive income, other than net income, are
unrealized gains on available-for-sale securities, unrealized gains on deferred
acquisition costs and foreign exchange adjustments.
The details on the unrealized gains included in comprehensive income, and the
related tax effects thereon are as follows:
<TABLE>
<CAPTION>
BEFORE FEDERAL NET OF
FEDERAL INCOME TAX FEDERAL
INCOME EXPENSE INCOME
TAX (BENEFIT) TAX
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
DECEMBER 31, 1999
- ------------------
Unrealized gains....................................... $ 80,700 $ 28,359 $ 52,341
Less: reclassification adjustment for
gains realized in net income.......................... (148,721) (52,052) (96,669)
- --------------------------------------------------------------------------------------------------------
Net unrealized loss component of
comprehensive income.................................. $ (68,021) $ (23,693) $ (44,328)
========================================================================================================
DECEMBER 31, 1998
- -----------------
Unrealized gains....................................... $ 163,103 $ 57,086 $ 106,017
Less: reclassification adjustment for
gains realized in net income.......................... (34,960) (12,236) (22,724)
- --------------------------------------------------------------------------------------------------------
Net unrealized gains component of
comprehensive income................... $ 128,143 $ 44,850 $ 83,293
========================================================================================================
</TABLE>
(12) COMMON STOCK AND EARNINGS PER SHARE
American National has only one class of common stock and no preferred stock. At
December 31, 1999 and 1998, American National had 50,000,000 authorized shares
of $1.00 par value common stock with 30,832,449 shares issued. At December 31,
1999, treasury shares were 4,274,284, restricted shares were 79,000 and
unrestricted shares outstanding were 26,479,165. At December 31, 1998 there were
no restricted shares, treasury shares were 4,353,284; and total outstanding
shares were 26,479,165.
STOCK-BASED COMPENSATION--During 1999, American National's stockholders approved
the "1999 Stock and Incentive Plan." Under this plan, American National can
grant Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock
Awards, Performance Rewards, Incentive Awards and any combination of these. The
number of shares available for grants under the plan cannot exceed 900,000
shares, and no more than 50,000 shares may be granted to any one individual in
any calendar year. Subsequent to the close of 1999, the plan was amended to
adjust the grant price of awards made during 1999.
On August 1, 1999, American National granted Stock Appreciation Rights (SAR) on
81,500 shares to selected officers. These SARs were granted at a stated price of
$70.50 per share (subsequently amended in 2000 to $57 per share), vest at a rate
of 20% per year for 5 years and expire 5 years after the vesting period. None of
these SARs were exercisable during 1999, none of them terminated, and all were
outstanding at the end of the year.
Also, on August 1, 1999, American National granted Restricted Stock Awards to
directors and consultants. A total of 79,000 shares were granted, with 19,000
granted at an exercise price of $70.50 per share (subsequently amended in 2000
to $57 per share), and 60,000 granted at an exercise price of zero. The
restrictions on these awards lapse after 10 years, and feature a graded
57
<PAGE>
vesting schedule in the case of the retirement of an award holder. All of the
Restricted Stock was outstanding at the end of the year.
American National uses a Black-Scholes option pricing model to calculate the
fair value and compensation expense for SARs and Restricted Stock Awards, in
accordance with FAS No. 123 "Accounting for Stock-Based Compensation." The fair
value per share of the SARs and the Restricted Stock Awards that were originally
granted at $70.50 per share was zero at December 31, 1999. The fair value of the
Restricted Stock Awards granted at a price of zero was $70.50 per share at
December 31, 1999. The following assumptions were used in these computations for
1999: dividend yield of 4.5%; expected volatility of 32%; risk-free interest
rate of 6.79%; and expected lives of 5 years for the SARs and 10 years for the
Restricted Stock Awards. Compensation expense calculated for 1999 on these
awards was not material.
The plan amendment made in February, 2000 will increase compensation expense in
the future, but the effect is not material on American National's financial
position or results from operations in 1999.
EARNINGS PER SHARE--Earnings per share for 1999 and 1998 were calculated using a
weighted average number of shares outstanding of 26,479,165. There were no
potentially dilutive items outstanding in 1998. In 1999, the average market
price, since the grant date of the SARs and Restricted Stock Awards, was less
than the exercise price. As a result, diluted earnings per share is equal to the
basic earnings per share.
DIVIDENDS--American National's payment of dividends to stockholders is
restricted by statutory regulations. Generally, the restrictions require life
insurance companies to maintain minimum amounts of capital and surplus, and, in
the absence of special approval, limit the payment of dividends to statutory net
gain from operations on an annual, noncumulative basis. Additionally, insurance
companies are not permitted to distribute the excess of stockholders' equity, as
determined on a GAAP basis over that determined on a statutory basis.
Generally, the same restrictions on amounts that can transfer in the form of
dividends, loans, or advances to the parent company apply to American National's
insurance subsidiaries.
At December 31, 1999, approximately $606,699,000 of American National's
consolidated stockholders' equity represents net assets of its insurance
subsidiaries. Any transfer of these net assets to American National would be
subject to statutory restrictions and approval.
(13) SEGMENT INFORMATION
American National and its subsidiaries are engaged principally in the insurance
business. Management organizes the business around its marketing distribution
channels. Separate management of each segment is required because each business
unit is subject to different marketing strategies. There are eight operating
segments based on the company's marketing distribution channels.
58
<PAGE>
The operating segments are as follows:
MULTIPLE LINE MARKETING -- This segment derives its revenues from the sale of
individual life, annuity, accident and health, and property and casualty
products marketed through American National, ANTEX, ANPAC, ANGIC and ANPAC
Lloyds.
HOME SERVICE DIVISION -- This segment derives its revenues from the sale of
individual life, annuity and accident and health insurance. In this segment, the
agent collects the premiums. This segment includes business in the United States
and Mexico.
INDEPENDENT MARKETING -- This segment derives its revenues mainly from the sale
of life and annuity lines marketed through independent marketing organizations.
HEALTH DIVISION -- This segment derives its revenues primarily from the sale of
accident and health insurance plus group life insurance marketed through group
brokers and third party marketing organizations.
SENIOR AGE MARKETING -- This segment derives its revenues primarily from the
sale of Medicare supplement plans, individual life, annuities, and accident and
health insurance marketed through Standard Life and Accident Insurance Company.
DIRECT MARKETING -- This segment derives its revenues principally from the sale
of individual life insurance, marketed through Garden State Life Insurance
Company, using direct selling methods.
CREDIT INSURANCE DIVISION -- This segment derives its revenues principally from
the sale of credit life and credit accident and health insurance.
CAPITAL AND SURPLUS -- This segment derives its revenues principally from
investment instruments.
ALL OTHER -- This category comprises segments which are too small to show
individually. This category includes non-insurance, reinsurance assumed, and
retirement benefits.
All income and expense amounts specifically attributable to policy transactions
are recorded directly to the appropriate line of business within each segment.
Income and expenses not specifically attributable to policy transactions are
allocated to the lines within each segment as follows:
. Net investment income from fixed income assets (bonds and mortgage loans on
real estate) is allocated based on the funds generated by each line at the
average yield available from these fixed income assets at the time such funds
become available.
. Net investment income from all other assets is allocated to capital and
surplus to arrive at an underwriting gain from operations. A portion of the
income allocated to capital and surplus is then re-allocated to the other
segments in accordance with the amount of equity invested in each segment.
. Expenses are allocated to the lines based upon various factors, including
premium and commission ratios within the respective operating segments.
. Gain or loss on the sale of investments is allocated to capital and surplus.
. Equity in earnings of unconsolidated affiliates is allocated to the segment
that provided the funds to invest in the affiliate.
. Federal income taxes have been applied to the net earnings of each segment
based on a fixed tax rate. Any difference between the amount allocated to the
segments and the total federal income tax amount is allocated to capital and
surplus.
59
<PAGE>
The following tables summarize net income and various components of net income
by operating segment for the years ended December 31, 1999 and 1998 (in
thousands):
<TABLE>
<CAPTION>
GAIN FROM
PREMIUMS NET OPERATIONS FEDERAL
AND INVESTMENT EQUITY BEFORE INCOME
OTHER INCOME EXPENSES IN FEDERAL TAX
POLICY AND AND UNCONSOLIDATED INCOME EXPENSE NET
REVENUE REALIZED GAINS BENEFITS AFFILIATES TAXES (BENEFIT) INCOME (LOSS)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1999
- ----
Multiple Line Marketing $ 489,263 $ 95,821 $ 530,321 $ -- $ 54,763 $ 18,072 $ 36,691
Home Service Division 209,033 118,978 263,945 -- 64,066 21,142 42,924
Independent Marketing 60,574 118,960 162,052 -- 17,482 5,769 11,713
Health Division 237,446 7,406 256,390 -- (11,538) (3,808) (7,730)
Credit Insurance Division 63,262 16,094 65,903 -- 13,453 4,439 9,014
Senior Age Marketing 148,368 18,013 162,209 -- 4,172 1,377 2,795
Direct Marketing 26,857 3,734 24,823 -- 5,768 1,903 3,865
Capital and Surplus 1,087 211,453 256 12,249 224,533 67,900 156,633
All other 30,714 32,551 54,976 7,693 15,982 5,274 10,708
- -----------------------------------------------------------------------------------------------------------------------------------
$1,266,604 $623,010 $1,520,875 $19,942 $388,681 $122,068 $266,613
===================================================================================================================================
1998
- ----
Multiple Line Marketing $ 452,146 $ 95,063 $ 488,842 $ -- $ 58,367 $ 19,261 $ 39,106
Home Service Division 203,976 122,188 252,446 -- 73,718 24,327 49,391
Independent Marketing 69,714 122,279 184,655 -- 7,338 2,422 4,916
Health Division 211,249 7,850 240,195 -- (21,096) (6,962) (14,134)
Credit Insurance Division 57,727 15,215 61,181 -- 11,761 3,881 7,880
Senior Age Marketing 162,161 17,760 169,929 -- 9,992 3,297 6,695
Direct Marketing 26,619 3,588 24,034 -- 6,173 2,037 4,136
Capital and Surplus 982 107,737 761 8,048 116,006 24,390 91,616
All other 35,081 33,330 56,781 -- 11,630 3,838 7,792
- -----------------------------------------------------------------------------------------------------------------------------------
$1,219,655 $525,010 $1,478,824 $ 8,048 $273,889 $ 76,491 $197,398
===================================================================================================================================
</TABLE>
There were no significant non-cash items to report. Almost all of the
consolidated revenues were derived in the U.S.
60
<PAGE>
Most of the operating segments provide essentially the same types of products.
The following table provides revenues within each segment by line of business
for the years ended December 31, 1999 and 1998 (in thousands):
TOTAL REVENUES
<TABLE>
<CAPTION>
ACCIDENT & PROPERTY & TOTAL
LIFE ANNUITY HEALTH CASUALTY CREDIT ALL OTHER REVENUES
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1999
- ----
Multiple Line Marketing $121,753 $ 17,637 $ 19,736 $403,029 $ -- $ -- $ 562,155
Home Service Division 283,566 4,576 8,778 -- -- -- 296,920
Independent Marketing 8,938 157,569 -- -- -- -- 166,507
Health Division 3,920 -- 236,559 -- -- -- 240,479
Credit Insurance Division -- -- -- -- 69,007 -- 69,007
Senior Age Marketing 31,577 1,692 125,609 -- -- -- 158,878
Direct Marketing 29,501 146 427 -- -- -- 30,074
Capital and Surplus -- -- -- -- -- 306,797 306,797
All other 30,120 1,878 1,709 -- -- 25,090 58,797
- --------------------------------------------------------------------------------------------------------------------
$509,375 $183,498 $392,818 $403,029 $69,007 $331,887 $1,889,614
====================================================================================================================
1998
- ----
Multiple Line Marketing $121,829 $ 16,826 $ 20,232 $365,369 $ -- $ -- $ 524,256
Home Service Division 279,531 4,410 8,793 -- -- -- 292,734
Independent Marketing 5,328 173,990 -- -- -- -- 179,318
Health Division 3,802 -- 210,622 -- -- -- 214,424
Credit Insurance Division -- -- -- -- 63,470 -- 63,470
Senior Age Marketing 32,821 1,583 137,889 -- -- -- 172,293
Direct Marketing 29,042 165 462 -- -- -- 29,669
Capital and Surplus -- -- -- -- -- 204,991 204,991
All other 31,996 18,962 1,977 -- -- 10,575 63,510
- --------------------------------------------------------------------------------------------------------------------
$504,349 $215,936 $379,975 $365,369 $63,470 $215,566 $1,744,665
====================================================================================================================
</TABLE>
The operating segments are supported by the fixed income assets and policy
loans. Equity type assets, such as stocks, real estate and other invested
assets, are investments of the Capital and Surplus segment. Assets of the non-
insurance companies are specifically associated with those companies in the "All
other" segment. Any assets not used in support of the operating segments are
assigned to Capital and Surplus.
The following table summarizes assets by operating segment for the years ended
December 31, 1999 and 1998 (in thousands):
<TABLE>
<CAPTION>
1999 1998
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Multiple Line Marketing................................................................. $1,598,043 $1,513,396
Home Service Division................................................................... 1,789,073 1,760,415
Independent Marketing................................................................... 1,719,508 1,761,832
Health Division......................................................................... 193,018 170,301
Credit Insurance Division............................................................... 387,669 372,787
Senior Age Marketing.................................................................... 326,163 330,631
Direct Marketing........................................................................ 82,799 83,759
Capital and Surplus..................................................................... 2,400,368 2,232,612
All other............................................................................... 593,885 589,919
- --------------------------------------------------------------------------------------------------------------------
$9,090,526 $8,815,652
====================================================================================================================
</TABLE>
The net assets of the Capital and Surplus segment include investments in
unconsolidated affiliates. Almost all of American National's assets are located
in the U.S.
61
<PAGE>
The amount of each segment item reported is the measure reported to the chief
operating decision-maker for purposes of making decisions about allocating
resources to the segment and assessing its performance. Adjustments and
eliminations are made when preparing the financial statements, and allocations
of revenues, expenses and gains or losses have been included when determining
reported segment profit or loss.
The reported measures are determined in accordance with the measurement
principles most consistent with those used in measuring the corresponding
amounts in the consolidated financial statements.
The results of the operating segments of the business are affected by economic
conditions and customer demands. A portion of American National's insurance
business is written through one third-party marketing organization. During 1999,
approximately 8% of the total premium revenues and policy account deposits were
written through that organization, which is included in the Independent
Marketing operating segment. This compares with 11% in 1998. Of the total
business written by this one organization, the majority was annuities.
62
<PAGE>
(14) RECONCILIATION TO STATUTORY ACCOUNTING
American National and its insurance subsidiaries are required to file statutory
financial statements with state insurance regulatory authorities. Accounting
principles used to prepare these statutory financial statements differ from
those used to prepare financial statements on the basis of Generally Accepted
Accounting Principles.
Reconciliations of statutory net income and capital and surplus, as determined
using statutory accounting principles, to the amounts included in the
accompanying consolidated financial statements, as of and for the years ended
December 31, are as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Statutory net income of insurance companies............ $ 159,375 $ 155,368
Net gain of non-insurance companies.................... 97,782 15,240
- ---------------------------------------------------------------------------------------
Combined net income.................................... 257,157 170,608
Increases (decreases):
Deferred policy acquisition costs..................... 2,188 (9,795)
Policyholder funds.................................... 4,288 18,702
Deferred federal income tax benefit................... 10,060 1,216
Premiums deferred and other receivables............... (2,315) (84)
Gain from sale of investments......................... 416 (292)
Change in interest maintenance reserve................ (1,033) 2,773
Asset valuation allowances............................ (4,762) 12,010
Other adjustments, net................................. 948 2,336
Consolidating eliminations and adjustments............. (334) (76)
- ---------------------------------------------------------------------------------------
Net income reported herein............................. $ 266,613 $ 197,398
=======================================================================================
1999 1998
- ---------------------------------------------------------------------------------------
Statutory capital and surplus of insurance companies... $2,377,589 $ 2,163,593
Stockholders equity of non-insurance companies......... 523,550 524,630
- ---------------------------------------------------------------------------------------
Combined capital and surplus........................... 2,901,139 2,688,223
Increases (decreases):
Deferred policy acquisition costs..................... 758,796 731,703
Policyholder funds.................................... 159,394 154,445
Deferred federal income taxes......................... (221,341) (259,243)
Premiums deferred and other receivables............... (80,453) (78,139)
Reinsurance in "unauthorized companies"............... 37,376 38,748
Statutory asset valuation reserve..................... 370,191 344,926
Statutory interest maintenance reserve................ 9,729 10,762
Asset valuation allowances............................ (38,285) (28,489)
Investment market value adjustments................... (9,556) 48,656
Non-admitted assets and other adjustments, net......... 158,876 173,877
Consolidating eliminations and adjustments............. (982,720) (910,857)
- ---------------------------------------------------------------------------------------
Stockholders' equity reported herein................... $3,063,146 $ 2,914,612
=======================================================================================
</TABLE>
In accordance with various government and state regulations, American National
and its insurance subsidiaries had bonds with an amortized value of $74,543,000
on deposit with appropriate regulatory authorities.
(15) RETIREMENT BENEFITS
American National and its subsidiaries have one tax-qualified pension plan,
which has three separate programs. One of the programs is contributory and
covers home service agents and managers. The other two programs are
noncontributory, with one covering salaried and management employees and the
other covering home office clerical employees subject to a
63
<PAGE>
collective bargaining agreement. The program covering salaried and management
employees provides pension benefits that are based on years of service and the
employee's compensation during the five years before retirement. The programs
covering hourly employees and agents generally provide benefits that are based
on the employee's career average earnings and years of service.
American National also sponsors for key executives two non-tax-qualified pension
plans that restore benefits that would otherwise be curtailed by statutory
limits on qualified plan benefits.
The companies' funding policy for the pension plans is to make annual
contributions in accordance with the minimum funding standards of the Employee
Retirement Income Security Act of 1974. The unfunded plans will be funded out of
general corporate assets when necessary.
Actuarial computations of pension expense (before income taxes) produced a
pension debit of $3,954,000 for 1999 and $3,051,000 for 1998.
The pension debit is made up of the following (in thousands):
1999 1998
- ------------------------------------------------------------------------
Service cost--benefits earned during period..... $ 5,833 $ 5,629
Interest cost on projected benefit obligation... 8,175 7,661
Expected return on plan assets.................. (8,946) (8,887)
Amortization of past service cost............... 534 473
Amortization of transition asset................ (2,619) (2,619)
Amortization of actuarial loss.................. 977 794
- ------------------------------------------------------------------------
Total pension debit....................... $ 3,954 $ 3,051
========================================================================
64
<PAGE>
The following table sets forth the funded status and amounts recognized in the
consolidated statements of financial position at December 31 for the companies'
pension plans.
Actuarial present value of benefit obligation:
<TABLE>
<CAPTION>
1999 1998
- --------------------------------------------------------------------------------------------------------------------
ASSETS ACCUMULATED ASSETS ACCUMULATED
EXCEED BENEFITS EXCEED BENEFITS
ACCUMULATED EXCEED ACCUMULATED EXCEED
BENEFITS ASSETS BENEFITS ASSETS
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Vested benefit obligation.............................. $ (72,591) $ (24,781) $ (76,916) $ (19,136)
=====================================================================================================================
Accumulated benefit obligation......................... $ (75,578) $ (24,781) $ (79,405) $ (19,136)
=====================================================================================================================
Projected benefit obligation........................... $ (91,897) $ (27,189) $ (96,812) $ (26,340)
=====================================================================================================================
Plan assets at fair value (long-term securities)....... 130,363 -- 137,543 --
=====================================================================================================================
Funded status:
Plan assets in excess of projected
benefit obligation.................................. 38,466 (27,189) 40,731 (26,340)
Unrecognized net loss................................. 1,981 1,554 2,341 3,729
Prior service cost not yet recognized
in periodic pension cost............................ -- 497 -- 1,028
Unrecognized net transition asset at
January 1 being recognized over 15 years............ (5,239) -- (7,858) --
- --------------------------------------------------------------------------------------------------------------------
Accrued pension cost included in
other assets or other liabilities..................... $ 35,208 $ (25,138) $ 35,214 $ (21,583)
=====================================================================================================================
ASSUMPTIONS USED AT DECEMBER 31: 1999 1998
- --------------------------------------------------------------------------------------------------------------------
Weighted-average discount rate on benefit obligation....................................... 7.30% 6.50%
Rate of increase in compensation levels.................................................... 4.80% 4.80%
Expected long-term rate of return on plan assets........................................... 7.00% 7.00%
</TABLE>
Other Benefits
Under American National and its subsidiaries' various group benefit plans for
active employees, a $2,500 paid-up life insurance certificate is provided upon
retirement for eligible participants who meet certain age and length of service
requirements.
American National has one retiree health benefit plan for retirees of all
companies in the consolidated group, with the exception of Standard Life and
Accident Insurance Company (Standard). The retirees of Standard are covered
under a separate health plan. Participation in either of these plans is limited
to current retirees and their dependents and those employees and their
dependents who met certain age and length of service requirements as of December
31, 1993. No new participants will be added to these plans in the future.
The retiree health benefit plans provide major medical benefits for participants
under the age of 65 and Medicare supplemental benefits for those over 65.
Prescription drug benefits are provided to both age groups. The plans are
contributory, with the company's contribution limited to $80 per month for
retirees and spouses under the age of 65 and $40 per month for retirees and
spouses over the age of 65. All additional contributions necessary, over the
amount to be contributed by the companies, are to be contributed by the
retirees.
The accrued post-retirement benefit obligation, included in other liabilities,
was $13,221,000 and $12,989,000 at December 31, 1999 and 1998, respectively.
These amounts were approximately equal to the unfunded accumulated post-
retirement benefit obligation. Since the companies'
65
<PAGE>
contributions to the cost of the retiree benefit plans are fixed, the health
care cost trend rate will have no effect on the future expense or the
accumulated post-retirement benefit obligation.
(16) COMMITMENTS AND CONTINGENCIES
COMMITMENTS--American National and its subsidiaries lease insurance sales office
space in various cities. The long-term lease commitments at December 31, 1999
were approximately $6,356,000.
In the ordinary course of their operations, the companies also had commitments
outstanding at December 31, 1999 to purchase, expand or improve real estate, and
to fund mortgage loans aggregating $96,000,000, all of which are expected to be
funded in 2000. As of December 31, 1999, all of the mortgage loan commitments
have interest rates that are fixed.
CONTINGENCIES--The companies are defendants in various lawsuits concerning
alleged failure to honor certain loan commitments, alleged breach of certain
agency and real estate contracts, various employment matters, allegedly
deceptive insurance sales and marketing practices, and other litigation arising
in the ordinary course of operations. Certain of these lawsuits include claims
for compensatory and punitive damages. After reviewing these matters with legal
counsel, management is of the opinion that the ultimate resultant liability, if
any, would not have a material adverse effect on the companies' consolidated
financial position or results of operations. However, these lawsuits are in
various stages of development, and future facts and circumstances could result
in management changing its conclusions.
66
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors,
American National Insurance Company:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements of American National Insurance Company and
subsidiaries included in this registration statement and have issued our report
thereon dated February 11, 2000. Our audit was made for the purpose of forming
an opinion on the basic consolidated financial statements taken as a whole. The
accompanying schedules are the responsibility of the Company's management and
are presented for purposes of complying with the Securities and Exchange
Commission's rules and are not a required part of the basic consolidated
financial statements. These schedules have been subjected to the auditing
procedures applied in our audit of the basic consolidated financial statements
and, in our opinion, fairly state in all material respects the financial data
required to be set forth therein in relation to the basic consolidated financial
statements taken as a whole.
ARTHUR ANDERSEN LLP
Houston, Texas
February 11, 2000
67
<PAGE>
AMERICAN NATIONAL INSURANCE COMPANY AND SUBSIDIARIES
SCHEDULE I - SUMMARY OF INVESTMENTS - OTHER THAN INVESTMENTS IN RELATED PARTIES
(IN THOUSANDS)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
<S> <C> <C> <C>
COLUMN A Column B Column C Column D
- ------------------------------------------------------------------------------------------------------------------------------------
AMOUNT AT WHICH
MARKET SHOWN IN THE
TYPE OF INVESTMENT COST (a) VALUE BALANCE SHEET
- -------------------------------------------------- --------------------- --------------------- ------------------------
Fixed Maturities:
Bonds Held-to-Maturity:
United States Government and government agencies
and authorities $ 141,247 $ 139,642 $ 141,247
States, municipalities and political 44,624 40,818 44,624
subdivisions
Foreign governments 107,250 107,893 107,250
Public utilities 1,126,456 1,101,807 1,126,456
All other corporate bonds 2,217,209 2,161,963 2,217,209
Bonds Available-for-Sale:
United States Government and government agencies
and authorities 54,506 53,855 53,855
States, municipalities and political 38,538 34,702 34,702
subdivisions
Foreign governments 27,469 28,477 28,477
Public utilities 184,125 183,556 183,556
All other corporate bonds 552,529 537,571 537,571
Redeemable preferred stock 39,145 39,752 39,752
--------------------- --------------------- -----------------------
Total fixed maturities $ 4,533,098 $ 4,430,036 $ 4,514,699
--------------------- --------------------- -----------------------
Equity Securities:
Common stocks:
Public utilities $ 10,669 $ 9,420 $ 9,420
Banks, trust and insurance companies 59,822 82,739 82,739
Industrial, miscellaneous and all other 480,573 871,178 871,178
--------------------- --------------------- -----------------------
Total equity securities $ 551,064 $ 963,337 $ 963,337
--------------------- --------------------- -----------------------
Mortgage loans on real estate $ 1,033,330 XXXXXX $ 1,033,330
Investment real estate 242,801 XXXXXX 242,801
Real estate acquired in satisfaction of debt 8,728 XXXXXX 8,728
Policy loans 293,287 XXXXXX 293,287
Other long-term investments 102,001 XXXXXX 102,001
Short-term investments 95,352 XXXXXX 95,352
--------------------- -----------------------
Total investments $ 6,859,661 XXXXXX $ 7,253,535
===================== =======================
</TABLE>
(a) Original cost of equity securities and, as to fixed maturities, original
cost reduced by repayments and valuation write-downs and adjusted for
amortization of premiums or accrual of discounts.
68
<PAGE>
AMERICAN NATIONAL INSURANCE COMPANY AND SUBSIDIARIES
SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION
(IN THOUSANDS)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Column A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
FUTURE POLICY
DEFERRED BENEFITS, OTHER POLICY
POLICY LOSSES, CLAIMS CLAIMS AND
ACQUISITION AND LOSS UNEARNED BENEFITS PREMIUM
SEGMENT COST EXPENSES PREMIUMS PAYABLE REVENUE
- ------------------------- -------------- -------------- ----------- ------------ ------------
1999
- ----
Multiple Line Marketing $ 126,950 $ 867,916 $ 239,825 $ 201,544 $ 441,299
Home Service 233,883 1,419,161 5,060 30,171 189,449
Independent Marketing 161,578 1,562,493 21 11,302 36,729
Health Insurance 18,658 22,612 14,121 91,518 223,638
Credit Insurance 65,801 -- 235,200 45,074 55,294
Senior Age Marketing 76,359 160,815 35,908 41,321 149,142
Direct Marketing 33,656 43,911 291 3,934 25,929
Capital and Surplus -- -- -- -- --
All other 41,911 330,137 394 5,403 9,198
-------------- -------------- ----------- ------------ ------------
Total $ 758,796 $ 4,407,045 $ 530,820 $ 430,267 $ 1,130,678
============== ============== ========== =========== ===========
1998
- ----
Multiple Line Marketing $ 115,981 $ 857,532 $ 200,675 $ 183,998 $ 406,317
Home Service 230,216 1,396,059 4,630 27,640 183,189
Independent Marketing 156,334 1,603,818 5 11,214 40,535
Health Insurance 16,087 22,092 11,999 69,186 210,502
Credit Insurance 61,575 -- 229,371 42,803 50,391
Senior Age Marketing 75,818 154,625 36,525 37,776 162,060
Direct Marketing 31,392 41,992 266 8,228 25,588
Capital and Surplus -- -- -- -- --
All other 44,300 337,701 437 5,330 10,126
-------------- -------------- ----------- ------------ ------------
Total $ 731,703 $ 4,413,819 $ 483,908 $ 386,175 $ 1,088,708
============== ============== ========== =========== ===========
<S> <C> <C> <C> <C> <C>
Column A COLUMN G COLUMN H COLUMN I COLUMN J COLUMN K
BENEFITS, AMORTIZATION
CLAIMS, LOSSES OF DEFERRED
NET AND POLICY OTHER
INVESTMENT SETTLEMENT ACQUISITION OPERATING PREMIUMS
Segment INCOME (A) EXPENSES COSTS EXPENSES WRITTEN
- ------------------------- ------------- -------------- --------------- -------------- -----------
1999
- ----
Multiple Line Marketing $ 95,820 $ 375,364 $ 39,863 $ 84,284 $ 404,817
Home Service 119,065 118,638 27,921 94,825 --
Independent Marketing 118,961 30,575 33,419 17,089 --
Health Insurance 7,398 165,525 21,475 67,902 --
Credit Insurance 16,094 21,859 6,209 37,834 --
Senior Age Marketing 18,021 111,573 3,039 43,751 --
Direct Marketing 3,734 14,584 3,459 5,179 --
Capital and Surplus 62,305 -- -- 225 --
All other 32,551 28,024 -- 20,767 --
-------------- -------------- ----------- ------------ ------------
Total $ 473,949 $ 866,142 $ 135,385 $ 371,856 $ 404,817
============== ============== ========== =========== ===========
1998
- ----
Multiple Line Marketing $ 95,063 $ 343,841 $ 37,772 $ 81,041 $ 373,506
Home Service 122,188 114,292 34,149 83,438 --
Independent Marketing 122,279 26,903 25,940 29,219 --
Health Insurance 7,849 158,388 14,119 68,437 --
Credit Insurance 15,215 22,942 21,100 17,680 --
Senior Age Marketing 17,760 116,297 5,696 44,816 --
Direct Marketing 3,589 13,626 3,787 4,817 --
Capital and Surplus 57,969 -- -- (1,200) --
All other 33,330 32,310 6,553 11,074 --
-------------- -------------- ----------- ------------ ------------
Total $ 475,242 $ 828,599 $ 149,116 $ 339,322 $ 373,506
============== ============== ========== =========== ===========
</TABLE>
(a) Net investment income from fixed income assets (bonds and mortgage loans on
real estate) is allocated to insurance lines based on the funds generated
by each line at the average yield available from these fixed income
assets at the time such funds become available. Net investment income
from policy loans is allocated to the insurance lines according to the
amount of loans made by each line. Net investment income from all other
assets is allocated to the insurance lines as necessary to support the
equity assigned to that line with the remainder allocated to capital &
surplus.
(b) Identifiable commissions and expenses are charged directly to the
appropriate line of business. The remaining expenses are allocated to the
lines based upon various factors including premium and commission ratios
within the respective lines.
69
<PAGE>
AMERICAN NATIONAL INSURANCE COMPANY AND SUBSIDIARIES
SCHEDULE IV - REINSURANCE
(IN THOUSANDS)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
CEDED TO ASSUMED PERCENTAGE OF
GROSS OTHER FROM OTHER NET AMOUNT ASSUMED
AMOUNT COMPANIES COMPANIES AMOUNT TO NET
--------------- ------------- ------------------ -------------- --------------
1999
- ----
Life insurance in force $ 46,156,190 $ 9,629,707 $ 797,059 $ 37,323,542 2.1%
=============== =============== =============== =============== ===============
Premiums:
Life insurance 393,410 65,761 14,381 342,030 4.2%
Accident and health insurance 451,614 144,298 88,756 396,072 22.4%
Property and liability insurance 423,105 37,572 7,043 392,576 1.8%
------------- ------------- ------------- -------------
Total premiums $ 1,268,129 $ 247,631 $ 110,180 $ 1,130,678 9.7%
=============== =============== =============== =============== ===============
1998
- ----
Life insurance in force $ 4,134,974 $ 7,965,042 $ 713,200 $ 36,883,132 1.9%
=============== =============== =============== =============== ===============
Premiums:
Life insurance 386,554 55,700 9,432 340,286 2.8%
Accident and health insurance 442,233 73,256 24,625 393,602 6.3%
Property and liability insurance 372,402 25,928 8,346 354,820 2.4%
------------- ------------- ------------- -------------
Total premiums $ 1,201,189 $ 154,884 $ 42,403 $ 1,088,708 3.9%
=============== =============== =============== =============== ===============
</TABLE>
70
<PAGE>
AMERICAN NATIONAL INSURANCE COMPANY AND SUBSIDIARIES
SCHEDULE V - VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
DEDUCTIONS - DESCRIBE
-----------------------------------------
BALANCE AT ADDITIONS AMOUNTS BALANCE AT
BEGINNING OF CHARGED TO WRITTEN OFF DUE AMOUNTS END OF
Description PERIOD EXPENSE TO DISPOSAL (a) COMMUTED (b) PERIOD
- ----------------------------------- ---------------- ---------------- ---------------- ---------------- ---------------
1999
- ----
Investment valuation allowances:
Mortgage loans on real estate $ 12,800 $ 8,953 $ ---- $ 1,920 $ 19,833
Investment real estate 21,718 3,528 $ 5,799 $ ---- 19,447
Investment in unconsolidated
affiliates 5,006 ---- ---- ---- 5,006
Other assets 1,800 ---- ---- ---- 1,800
---------- ---------- ---------- ------------ -----------
Total $ 41,324 $ 12,481 $ 5,799 $ 1,920 $ 46,086
========== ========== ========== ============ ===========
1998
- ----
Investment valuation allowances:
Mortgage loans on real estate $ 15,230 $ ---- $ ---- $ 2,430 $ 12,800
Investment real estate 22,577 1,038 $ 1,379 $ 518 21,718
Investment in unconsolidated
affiliates 3,727 1,279 ---- ---- 5,006
Other assets 11,800 ---- ---- 10,000 1,800
---------- ---------- ---------- ------------ -----------
Total $ 53,334 $ 2,317 $ 1,379 $ 12,948 $ 41,324
========== ========== ========== ============ ===========
</TABLE>
(a) Amounts written off due to disposal represent reductions or (additions) in
the balance due to sales, transfers or other disposals of the asset with
which the allowance is associated.
(b) Amounts commuted represent reductions in the allowance balance due to
changes in requirements or investment conditions.
71
<PAGE>
5774-SAI [AMERICAN NATIONAL LOGO APPEARS HERE] REV. 5-00
72
<PAGE>
PART C ITEM AND CAPTION
Items 24. Financial Statements and Exhibits.
(a) Financial Statements FINANCIAL STATEMENTS and FINANCIAL STATEMENT
SCHEDULES sections of Statement of Additional
Information
(b) Exhibits
Exhibit "1" - Copy of the resolutions of the Board of Directors
of the Depositor authorizing the establishment of
the Registrant (previously filed on April 26, 1996
in Registrant's Post-Effective Amendment No. 6)
Exhibit "2" - Not applicable
Exhibit "3" - Distribution and Administrative Services Agreement
(previously filed on April 26, 1996 in
Registrant's Post-Effective Amendment No. 6)
Exhibit "4" - Form of each variable annuity contract (previously
filed on April 26, 1996 in Registrant's Post-
Effective Amendment No. 6)
Exhibit "5" - Form of application used with any variable annuity
contract (previously filed on April 26, 1996 in
Registrant's Post-Effective Amendment No. 6)
Exhibit "6a" - Copy of the Articles of Incorporation of the
Depositor (previously filed on April 26, 1996 in
Registrant's Post-Effective Amendment No. 6)
Exhibit "6b" - Copy of the By-laws of the Depositor
(previously filed on April 26, 1996 in
Registrant's Post-Effective Amendment No. 6)
Exhibit "7" - Not applicable
Exhibit "8a" Form of American National Investment Account, Inc.
Participation Agreement (previously filed on April
26, 1996 in Registrant's Post-Effective Amendment
No. 6)
Exhibit "8b" Form of Fidelity Investments' Variable Insurance
Products Fund Participation Agreement (previously
filed on April 26, 1996 in Registrant's Post-
Effective Amendment No. 6)
<PAGE>
Exhibit "8c" Form of Variable Insurance Products Fund II
Participation Agreement (previously filed on
April 26, 1996 in Registrant's Post-Effective
Amendment No. 6)
Exhibit "8d" Form of T. Rowe Price Participation Agreement
(previously filed on April 30, 1999 in
Registrant's Post-Effective Amendment No. 6)
Exhibit "9" - An opinion of counsel and consent to its use as to
the legality of the securities being registered,
indicating whether they will be legally issued and
will represent binding obligations of the
depositor
Exhibit "10" - Consent of independent accountants
Exhibit "11" - Not applicable
Exhibit "12" - Not applicable
Exhibit "13" - Not Applicable
Exhibit "14" - Control chart of Depositor
Exhibit "27" - Financial data schedule
Item 25. Directors and Officers of the Depositor.
Directors
- ---------
Name Business Address
- ---- ----------------
G. Richard Ferdinandtsen American National Insurance Company
One Moody Plaza
Galveston, Texas 77550
Irwin M. Herz, Jr. Greer, Herz & Adams, L.L.P.
One Moody Plaza, 18th Floor
Galveston, Texas 77550
R. Eugene Lucas Gal-Tex Hotel Corporation
2302 Postoffice, Suite 504
Galveston, Texas 77550
E. Douglas McLeod The Moody Foundation
2302 Postoffice, Suite 704
Galveston, Texas 77550
Frances Anne Moody 7031 Inwood
Dallas, Texas 75209
<PAGE>
Robert L. Moody 2302 Postoffice, Suite 702
Galveston, Texas 77550
Russell S. Moody 6016 Mount Bonnell Hollow
Austin, Texas 78731
W.L. Moody, IV 2302 Postoffice, Suite 502
Galveston, Texas 77550
Joe Max Taylor Galveston County Sheriff's Department
715 19th Street
Galveston, Texas 77550
Officers
- --------
The principal business address of the officers, unless indicated otherwise
in the "Directors" section, or unless indicated by an asterisk (*), is American
National Insurance Company, One Moody Plaza, Galveston, Texas 77550. Those
officers with an asterisk by their names have a principal business address of
2450 South Shore Boulevard, League City, Texas 77573.
Name Office
- ---- ------
R.L. Moody Chairman of the Board, President and Chief Executive Officer
G.R. Ferdinandtsen Senior Executive Vice President and Chief Operating Officer
D.A. Behrens Executive Vice President, Independent Marketing
R.A. Fruend Executive Vice President, Director of Multiple Line Marketing
B.J. Garrison Executive Vice President, Director of Home Service Division
M.W. McCroskey * Executive Vice President, Investments
J.E. Pozzi Executive Vice President, Corporate Planning
R.J. Welch Executive Vice President and Chief Actuary
C.H. Addison Senior Vice President, Systems Planning and Computing
A.L. Amato, Jr. Senior Vice President, Life Policy Administration
G.C. Langley Senior Vice President, Human Resources
S.E. Pavlicek Senior Vice President and Controller
S.H. Schouweiler Senior Vice President, Health Insurance Operations
J.R. Thomason Senior Vice President, Credit Insurance Services
<PAGE>
G.W. Tolman Senior Vice President, Corporate Affairs
V.E. Soler, Jr. Vice President, Secretary & Treasurer
J.J. Antkowiak Vice President, Director of Computing Services
D.M. Azur Vice President, Claims
P. Barber Vice President, Human Resources
S.F. Brast * Vice President, Real Estate Investments
D. D. Brichler * Vice President, Mortgage Loan Production
F.V. Broll, Jr. Vice President & Actuary
W.F. Carlton Vice President & Assistant Controller, Financial Reports
R.T. Crawford Vice President & Assistant Controller, General Accounting
G.C. Crume Vice President, Independent Marketing
D.A. Culp Vice President, Independent Marketing
G.D. Dixon * Vice President, Stocks
S.L. Dobbe Vice President, Independent Marketing
F.J. Gerren Vice President, Independent Marketing
J.F. Grant, Jr. Vice President, Group Actuary
R.D. Hemme Vice President and Actuary
M.E. Hogan Vice President, Credit Insurance Operations
D.M. Jensen Vice President, Multiple Line Marketing
C.J. Jones Vice President, Health Administration
D.D. Judy Vice President, Financial Marketing
Dr. H.B. Kelso, Jr. Vice President & Medical Director
G.W. Kirkham Vice President, Director of Planning and Support
D.D. Lagrone Vice President, Home Office Services
George A. Macke Vice President, General Auditor
<PAGE>
G.W. Marchand Vice President, Life Underwriting
D.N. McDaniel Vice President, Home Service Administration
J.W. Pangburn Vice President, Credit Insurance/Special Markets
E.B. Pavelka Vice President, Life Premium Accounting & Policy Service
R.A. Price Vice President, Director of Training and Market Development
J.T. Smith Vice President, 401(K) Pension Sales
G.A. Sparks, Sr. Vice President, Director of Field Services
W.H. Watson III Vice President, Health Actuary
G.W. Williamson Vice President, Assistant Director, Home Service Division
J.L. Broadhurst Asst. Vice President, Director Individual Health/Group Systems
J.J. Cantu Asst. Vice President and Illustration Actuary
J.D. Ferguson Asst. Vice President, Creative Services
J.M. Flippin Asst. Vice President; Director, Life Marketing
D.S. Fuentes Asst. Vice President, Director of Group Claims
D.N. Fullilove Asst. Vice President, Director, Agents Employment
K.E. Johnston Asst. Vice President, Asst. Director of Financial Marketing
K.J. Juneau Asst. Vice President, Director, Advisory Systems Engineer
P.E. Kennedy Asst. Vice President, Human Resources
D. Knowles Asst. Vice President, Director of Marketing/Agency Support
C.A. Kratz Asst. Vice President, Human Resources
C.H. Lee Asst. Vice President and Actuary
D.L. Leining Asst. Vice President, Life Underwriting
R.G. McCrary Asst. Vice President, Application Development Division
M. Mitchell Asst. Vice President, Director Insurance Systems
M.S. Nimmons Asst. Vice President; Associate General Auditor, Home Office
<PAGE>
R.J. Ostermayer Asst. Vice President, Director of Group Quality Assurance
M.C. Paetz Asst. Vice President, Director of Group Underwriting
R.E. Pittman, Jr. Asst. Vice President, Director of Marketing/Career Development
G.A. Schillaci Asst. Vice President & Actuary
M.J. Soler Asst. Vice President, Health Marketing Administration
J.P. Stelling Asst. Vice President, Health Compliance
C.E. Tipton Asst. Vice President & Assistant Actuary
D.G. Trevino Asst. Vice President, Director, Computing Services
J.A. Tyra Asst. Vice President, Life Insurance Systems
M.L. Waugh, Jr. Asst. Vice President, Claims
R.M. Williams Life Product Actuary
J.E. Cernosek Asst. Secretary
V.J. Krc Asst. Treasurer
Item 26. Persons Controlled by or Under Common Control with Depositor of
Registrant.
Exhibit "14" - control chart of depositor
Item 27. Number of Contractowners.
As of December 31, 1999, the Registrant had 1,456 Contractowners of the
Flexible Purchase Payment Deferred Annuity Contracts, 1 Contractowner of the
Single Premium Immediate Annuity Contracts, and 1 Contractowner of the Group
Unallocated Annuity Contracts.
Item 28. Indemnification.
The following provision is in the Distribution and Administrative Services
Agreement:
"American National agrees to indemnify SM&R for any liability that
SM&R may incur to a Contractowner or party-in-interest under a
Contract (i) arising out of any act or omission in the course of, or
in connection with, rendering services under this Agreement, or (ii)
arising out of the purchase, retention or surrender of a Contract;
provided, however, that American National will not indemnify SM&R for
any such liability that results from the willful misfeasance, bad
faith or gross negligence of SM&R, or from the reckless disregard, by
SM&R, of its duties and obligations arising under this Agreement."
<PAGE>
The officers and directors of American National are indemnified by American
National in the American National By-Laws for liability incurred by reason of
the officer and directors serving in such capacity. This indemnification would
cover liability arising out of the variable annuity sales of American National.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefor, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 29. Principal Underwriters.
(a) SM&R Equity Funds consisting of SM&R Growth Fund, Inc., SM&R Equity
Income Fund, Inc. and SM&R Balanced Fund, Inc.; SM&R Investments, Inc.
consisting of SM&R Government Bond Fund, SM&R Tax Free Fund, SM&R Primary Fund
and SM&R Money Market Fund; American National Investment Accounts, Inc.
(b) The Registrant's principal underwriter is Securities Management and
Research, Inc. The following are the officers and directors of Securities
Management and Research, Inc.
<TABLE>
<CAPTION>
Principal Business
Name Position Address
- ---- -------- ------------------
<S> <C> <C>
Gordon D. Dixon Director, Securities Management
Senior Vice and Research, Inc.
President 2450 South Shore Boulevard
and Chief League City, Texas 77573
Investment
Officer
G. Richard Ferdinandtsen Director American National
Insurance Company
One Moody Plaza
Galveston, Texas 77550
Robert A. Fruend, C.L.U. Director American National
Insurance Company
One Moody Plaza
Galveston, Texas 77550
R. Eugene Lucas Director Gal-Tenn Hotel Corporation
504 Moody National Bank
Tower
Galveston, Texas 77550
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Michael W. McCroskey Director, Securities Management
President and Research, Inc.
and Chief 2450 South Shore Boulevard
Executive League City, Texas 77573
Officer
Ronald J. Welch Director American National
Insurance Company
One Moody Plaza
Galveston, Texas 77550
K. David Wheeler Senior Vice President Securities Management and
Research, Inc.
2450 South Shore Boulevard
League City, Texas 77573
Teresa E. Axelson Vice President and Securities Management and
Secretary Research, Inc.
2450 South Shore Boulevard
League City, Texas 77573
Brenda T. Koelemay Vice President, Securities Management and
Chief Administrative Research, Inc.
Officer and Chief 2450 South Shore Boulevard
Financial Officer League City, Texas 77573
Emerson V. Unger Vice President Securities Management and
Research, Inc.
2450 South Shore Boulevard
League City, Texas 77573
Vicki R. Douglas Assistant Vice Securities Management and
President Research, Inc.
2450 South Shore Boulevard
League City, Texas 77573
Steven Douglas Geib Assistant Vice Securities Management and
President Research, Inc.
2450 South Shore Boulevard
League City, Texas 77573
T. Brett Harrington Assistant Vice Securities Management and
President Research, Inc.
2450 South Shore Boulevard
League City, Texas 77573
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Sally F. Praker Assistant Vice Securities Management and
President Research, Inc.
2450 South Shore Boulevard
League City, Texas 77573
Michele S. Lord Assistant Vice Securities Management and
President Research, Inc.
2450 South Shore Boulevard
League City, Texas 77573
</TABLE>
(c) Not Applicable
Item 30. Location of Accounts and Records.
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules promulgated
thereunder will be maintained at the offices of American National Insurance
Company, One Moody Plaza, Galveston, Texas 77550.
Item 31. Management Services.
Not Applicable
Item 32. Undertakings.
(a) Registrant undertakes to file a post-effective amendment to this
registration statement as frequently as is necessary to ensure that the audited
financial statements in the registration statement are never more than 16 months
old for so long as payments under the variable annuity contracts may be
accepted.
(b) Registrant undertakes to include as part of any application to purchase
a contract offered by the prospectus, a space that an applicant can check to
request a Statement of Additional Information.
(c) Registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available under
this Form promptly upon written or oral request.
(d) The Registrant hereby represents that it is relying upon a No Action
Letter issued to the American Council of Life Insurance dated November 28, 1988
(Commission ref. IP-6-88) and that the following provisions have been complied
with:
(i) Include appropriate disclosure regarding the redemption
restrictions imposed by Section 403 (b) (11) in each
registration statement, including the prospectus, used in
connection with the offer of the contract;
(ii) Include appropriate disclosure regarding the redemption
restrictions imposed by Section 403 (b) (11) in any sales
literature used in connection with the offer of the
contract;
<PAGE>
(iii) Instruct sales representatives who solicit participants to
purchase the contract specifically to bring the redemption
restrictions imposed by Section 403(b) (11) to the attention
of the potential participants;
(iv) Obtain from each plan participant who purchases a Section
403 (b) annuity contract, prior to or at the time of such
purchase, a signed statement acknowledging the participant's
understanding of (1) the restrictions on redemption imposed
by Section 403 (b) (11), and (2) other investment
alternatives available under the employer's Section 403 (b)
arrangement to which the participant may elect to transfer
his contract value.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it meets all of the requirements of
Securities Act Rule 485(b) for effectiveness of this Post-Effective Amendment
and has caused this amended Registration Statement to be signed on its behalf,
in the City of Galveston, and the State of Texas on the 28th day of April, 2000.
AMERICAN NATIONAL VARIABLE ANNUITY
SEPARATE ACCOUNT (Registrant)
By: AMERICAN NATIONAL INSURANCE COMPANY
By: /s/ Robert L. Moody
---------------------------------------------
Robert L. Moody, Chairman of the
Board, President and Chief Executive Officer
AMERICAN NATIONAL INSURANCE COMPANY
(Sponsor)
By: /s/ Robert L. Moody
---------------------------------------------
Robert L. Moody, Chairman of the
Board, President and Chief Executive Officer
ATTEST:
/s/ Vincent E. Soler, Jr.
- -------------------------------
Vincent E. Soler, Jr.,
Vice President, Secretary and Treasurer
As required by the Securities Act of 1933, this amended Registration Statement
has been signed by the following persons in their capacities and on the dates
indicated:
Signature Title Date
- --------- ----- ----
/s/ Michael W. McCroskey Executive Vice President - April 28, 2000
- --------------------------- Investments
Michael W. McCroskey (Principal Financial Officer)
/s/ Stephen E. Pavlicek Senior Vice President and April 28, 2000
- --------------------------- Controller
Stephen E. Pavlicek (Principal Accounting Officer)
<PAGE>
Signature Title Date
- --------- ----- ----
/s/ Robert L. Moody Chairman of the Board, April 28, 2000
- ------------------------- Director, President and Chief
Robert L. Moody Executive Officer
/s/ Richard Ferdinandtsen Director, Senior Executive Vice April 28, 2000
- ------------------------- President and Chief Operating
Richard Ferdinandtsen Officer
/s/ Irwin M. Herz. Jr. Director April 28, 2000
- --------------------------
Irwin M. Herz, Jr.
/s/ R. Eugene Lucas Director April 28, 2000
- --------------------------
R. Eugene Lucas
/s/ E. Douglas McLeod Director April 28, 2000
- --------------------------
E. Douglas McLeod
Director
- --------------------------
Frances Anne Moody
Director
- --------------------------
Russell S. Moody
Director
- --------------------------
W. L. Moody IV
Director
- --------------------------
Joe Max Taylor
<PAGE>
Exhibit 99.B9
Law Offices
Greer, Herz & Adams, L.L.P.
a registered limited liability partnership
including professional corporations
One Moody Plaza
Galveston, Texas 77550
Galveston (409) 765-5525
Houston (713) 480-5278
Telecopier (409) 766-6424
April 28, 2000
Securities and Exchange Commission
450 Fifth Street, N.W.
Judicial Plaza
Washington, D.C. 20549
RE: American National Variable Annuity Separate Account ("Separate Account")
Post-Effective Amendment No. 11 to Form N-4; File No. 33-60442; Opinion
and Consent of Counsel
Gentlemen:
We are counsel to American National Insurance Company ("ANICO"), the depositor
of the Separate Account. As such, we participated in the formation of the
Separate Account and the registration of such separate account with the
Securities and Exchange Commission. Accordingly, we are familiar with the
corporate records, certificates, and consents of officers of ANICO as we have
deemed necessary or appropriate for the purpose of this opinion.
Based upon the foregoing, and our consideration of such other matters of fact
and questions of law as we have deemed necessary and proper in the
circumstances, we are of the opinion that:
1. ANICO is a duly organized and existing corporation under the laws of the
State of Texas and that its principal business is to be an insurer.
2. The Separate Account is a duly organized and existing separate account of
ANICO under the laws of the State of Texas and is registered as a unit
investment trust under the Investment Company Act of 1940.
3. The Variable Annuity Contracts registered by this Registration Statement
under the Securities Act of 1933 and the Investment Company Act of 1940 (File
No. 33-60442) will, upon issuance thereof, be validly authorized and issued.
We hereby consent to the use of our opinion of counsel in the Post-Effective
Amendment No. 11 to Form N-4 Registration Statement (File No. 33-60442) filed on
behalf of the Separate Account. We further consent to the
<PAGE>
statements made regarding us and to the use of our name under the caption "Legal
Matters" in the prospectuses constituting a part of such Post-Effective
Amendment No. 11 to such Registration Statement.
Yours very truly,
GREER, HERZ & ADAMS, L.L.P.
/s/ Jerry L. Adams
-----------------------------
Jerry L. Adams
<PAGE>
Exhibit 99.B10
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
(and to all references to our Firm) included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
/s/ ARTHUR ANDERSEN LLP
___________________________
Houston, Texas
April 28, 2000
<PAGE>
Exhibit 99.B14
CONTROL LIST
The Registrant, American National Variable Annuity Separate Account, is a
separate account of American National Insurance Company, a Texas insurance
company The Libbie Shearn Moody Trust owns approximately 37.46% of the
outstanding stock of American National Insurance Company. The Moody Foundation,
which has a 75% contingent remainder interest in the Libbie Shearn Moody Trust,
owns approximately 23.63% of the outstanding stock of American National
Insurance Company.
The Trustees of The Moody Foundation are Mrs. Frances Moody Newman, Robert L.
Moody and Ross Rankin Moody. Robert L. Moody is a life income beneficiary of
the Libbie Shearn Moody Trust and Chairman of the Board, Director, President and
Chief Executive Officer of American National Insurance Company. Robert L. Moody
has assigned his interest in the Libbie Shearn Moody Trust to National Western
Life Insurance Company, a Colorado insurance company of which he is also
Chairman of the Board, a Director and controlling shareholder.
The Moody National Bank of Galveston is the trustee of the Libbie Shearn Moody
Trust and various other trusts which, in the aggregate, own approximately 44% of
the outstanding stock of American National Insurance Company. Moody Bank
Holding Company, Inc. owns approximately 97% of the outstanding shares of The
Moody National Bank of Galveston. Moody Bank Holding Company, Inc. is a wholly
owned subsidiary of Moody Bancshares, Inc. The Three R Trusts, trusts created
by Robert L. Moody for the benefit of his children, are controlling stockholders
of Moody Bancshares, Inc.
The Moody Foundation owns 33.0% and the Libbie Shearn Moody Trust owns 51.0%
of the outstanding stock of Gal-Tex Hotel Corporation, a Texas corporation.
Gal-Tex Hotel Corporation has the following wholly-owned subsidiaries, listed in
alphabetical order:
Gal-Tenn Hotel Corporation
Gal-Tex Management Company
Gal-Tex Woodstock, Inc.
GTG Corporation
New Paxton Hotel Corporation
American National owns a direct or indirect interest in the following
entities, listed in alphabetical order:
Entity: Alternative Benefit Management, Inc.
Entity Form: a Nevada corporation
Ownership or Other Basis of Control: ANTAC, Inc. owns all of the outstanding
common stock.
Entity: American Hampden Joint Venture
Entity Form: a Texas joint venture
Ownership or Other Basis of Control: American National Insurance Company owns a
98% interest.
<PAGE>
Entity: American National de Mexico, Compania de Seguras de Vida, S.A. de C.V.
Entity Form: a Mexico insurance company
Ownership or Other Basis of Control: ANMEX International, Inc. owns 99.9%, and
ANMEX International Services, Inc. owns 0.10%.
Entity: American National of Delaware Corporation
Entity Form: a Delaware corporation (inactive)
Ownership or Other Basis of Control: Wholly owned subsidiary of American
National Insurance Company
Entity: American National Financial Corporation
Entity Form: a Texas corporation (inactive)
Ownership or Other Basis of Control: Wholly owned subsidiary of American
National Property and Casualty Company
Entity: American National Financial Corporation (Delaware)
Entity Form: a Delaware corporation (inactive)
Ownership or Other Basis of Control: Wholly owned subsidiary of American
National Insurance Company.
Entity: American National Financial Corporation (Nevada)
Entity Form: a Nevada corporation (inactive)
Ownership or Other Basis of Control: Wholly owned subsidiary of American
National Insurance Company.
Entity: American National General Insurance Company
Entity Form: a Missouri insurance company
Ownership or Other Basis of Control: Wholly owned subsidiary of American
National Property and Casualty Company.
Entity: American National Insurance Service Company
Entity Form: a Missouri corporation
Ownership or Other Basis of Control: Wholly owned subsidiary of American
National Property and Casualty Company.
<PAGE>
Entity: American National Investment Accounts, Inc.
Entity Form: a Maryland corporation - registered investment company
Ownership or Other Basis of Control: Investment Advisory Agreement with
Securities Management and Research, Inc. Also, American National Insurance
Company and Securities Management and Research, Inc. own all of the outstanding
stock of the Company.
Entity: American National Life Insurance Company of Texas
Entity Form: a Texas insurance company
Ownership or Other Basis of Control: Wholly owned subsidiary of American
National Insurance Company
Entity: American National Lloyds Insurance Company
Entity Form: a Texas insurance company
Ownership or Other Basis for Control: ANPAC Lloyds Management, Inc. is attorney-
in-fact
Entity: American National Promotora de Ventas, S.A. de C.V.
Entity Form: a Mexico company
Ownership or Other Basis of Control: ANMEX International Services, Inc. owns
99.9%, and ANMEX International, Inc. owns 0.10%.
Entity: American National Property and Casualty Company
Entity Form: a Missouri insurance company
Ownership or Other Basis of Control: Wholly owned subsidiary of American
National Insurance Company.
Entity: ANDV 97, Inc.
Entity Form: a Texas corporation
Ownership or Other Basis of Control: Wholly owned subsidiary of ANTAC, Inc.
Entity: ANIND TX, Inc.
Entity Form: a Texas corporation
Ownership or Other Basis of Control: Wholly owned subsidiary of ANREM
Corporation
<PAGE>
Entity: ANMEX International, Inc.
Entity Form: a Nevada corporation
Ownership or Other Basis of Control: Wholly owned subsidiary of American
National Insurance Company.
Entity: ANMEX International Services, Inc.
Entity Form: a Nevada corporation
Ownership or Other Basis of Control: Wholly owned subsidiary of American
National Insurance Company.
Entity: ANPAC General Agency of Texas
Entity Form: a Texas corporation
Ownership or Other Basis of Control: Wholly owned subsidiary of American
National Property and Casualty Company.
Entity: ANPAC Lloyds Insurance Management, Inc.
Entity Form: a Texas corporation
Ownership or Other Basis for Control: Wholly owned subsidiary of American
National Property and Casualty Company
Entity: ANREM Corporation
Entity Form: a Texas corporation
Ownership or Other Basis of Control: Wholly owned subsidiary of Securities
Management and Research, Inc.
Entity: ANTAC, Inc.
Entity Form: a Nevada corporation
Ownership or Other Basis of Control: Wholly owned subsidiary of American
National Insurance Company
Entity: AN/WRI Partnership, Ltd.
Entity Form: a Texas limited partnership
Ownership or Other Basis of Control: Eagle AN, L.P. owns an 80% limited
partnership interest
<PAGE>
Entity: Beechwood Business Park Joint Venture.
Entity Form: a Texas limited partnership
Ownership or Other Basis of Control: ANDV 97, Inc. owns a 50% limited
partnership interest.
Entity: Comprehensive Investment Services, Inc.
Entity Form: a Nevada corporation
Ownership or Other Basis of Control: Wholly owned subsidiary of American
National Insurance Company.
Entity: Eagle 99, Inc.
Entity Form: a Nevada corporation
Ownership or Other Basis of Control: Wholly owned subsidiary of ANTAC, Inc.
Entity: Eagle AN, L.P.
Entity Form: a Texas limited partnership
Ownership or Other Basis of Control: Eagle 99, Inc. owns a 99.9% limited
partnership interest. ANIND TX, Inc. owns a 0.10% general partnership interest.
Entity: Eagle Ind., L.P.
Entity Form: a Texas limited partnership
Ownership or Other Basis of Control: American National Insurance Company owns a
99.9% limited partnership interest. ANIND TX, Inc. owns a 0.10% general
partnership interest.
Entity: Fairway Plaza Associates, L.P.
Entity Form: a Texas limited partnership
Ownership or Other Basis of Control: ANREM Corporation owns a 50% limited
partnership interest.
Entity: Galveston Health Network, Inc.
Entity Form: a Texas corporation (inactive)
<PAGE>
Ownership or Other Basis of Control: Wholly owned subsidiary of American
National Insurance Company.
Entity: Garden State Life Insurance Company
Entity Form: a Texas insurance company
Ownership or Other Basis of Control: Wholly owned subsidiary of American
National Insurance Company.
Entity: Gateway Park Joint Venture
Entity Form: a Texas joint venture
Ownership or Other Basis of Control: South Shore Harbour Development, Ltd. has
a 50% interest.
Entity: Harbour Title Company
Entity Form: a Texas corporation
Ownership or Other Basis of Control: South Shore Harbour Development, Ltd. owns
50% of the outstanding stock.
Entity: Hicks, Muse, Tate & Furst Equity Fund III, L.P.
Entity Form: a Delaware limited partnership
Ownership or Other Basis of Control: American National Insurance Company owns a
limited partnership interest.
Entity: Hicks, Muse, Tate & Furst Equity Fund IV, L.P.
Entity Form: a Delaware limited partnership
Ownership or Other Basis of Control: American National Insurance Company owns a
limited partnership interest.
Entity: I-10 Westview Partnership, Ltd.
Entity Form: a Texas limited partnership
Ownership or Other Basis of Control: ANDV 97, Inc. owns a 50% interest
Entity: IAH 97 Joint Venture
Entity Form: a Texas general partnership
<PAGE>
Ownership or Other Basis of Control: ANDV 97, Inc. has a 50% interest.
Entity: Kearns Building Joint Venture
Entity Form: a Texas joint venture
Ownership or Other Basis of Control: American National Insurance Company owns a
85% interest.
Entity: Lincolnshire Equity Fund, L.P.
Entity Form: a Delaware limited partnership
Ownership or Other Basis of Control: American National Insurance Company owns a
limited partnership interest
Entity: Lincolnshire Equity Fund II, L.P.
Entity Form: a Delaware limited partnership
Ownership or Other Basis of Control: American National Insurance Company owns a
limited partnership interest.
Entity: Pacific Property and Casualty Company
Entity Form: a California corporation
Ownership or Other Basis of Control: Wholly owned subsidiary of American
National Property and Casualty Company
Entity: Panther Creek Limited Partnership
Entity Form: a Texas limited partnership
Ownership or Other Basis of Control: American National Insurance Company owns a
99% limited partnership interest
Entity: PCO Corporate Drive Limited Partnership
Entity Form: a North Carolina limited partnership
Ownership or Other Basis of Control: Eagle AN, L.P. owns a 1% interest
<PAGE>
Entity: Rutledge Partners, L.P.
Entity Form: a Texas limited partnership
Ownership or Other Basis of Control: American National Insurance Company owns a
50% interest.
Entity: Securities Management and Research, Inc.
Entity Form: a Florida corporation - a registered broker-dealer and investment
adviser
Ownership or Other Basis of Control: wholly-owned subsidiary of American
National Insurance Company
Entity: Servicios de Administracion American National, S.A. de C.V.
Entity Form: a Mexico company
Ownership or Other Basis of Control: ANMEX International Services, Inc. owns
99.9%, and ANMEX International, Inc. owns 0.10%.
Entity: SM&R Balanced Fund, Inc.
Entity Form: a Maryland corporation - a registered investment company
Ownership or Other Basis of Control: Investment Advisory Agreement with
Securities Management and Research, Inc. Also, American National Insurance
Company and Securities Management and Research, Inc. own stock of the Company.
Entity: SM&R Equity Income Fund, Inc.
Entity Form: a Maryland corporation - registered investment company
Ownership or Other Basis of Control: Investment Advisory Agreement with
Securities Management and Research, Inc. Also, American National Insurance
Company and Securities Management and Research, Inc. own stock of the Company.
Entity: SM&R Growth Fund, Inc.
Entity Form: a Maryland corporation - registered investment company
Ownership or Other Basis of Control: Investment Advisory Agreement with
Securities Management and Research, Inc. Also, American National Insurance
Company and Securities Management and Research, Inc. own stock of the Company.
Entity: SM&R Investments, Inc.
<PAGE>
Entity Form: a Maryland corporation - a registered investment company
Ownership or Other Basis of Control: Investment Advisory Agreement with
Securities Management and Research, Inc. Also, the Company consists of four
different series: Government Bond Fund, Primary Fund, Tax Free Fund, and Money
Market Fund. American National Insurance Company and Securities Management and
Research, Inc. own stock in each. Various subsidiaries of American National
Insurance Company own stock in the Primary Fund and the Money Market Fund.
Entity: South Shore Harbour Development, Ltd.
Entity Form: a Texas limited partnership
Ownership or Other Basis of Control: ANTAC, Inc. owns a 95% limited partnership
interest. ANREM Corp. owns a 5% general partnership interest.
Entity: Standard Life and Accident Insurance Company
Entity Form: an Oklahoma insurance company
Ownership or Other Basis of Control: Wholly owned subsidiary of American
National Insurance Company.
Entity: Starvest Partners, L.P.
Entity Form: a Delaware limited partnership
Ownership or Other Basis of Control: American National Insurance Company owns a
limited partnership interest.
Entity: Third and Catalina, Ltd.
Entity Form: a Texas limited partnership
Ownership or Other Basis of Control: American National Insurance Company owns a
49% limited partnership interest.
Entity: Thomas Weisel Capital Partners, L.P.
Entity Form: limited partnership
Ownership or Other Basis of Control: American National Insurance Company owns a
limited partnership interest.
Entity: Timbermill, Ltd.
Entity Form: a Texas joint venture
<PAGE>
Ownership or Other Basis of Control: American National Insurance Company owns a
99% limited partnership interest.
Entity: Town and Country Joint Venture
Entity Form: a Texas joint venture
Ownership or Other Basis of Control: ANDV 97, Inc. owns a 99% limited
partnership interest.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AMERICAN
NATIONAL VARIABLE ANNUITY SEPARATE ACCOUNT AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<INVESTMENTS-AT-COST> 32,535
<INVESTMENTS-AT-VALUE> 39,625
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 39,625
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 39,625
<DIVIDEND-INCOME> 498
<INTEREST-INCOME> 0
<OTHER-INCOME> 1,432
<EXPENSES-NET> 481
<NET-INVESTMENT-INCOME> 1,449
<REALIZED-GAINS-CURRENT> 1,272
<APPREC-INCREASE-CURRENT> 2,736
<NET-CHANGE-FROM-OPS> 5,456
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 6,807
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
</TABLE>
