<PAGE>
As filed with the Securities and Exchange Commission on April 29, 1996.
Registration Nos. 33-71688
811-8154-01
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 3
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 9
SEPARATE ACCOUNT A
OF
FIRST FORTIS LIFE INSURANCE COMPANY
(Exact Name of Registrant)
---------------------------------
FIRST FORTIS LIFE INSURANCE COMPANY
(Name of Depositor)
220 Salina Meadows Parkway
Syracuse, New York 13220
(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number, including Area Code:
315-451-0066
---------------------------------
DAVID A. PETERSON, ESQ.
500 Bielenberg Drive
Woodbury, Minnesota 55125
(Name and Address of Agent for Service)
This document consists of 120 pages. Exhibit Index appears on page 65.
<PAGE>
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Registration Statement.
-----------------------------------
It is proposed that this filing will be come effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485.
[ X ] on May 1, 1996 pursuant to paragraph (b) of Rule 485.
[ ] 60 days after filing pursuant to paragraph (a)(i) of Rule 485.
[ ] On ___________ pursuant to paragraph (a)(i) of Rule 485.
[ ] 75 days after filing pursuant to paragraph (a)(ii) of Rule 485.
[ ] On ___________ 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.
--------------------------------------
An indefinite amount of the securities being offered has been registered
pursuant to a declaration under Rule 24f-2 under the Investment Company Act of
1940, set out in the Form N-4 Registration Statement contained in File No. 33-
71686. The registration has not yet needed to file a Rule 24f-2 notice because
it did not sell any securities pursuant to such declaration in its prior fiscal
year.
<PAGE>
VARIABLE ACCOUNT A OF
FIRST FORTIS LIFE INSURANCE COMPANY
Cross Reference Sheet Showing Location
of Information in Prospectus or
Statement of Additional Information
--------------------------------------
Form N-4 Prospectus Caption
-------- ------------------
1. Cover Page Cover Page
2. Definitions Special Terms Used in This Prospectus
3. Synopsis of Highlights Summary; Information concerning fees and
charges
4. Condensed Financial Summary -- Financial information
Information
5. General Description of Summary--Separate Account Invest-
Registrant, Depositor and ment Options; First Fortis and the
Portfolio Companies Separate Account; Fixed Account
6. Deductions Summary--Charges and Deductions; Charges
and Deductions
7. General Description of Variable Accumulation Period; General
Annuity Contracts Provisions
8. Annuity Period The Annuity Period
9. Death Benefit Summary--Death Benefit; Accumulation
Period --
- Benefit Payable on Death of
Annuitant or Contract Owner
10. Purchases and Contract Value Accumulation Period --
- Issuance of a Contract and
Purchase Payments
- Contract Value
11. Redemptions Summary--Total and Partial Surrenders;
Accumulation Period
-- Total and Partial Surrenders
12. Taxes Summary--Tax Implications; Federal Tax
Matters
<PAGE>
PROSPECTUS OR
STATEMENT OF ADDITIONAL
FORM N-4 INFORMATION CAPTION
-------- ------------------------
(cont'd.)
13. Legal Proceedings None
14. Table of Contents of the Contents of the Statement of
Statement of Additional Additional Information
Information
15. Cover Page Cover Page
16. Table of Contents Table of Contents
17. General Information and First Fortis Life Insurance
History Company
18. Services Services
19. Purchases of Securities Being Reduction of Charges
Offered
20. Underwriters Services
21. Calculation of Performance Appendix A
Data
22. Annuity Payments Calculation of Annuity Payments
23. Financial Statements Financial Statements
<PAGE>
<TABLE>
<S> <C> <C>
FIRST FORTIS
FIRST FORTIS LIFE INSURANCE COMPANY
MAILING ADDRESS: STREET ADDRESS: PHONE:
</TABLE>
OPPORTUNITY
<TABLE>
<S> <C> <C>
P.O. BOX 3249 220 SALINA MEADOWS 1-800-745-8248
SYRACUSE, NY PARKWAY
13220 SUITE 255
</TABLE>
VARIABLE
<TABLE>
<S> <C> <C>
SYRACUSE, NY 13220
</TABLE>
ANNUITY
This Prospectus describes an individual flexible premium
deferred variable annuity contract ("Contract")
Individual Flexible
issued by First Fortis Life Insurance Company ("First
Fortis"). The minimum initial or subsequent Premium
Deferred
purchase payment is generally $50.
Variable Annuity Contract
The Contract allows you to accumulate funds on a
tax-deferred basis. Contract Owners may elect a
guaranteed interest accumulation option through First
Fortis' Fixed Account or a variable return accumulation
option through Separate Account A (the "Separate
Account") of First Fortis Life Insurance Company, or a
combination of these two options. Under the variable
rate accumulation option, Contract Owners can choose one
or more of the following investment Portfolios of Fortis
Series Fund, Inc. ("Fortis Series"): Money Market
Series, U.S. Government Securities Series, Diversified
Income Series, Global Bond Series, High Yield Series,
Asset Allocation Series, Global Asset Allocation Series,
Value Series, Growth & Income Series, S&P 500 Index
Series, Blue Chip Stock Series, Growth Stock Series,
Global Growth Series, International Stock Series and
Aggressive Growth Series. The accompanying Prospectus
for Fortis Series describes the investment objectives,
policies and risks of each of the Portfolios.
The Contract provides several different types of
retirement and death benefits to Contract Owners,
Annuitants or their Beneficiaries, including fixed and
variable annuity income options. Contract Owners may,
under certain circumstances, make partial surrenders of
the Contract Value or may totally surrender the Contract
for its Cash Surrender Value.
You have the right to examine a Contract for ten days
from the time you receive the Contract and return it for
a refund of the full Contract Value.
PROSTPECTUS DATED
May 1, 1996
This Prospectus gives prospective investors information
about the Contracts that they should know before
investing. This Prospectus must be accompanied by a
current Prospectus of Fortis Series Fund, Inc. Both
Prospectuses should be read carefully and kept for
future reference.
A Statement of Additional Information, dated May 1,
1996, about the Contracts has been filed with the
Securities and Exchange Commission and is available
without charge, from First Fortis at the address and
phone number printed above. The Table of Contents for
the Statement of Additional Information appears on page
18 of this Prospectus.
THESE CONTRACTS ARE NOT OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, CREDIT UNION, BROKER-DEALER OR
OTHER FINANCIAL INSTITUTION. THEY ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY; AND
INVOLVE INVESTMENT
[Logo]
RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
97103 (Ed. 5/96)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
SPECIAL TERMS USED IN THIS PROSPECTUS................................................................... 3
INFORMATION CONCERNING FEES AND CHARGES................................................................. 4
SUMMARY................................................................................................. 6
FIRST FORTIS AND THE SEPARATE ACCOUNT................................................................... 7
- First Fortis Life Insurance Company............................................................... 7
- The Separate Account.............................................................................. 7
- Fortis Series Fund, Inc........................................................................... 8
ACCUMULATION PERIOD..................................................................................... 8
- Issuance of a Contract and Purchase Payments...................................................... 8
- Contract Value.................................................................................... 9
- Allocation of Purchase Payments and Contract Value................................................ 9
- Total and Partial Surrenders...................................................................... 10
- Benefit Payable on Death of Annuitant or Contract Owner........................................... 10
THE ANNUITY PERIOD...................................................................................... 11
- Annuity Commencement Date......................................................................... 11
- Commencement of Annuity Payments.................................................................. 11
- Relationship Between Subaccount Investment Performance and Amount of Variable Annuity Payments.... 11
- Annuity Forms..................................................................................... 12
- Death of Annuitant or Other Payee................................................................. 12
CHARGES AND DEDUCTIONS.................................................................................. 12
- Premium Taxes..................................................................................... 12
- Annual Administrative Charge...................................................................... 12
- Charges Against the Separate Account.............................................................. 12
- Surrender Charge.................................................................................. 13
- Miscellaneous..................................................................................... 13
- Reduction of Charges.............................................................................. 13
FIXED ACCOUNT........................................................................................... 14
- General Description............................................................................... 14
- Fixed Account Value............................................................................... 14
- Fixed Account Transfers, Total and Partial Surrenders............................................. 14
GENERAL PROVISIONS...................................................................................... 14
- The Contract...................................................................................... 14
- Postponement of Payments.......................................................................... 14
- Misstatement of Age or Sex and Other Errors....................................................... 14
- Assignment and Ownership Rights................................................................... 15
- Beneficiary....................................................................................... 15
- Reports........................................................................................... 15
RIGHTS RESERVED BY FIRST FORTIS......................................................................... 15
DISTRIBUTION............................................................................................ 15
FEDERAL TAX MATTERS..................................................................................... 16
VOTING PRIVILEGES....................................................................................... 17
STATE REGULATION........................................................................................ 18
LEGAL MATTERS........................................................................................... 18
CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION......................................................... 18
APPENDIX A--Sample Death Benefit Calculations........................................................... A-1
APPENDIX B--Explanation of Expense Calculations......................................................... B-1
</TABLE>
THE CONTRACTS ARE NOT AVAILABLE IN ALL STATES. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE. FIRST FORTIS DOES NOT AUTHORIZE ANY INFORMATION OR
REPRESENTATION REGARDING THE OFFERING DESCRIBED IN THIS PROSPECTUS WHICH IS NOT
INCLUDED IN THIS PROSPECTUS, THE RELATED STATEMENT OF ADDITIONAL INFORMATION, OR
ANY SUPPLEMENTS THERETO OR IN ANY SUPPLEMENTAL SALES MATERIAL AUTHORIZED BY
FIRST FORTIS.
<PAGE>
SPECIAL TERMS USED IN THIS PROSPECTUS
<TABLE>
<S> <C>
ACCUMULATION PERIOD The time period under a Contract between the Contract Date and the Annuity Period.
ACCUMULATION UNIT A unit of measure used to calculate the interest of the Contract Owner in the Separate
Account during the Accumulation Period.
ANNUITANT A person during whose life annuity payments are to be made by First Fortis under the
Contract.
ANNUITY COMMENCEMENT The date on which the Annuity Period commences.
DATE
ANNUITY PERIOD The time period following the Accumulation Period, during which annuity payments are
made by First Fortis.
ANNUITY UNIT A unit of measurement used to calculate variable annuity payments.
BENEFICIARY The person entitled to receive benefits under the terms of the Contract.
CASH SURRENDER VALUE The amount payable to the Contract Owner on surrender of the Contract after deduction
of all applicable charges.
CONTRACT OWNER The person named in the application as the Contract Owner, or any successor Contract
Owner. Unless otherwise named, the Annuitant is the Contract Owner.
CONTRACT DATE The date on which the Contract was issued. Contract years are measured from the
Contract Date.
CONTRACT VALUE The sum of the Fixed Account Value and the Separate Account Value.
FIVE YEAR ANNIVERSARY The fifth anniversary of a Contract Date, and each subsequent fifth anniversary of
that date.
FIXED ACCOUNT The name of the alternative under which purchase payments are allocated to First
Fortis' General Account.
FIXED ACCOUNT VALUE The amount of your Contract Value which is in the Fixed Account.
FIXED ANNUITY OPTION An annuity option under which First Fortis promises to pay the Annuitant or any other
properly designated payee one or more fixed payments.
FORTIS GROUP FUNDS All publicly-available mutual funds advised by Fortis Advisers, Inc. (other than
Fortis Money Portfolios, Inc.). Currently, these mutual funds are: Fortis Worldwide
Portfolios, Inc., Fortis Equity Portfolios, Inc., Fortis Growth Fund, Inc., Fortis
Fiduciary Fund, Inc., Fortis Tax-Free Portfolios, Inc., Fortis Income Portfolios,
Inc., and Fortis Advantage Portfolios, Inc.
FORTIS SERIES The Fortis Series Fund, Inc., a diversified, open-end management investment company in
which the Separate Account invests.
GENERAL ACCOUNT All assets of First Fortis other than those in the Separate Account, or in any other
legally segregated separate account established by First Fortis.
HOME OFFICE Our office at 220 Salina Meadows Parkway, Suite 255, Syracuse, New York;
1-800-745-8248; Mailing address: P.O. Box 3249, Syracuse, NY 13220.
NET PURCHASE PAYMENT The gross amount of a purchase payment less any applicable premium taxes or similar
governmental assessments.
NON-QUALIFIED CONTRACTS Contracts that do not qualify for the special federal income tax treatment applicable
in connection with certain retirement plans.
PORTFOLIO Each separate investment portfolio of Fortis Series eligible for investment by the
Separate Account.
QUALIFIED CONTRACTS Contracts that are qualified for the special federal income tax treatment applicable
in connection with certain retirement plans.
SEPARATE ACCOUNT The segregated asset account referred to as Separate Account A of First Fortis Life
Insurance Company established to receive and invest purchase payments made under
Contracts.
SEPARATE ACCOUNT VALUE The amount of your Contract Value in the Subaccounts of the Separate Account.
SUBACCOUNTS The several Subaccounts of the Separate Account, each of which invests its assets in a
different Portfolio.
VALUATION DATE Each business day of First Fortis except, with respect to any Subaccount, days on
which the related Portfolio does not value its shares. Generally, the Portfolios value
their shares on each day the New York Stock Exchange is open.
VALUATION PERIOD The period that starts at the close of regular trading on the New York Stock Exchange
on a Valuation Date and ends at the close of regular trading on the exchange on the
next succeeding Valuation Date.
VARIABLE ANNUITY OPTION An annuity option under which First Fortis promises to pay the Annuitant or any other
properly designated payee one or more payments which vary in amount in accordance with
the net investment experience of the Subaccounts selected by the Annuitant.
WRITTEN REQUEST A written, signed and dated request, in form and substance satisfactory to First
Fortis and received at our Home Office.
</TABLE>
3
<PAGE>
INFORMATION CONCERNING FEES AND CHARGES
CONTRACT OWNER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Front End Sales Charge Imposed on Purchases................................................. 0%
Maximum Surrender Charge for Sales Expenses (as a percentage of purchase payments).......... 5%(1)
</TABLE>
<TABLE>
<CAPTION>
YEARS SINCE
DATE OF
PAYMENT AMOUNT OF CHARGE
- -------------- ----------------
<S> <C>
Less than 5 5%
5 or more 0%
</TABLE>
<TABLE>
<S> <C>
Other Surrender Fees........................................................................ 0%
Exchange Fee................................................................................ 0%
Charge for Each 403(b) Contract Loan........................................................ $ 100
ANNUAL CONTRACT ADMINISTRATION CHARGE.............................................................. $ 30 (2)
SEPARATE ACCOUNT ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE ACCOUNT VALUE)
Mortality and Expense Risk Charge........................................................... 1.25 %
Separate Account Administrative Charge...................................................... .10 %
---
Total Separate Account Annual Expenses.................................................... 1.35 %
</TABLE>
- ------------------------------
(1) This charge does not apply in certain cases such as partial surrenders each
year of up to 10% of "new purchase payments" as defined under the heading
"surrender charge" or, payment of a death benefit.
(2) This charge, which is otherwise applied at each Contract anniversary and
total surrender of the Contract, will not be charged during the Accumulation
Period if the Contract Value as of such anniversary or surrender is $25,000
or more. Currently, First Fortis waives this charge during the Annuity
Period. This charge is also subject to any applicable limitations under the
law of any state.
FORTIS SERIES ANNUAL EXPENSES (A)
<TABLE>
<CAPTION>
MONEY ASSET
MARKET U.S. GOVERNMENT DIVERSIFIED GLOBAL BOND HIGH YIELD ALLOCATION
SERIES SECURITIES SERIES INCOME SERIES SERIES SERIES SERIES
------ -------------------- -------------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Investment Advisory and
Management Fee............. .30% .46% .47% .75% .50% .49%
Other Expenses.............. .10% .07% .08% .53% .13% .06%
Total Fortis Series
Operating Expenses......... .40% .53% .55% 1.28% .63% .55%
<CAPTION>
GLOBAL ASSET S&P 500 BLUE CHIP GLOBAL
ALLOCATION VALUE GROWTH & INDEX STOCK GROWTH STOCK GROWTH
SERIES SERIES INCOME SERIES SERIES SERIES SERIES SERIES
------------- ----------- -------------- ----------- ----------- ------ ------
<S> <C> <C>
Investment Advisory and
Management Fee............. .90% .70% .70% .40% .85% ,62% .70%
Other Expenses.............. .37% .16% .11% .16% .16% .05% .10%
Total Fortis Series
Operating Expenses......... 1.27% .86% .81% .56% 1.01% .67% .80%
<CAPTION>
INTERNATIONAL AGGRESSIVE
STOCK SERIES GROWTH SERIES
---------------- --------------
Investment Advisory and
Management Fee............. .85% .70%
Other Expenses.............. .29% .11%
Total Fortis Series
Operating Expenses......... 1.14% .81%
</TABLE>
- ------------------------------
(a) As a percentage of Series average net assets based on 1995 historical data
except that the expenses of Blue Chip Stock Series, Value Series, and S&P
500 Index Series are based upon an estimate of 1996 expenses.
4
<PAGE>
EXAMPLES*
If you SURRENDER your Contract in full at the end of any of the time periods
shown below, you would pay the following cumulative expenses on a $1,000
investment, assuming a 5% annual return on assets:
<TABLE>
<CAPTION>
IF ALL AMOUNTS ARE INVESTED IN ONE PORTFOLIO: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Money Market Series....................................... $ 64 $ 103 $ 146 $ 218
U.S. Government Securities Series......................... 65 107 152 231
Diversified Income Series................................. 65 108 153 233
Global Bond Series........................................ 73 130 190 307
High Yield Series......................................... 66 110 157 242
Asset Allocation Series................................... 65 108 153 233
Global Asset Allocation Series............................ 73 130 189 306
Growth & Income Series.................................... 68 116 166 260
Growth Stock Series....................................... 67 112 159 246
Global Growth Series...................................... 68 116 166 259
Aggressive Growth Series.................................. 68 116 166 260
International Stock Series................................ 71 126 183 293
S&P 500 Index Series...................................... 66 108 154 234
Blue Chip Stock Series.................................... 70 122 176 280
Value Series.............................................. 69 117 169 265
</TABLE>
If you COMMENCE AN ANNUITY payment option, or do NOT surrender your Contract or
commence an annuity payment option, you would pay the following cumulative
expenses on a $1,000 investment, assuming a 5% annual return on assets:
<TABLE>
<CAPTION>
IF ALL AMOUNTS ARE INVESTED IN ONE PORTFOLIO: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Money Market Series....................................... $ 19 $ 58 $ 101 $ 218
U.S. Government Securities Series......................... 20 62 107 231
Diversified Income Series................................. 20 63 108 233
Global Bond Series........................................ 28 85 145 307
High Yield Series......................................... 21 65 112 242
Asset Allocation Series................................... 20 63 108 233
Global Asset Allocation Series............................ 28 85 144 306
Growth & Income Series.................................... 23 71 121 260
Growth Stock Series....................................... 22 67 114 246
Global Growth Series...................................... 23 71 121 259
Aggressive Growth Series.................................. 23 71 121 260
International Stock Series................................ 26 81 138 293
S&P 500 Index Series...................................... 21 63 109 234
Blue Chip Stock Series.................................... 25 77 131 280
Value Series.............................................. 24 72 124 265
</TABLE>
- ------------------------
* For purposes of these examples, the effect of the annual Contract
administration charge has been computed based on the experience of an
affiliated company.
------------------------------
THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The foregoing tables and examples, prescribed by the SEC, are included to assist
Contract Owners in understanding the transaction and operating expenses imposed
directly or indirectly under the Contracts and Fortis Series. Amounts for state
premium taxes or similar assessments will also be deducted, where applicable.
See Appendix B for an explanation of the calculation of the amounts set forth
above.
5
<PAGE>
SUMMARY
The following summary should be read in conjunction with the detailed
information in this Prospectus. This Prospectus generally describes only the
portion of the Contract involving the Separate Account. For a brief description
of First Fortis' Fixed Account, please refer to the heading "Fixed Account" in
this Prospectus.
The Contract is designed to provide individuals with retirement benefits through
the accumulation of Net Purchase Payments on a fixed or variable basis, and by
the application of such accumulations to provide fixed or variable annuity
payments.
"We," "our," and "us" mean First Fortis Life Insurance Company. "You" and "your"
mean a reader of this Prospectus who is contemplating making purchase payments
or taking any other action in connection with a Contract.
PURCHASE PAYMENTS
For individual Contracts, each initial or subsequent purchase payment must be at
least $50. For contracts issued in connection with a benefit plan covering
employees, the initial and subsequent purchase payments under each Contract must
at all times average at least $50 and in no case be less than $25. No additional
purchase payments are required, if the Contract Value is at least $500 by the
end of the first Contract year and at least $1,000 by the end of second Contract
year and at all times thereafter. See "Issuance of a Contract and Purchase
Payments."
On the Contract Date, the initial purchase payment is allocated, as specified by
the Contract Owner in the Contract application, among one or more of the
Subaccounts of the Separate Account, or to the Fixed Account, or to both.
Subsequent purchase payments are allocated in the same way, or pursuant to
different allocation percentages that the Contract Owner may subsequently
request.
SEPARATE ACCOUNT INVESTMENT OPTIONS
Each of the Subaccounts of the Separate Account invests in shares of a
corresponding Portfolio of Fortis Series. The investment objective of each of
the Subaccounts of the Separate Account and that of the corresponding Portfolio
of Fortis Series is the same.
Contract Value in each of the Subaccounts of the Separate Account will vary to
reflect the investment experience of each of the corresponding Series, as well
as deductions for certain charges.
Each Portfolio has a separate and distinct investment objective and is managed
by Fortis Advisers, Inc. or a subadviser of Fortis Advisers, Inc. For providing
investment management services to the Portfolios, Fortis Advisers, Inc. receives
fees from Fortis Series based on the average daily net assets of each Portfolio.
The Portfolios also bear most of their other expenses. A full description of the
Portfolios and their investment objectives, policies and risks can be found in
the current Prospectus for Fortis Series, which accompanies this Prospectus, and
Fortis Series' Statement of Additional Information, which is available upon
request.
TRANSFERS
During the Accumulation Period, you can transfer all or part of your Contract
Value from one Subaccount to another or into the Fixed Account. Additionally,
during the accumulation period we may, in our discretion, permit a continuing
request for transfers of specified amounts automatically on a periodic basis.
There is currently no charge for any of these transfers. We reserve the right to
restrict the frequency of or otherwise condition, terminate, or impose charges
upon, transfers from a Subaccount during the Accumulation Period. During the
Annuity Period the person receiving annuity payments may make up to four
transfers (but not from a Fixed Annuity Option) during each year of the Annuity
Period. For a description of certain limitations on transfer rights, see
"Allocations of Purchase Payments and Contract Values--Transfers."
TOTAL OR PARTIAL SURRENDERS
All or part of the Contract Value of a Contract may be surrendered by the
Contract Owner before the earlier of the Annuitant's death or the Annuity
Commencement Date. Amounts surrendered may be subject to a surrender charge and
total surrenders may not be made without application of the annual
administrative charge if the Contract Value is less than $25,000. See "Total and
Partial Surrenders," "Surrender Charge" and "Annual Administrative Charge."
Particular attention should be paid to the tax implications of any surrender,
including possible penalties for premature distributions. See "Federal Tax
Matters."
CHARGES AND DEDUCTIONS
First Fortis deducts daily charges at a rate of 1.25% per annum of the value of
the average net assets in the Separate Account for the mortality and expense
risks it assumes and .10% per annum of the value of the average net assets in
the Separate Account to cover certain administrative expenses. See "Mortality
and Expense Risk Charge" and "Administrative Expense Charge" under the heading
"Charges Against the Separate Account."
In order to permit investment of the entire Net Purchase Payment, First Fortis
does not deduct sales charges at the time of investment. However, a surrender
charge is imposed on certain total or partial surrenders of the Contract to help
defray expenses relating to the sale of the Contract, including commissions to
registered representatives and other promotional expenses. Certain amounts may
be surrendered without the imposition of any surrender charge. The amount of
such charge-free surrender depends on how recently the purchase payments to
which the surrender relates were made. The aggregate surrender charges will
never exceed 5% of the purchase payments made to date.
There is also an annual administrative charge each year for Contract
administration and maintenance. This charge is $30 per year (subject to any
applicable state law limitations) and is deducted on each anniversary of the
Contract Date and upon total surrender of the Contract. Currently, this charge
is not deducted during the Annuity Period. This charge will be waived during the
Accumulation Period if the Contract Value at the end of the Contract year (or
upon total surrender) is $25,000 or more.
Certain states and other jurisdictions impose premium taxes or similar
assessments upon First Fortis, either at the time purchase payments are made or
when Contract Value is applied to an annuity option. Where such taxes or
assessments are imposed by your state or other jurisdiction upon receipt of
purchase payments, we will deduct a charge for these amounts from the Contract
Value upon surrender, death of the Annuitant or Contract Owner, or annuitization
of the Contract. In jurisdictions where such taxes or assessments are imposed at
the time of annuitization, we will deduct a charge for such amounts at that
time.
ANNUITY PAYMENTS
The Contract provides several types of annuity benefits to Annuitants or their
Beneficiaries, including Fixed and Variable Annuity Options.
6
<PAGE>
The Contract Owner has considerable flexibility in choosing the Annuity
Commencement Date. However, the tax implications of an Annuity Commencement Date
must be carefully considered, including the possibility of penalties for
commencing benefits either too soon or too late. See "Annuity Commencement
Date," "Annuity Forms" and "Federal Tax Matters" in this Prospectus and
"Taxation Under Certain Retirement Plans" in the Statement of Additional
Information.
DEATH BENEFIT
In the event that the Annuitant or Contract Owner dies prior to the Annuity
Commencement Date, a death benefit is payable. See "Benefit Payable on Death of
Annuitant or Contract Owner."
RIGHT TO EXAMINE THE CONTRACT
The Contract Owner has a right to examine the Contract. The Contract Owner can
cancel the Contract by delivering or mailing it, together with a Written
Request, to First Fortis' Home Office or to the sales representative through
whom it was purchased, before the close of business on the tenth day after
receipt of the Contract. If these items are sent by mail, properly addressed and
postage prepaid, they will be deemed to be received by First Fortis on the date
postmarked. First Fortis will return to you the then current Contract Value.
LIMITATIONS IMPOSED BY RETIREMENT PLANS
Certain rights a Contract Owner would otherwise have under a Contract may be
limited by the terms of any employee benefit plan in connection with which the
Contract is issued. These limitations may restrict such things as total and
partial surrenders, the amount or timing of purchase payments that may be made,
when annuity payments must start and the type of annuity options that may be
selected. Accordingly, you should familiarize yourself with these and all other
aspects of any retirement plan in connection with which a Contract is issued.
TAX IMPLICATIONS
The tax implications for Contract Owners, Annuitants and Beneficiaries, and
those of any related employee benefit plan can be quite important. A brief
discussion of some of these is set out under "Federal Tax Matters" in this
Prospectus and "Taxation Under Certain Retirement Plans" in the Statement of
Additional Information, but such discussion is not comprehensive. Therefore, you
should consider these matters carefully and consult a qualified tax adviser
before making purchase payments or taking any other action in connection with a
Contract or any related employee benefit plan. Failure to do so could result in
serious adverse tax consequences which might otherwise have been avoided.
QUESTIONS AND OTHER COMMUNICATIONS
Any question about procedures or the Contract should be directed to your sales
representative, or First Fortis' Home Office: P.O. Box 3249, Syracuse, NY 13220;
1-800-745-8248. For certain current information relating to Contract Values such
as Subaccount unit values, interest rates in the Fixed Account, and your
Contract Value, call 1-800-745-8248. Purchase payments and Written Requests
should be mailed or delivered to the same Home Office address. All
communications should include the Contract number, the Contract Owner's name
and, if different, the Annuitant's name. The number for telephone transfers is
1-800-745-8248.
Any purchase payment or other communication, except a 10-day cancellation
notice, is deemed received at First Fortis' Home Office on the actual date of
receipt there in proper form unless received (1) after the close of regular
trading on the New York Stock Exchange, or (2) on a date that is not a Valuation
Date. In either of these two cases, the date of receipt will be deemed to be the
next Valuation Date.
FINANCIAL AND PERFORMANCE INFORMATION
This Prospectus contains no Accumulation Unit Information for subaccounts of the
Separate Account because the Separate Account has not yet commenced operations,
has no assets or liabilities, and has received no income nor incurred any
expenses as of the date of this Prospectus.
For the same reasons, no audited financial statements of the Separate Account
are included in the Statement of Additional Information. Audited financial
statements of First Fortis are included in the Statement of Additional
Information.
Advertising and other sales materials may include yield and total return figures
for the Subaccounts of the Separate Account. These figures are based on
historical results and are not intended to indicate future performance. "Yield"
is the income generated by an investment in the Subaccount over a period of time
specified in the advertisement. This rate of return is assumed to be earned over
a full year and is shown as a percentage of the investment. "Total return" is
the total change in value of an investment in the Subaccount over period of time
specified in the advertisement. The rate of return shown would produce that
change in value over the specified period, if compounded annually. Yield figures
do not reflect the surrender charge and yield and total return figures do not
reflect premium tax charges. This makes the performance shown more favorable.
FIRST FORTIS AND THE SEPARATE ACCOUNT
FIRST FORTIS LIFE INSURANCE COMPANY
First Fortis Life Insurance Company, the issuer of the Policies, was founded in
1971. At the end of 1995, First Fortis had approximately $6.5 billion of total
life insurance in force. First Fortis is a New York corporation and is qualified
to sell life insurance and annuity contracts in New York. First Fortis is a
wholly-owned subsidiary of Fortis AMEV.
First Fortis is affiliated with the Fortis Financial Group, a joint effort by
Fortis Benefits Life Insurance Company, Fortis Advisers, Inc., Fortis Investors,
Inc. and Time Insurance Company, offering financial products through the
management, marketing and servicing of mutual funds, annuities, life insurance
and disability income products.
Fortis AMEV is a diversified multi-national insurance, real estate, and
financial services group headquartered in Utrecht, The Netherlands, where its
insurance operations began in 1847.
All of the guarantees and commitments under the Contracts are general
obligations of First Fortis, regardless of whether the Contract Value has been
allocated to the Separate Account or to the Fixed Account. None of First Fortis'
affiliated companies has any legal obligation to back First Fortis' obligations
under the Contracts.
THE SEPARATE ACCOUNT
The Separate Account, which is a segregated investment account of First Fortis,
was established as Separate Account A by First Fortis pursuant to the insurance
laws of New York as of October 1, 1993. The assets allocated to the Separate
Account are the exclusive property of First Fortis. Although the Separate
Account is an integral part of First Fortis, the Separate Account is registered
with the Securities and
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Exchange Commission as a unit investment trust under the Investment Company Act
of 1940. Registration does not involve supervision of the management or
investment practices or policies of the Separate Account or of First Fortis by
the Securities and Exchange Commission.
All income, gains and losses, whether or not realized, from assets allocated to
the Separate Account are credited to or charged against the Separate Account
without regard to other income, gains or losses of First Fortis. Assets in the
Separate Account representing reserves and liabilities will not be chargeable
with liabilities arising out of any other business of First Fortis. First Fortis
may accumulate in the Separate Account proceeds from charges under variable
annuity contracts and other amounts in excess of the Separate Account assets
representing reserves and liabilities. First Fortis may from time to time
transfer to its General Account any of such excess amounts.
There are currently fifteen Subaccounts in the Separate Account. The assets in
each Subaccount are invested exclusively in a distinct class (or series) of
stock issued by Fortis Series, each of which represents a separate investment
Portfolio within Fortis Series. Income and both realized and unrealized gains or
losses from the assets of each Subaccount of the Separate Account are credited
to or charged against that Subaccount without regard to income, gains or losses
from any other Subaccount of the Separate Account or arising out of any other
business we may conduct. Under certain remote circumstances, the assets of one
Subaccount may not be insulated from liability associated with another
Subaccount. New Subaccounts may be added as new Portfolios are added to Fortis
Series and made available to Contract Owners. Correspondingly, if any Portfolios
are eliminated from Fortis Series, Subaccounts may be eliminated from the
Separate Account.
FORTIS SERIES FUND, INC.
Fortis Series is a "series" type of mutual fund which is registered with the
Securities and Exchange Commission as a diversified open-end management
investment company under the Investment Company Act of 1940. Fortis Series has
served as the investment medium for the Separate Account since the Separate
Account commenced operations.
First Fortis purchases and redeems Fortis Series' shares for the Separate
Account at their net asset value without the imposition of any sales or
redemption charges. Such shares represent interests in the Portfolios of Fortis
Series available for investment by the Separate Account. Each Portfolio
corresponds to one of the Subaccounts of the Separate Account. The assets of
each Portfolio are separate from the others and each Series operates as a
separate investment portfolio whose performance has no effect on the investment
performance of any other Portfolio.
Any dividend or capital gain distributions attributable to Contracts are
automatically reinvested in shares of the Portfolio from which they are received
at that Portfolio's net asset value on the date paid. Such dividends and
distributions will have the effect of reducing the net asset value of each share
of the corresponding Portfolio and increasing, by an equivalent value, the
number of shares outstanding of that Portfolio. However, the value of the
interests of Contract Owners, Annuitants and Beneficiaries in the corresponding
Subaccount will not change as a result of any such dividends and distributions.
The Portfolios of Fortis Series available for investment by the Separate Account
are Money Market Series, U.S. Government Securities Series, Diversified Income
Series, Global Bond Series, High Yield Series, Asset Allocation Series, Global
Asset Allocation Series, Value Series, Growth & Income Series, S&P 500 Index
Series, Blue Chip Stock Series, Growth Stock Series, Global Growth Series,
International Stock Series and Aggressive Growth Series. A full description of
the Portfolios, their investment policies and restrictions, their charges, the
risks attendant to investing in them, and other aspects of their operations is
contained in the Prospectus for Fortis Series accompanying this Prospectus and
in the Statement of Additional Information for Fortis Series referred to
therein. Additional copies of these documents may be obtained from your sales
representative or from our Home Office. The complete Risk Disclosure in the
Prospectus for Diversified Income Series and Asset Allocation Series should be
read before selection of them for Contract Investment.
ACCUMULATION PERIOD
ISSUANCE OF A CONTRACT AND PURCHASE PAYMENTS
Persons wishing to purchase a Contract must complete an application and make an
initial purchase payment of at least $50. The application is forwarded to First
Fortis for processing. Acceptance is subject to underwriting and suitability
rules and procedures. First Fortis reserves the right to reject any application
for any reason.
Purchase payments which are remitted through an employer for multiple
employee-Annuitants must also be accompanied by information identifying the
proper Contracts and accounts to be credited with purchase payments.
If the application can be accepted in the form received, the initial purchase
payment will be credited within two Valuation Dates after the later of receipt
of the application or receipt of the initial purchase payment at First Fortis'
Home Office. If the initial purchase payment cannot be credited within five
Valuation Dates after receipt because the application or other issuing
requirements are incomplete, the initial purchase payment will be returned
unless the applicant consents to our retaining the initial purchase payment and
crediting it as of the end of the Valuation Period in which the necessary
requirements are fulfilled. Despite the consent of the applicant, if the initial
purchase payment still cannot be credited within thirty Valuation Dates after
receipt because the application or issuing instructions are incomplete, the
initial purchase payment will be returned to the applicant.
The date that the initial purchase payment is applied to the purchase of the
Contract is the Contract Date. The Contract Date is the date used to determine
Contract years, regardless of when the Contract is delivered. The crediting of
investment experience in the Separate Account, or a fixed rate of return in the
Fixed Account, begins as of the Contract Date, even if that date is delayed due
to underwriting or administrative requirements.
We will accept additional purchase payments at any time after the Contract Date
and prior to the Annuity Commencement Date, as long as the Annuitant is living.
Purchase payments (together with any required information identifying the proper
Contracts and accounts to be credited with purchase payments) must be
transmitted to our Home Office. Additional purchase payments are credited to the
Contract and added to the Contract Value as of the end of the Valuation Period
in which they are received.
Each additional purchase payment must be at least $50; except that, under
Contracts issued in connection with a benefit plan covering employees, it is
sufficient that all purchase payments under each Contract at all times average
$50. In no case, however, will a purchase payment be accepted if it is less than
$25, and we reserve the right to raise this minimum to not more than $100. The
total of all purchase payments for all Contracts having the same owner,
participant or
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annuitant may not exceed $1 million (not more than $500,000 allocated to the
Fixed Account) without First Fortis' prior approval, and we reserve the right to
modify this limitation at any time.
Purchase payments in excess of the initial minimum may be made by monthly draft
against the bank account of any Contract Owner that has completed and returned
to us a special "Thrift-O-Matic" authorization form that may be obtained from
your sales representative or from our Home Office. Arrangements can also be made
for purchase payments by wire transfer, payroll deduction, military allotment,
direct deposit and billing. Purchase payments by check should be made payable to
First Fortis Life Insurance Company.
We may cancel a Contract if its Contract Value falls below $1,000. (Under our
current administrative procedures, however, we will not cancel a Contract during
the first two Contract years, if the Contract Value is at least $500 by the end
of the first Contract year.) We will provide the Contract Owner with 90 days'
written notice so that additional purchase payments may be made in order to
raise the Contract Value above the applicable minimum. Otherwise, we may cancel
the Contract as of the end of the Valuation Period which includes the next
anniversary of the Contract Date. Upon such cancellation, we will pay the
Contract Owner the full Contract Value. So long as the Contract Value remains
above $1,000, no additional purchase payments under a Contract are ever
required.
CONTRACT VALUE
Contract Value is the total of any Separate Account Value in all the Subaccounts
of the Separate Account pursuant to a Contract, plus any Fixed Account Value
under the Contract. For a discussion of how Fixed Account Value is calculated,
see "The Fixed Account."
There is no guaranteed minimum Separate Account Value. The Separate Account
Value will reflect the investment experience of the chosen Subaccounts of the
Separate Account, all purchase payments made, any partial surrenders, and all
charges assessed in connection with the Contract. Therefore, the Separate
Account Value changes from Valuation Period to Valuation Period. To the extent
Contract Value is allocated to the Separate Account, the Contract Owner bears
the entire investment risk.
DETERMINATION OF SEPARATE ACCOUNT VALUE. A Contract's Separate Account Value is
based on Accumulation Unit values, which are determined on each Valuation Date.
The value of an Accumulation Unit for a Subaccount on any Valuation Date is
equal to the previous value of that Subaccount's Accumulation Unit multiplied by
that Subaccount's net investment factor (discussed directly below) for the
Valuation Period ending on that Valuation Date. Net purchase payments applied to
a given Subaccount will be used to purchase Accumulation Units at the unit value
of that Subaccount next determined after receipt of a purchase payment. See
"Allocation of Purchase Payments and Contract Value--Allocation of Purchase
Payments."
At the end of any Valuation Period, a Contract's Separate Account Value in a
Subaccount is equal to:
- The number of Accumulation Units in the Subaccount;
times
- The value of one Accumulation Unit for that
Subaccount.
The number of Accumulation Units in each Subaccount is equal to:
- The initial Accumulation Units purchased on the
Contract Date; plus
- Accumulation Units purchased at the time that
additional Net Purchase Payments are allocated to the Subaccount; plus
- Accumulation Units purchased through transfers from
another Subaccount or from the Fixed Account; less
- Accumulation Units redeemed to pay for the portion of
any partial surrenders allocated to the Subaccount; less
- Accumulation Units redeemed as part of a transfer to
another Subaccount or to the Fixed Account; less
- Accumulation Units redeemed to pay charges under the
Contract.
NET INVESTMENT FACTOR. A Subaccount's net investment factor for a Valuation
Period is an index number that reflects certain charges to a Contract and the
investment performance of the Subaccount during the Valuation Period. If the net
investment factor is greater than one, the Subaccount's Accumulation Unit value
has increased. If the net investment factor is less than one, the Subaccount's
Accumulation Unit value has decreased. The net investment factor for a
Subaccount is determined by dividing (1) the net asset value per share of the
Portfolio shares held by the Subaccount, determined at the end of the current
Valuation Period, plus the per share amount of any dividend or capital gains
distribution made with respect to the Portfolio shares held by the Subaccount
during the current Valuation Period, minus a per share charge for the increase,
plus a per share credit for the decrease, in any income taxes assessed which we
determine to have resulted from the investment operations of the Subaccount or
any other taxes which are attributable to the Contract, by (2) the net asset
value per share of the Portfolio shares held in the Subaccount as determined at
the end of the previous Valuation Period, and subtracting from that result a
factor representing the mortality risk, expense risk and administrative expense
charge.
ALLOCATION OF PURCHASE PAYMENTS AND CONTRACT VALUE
ALLOCATION OF PURCHASE PAYMENTS. In the application for a Contract, the Contract
Owner can allocate Net Purchase Payments, or portions thereof, to the available
Subaccounts of the Separate Account or to the Fixed Account, or both.
Percentages must be in whole numbers and the total allocation must equal 100%.
The percentage allocations for future Net Purchase Payments may be changed,
without charge, at any time by sending a Written Request to First Fortis' Home
Office. Changes in the allocation of future Net Purchase Payments will be
effective on the date we receive the Contract Owner's Written Request.
TRANSFERS. Transfers of Contract Value from one available Subaccount to another
or into the Fixed Account can be made by the Contract Owner by Written Request
to First Fortis' Home Office, or by telephone transfer as described below. There
is currently no charge for any transfer. All or part of the Contract Value in
one or more Subaccounts of the Separate Account may be transferred at one time.
We may in our discretion permit a continuing request for transfers automatically
and on a periodic basis. However, we reserve the right to impose charges (not to
exceed $25 per transfer) upon transfers out of a Subaccount during the
Accumulation Period. The only current restriction on the frequency of transfers
is a prohibition of making transfers INTO the Fixed Account within six months of
a transfer out of the Fixed Account. Transfers of Contract Value FROM the Fixed
Account are restricted in both amount and timing. See "Fixed Account--Fixed
Account Transfers, Total and Partial Surrenders." We will count all transfers
between and among the Subaccounts of the Separate Account and the Fixed Account
as one transfer, if all the transfer requests are made at the same time as part
of one request. We will execute the transfers and determine all values in
connection with transfers as of the end of the Valuation Period in which we
receive the transfer request.
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At the time an application for a Contract is completed, or at any subsequent
time, you may complete the Telephone Transfer Authorization Form. We will honor
telephone transfer instructions from any person who provides the correct
identifying information. First Fortis will not be responsible for, and you will
bear the risk of loss from, oral instructions, including fraudulent
instructions, which are reasonably believed to be genuine. We will employ
reasonable procedures to confirm that telephone instructions are genuine, but if
such procedures are not deemed reasonable, we may be liable for any losses due
to unauthorized or fraudulent instructions. Our procedures are to verify address
and social security number, tape record the telephone call, and provide written
confirmation of the transaction.
We may modify or terminate our telephone transfer procedures at any time. The
number for telephone transfers is 1-800-745-8248.
Certain restrictions on very substantial investments in any one Subaccount are
set forth under "Limitations on Allocations" in the Statement of Additional
Information.
TOTAL AND PARTIAL SURRENDERS
TOTAL SURRENDERS. The Contract Owner may surrender all of the Cash Surrender
Value at any time during the life of the Annuitant and prior to the Annuity
Commencement Date by a Written Request sent to First Fortis' Home Office. We
reserve the right to require that the Contract be returned to us prior to making
payment, although this will not affect our determination of the amount of the
Cash Surrender Value. Cash Surrender Value is the Contract Value at the end of
the Valuation Period during which the Written Request for the total surrender is
received by First Fortis at its Home Office, less any applicable surrender
charge and less any applicable administrative charge. For a discussion of these
charges and the circumstances under which they apply, see "Annual Administrative
Charge" and "Surrender Charge."
The written consent of all collateral assignees and irrevocable beneficiaries
must be obtained prior to any total surrender. Surrenders from the Separate
Account will generally be paid within seven days of the date of receipt by First
Fortis' Home Office of the Written Request. Postponement of payments may occur,
however, in certain circumstances. See "Postponement of Payment."
Since the Contract Owner assumes the investment risk with respect to amounts
allocated to the Separate Account, and because certain surrenders are subject to
a surrender charge, the amount paid upon total surrender of the Cash Surrender
Value (taking into account any prior partial surrenders) may be more or less
than the total Net Purchase Payments made. After a surrender of the Cash
Surrender Value or at any time the Contract Value is zero all rights of the
Contract Owner, Annuitant, and any Beneficiary, will terminate.
PARTIAL SURRENDERS. At any time prior to the Annuity Commencement Date and
during the lifetime of the Annuitant, you may surrender a portion of the Fixed
Account Value and/or the Separate Account Value by sending to First Fortis' Home
Office a Written Request. The minimum partial surrender amount is $500,
including any surrender charge. If the total Contract Value in both the Separate
Account and Fixed Account would be less than $1,000 after the partial surrender,
First Fortis will surrender the entire Cash Surrender Value under the Contract.
(Under our current administrative procedures, however, we will honor a surrender
request during the first two Contract years without regard to the remaining
Contract Value.)
In order for a request to be processed, the Contract Owner MUST specify from
which Subaccounts of the Separate Account or the Fixed Account a partial
surrender should be made and charges deducted.
We will surrender Accumulation Units from the Separate Account and/ or dollar
amounts from the Fixed Account so that the total amount of the partial surrender
equals the dollar amount of the partial surrender request plus any applicable
surrender charge. The partial surrender will be effective at the end of the
Valuation Period in which First Fortis receives the Written Request for partial
surrender at its Home Office. Payments will generally be made within seven days
of the effective date of such request, although certain delays are permitted.
See "Postponement of Payment."
The Internal Revenue Code provides that a penalty tax will be imposed on certain
premature surrenders. For a discussion of this and other tax implications of
total and partial surrenders, including withholding requirements, see "Federal
Tax Matters." Also, under tax deferred annuity Contracts pursuant to Section
403(b) of the Internal Revenue Code, no distributions of voluntary salary
reduction amounts will be permitted prior to one of the following events:
attainment of age 59 1/2 by the employee or the employee's separation from
service, death, disability or hardship. (Hardship distributions will be limited
to the lesser of the amount of the hardship or the amount of salary reduction
contributions, exclusive of earnings thereon.) This restriction does not apply
to amounts transferred to another investment alternative permitted under a
Section 403(b) retirement arrangement or to amounts attributable to premium
payments received prior to January 1, 1989.
BENEFIT PAYABLE ON DEATH OF ANNUITANT OR CONTRACT OWNER
If the Annuitant or Contract Owner dies prior to the Annuity Commencement Date,
a death benefit will be paid to the Beneficiary. If more than one Annuitant has
been named, the death benefit payable upon the death of an Annuitant will only
be paid upon the death of the last survivor of the persons so named. The death
benefit will equal the greater of:
the sum of all Net(1)Purchase Payments made, less all prior
surrenders (other than any automatic surrenders made to pay the annual
administrative charge) and previously-imposed surrender charges,
(2)
the Contract Value as of the date used for valuing the death
benefit, or
the Contract Value (3)(less the amount of any subsequent
surrenders and surrender charges) as of the Contract's Five Year Anniversary
immediately preceding the earlier of (a) the date of death of either the
Contract Owner or the Annuitant, or (b) the date either first reaches his
or her 75th birthday. (See Appendix A for sample death benefit
calculations.)
The death benefit may be reduced by premium taxes where such taxes were imposed
upon receipt of purchase payments and were paid by First Fortis in behalf of the
Contract Owner. For further information, see "Charges and Deductions--Premium
Taxes."
The value of the death benefit is determined as of the end of the Valuation
Period in which we receive, at our Home Office, proof of death and the Written
Request as to the manner of payment. Upon receipt of these items, the death
benefit generally will be paid within seven days. Under certain circumstances,
payment of the death benefit may be postponed. See "Postponement of Payment." If
we do not receive a Written Request for a settlement method, we will pay the
death benefit in a single sum, based on values determined at that time.
The Beneficiary may (a) receive a single sum payment, which terminates the
Contract, or (b) select an annuity option. If the Beneficiary selects an annuity
option, he or she will have all the rights and privileges of an Annuitant under
the Contract. If the Beneficiary desires an annuity option, the election should
be made within 60 days
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of the date the death benefit becomes payable. Failure to make a timely election
can result in unfavorable tax consequences. For further information, see
"Federal Tax Matters."
We accept any of the following as proof of death: a copy of a certified death
certificate; a copy of a certified decree of a court of competent jurisdiction
as to the finding of death; a written statement by a medical doctor who attended
the deceased at the time of death.
If the Contract Owner dies before the Annuitant and before the Annuity
Commencement Date with respect to a Non-Qualified Contract, certain additional
requirements are mandated by the Internal Revenue Code, which are discussed
below under "Federal Tax Matters-- Required Distributions for Non-Qualified
Contracts." It is imperative that Written Notice of the death of the Contract
Owner be promptly transmitted to First Fortis at its Home Office, so that
arrangements can be made for distribution of the entire interest in the Contract
to the Beneficiary in a manner that satisfies the Internal Revenue Code
requirements. Failure to satisfy these requirements may result in the Contract
not being treated as an annuity contract for federal income tax purposes, which
could have adverse tax consequences.
THE ANNUITY PERIOD
ANNUITY COMMENCEMENT DATE
The Contract Owner may specify an Annuity Commencement Date in the application
not later than the Annuitant's 85th birthday. The Annuity Commencement Date
marks the beginning of the period during which an Annuitant receives annuity
payments under the Contract. We may not permit an Annuity Commencement Date
which is on or after the Annuitant's 75th birthday, and you should consult your
sales representative in this regard. The Annuity Commencement Date must be at
least two years after the Contract Date. However, We may allow an earlier
Annuity Commencement Date associated with certain annuitizations where the
Contract is purchased in conjunction with the purchase of a life insurance
policy issued by Us, if it fulfills certain other minimum guidelines established
by Us, and the annuity payments are designated to be applied to the payment of
the premiums on such life insurance policy.
Depending on the type of retirement arrangement in connection with which a
Contract is issued, amounts that are distributed either too soon or too late may
be subject to penalty taxes under the Internal Revenue Code. See "Federal Tax
Matters." You should consider this carefully in selecting or changing an Annuity
Commencement Date.
In order for the Contract Owner to advance or defer the Annuity Commencement
Date, the Contract Owner must submit a Written Request during the Annuitant's
lifetime. The request must be received at our Home Office at least 30 days
before the then-scheduled Annuity Commencement Date. The new Annuity
Commencement Date must also be at least 30 days after the Written Request is
received. There is no right to make any total or partial surrender during the
Annuity Period.
COMMENCEMENT OF ANNUITY PAYMENTS
If the Contract Value at the end of the Valuation Period which contains the
Annuity Commencement Date is less than $2,000, we may pay the entire Contract
Value, without the imposition of any charges other than premium taxes, if
applicable, in a single sum payment to the Annuitant or other properly
designated payee and cancel the Contract.
Otherwise, First Fortis will apply (1) the Fixed Account Value to provide a
Fixed Annuity Option and (2) the Separate Account Value in any Subaccount to
provide a Variable Annuity Option using the same Subaccount, unless the Contract
Owner has notified us by Written Request to apply the Fixed Account Value and
Separate Account Value in different proportions. Any such Written Request must
be received by us at our Home Office at least 30 days before the Annuity
Commencement Date.
Annuity payments under a Fixed or Variable Annuity Option will be made on a
monthly basis to the Annuitant or other properly-designated payee, unless we
agree to a different payment schedule. If more than one person is named as an
Annuitant, the Contract Owner may elect to name one of such persons to be the
sole Annuitant as of the Annuity Commencement Date. We reserve the right to
change the frequency of any annuity payment so that each payment will be at
least $50. There is no right to make any total or partial surrender during the
Annuity Period.
The amount of each annuity payment will depend on the amount of Contract Value
applied to an annuity option, the form of annuity selected and the age of the
Annuitant. Information concerning the relationship between the Annuitant's sex
and the amount of annuity payments, including special requirements in connection
with employee benefit plans, is set forth under "Calculation of Annuity
Payments" in the Statement of Additional Information. The Statement of
Additional Information also contains detailed information about how the amount
of each annuity payment is computed.
The dollar amount of any fixed annuity payments is specified during the entire
period of annuity payments according to the provisions of the annuity form
selected.
The dollar amount of variable annuity payments varies during the annuity period
based on changes in Annuity Unit Values for the Subaccounts that you choose to
use in connection with your payments.
RELATIONSHIP BETWEEN SUBACCOUNT INVESTMENT PERFORMANCE AND AMOUNT OF VARIABLE
ANNUITY PAYMENTS
If a Subaccount on which a variable annuity payment is based has an average
effective net investment return higher than 4% per annum during the period
between two such annuity payments, the Annuity Unit Value will increase, and the
second payment will be higher than the first. Conversely, if the Subaccount's
average effective net investment return over the period between the annuity
payments is less than 4% per annum, the Annuity Unit Value will decrease, and
the second payment will be lower than the first. "Net investment return," for
this purpose, refers to the Subaccount's overall investment performance, net of
the mortality and expense risk and administrative expense charges, which are
assessed at a nominal aggregate annual rate of 1.35%.
We guarantee that the amount of each variable annuity payment after the first
payment will not be affected by variations in our mortality experience or our
expenses, except to the extent that we reserve the right to impose the $30
annual administrative expense charge during the Annuity Period just as we do
during the Accumulation Period.
TRANSFERS. During the Annuity Period, the person receiving annuity payments may
make up to four transfers a year among Subaccounts or from Subaccounts to the
Fixed Account. The current procedures for these transfers are the same as
described above under "Allocation of Purchase Payments and Contract
Value--Transfers." Transfers out of the Fixed Account are not permitted during
the Annuity Period.
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ANNUITY FORMS
The Contract Owner may select an annuity form or change a previous selection by
Written Request, which must be received by us at least 30 days before the
Annuity Commencement Date. Only one annuity form may be selected, although as
discussed above, payments under that form may be received on a combination fixed
and variable basis. If no annuity form selection is in effect on the Annuity
Commencement Date, in most cases we automatically apply Option B (described
below), with payments guaranteed for 10 years. If the Contract is issued under
certain retirement plans, however, federal pension law may require that payments
be made pursuant to Option D (described below), unless otherwise elected. Tax
laws and regulations may impose further restrictions to assure that the primary
purpose of the plan is distribution of the accumulated funds to the employee.
The following options are available for fixed annuity payments and for variable
annuity payments.
OPTION A, LIFE ANNUITY. Payments are made as of the first Valuation Date of each
monthly period during the Annuitant's life, starting with the Annuity
Commencement Date. No payments will be made after the Annuitant dies. It is
possible for the payee to receive only one payment under this option if the
Annuitant dies before the second payment is due.
OPTION B, LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR 10 YEARS OR 20
YEARS. Payments are made as of the first Valuation Date of each monthly period
starting on the Annuity Commencement Date. Payments will continue as long as the
Annuitant lives. If the Annuitant dies before all of the guaranteed payments
have been made, we will continue installments of the guaranteed payments to the
Beneficiary.
OPTION C, JOINT AND FULL SURVIVOR ANNUITY. Payments are made as of the first
Valuation Date of each monthly period starting with the Annuity Commencement
Date. Payments will continue as long as either the Annuitant or the joint
Annuitant is alive. Payments will stop when both the Annuitant and the joint
Annuitant have died. It is possible for the payee or payees under this option to
receive only one payment if both Annuitants die before the second payment is
due.
OPTION D, JOINT AND ONE-HALF CONTINGENT SURVIVOR ANNUITY. Payments are made as
of the first Valuation Date of each monthly period starting with the Annuity
Commencement Date. Payments will continue as long as either the Annuitant or the
joint Annuitant is alive. If the Annuitant dies first, payments will continue to
the joint Annuitant at one-half the original amount. If the joint Annuitant dies
first, payments will continue to the Annuitant at the original full amount.
Payments will stop when both the Annuitant and the joint Annuitant have died. It
is possible for the payee or payees under this option to receive only one
payment if both Annuitants die before the second payment is due.
We also have other annuity forms available and information about them can be
obtained from your sales representative or by calling or writing to our Home
Office.
DEATH OF ANNUITANT OR OTHER PAYEE
Under most annuity forms offered by First Fortis, the amounts, if any, payable
on the death of the Annuitant during the Annuity Period are the continuation of
annuity payments for any remaining guarantee period or for the life of any joint
Annuitant. In all cases, the person entitled to receive payments also receives
any rights and privileges under the annuity form in effect.
Additional rules applicable to such distributions under Non-Qualified Contracts
are described under "Federal Tax Matters--Required Distributions for
Non-qualified Contracts". Though the rules there described do not apply to
Contracts issued in connection with qualified plans, similar rules apply to the
plans themselves.
CHARGES AND DEDUCTIONS
The charges that we assess in connection with the Contracts are described below.
PREMIUM TAXES
First Fortis will deduct a charge for state premium taxes or similar assessments
from the Contract Value at the time that annuity payments begin. The charge will
be deducted on a pro-rata basis from the then-current Fixed Account Value and,
by redemption of Accumulation Units, the then-current Separate Account Value in
each Subaccount. Similarly, First Fortis may deduct premium taxes from the
Contract Value when no deduction was made from purchase payments, but is
subsequently determined to be due. Conversely, First Fortis will credit to
Contract Value the amount of any deductions for premium taxes or similar
assessments that are subsequently determined not to be owed.
Applicable premium tax rates depend upon the Contract Owner's then-current place
of residence. Applicable rates are subject to change by legislation,
administrative interpretations or judicial acts.
ANNUAL ADMINISTRATIVE CHARGE
A $30 annual administrative charge is deducted each Contract year from the
Contract Value on each anniversary of the Contract Date. (This charge will be
lower to the extent legally required in some states.) This charge is to help
cover administrative costs such as those incurred in issuing Contracts,
establishing and maintaining the records relating to Contracts, making
regulatory filings and furnishing confirmation notices, voting materials and
other communications, providing computer, actuarial and accounting services, and
processing Contract transactions. We do not anticipate any profit from this
charge. This charge will initially be waived during the Annuity Period, although
First Fortis reserves the right to reinstitute it at any time. This charge will
be waived during the Accumulation Period if the Contract Value at the end of the
Contract Year (or upon total surrender) is $25,000 or more.
The annual administrative charge will be deducted by redemption of Accumulation
Units from each Subaccount of the Separate Account and from the Fixed Account in
the same proportion as the then-current Contract Value is then allocated among
those alternatives pursuant to the Contract. If the Contract is totally
surrendered, the full annual administrative charge will be deducted at the time
of surrender if the Contract Value is less than $25,000 at such time.
CHARGES AGAINST THE SEPARATE ACCOUNT
Certain charges will be assessed as a percentage of the value of the net assets
of the Separate Account to compensate First Fortis for risks assumed in
connection with the Contract, and administrative expenses which may apply to the
Separate Account.
MORTALITY AND EXPENSE RISK CHARGE. We will assess each Subaccount of the
Separate Account with a daily charge for mortality and expense risk at a nominal
annual rate of 1.25% of the average daily net assets of the Separate Account
(consisting of approximately .8% for mortality risk and approximately .45% for
expense risk). This charge is assessed during both the Accumulation Period and
the Annuity Period. We
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guarantee not to increase this charge for the duration of the Contract. This
charge is assessed daily when determining the value of an Accumulation Unit.
The mortality risk borne by First Fortis arises from its obligation to make
annuity payments (determined in accordance with the annuity tables and other
provisions contained in the Contract) for the full life of all Annuitants
regardless of how long all Annuitants or any individual Annuitant might live.
This undertaking assures that neither an Annuitant's own longevity, nor an
improvement in life expectancy generally, will have any adverse effect on the
annuity payments the Annuitant will receive under the Contract. This, therefore,
relieves the Annuitant from the risk that he or she will outlive the funds
accumulated for retirement.
In addition, First Fortis bears a mortality risk in that it guarantees to pay a
death benefit in a single sum (which may also be taken in the form of an annuity
option) upon the death of an Annuitant or Contract Owner prior to the Annuity
Commencement Date. No surrender charge is imposed upon the payment of a death
benefit, which places a further mortality risk on the Company.
The expense risk assumed is that actual expenses incurred in connection with
issuing and administering the Contracts will exceed the limits on administrative
charges set in the Contracts.
If the administrative charges and the mortality and expense risk charge are
insufficient to cover the expenses and costs assumed, the loss will be borne by
the Company. Conversely, if the amount deducted proves more than sufficient, the
excess will be profit to First Fortis. First Fortis expects a profit from the
mortality and expense risk charge.
ADMINISTRATIVE EXPENSE CHARGE. We will assess each Subaccount of the Separate
Account with a daily charge at a nominal annual rate of .10% of the average
daily net assets of the Subaccount. This charge is imposed during both the
Accumulation Period and the Annuity Period. The daily administrative expense
charge is assessed to help cover administrative expenses such as those described
above under "Annual Administrative Charge." The daily administrative expense
charge, like the annual administrative charge, is designed to defray expenses
actually incurred, without profit. That is, the total anticipated revenues from
both charges, on average, are not expected to exceed the actual administrative
costs incurred by First Fortis and its affiliates. There is no necessary
relationship between the amount of administrative charges imposed on a given
Contract and the amount of expenses actually attributable to that Contract.
TAX CHARGE. We currently impose no charge for taxes payable by us in connection
with this Contract, other than for premium taxes and similar assessments when
applicable. We reserve the right to impose a charge for any other taxes that may
become payable by us in the future in connection with the Contracts or the
Separate Account.
SURRENDER CHARGE
No sales charge is collected or deducted at the time Net Purchase Payments are
applied under a Contract. A surrender charge will be assessed on certain total
or partial surrenders. The amounts obtained from the surrender charge will be
used to partially defray expenses incurred in the sale of the Contracts,
including commissions and other promotional or distribution expenses associated
with the marketing of the Contracts, and costs associated with the printing and
distribution of prospectuses and sales material.
FREE SURRENDERS. The following amounts can be withdrawn from the Contract
without a surrender charge:
- Any purchase payments received by us more than five
years prior to the surrender date and that have not been previously
surrendered;
- In any Contract year, up to 10% of the purchase payments
received by us less than five years prior to the surrender date
(whether or not the purchase payments have been previously
surrendered).
Purchase payments not subject to a surrender charge are deemed to be withdrawn
first. If all purchase payments have been withdrawn, the remaining earnings can
be withdrawn without a surrender charge. That is, surrender charges do not apply
to Contract earnings. For this purpose, it is assumed that all purchase payments
are withdrawn before earnings are withdrawn. (For federal income tax purposes,
however, certain partial surrenders will be deemed to come first from earnings.
See "Federal Tax Matters.")
No surrender charge is imposed on annuitization (or payment of a single sum
because the Contract Value is less than the minimum required to provide an
annuity on the Annuity Commencement Date). Nor is the surrender charge deducted
from the payment of any benefit upon the death of an Annuitant or Contract
Owner.
In addition, we have an administrative policy to waive surrender charges for
full surrenders of Contracts that have been in force for at least ten years
provided that the amount then subject to the surrender charge is less than 25%
of the Contract Value. Since the Contracts have been offered only since 1994, no
such waivers have yet been made. We reserve the right to change or terminate
this practice at any time, both for new and for previously issued Contracts.
AMOUNT OF SURRENDER CHARGE. Surrender charges apply only if the amount being
withdrawn exceeds the sum of the amounts listed above under Free Surrenders. The
surrender charge is 5% of the purchase payments withdrawn which were received by
us less than five years prior to the surrender date.
We anticipate the surrender charge will not be sufficient to cover our
distribution expenses. To the extent that the surrender charge is insufficient
to cover the actual costs of distribution, such costs will be paid from First
Fortis' General Account assets, which will include profit, if any, derived from
the mortality and expense risk charge.
MISCELLANEOUS
Because the Separate Account invests in shares of the Portfolios of Fortis
Series, the net assets of the Separate Account will reflect the investment
advisory fees and certain other expenses incurred by the Portfolios that are
described in the prospectus for Fortis Series.
REDUCTION OF CHARGES
No surrender charge will be imposed under any Contract owned by (A) First
Fortis, Fortis, Inc. or its subsidiaries, and the following persons associated
with such companies, if at the Contract Issue date they are: (1) officers and
directors; (2) employees; or (3) spouses of any such persons or any of such
persons' children, grandchildren, parents, grandparents, or siblings--or spouses
of any of these persons; (B) Series Fund directors, officers, or their spouses
(or such persons' children, grandchildren, parents or grandparents--or spouses
of any such persons); and (C) representatives or employees (or their spouses) of
Fortis Investors (including agencies) or of other
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broker-dealers having a sales agreement with Fortis Investors (or such persons'
children, grandchildren, parents or grandparents--or spouses of any such
persons).
FIXED ACCOUNT
Contract Owners may allocate Net Purchase Payments and transfer Contract Value
to the Fixed Account, in which case such amounts are held in the General Account
of First Fortis. Because of exemptive and exclusionary provisions, interests in
the Fixed Account have not been registered under the Securities Act of 1933 and
the Fixed Account has not been registered as an investment company under the
Investment Company Act of 1940. Accordingly, neither the Fixed Account nor any
interests therein are subject to the provisions of these acts and, as a result,
the staff of the Securities and Exchange Commission has not reviewed the
disclosures in this Prospectus relating to the Fixed Account. Disclosures
regarding the Fixed Account may, however, be subject to certain generally
applicable provisions of the federal securities laws relating to the accuracy
and completeness of statements made in prospectuses. This Prospectus is
generally intended to serve as a disclosure document only for the aspects of the
Contract involving the Separate Account and contains only selected information
regarding the Fixed Account. More information regarding the Fixed Account may be
obtained from First Fortis' Home Office or from your sales representative.
GENERAL DESCRIPTION
Our obligations with respect to the Fixed Account are supported by our General
Account. Subject to applicable law, we have sole discretion over the investment
of the assets in our General Account.
First Fortis guarantees that Contract Value in the Fixed Account will accrue
interest at an effective annual rate of at least 4%, independent of the actual
investment experience of the General Account. We may, at our sole discretion,
credit higher rates of interest, although we are not obligated to credit
interest in excess of the guaranteed rate of 4% per year. Any interest rate in
excess of 4% per year with respect to any amount in the Fixed Account pursuant
to a Contract will not be modified more than once each calendar year. Any higher
rate of interest will be quoted at an effective annual rate. The rate of any
excess interest initially or subsequently credited to any amount can in many
cases vary, depending on when that amount was originally allocated to the Fixed
Account. Once credited, such interest will be guaranteed and will become part of
Contract Value in the Fixed Account from which deductions for fees and charges
may be made.
Charges under the Contract are the same as when the Separate Account is being
used, except that the 1.35% per annum charged for mortality and expense risk and
administrative expenses is not imposed on amounts of Contract Value in the Fixed
Account.
FIXED ACCOUNT VALUE
The Contract's Fixed Account Value on any Valuation Date is the sum of the Net
Purchase Payments allocated to the Fixed Account, plus any transfers from the
Separate Account, plus interest credited to the Fixed Account, less any
surrenders, surrender charges or annual administrative charges allocated to the
Fixed Account or transfers to the Separate Account.
FIXED ACCOUNT TRANSFERS, TOTAL AND PARTIAL SURRENDERS
Amounts in the Fixed Account are generally subject to the same rights and
limitations and will be subject to the same charges as are amounts allocated to
the Subaccounts of the Separate Account with respect to total and partial
surrenders. See "Total and Partial Surrenders."
Transfers out of the Fixed Account have special limitations. Prior to the
Annuity Commencement Date, Contract Owners may transfer part or all of the
Contract Value from the Fixed Account to the Separate Account, provided that (1)
no more than one such transfer is made each Contract year, (2) no more than 50%
of the Fixed Account Value is transferred at any time (unless the balance in the
Fixed Account after the transfer would be less than $1,000, in which case up to
the entire balance may be transferred) and (3) at least $500 is transferred at
any one time (or, if less, the entire amount in the Fixed Account). Irrespective
of the above, we may in our discretion permit a continuing request for transfer
of lesser specified amounts automatically on a periodic basis. However, we
reserve the right to discontinue or modify any such arrangements at our
discretion.
No transfers from the Fixed Account may be made after the Annuity Commencement
Date.
GENERAL PROVISIONS
THE CONTRACT
The Contract, copies of any applications, amendments, riders, or endorsements
attached to the Contract, and copies of any supplemental applications,
amendments, endorsements, or revised Contract pages which are mailed to you are
the entire Contract. Only an officer of First Fortis can agree to change or
waive any provisions of a Contract. Any change or waiver must be in writing and
signed by one of these representatives of First Fortis.
The Contracts are non-participating and do not share in dividends or earnings of
First Fortis.
POSTPONEMENT OF PAYMENTS
With respect to amounts in the Subaccounts of the Separate Account, payment of
any amount due upon a total or partial surrender, death or under an annuity
option will ordinarily be made within seven days after all documents required
for such payment are received by First Fortis at its Home Office.
However, First Fortis may defer the determination, application or payment of any
death benefit, partial or total surrender or annuity payment, to the extent
dependent on Accumulation or Annuity Unit Values, or any transfer, for any
period during which the New York Stock Exchange is closed (other than customary
weekend and holiday closings) or trading on the New York Stock Exchange is
restricted as determined by the Securities and Exchange Commission, for any
period during which any emergency exists as a result of which it is not
reasonably practicable for First Fortis to determine the investment experience
for the Contract, or for such other periods as the Securities and Exchange
Commission may by order permit for the protection of Contract Owners.
First Fortis may also defer for up to 15 days the payment of any amount
attributable to a purchase payment made by check to allow the check reasonable
time to clear. First Fortis may also defer payment of surrender proceeds payable
out of the Fixed Account for a period of up to 6 months.
MISSTATEMENT OF AGE OR SEX AND OTHER ERRORS
If the age or sex of the Annuitant has been misstated, any amount payable will
be that which the purchase payments paid would have purchased at the correct age
and sex. If we have made any overpayments because of incorrect information about
age or sex, or any error or miscalculation, First Fortis will deduct the
overpayment from the
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next payment or payments due. We add underpayments to the next payment. The
amount of any adjustment will be credited or charged with interest at the rate
of 4% per year.
ASSIGNMENT AND OWNERSHIP RIGHTS
Rights and interests under a Qualified Contract may be assigned only in certain
narrow circumstances referred to in the Contract. Contract Owners and other
payees may assign their rights and interests under Non-Qualified Contracts,
including their ownership rights.
We take no responsibility for the validity of any assignment. An ownership
change must be made in writing and a copy must be sent to First Fortis' Home
Office. The change will be effective on the date it was made, although we are
not bound by a change until the date we record it. Contract Owner, Annuitant and
Beneficiary rights are subject to any assignment of record at the Home Office of
First Fortis. An assignment or pledge of a Contract may have adverse tax
consequences. See below under "Federal Tax Matters."
BENEFICIARY
Before the Annuity Commencement Date and while the Annuitant is living, the
Contract Owner may name or change a beneficiary or a contingent beneficiary by
sending a Written Request of the change to First Fortis. Under certain
retirement programs, however, spousal consent may be required to name or change
a beneficiary, and the right to name a beneficiary other than the spouse may be
subject to applicable tax laws and regulations. We are not responsible for the
validity of any change. A change will take effect as of the date it is signed
but will not affect any payments we make or action we take before receiving the
Written Request. We also need the consent of any irrevocably named person before
making a requested change.
In the event of the death of a Contract Owner or Annuitant prior to the Annuity
Commencement date the Beneficiary will be determined as follows:
- If upon the death of a Contract Owner there is one or
more surviving Contract Owners, the surviving Contract Owner(s) will
be the Beneficiary (this overrides any other beneficiary designation).
- If upon the death of a Contract Owner there are no
surviving Contract Owners, and upon the death of the Annuitant, the
Beneficiary will be the beneficiary designated by the Contract Owner.
If there is no surviving beneficiary who has been designated by the
Contract Owner, then the Contract Owner, or the Contract Owner's
estate will be the Beneficiary.
REPORTS
We will mail to the Contract Owner, at the last known address of record, any
reports required by any applicable law or regulation. You should therefore give
us prompt written notice of any address change. Each Contract Owner will also be
sent an annual and a semi-annual report for Fortis Series and a list of the
portfolio securities held in each Portfolio of Fortis Series. All reports will
be mailed to the person receiving payments during the Annuity Period, rather
than to the Contract Owner.
RIGHTS RESERVED BY FIRST FORTIS
First Fortis reserves the right to make certain changes if, in its judgement,
they would best serve the interests of Contract Owners and Annuitants or would
be appropriate in carrying out the purposes of the Contract. Any changes will be
made only to the extent and in the manner permitted by applicable laws. Also,
when required by law, First Fortis will obtain your approval of the changes and
approval from any appropriate regulatory authority. Such approval may not be
required in all cases, however. Examples of the changes First Fortis may make
include:
- To operate the Separate Account in any form permitted
under the Investment Company Act of 1940 or in any other form
permitted by law.
- To transfer any assets in any Subaccount to another
Subaccount, or to one or more separate accounts, or to the Fixed
Account; or to add, combine or remove Subaccounts in the Separate
Account.
- To substitute, for the Portfolio shares held in any
Subaccount, the shares of another Portfolio of Fortis Series or the shares
of another investment company or any other investment permitted by
law.
- To make any changes required by the Internal Revenue
Code or by any other applicable law in order to continue treatment of
the Contract as an annuity.
- To change the time or times of day at which a Valuation
Date is deemed to have ended.
- To make any other necessary technical changes in the
Contract in order to conform with any action the above provisions
permit First Fortis to take, including to change the way First Fortis
assesses charges, but without increasing as to any then outstanding
Contract the aggregate amount of the types of charges which First
Fortis has guaranteed.
DISTRIBUTION
The Contracts will be sold by individuals who, in addition to being licensed by
state insurance authorities to sell the Contracts of First Fortis, are also
registered representatives of Fortis Investors, Inc. ("Fortis Investors"), the
principal underwriter of the Contracts or registered representatives of other
broker-dealer firms, or representatives of other firms that are exempt from
broker-dealer regulation. Fortis Investors and any such other broker-dealer
firms are registered with the Securities and Exchange Commission under the
Securities Exchange Act of 1934 as broker-dealers and are members of the
National Association of Securities Dealers, Inc.
As compensation for distributing the Contracts, First Fortis pays Fortis
Investors a maximum of 7.3% of all purchase payments minus .15% annually of
Contract Values in the Variable Account. Fortis Investors pays a selling
allowance not in excess of 6.0% of purchase payments to other broker-dealer
firms or exempt firms who sell the Contracts.
Additionally, registered representatives, broker-dealer firms, and exempt firms
may be eligible for additional compensation based upon meeting certain
production standards. Fortis Investors may "chargeback" commissions paid to
others if the contract upon which the commission was paid is surrendered or
canceled within certain specified time periods.
First Fortis or Fortis Investors may also provide additional compensation to
broker-dealers in connection with sales of Contracts. Compensation may include
financial assistance to broker-dealers in connection with conferences, sales or
training programs for their employees, seminars for the public, advertising,
sales campaigns regarding Contracts, and other broker-dealer sponsored programs
or events. Compensation may include payment for travel expenses
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incurred in connection with trips taken by invited sales representatives and
members of their families to locations within or outside of the United States
for meetings or seminars of a business nature.
Fortis Investors is an indirect subsidiary of Fortis AMEV and Fortis AG and is
therefore under common control with First Fortis. Fortis Investors' principal
business address is 500 Bielenberg Drive, Woodbury, Minnesota 55115 and its
mailing address is P.O. Box 64284, St. Paul, MN 55164.
FEDERAL TAX MATTERS
The following description is a general summary of the tax rules, primarily
related to federal income taxes, which in the opinion of First Fortis are
currently in effect. These rules are based on laws, regulations and
interpretations which are subject to change at any time. This summary is not
comprehensive and is not intended as tax advice. Federal estate and gift tax
considerations, as well as state and local taxes, may also be material. You
should consult a qualified tax adviser as to the tax implications of taking any
action under a Contract or related retirement plan.
NON-QUALIFIED CONTRACTS
Section 72 of the Internal Revenue Code ("Code") governs the taxation of
annuities in general. Purchase payments made under Non-Qualified Contracts are
not excludible or deductible from the gross income of the Contract Owner or any
other person. However, any increase in the accumulated value of a Non-Qualified
Contract resulting from the investment performance of the Separate Account or
interest credited to the Fixed Account is generally not taxable to the Contract
Owner or other payee until received by him or her, as surrender proceeds, death
benefit proceeds, or otherwise. The exception to this rule is that, generally,
Contract Owners who are not natural persons ARE taxed annually for any increase
in the Contract Value. However, this exception does not apply in all cases, and
you may wish to discuss this with your tax adviser.
The following discussion applies generally to Contracts owned by natural
persons.
In general, surrenders or partial withdrawals under Contracts are taxed as
ordinary income to the extent of the accumulated income or gain under the
Contract. If a Contract Owner assigns or pledges any part of the value of a
Contract, the value so pledged or assigned is taxed to the Contract Owner as
ordinary income to the same extent as a partial withdrawal.
With respect to annuity payment options, although the tax consequences may vary
depending on the option elected under the Contract, until the investment in the
Contract is recovered, generally only the portion of the annuity payment that
represents the amount by which the Contract Value exceeds the "investment in the
contract" will be taxed. In general, an Annuitant's or other payee's "investment
in the contract" is the aggregate amount of purchase payments made by him or
her. After the "investment in the contract" is recovered, the full amount of any
additional annuity payments is taxable. For variable annuity payments, in
general the taxable portion of each annuity payment (prior to recovery of the
"investment in the contract") is determined by a formula which establishes the
specific dollar amount of each annuity payment that is not taxed. 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,
prior to recovery of the "investment in the contract," there is no tax on the
amount of each payment which bears the same ratio to such payment that the
"investment in the contract" bears to the total expected return under the
Contract. The remainder of each annuity payment is taxable. The taxable portion
of a distribution (in the form of an annuity or a single sum payment) is taxed
as ordinary income.
For purposes of determining the amount of taxable income resulting from
distributions, all Contracts and other annuity contracts issued by us or our
affiliates to the same Contract Owner within the same calendar year will be
treated as if they were a single contract.
There is a 10% penalty under the Code on the taxable portion of a "premature
distribution." Generally, an amount is a "premature distribution" unless the
distribution is (1) made on or after the Contract Owner or other payee reaches
age 59 1/2, (2) made to a Beneficiary on or after death of the Contract Owner,
(3) made upon the disability of the Contract Owner or other payee, or (4) part
of a series of substantially equal annuity payments for the life or life
expectancy of the Contract Owner or the Contract Owner and Beneficiary.
Premature distributions may result, for example, from an early Annuity
Commencement Date, any early surrender, partial surrender or assignment of a
Contract or the early death of an Annuitant who is not the Contract Owner.
A transfer of ownership of a Contract, or designation of an Annuitant or other
payee who is not also the Contract Owner, may result in certain income or gift
tax consequences to the Contract Owner that are beyond the scope of this
discussion. A Contract Owner contemplating any transfer or assignment of a
Contract should contact a competent tax adviser with respect to the potential
tax effects of such transaction.
REQUIRED DISTRIBUTIONS FOR NON-QUALIFIED CONTRACTS
In order that a Non-Qualified Contract be treated as an annuity contract for
federal income tax purposes, Section 72(s) of the Code requires (a) if the
person receiving payments dies on or after the Annuity Commencement Date but
prior to the time the entire interest in the Contract has been distributed, the
remaining portion of such interest will be distributed at least as rapidly as
under the method of distribution being used as of the date of that person's
death; and (b) if any Contract Owner dies prior to the Annuity Commencement
Date, the entire interest in the Contract will be distributed (1) within five
years after the date of that Contract Owner's death or (2) as annuity payments
which will begin within one year of that Contract Owner's death and which will
be made over the life of the Contract Owner's designated beneficiary or over a
period not extending beyond the life expectancy of that beneficiary. However, if
the Contract Owner's designated Beneficiary is the surviving spouse of the
Contract Owner, the Contract may be continued with the surviving spouse deemed
to be the new Contract Owner for purposes of Section 72(s). Where the Contract
Owner or other person receiving payments is not a natural person, the required
distributions provided for in Section 72(s) apply upon the death of the primary
Annuitant.
No regulations interpreting the requirements of Section 72(s) have yet been
issued (although proposed regulations have been issued interpreting similar
requirements for qualified plans). First Fortis intends to review and modify the
endorsement if necessary to ensure that the Contracts comply with the
requirements of Section 72(s) when clarified by regulation or otherwise.
Generally, unless the Beneficiary elects otherwise, the above requirements will
be satisfied where the death occurs prior to the Annuity Commencement Date by
paying the death benefit in a single sum, subject to proof of the Contract
Owner's death. The Beneficiary, however, may elect by Written Request to receive
an annuity option instead of a lump sum payment. However, if the election is not
made within 60 days of the date the single sum death benefit otherwise
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becomes payable, particularly where the annuitant dies and the annuitant is not
the Contract Owner, the IRS may disregard the election for tax purposes and tax
the Beneficiary as if a single sum payment had been made.
QUALIFIED CONTRACTS
The Contract may be used with several types of tax-qualified plans. The tax
rules applicable to Contract Owners, Annuitants and other payees vary according
to the type of plan and the terms and conditions of the plan itself. In general,
purchase payments made under a retirement program recognized under the Code on
behalf of an individual are excludible from the individual's gross income for
tax purposes during the Accumulation Period. The portion, if any, of any
purchase payment made by or on behalf of an individual under a Contract that is
not excluded from the individual's gross income for tax purposes during the
Accumulation Period constitutes the individual's "investment in the contract."
Aggregate deferrals under all plans at the employee's option may be subject to
limitations.
The Contracts are available in connection with the following types of retirement
plans: Section 403(b) annuity plans for employees of certain tax-exempt
organizations and public educational institutions; Section 401 or 403(a)
qualified pension, profit-sharing or annuity plans; individual retirement
annuities ("lRAs") under Section 408(b); simplified employee pension plans
("SEPs") under Section 408(k); Section 457 unfunded deferred compensation plans
of public employers and tax-exempt organizations; and private employer unfunded
deferred compensation plans. The tax implications of these plans are further
discussed in the Statement of Additional Information under the heading "Taxation
Under Certain Retirement Plans."
When annuity payments begin, the individual will receive back his or her
"investment in the contract" if any, as a tax-free return of capital. The dollar
amount of annuity payments received in any year in excess of such return is
taxable as ordinary income. When payments are received as an annuity, the
tax-free return of capital is treated as if received ratably over the entire
period of the annuity until fully recovered (as described above with respect to
Non-Qualified Contracts).
WITHHOLDING
Annuity payments and other amounts received under Contracts are subject to
income tax withholding unless the recipient elects not to have taxes withheld.
The amounts withheld will vary among recipients depending on the tax status of
the individual and the type of payments from which taxes are withheld.
Notwithstanding the recipient's election, withholding may be required with
respect to certain payments to be delivered outside the United States and with
respect to certain distributions from certain types of qualified retirement
plans unless the proceeds are transferred directly from the qualified retirement
plan to another qualified retirement plan. Moreover, special "backup
withholding" rules may require First Fortis to disregard the recipient's
election if the recipient fails to supply First Fortis with a "TIN" or taxpayer
identification number (social security number for individuals), or if the
Internal Revenue Service notifies First Fortis that the TIN provided by the
recipient is incorrect.
PORTFOLIO DIVERSIFICATION
The United States Treasury Department has adopted regulations under Section
817(h) of the Code which set standards of diversification for the investments
underlying the Contracts, in order for the Contracts to be treated as annuities.
First Fortis believes that these diversification standards will be satisfied.
Failure to do so would result in immediate taxation to Contract Owners or
Annuitants of all returns credited to Contracts, except in the case of certain
Qualified Contracts. Also, current regulations do not provide guidance as to any
circumstances in which control over allocation of values among different
investment alternatives may cause Contract Owners or Annuitants to be treated as
the owners of Separate Account assets for tax purposes. First Fortis reserves
the right to amend the Contracts in any way necessary to avoid any such result.
The Treasury Department has stated that it expects to establish standards in
this regard through regulations or rulings. Such standards may apply only
prospectively, although retroactive application is possible if such standards
were considered not to embody a new position.
CERTAIN EXCHANGES
Section 1035 of the Code provides generally that no gain or loss will be
recognized upon the exchange of a life insurance or annuity contract for an
annuity contract. Thus, a properly completed exchange from one of these types of
products into a Contract pursuant to the special annuity contract exchange form
we provide for this purpose is not generally a taxable event under the Code, and
your investment in the Contract will be the same as your investment in the
contract or policy exchanged. However, an exchange from a Fortis Group Fund or
other investment that is not a life insurance or annuity contract may be a
taxable event.
Certain existing annuity contracts may be "grandfathered" under various
provisions of the tax laws, i.e., subject to more favorable tax treatment than
generally offered under current law. For example, certain annuity contracts
issued before January 19, 1985 may not be subject to the distribution rules of
Code Section 72(s). Also, certain distributions from contracts issued before the
same date may not be subject to the 10% penalty tax for premature distributions.
Also, if a contract contained principal on August 13, 1982, that principal may
generally be withdrawn in a partial distribution before the withdrawal of any
taxable gain in the contract. These "grandfather" provisions may be lost if such
contract is exchanged for a Contract. In connection with contracts issued
pursuant to Section 1035 exchanges, if the data is provided to us, we can
separately track amounts attributable to purchase payments made to the original
contract before or after the effective date of the Tax Equity and Fiscal
Responsibility Act of 1982. That separate tracking can preserve certain of the
above grandfathered provisions.
Because of the complexity of these matters, you should consult a qualified tax
adviser before making any exchange.
TAX LAW RESTRICTIONS AFFECTING SECTION 403(B) PLANS
Section 403(b)(12) of the Internal Revenue Code restricts the distribution under
Section 403(b) annuity contracts of:
(1)
elective contributions made for years beginning after
December 31, 1988;
(2)
earnings on those contributions; and
(3)
earnings on amounts held as of December 31, 1988.
Distribution of those amounts may only occur upon death of the employee,
attainment of age 59 1/2, separation from service, disability, or financial
hardship. In addition, income attributable to elective contributions which
accrues after December 31, 1988 may not be distributed in the case of hardship.
VOTING PRIVILEGES
In accordance with its view of current applicable law, First Fortis will vote
shares of each of the Portfolios which are attributable to a
17
<PAGE>
Contract at regular and special meetings of the shareholders of Fortis Series in
proportion to instructions received from the persons having the voting interest
in the Contract as of the record date for the corresponding Fortis Series
shareholders meeting. Contract Owners have the voting interest during the
Accumulation Period, persons receiving annuity payments during the Annuity
Period, and Beneficiaries after the death of the Annuitant or Contract Owner.
However, if the Investment Company Act of 1940 or any rules thereunder should be
amended or if the present interpretation thereof should change, and as a result
First Fortis determines that it is permitted to vote shares of the Portfolios in
its own right, it may elect to do so.
During the Accumulation Period, the number of shares of a Portfolio attributable
to a Contract is determined by dividing the amount of Contract Value in the
corresponding Subaccount pursuant to the Contract as of the record date for the
shareholders meeting by the net asset value of one Portfolio share as of that
date. During the Annuity Period, or after the death of the Contract Owner or
Annuitant, the number of Portfolio shares deemed attributable to the Contract
will be computed in a comparable manner, based on the liability for future
variable annuity payments allocable to that Subaccount under the Contract as of
the record date. Such liability for future payments will be calculated on the
basis of the mortality assumptions and the assumed interest rate used in
determining the number of Annuity Units credited to the Contract and the
applicable Annuity Unit value on the record date. During the Annuity Period, the
number of votes attributable to a Contract will generally decrease since funds
set aside to make the annuity payments will decrease.
Where Contract Owners are permitted to instruct us as to how to vote Portfolio
shares, our policy is to permit an Annuitant or payee who is not the Contract
Owner to direct the Contract Owner with respect to the voting of certain
Portfolio shares attributable to his or her Contract. An Annuitant or other
payee may direct the Contract Owner with respect to that number of Portfolio
shares that is attributable to purchase payments, if any, contributed by such
Annuitant or payee and any additional shares, to the extent authorized by an
employee benefit plan. (For these purposes, the number of shares attributable to
the Annuitant or payee is computed on a basis consistent with that for
attributing Portfolio shares to Contract Owners, as described above.)
Contract Owners are to instruct First Fortis to vote in accordance with such
directions from Annuitants and payees. Furthermore, Contract Owners are to
instruct First Fortis to vote shares of any Portfolio for which directions could
have been but were not received from Annuitants and other payees in the same
proportion as other shares in that Portfolio attributable to the Contract Owner
which are to be voted in accordance with directions received from Annuitants and
other payees. The Contract Owner may instruct us as to the voting of any other
shares attributable to Contracts as the Contract Owner may determine. The
Separate Account, Fortis Series and First Fortis do not have any obligation to
determine whether or not voting directions are requested or received by a
Contract Owner or whether or not a Contract Owner has instructed First Fortis in
accordance with directions given by Annuitants and other payees.
First Fortis will vote shares as to which it has received no timely
instructions, and any shares attributable to excess amounts First Fortis has
accumulated in the related Subaccount, in proportion to the voting instructions
which it receives with respect to all Contracts and other variable annuity
contracts participating in a Portfolio. To the extent that First Fortis or any
affiliated company holds any shares of a Portfolio, they will be voted in the
same proportion as instructions for that Portfolio that are received from
persons holding the voting interest with respect to all First Fortis separate
accounts participating in that Portfolio. Shares held by separate accounts other
than the Separate Account will in general be voted in accordance with
instructions of participants in such other separate accounts. This diminishes
the relative voting influence of the Contracts.
Each person having a voting interest in a Subaccount of the Separate Account
will receive proxy material, reports and other materials relating to the
appropriate Portfolio. Pursuant to the procedures described above, these persons
may give instructions regarding the election of the Board of Directors of Fortis
Series, ratification of the selection of its independent auditors, the approval
of the investment manager of a Portfolio, changes in fundamental investment
policies of a Portfolio and all other matters that are put to a vote by Fortis
Series shareholders.
STATE REGULATION
First Fortis is subject to regulation and supervision by the Insurance
Department of the State of New York, which periodically examines its affairs.
LEGAL MATTERS
The legality of the Contracts described in this Prospectus has been passed upon
by David A. Peterson, Esquire, Vice President and Assistant General Counsel of
Fortis Benefits Insurance Company, an affiliate of First Fortis. Messrs.
Freedman, Levy, Kroll & Simonds, Washington, D.C., have advised First Fortis on
certain federal securities law matters.
CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
<S> <C>
First Fortis................................... 2
Calculation of Annuity Payments................ 2
Services....................................... 3
- Safekeeping of Separate Account Assets... 3
- Experts.................................. 3
- Principal Underwriter.................... 3
Limitation On Allocations...................... 3
Change of Investment Adviser or Investment
Policy........................................ 3
Taxation Under Certain Retirement Plans........ 3
Terms of Exemptive Relief in Connection with
Mortality and Expense Risk Charge............. 7
Other Information.............................. 8
Financial Statements........................... 8
APPENDIX A--Performance Information............ A-1
</TABLE>
18
<PAGE>
APPENDIX A
SAMPLE DEATH BENEFIT CALCULATIONS
DATE OF DEATH IS THE 3RD CONTRACT ANNIVERSARY:
<TABLE>
<CAPTION>
<S> <C>
a. Net Purchase Payments Made Prior to Date of Death..............................................................
b. Contract Value on Date of Death................................................................................
Death Benefit is larger of a, and b.......................................................................................
<CAPTION>
EXAMPLE 1 EXAMPLE 2
----------- -----------
<S> <C> <C>
a. $ 20,000 $ 20,000
b. $ 17,000 $ 25,000
Death Ben $ 20,000 $ 25,000
</TABLE>
DATE OF DEATH IS THE 8TH CONTRACT ANNIVERSARY:
<TABLE>
<CAPTION>
EXAMPLE 3
-----------
<S> <C> <C>
a. Net Purchase Payments Made Prior to Date of Death................................................... $ 20,000
b. Contract Value on 5th Contract Anniversary.......................................................... $ 15,000
c. Contract Value on Date of Death..................................................................... $ 17,000
Death Benefit is larger of a, b, and c......................................................................... $ 20,000
<CAPTION>
EXAMPLE 4 EXAMPLE 5
----------- -----------
<S> <C> <C>
a. $ 20,000 $ 20,000
b. $ 30,000 $ 30,000
c. $ 25,000 $ 35,000
Death Ben $ 30,000 $ 35,000
</TABLE>
DATE OF DEATH IS THE 13TH CONTRACT ANNIVERSARY:
<TABLE>
<CAPTION>
EXAMPLE 6
-----------
<S> <C> <C>
a. Net Purchase Payments Made Prior to Date of Death................................................... $ 20,000
b. Contract Value on 10th Contract Anniversary......................................................... $ 15,000
c. Contract Value on Date of Death..................................................................... $ 17,000
Death Benefit is larger of a, b, and c......................................................................... $ 20,000
<CAPTION>
EXAMPLE 7 EXAMPLE 8
----------- -----------
<S> <C> <C>
a. $ 20,000 $ 20,000
b. $ 40,000 $ 40,000
c. $ 30,000 $ 50,000
Death Ben $ 40,000 $ 50,000
</TABLE>
A-1
<PAGE>
(This page has been left blank intentionally.)
A-2
<PAGE>
APPENDIX B
EXPLANATION OF EXPENSE CALCULATIONS
The expense for a given year is calculated by multiplying the projected
beginning of the year policy value by the total expense rate. The total expense
rate is the sum of the variable account expense rate plus the total Series Fund
expense rate plus the annual administrative charge rate.
The policy values are projected by assuming a single payment of $1,000 grows at
an annual rate equal to 5% reduced by the total expense rate described above.
For example, the 3 year expense for the Growth Stock Series is calculated as
follows:
<TABLE>
<S> <C> <C>
Total Variable Account Annual Expenses 1.35%
+ Total Series Fund Operating Expenses 0.67%
+ Annual Administrative Charge Rate (See Below) 0.14%
= Total Expense Rate 2.16%
</TABLE>
The Annual Administrative Charge Rate is calculated by dividing the total Annual
Contract charges collected in 1995 by an affiliated company by the average
policy value in force in 1995 with that same affiliate.
Year 1 Beginning Policy Value = $1000.00
Year 1 Expense = 1000.00 x 0.0216 = $21.60
Year 2 Beginning Policy Value = $1028.40
Year 2 Expense = 1028.40 x 0.0216 = $22.21
Year 3 Beginning Policy Value = $1057.61
Year 3 Expense = 1057.61 x 0.0216 = $22.84
So the cumulative expenses for years 1-3 for the Growth Stock Series are equal
to 21.60 + 22.21 + 22.84 = $66.65.
If the contract is surrendered, the surrender charge is the surrender charge
percentage times the purchase payment minus the 10% free withdrawal amount:
<TABLE>
<S> <C> <C> <C>
Surrender Charge (Initial Premium - 10% Free
Percentage x Withdrawal) = Surrender Charge
0.05 x ( 1000.00 - 100.00 ) = 45.00
</TABLE>
So the total expense if surrendered is 66.65 + 45.00 = $111.65.
B-1
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
Individual Flexible Premium Deferred Variable Annuity Contracts (Opportunity)
Issued by
FIRST FORTIS LIFE INSURANCE COMPANY
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1996
This Statement of Additional Information is not a Prospectus. It is intended
that this Statement of Additional information be read in conjunction with the
Prospectus for a flexible premium deferred variable annuity contract
("Contract"), dated May 1, 1996. A copy of the Prospectus may be obtained
without charge from Fortis Investors, Inc. 1-800-800-2638, ext. 3057; mailing
address: P.O. Box 64272, St. Paul, MN 55164 or First Fortis Life Insurance
Company ("First Fortis") 1-800-745-8248, mailing address: P.O.Box 3249,
Syracuse, NY 13220. The Contracts are issued by First Fortis through its
Variable Account A (the "Separate Account").
TABLE OF CONTENTS
Page
First Fortis . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Calculation of Annuity Payments. . . . . . . . . . . . . . . . . . .2
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
- Safekeeping of Separate Account Assets. . . . . . . . . . . . . .3
- Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
- Principal Underwriter . . . . . . . . . . . . . . . . . . . . . .3
Limitation on Allocations. . . . . . . . . . . . . . . . . . . . . .3
Change of Investment Adviser or Investment Policy. . . . . . . . . .3
Taxation Under Certain Retirement Plans. . . . . . . . . . . . . . .4
Terms of Exemptive Relief in Connection With Mortality and
Expense Risk Charge . . . . . . . . . . . . . . . . . . . . .7
Other Information. . . . . . . . . . . . . . . . . . . . . . . . . .8
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . .8
Appendix A - Performance Information . . . . . . . . . . . . . . .A-1
In order to supplement the description in the Prospectus, the following provides
additional information about the Contract and other matters which may be of
interest to Contract Owners, Annuitants and Beneficiaries. Terms used in this
Statement of Additional Information have the same meanings as are defined in the
Prospectus under the heading "Special Terms Used in This Prospectus."
<PAGE>
FIRST FORTIS
First Fortis Life Insurance Company, the issuer of the Contracts, is a New York
corporation qualified to sell life insurance and annuity contracts in New York.
First Fortis is a wholly-owned subsidiary of Fortis AMEV. Fortis AMEV is a
publicly-traded, multi-national insurance and financial services group
headquartered in The Netherlands. Fortis AMEV is an international financial
services firm that has been in business since 1847. It is one of the largest
holding companies in Europe with subsidiary companies in twelve countries on
four continents. Fortis AMEV is the third largest insurance company in the
Netherlands.
Best's Insurance Reports has assigned First Fortis a rating of A (Excellent)
for financial position and operating performance. First Fortis has a rating
of AA from Standard & Poor's. As defined by Standard & Poor's, insurers rated
AA offer "excellent financial security." These ratings represent such rating
agencies' independent opinion of First Fortis' financial strength and ability
to meet policy holder obligations, but have no relevance to the performance
and quality of the assets in Subaccounts of the Variable Account.
CALCULATION OF ANNUITY PAYMENTS
FIXED ANNUITY OPTION
The amount of each annuity payment under a Fixed Annuity Option is fixed and
guaranteed by First Fortis. Monthly fixed annuity payments will start as of the
end of the Valuation Period that contains the Annuity Commencement Date. At
that time, the Contract Value of the Contract is computed and that portion of
the Contract Value which will be applied to the Fixed Annuity Option selected is
determined. The amount of the first monthly payment under the Fixed Annuity
Option selected will be at least as large as would result from using the annuity
tables contained in the Contract to apply such amount of Contract Value to the
annuity form selected. The dollar amounts of any fixed annuity payments after
the first are specified during the entire period of annuity payments according
to the provisions of the annuity form selected.
VARIABLE ANNUITY OPTION
ANNUITY UNITS. To the extent a Variable Annuity Option has been selected, we
convert the Accumulation Units for each Subaccount of the Separate Account into
Annuity Units for each Subaccount at their values determined as of the end of
the Valuation Period which contains the Annuity Commencement Date. As of such
time, any Fixed Account Value to be applied to a Variable Annuity Option is also
converted to Annuity Units in the Subaccounts selected based on the then-current
Annuity Unit value. The initial number of Annuity Units in each Subaccount is
determined by dividing the amount of the initial monthly variable annuity
payment (see "Variable Annuity Option--Variable Annuity Payments," below)
allocable to that Subaccount by the value of one Annuity Unit in that Subaccount
as of the time of the conversion. The number of Annuity Units for each
Subaccount will remain constant, as long as an annuity remains in force and the
allocation among the Subaccounts has not changed.
The value of each Subaccount's Annuity Units will vary to reflect the investment
experience of that Subaccount as well as charges deducted from the Subaccount.
The value of each Subaccount's Annuity Units is equal to the prior value of the
Subaccount's Annuity Units multiplied by the net investment factor for that
Subaccount (discussed in the Prospectus under "Contract Value") for the
Valuation Period ending on that Valuation Date, with an offset for the 4%
assumed interest rate used in the annuity tables of the Contract.
VARIABLE ANNUITY PAYMENTS. Variable annuity payments start at the end of the
Valuation Period that contains the Annuity Commencement Date, and will vary in
amount as the related Annuity Unit values vary. The amount of the first monthly
payment is shown on the annuity tables contained in the Contract for each $1,000
of Contract Value applied to the Variable Annuity Option selected as of the end
of such Valuation Period. The first variable annuity
2
<PAGE>
payment is, in effect, allocated among the Subaccounts in the same proportion as
the Contract Value is allocated among the Subaccounts upon commencement of
annuity payments.
Payments after the first will vary in amount and are determined on the first
Valuation Date of each subsequent monthly period. If the monthly payment under
the annuity form selected is based on the value of Annuity Units of a single
Subaccount, the monthly payment is found by multiplying the number of the
Contract's Annuity Units for that Subaccount by the Annuity Unit value of such
Subaccount as of the first Valuation Date in each monthly period following the
Annuity Commencement Date. If the monthly payment under the Variable Annuity
Option selected is based upon the value of Annuity Units in more than one
Subaccount, this is repeated for each applicable Subaccount. The sum of these
payments is the variable annuity payment.
SERVICES
SAFEKEEPING OF SEPARATE ACCOUNT ASSETS
Title to the assets of the Separate Account is held by First Fortis. The assets
of the Separate Account are kept segregated and held separate and apart from
First Fortis' other assets. Fortis Advisers, Inc., an affiliate of First
Fortis, maintains records of all purchases and redemptions of shares of Fortis
Series Fund, Inc. held by each of the Subaccounts of the Separate Account.
EXPERTS
The financial statements of First Fortis Life Insurance Company appearing in
this Statement of Additional Information have been audited by Ernst & Young LLP,
independent auditors as set forth in their report thereon also appearing in this
Statement of Additional Information and are included in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
PRINCIPAL UNDERWRITER
Fortis Investors, Inc. ("Fortis Investors"), the principal underwriter of the
Contracts, is a Minnesota corporation and a member of the Securities Investors
Protection Corporation. The offering of the Contracts is continuous, and Fortis
Investors does not anticipate discontinuing the offering of the Contracts,
although it reserves the right to do so. Contracts will be issued for
Annuitants from ages zero to ninety.
LIMITATION ON ALLOCATIONS
Under the Contract, First Fortis reserves the right to control the amount of any
assets in any investment alternative. Pursuant to this authority, First Fortis
has established the following administrative procedures for the protection of
the interests of ail investors participating in Fortis Series' Portfolios: a
Contract Owner may not invest, allocate, transfer or exchange Contract Value
into any Subaccount if the value allocated to that Subaccount under the Contract
(and under any other insurance or annuity contracts directly or indirectly
controlled by the same person, jointly or individually) would immediately
thereafter equal 25% or more of the related Fortis Series Portfolio's net
assets. First Fortis reserves the right to modify these procedures at any time.
CHANGE OF INVESTMENT ADVISER OR INVESTMENT POLICY
Unless otherwise required by law or regulation, and subject to Fortis Advisers,
Inc.'s right to terminate its investment advisory arrangements with Fortis
Series, neither the investment adviser nor any investment policy may be changed
without the consent of First Fortis. No investment policy will be changed
unless a statement of change is filed with and approved by the Insurance
Commissioner of the State of New York. The Contract Owner (or, after annuity
payments start, the Annuitant) will be notified of any material investment
policy change which has been approved.
3
<PAGE>
Notification of an investment policy change will be provided to Contract Owners
prior to its implementation by the Separate Account if Contract Owner comment or
vote is required for such change.
TAXATION UNDER CERTAIN RETIREMENT PLANS
Federal income tax information concerning the purchase of Contracts for specific
types of retirement plans is set forth below. You should also refer to "Federal
Tax Matters" in the Prospectus. The tax information provided is not
comprehensive, and you should consult a qualified tax adviser before taking any
action in connection with a retirement plan.
SECTION 403(B) ANNUITIES FOR EMPLOYEES OF CERTAIN TAX-EXEMPT ORGANIZATIONS OR
PUBLIC EDUCATIONAL INSTITUTIONS
PURCHASE PAYMENTS. Under Section 403(b) of the Internal Revenue Code ("Code"),
payments made by certain employers (i.e., tax-exempt organizations meeting the
requirements of Section 501(c)(3) of the Code, or public educational
institutions) to purchase Contracts for their employees are excludible from the
gross income of employees to the extent that such aggregate purchase payments do
not exceed certain limitations prescribed by the Code. This is the case whether
the purchase payments are a result of voluntary salary reduction amounts or
employer contributions. Salary reduction payments are, however, subject to FICA
(social security) taxes.
TAXATION OF DISTRIBUTIONS. Distributions from a Section 403(b) tax-deferred
annuity contract are taxed as ordinary income to the recipient as described
under "Federal Tax Matters" in the Prospectus. Taxable distributions
received before the employee attains age 59 1/2 generally are subject to a
10% penalty tax in addition to regular income tax. Certain distributions are
excepted from this penalty tax, including distributions following the
employee's death, disability, separation from service after age 55,
separation from service at any age if the distribution is in the form of an
annuity for the life (or life expectancy) of the employee (or the employee
and Beneficiary) and distributions not in excess of deductible medical
expenses. In addition, no distributions of voluntary salary reduction
amounts made for years after December 31, 1988 (plus earnings thereon and
earnings on Contract values as of December 31, 1988) will be permitted prior
to one of the following events: attainment of age 59 1/2 by the employee or
the employee's separation from service, death, disability or hardship.
(Hardship distributions will be limited to the lesser of the amount of the
hardship or the amount of salary reduction contributions, exclusive of
earnings thereon.)
REQUIRED DISTRIBUTIONS. Generally, distributions from Section 403(b)
annuities must commence not later than April 1 of the calendar year following
the calendar year in which the employee attains age 70 1/2, and such
distributions must be made over a period that does not exceed the life
expectancy of the employee (or the employee and Beneficiary). A penalty tax
of 50% would be imposed on any amount by which the minimum required
distribution in any year exceeded the amount actually distributed in that
year. In addition, in the event that the employee dies before his or her
entire interest in the Contract has been distributed, the employee's entire
interest must be distributed in accordance with rules similar to those
applicable upon the death of the Contract Owner in the case of a
Non-Qualified Contract, as described in the Prospectus. Certain of these and
other provisions are incorporated in a special endorsement attached to
Contracts that are intended to qualify under Section 403(b), and reference
should be made to that endorsement for its complete terms.
TAX-FREE EXCHANGES AND ROLLOVERS. The Code provides for the tax-free exchange
of one Section 403(b) annuity contract for another Section 403(b) annuity
contract, and the IRS has ruled (Revenue Ruling 90-24) that amounts transferred
may qualify as tax-free transfers under certain circumstances. In addition,
Section 403(b)(8) of the Code permits tax-free rollovers from Section 403(b)
programs to individual retirement annuities or other Section 403(b) programs
under certain circumstances.
SECTION 401 QUALIFIED PENSION, PROFIT-SHARING OR ANNUITY PLANS
PURCHASE PAYMENTS. Subject to certain limitations prescribed by the Code,
purchase payments made by an employer (or a self-employed individual) under a
pension, profit-sharing or annuity plan qualified under Section 401 or Section
403(a) of the Code are generally deductible by the employer and excluded from
the taxable income of the employee
4
<PAGE>
for federal income tax purposes, whether made under a salary reduction agreement
or directly by employer contributions. Salary reduction payments are, however,
subject to FICA (social security) taxes. Purchase payments made directly by an
employee generally are made on an after-tax basis.
TAXATION OF DISTRIBUTIONS. Distributions from Contracts purchased under these
qualified plans are taxable as ordinary income, except to the extent allocable
to an employee's after-tax contributions, as described under "Federal Tax
Matters--Qualified Plans," in the Prospectus. However, if an employee or other
payee receives a "lump sum" distribution, as defined in the Code, from an exempt
employees' trust, the taxable portion of the distribution may be subject to
special tax treatment. For most individuals receiving lump sum distributions
after attaining age 59 1/2, the rate of tax may be determined under a special
5-year income averaging provision. Those who attained age 50 by January 1, 1986
may instead elect to use a 10-year income averaging provision based on the
income tax rates in effect for 1986. Taxable distributions received prior to
attainment of age 59 1/2 under a Contract purchased under a qualified plan are
subject to the same 10% penalty tax (and the same exceptions) as described above
with respect to Section 403(b) annuity contracts.
REQUIRED DISTRIBUTIONS. The minimum distribution requirements for these
qualified plans are generally the same as described above with respect to
Section 403(b) annuity contracts.
TAX-FREE ROLLOVERS. If, within 60 days of receipt, an employee who receives
a single sum distribution transfers all of the taxable amount received to
another plan qualified under Section 401 or 403(a), or to an individual
retirement account or annuity as provided for under the Code, the transferred
amount will not be taxed in the year of distribution. Certain "partial"
distributions may also qualify for tax-free rollover treatment, but only if
transferred to an individual retirement account or annuity. However, income
tax may be required to be withheld from the distribution unless the
distribution is transferred directly from the qualified plan to an individual
retirement account or annuity.
INDIVIDUAL RETIREMENT ANNUITIES
PURCHASE PAYMENTS. Individuals may make contributions for individual retirement
annuity ("IRA") Contracts. Deductible contributions for any year may be made up
to the lesser of $2,000 or 100% of compensation for individuals who (1) are not
(and whose spouses are not) active participants in another retirement plan, (2)
are unmarried and have adjusted gross income of $25,000 or less, or (3) are
married and have adjusted gross income of $40,000 or less. Such individuals may
also establish an IRA for a spouse who makes no contribution to an IRA for the
tax year. The annual purchase payments for both spouses' Contracts cannot
exceed the lesser of $2,250 or 100% of the working spouse's earned income, and
no more than $2,000 may be contributed to either spouse's IRA for any year.
Individuals who are active participants in other retirement plans and whose
adjusted gross income (with certain special adjustments) exceeds the cut-off
point ($25,000 for unmarried, $40,000 for married persons filing jointly, and $0
for married persons filing a separate return) by less than $10,000 are entitled
to make deductible IRA contributions in proportionately reduced amounts. For
example, a married individual who is an active participant in another retirement
plan and files a separate tax return is entitled to a partial IRA deduction if
the individual's adjusted gross income is less than $10,000, and no IRA
deduction if his or her adjusted gross income is equal to or greater than
$10,000.
An individual may make non-deductible IRA contributions to the extent of the
excess of (1) the lesser of $2,000 ($2,250 in the case of a spousal IRA) or 100%
of compensation over (2) the IRA deductible contributions made with respect to
the individual.
An individual may not make any contribution to his/her own IRA for the year in
which he/she reaches age 70 1/2 or for any year thereafter.
TAXATION OF DISTRIBUTIONS. Distributions from IRA Contracts are taxed as
ordinary income to the recipient, although special rules exist for the tax-free
return of non-deductible contributions. In addition, taxable distributions
received under an IRA Contract prior to age 59 1/2% are subject to a 10% penalty
tax in addition to regular income tax. Certain
5
<PAGE>
distributions are exempted from this penalty tax, including distributions
following the owner's death, disability, or separation from service if the
distribution is in the form of an annuity for the life (or life expectancy) of
the owner (or the owner and beneficiary).
REQUIRED DISTRIBUTIONS. The minimum distribution requirements for IRAs are
generally the same as described above with respect to Section 403(b) annuity
contracts. Certain of these and other provisions are incorporated in a special
endorsement attached to IRA Contracts, and reference should be made to that
endorsement for its complete terms.
TAX-FREE ROLLOVERS. The Code permits funds to be transferred in a tax-free
rollover from a qualified employer pension, profit-sharing, annuity, bond
purchase or tax-deferred annuity plan to an IRA Contract if certain conditions
are met, and if the rollover of assets is completed within 60 days after the
distribution from the qualified plan is received. In addition, not more
frequently than once every twelve months, amounts may be rolled over tax-free
from one IRA to another, subject to the 60-day limitation and other
requirements. The once-per-year limitation on rollovers does not apply to
direct transfers of funds between IRA custodians or trustees.
SIMPLIFIED EMPLOYEE PENSION PLANS
PURCHASE PAYMENTS. Under Section 408(k) of the Code, employers may establish a
type of IRA plan referred to as a simplified employee pension plan (SEP).
Employer contributions to a SEP cannot exceed the lesser of $30,000 or 15% of
the employee's earned income. Employees of certain small employers may have
contributions made to the SEP on their behalf on a salary reduction basis.
These salary reduction contributions may not exceed $9,500 in 1996, which is
indexed for inflation. Employees of tax-exempt organizations and state and
local government agencies are not eligible for this type of SEP.
TAXATION OF DISTRIBUTIONS. Generally, distribution payments from SEPs are
subject to the same distribution rules described above for IRAs.
REQUIRED DISTRIBUTIONS. SEP distributions are subject to the same minimum
required distribution rules described above for IRAs.
TAX-FREE ROLLOVERS. Generally, rollovers and direct transfers may be made to
and from SEPs in the same manner as described above FOR IRAs, subject to the
same conditions and limitations.
SECTION 457 UNFUNDED DEFERRED COMPENSATION PLANS OF PUBLIC EMPLOYERS AND
TAX-EXEMPT ORGANIZATIONS
PURCHASE PAYMENTS. Under Section 457 of the Code, all individuals who perform
services for a state or local government or governmental agency may participate
in a deferred compensation program. Other tax-exempt employers may establish
unfunded deferred compensation plans under Section 457 for employees and/or
independent contractors.
Though not actually a qualified plan as that term is normally used, this type
of program allows individuals to defer the receipt of compensation that
otherwise would be currently payable and therefore to defer the payment of
federal income taxes on such amounts. Assuming that the program meets the
requirements to be considered an eligible deferred compensation plan (an
"EDCP"), an individual may contribute (and thereby defer from current income
for tax purposes) the lesser of $7,500 or 33-1/3% of the individual's
includible compensation. (Includible compensation means compensation from the
employer which would be currently includible in gross income for federal tax
purposes.) In addition, during the last three years before an individual
attains normal retirement age, additional "catch-up" deferrals are permitted.
The amounts which are deferred may be used by the employer to purchase the
Contracts offered by this Prospectus. The Contract is owned by the employer
and is subject to the claims of the employer's creditors. The employee has
no rights or interest in the Contract and is entitled only to payment in
accordance with the EDCP provisions.
6
<PAGE>
TAXATION OF DISTRIBUTIONS. Amounts received by an individual from an EDCP
are includible in gross income for the taxable year in which such amounts are
paid or otherwise made available.
DISTRIBUTIONS BEFORE SEPARATION FROM SERVICE. Distributions generally are
not permitted under an EDCP prior to separation from service or reaching age
70 1/2, except in cases of severe financial hardship. Hardship distributions
are includible in the gross income of the individual in the year in which
paid.
REQUIRED DISTRIBUTIONS. The distribution requirements for these qualified
plans are generally the same as described above with respect to Section
403(b) annuity contracts. However, if distributions do not commence before
the employee's death, the entire interest in the Contract must be distributed
within 15 years if the beneficiary is not the employee's surviving spouse.
TAX-FREE TRANSFERS. The Code permits the tax-free direct transfer of EDCP
amounts to another EDCP, subject to certain conditions.
PRIVATE EMPLOYER UNFUNDED DEFERRED COMPENSATION PLANS
PURCHASE PAYMENTS. Private taxable employers may establish unfunded,
non-qualified deferred compensation plans for a select group of management or
highly compensated employees and/or for independent contractors. Certain
arrangements of tax-exempt employers entered into prior to August 16, 1986,
and not subsequently modified, are also subject to the rules for private
taxable employer deferred compensation plans discussed below. (Unfunded
deferred compensation plans of other tax-exempt employers are generally
subject to the requirements of Section 457.)
These types of programs allow individuals to defer receipt of up to 100% of
compensation which would otherwise be includible in income and therefore to
defer the payment of federal income taxes on such amounts. Purchase payments
made by the employer, however are not immediately deductible by the employer,
and the employer is currently taxed on any increase in Contract Value.
Deferred compensation plans represent a contractual promise on the part of
the employer to pay current compensation at some future time. The Contract
is owned by the employer and is subject to the claims of the employer's
creditors. The individual has no right or interest in the Contract and is
entitled only to payment from the employer's general assets in accordance
with plan provisions.
TAXATION OF DISTRIBUTIONS. Amounts received by an individual from a private
employer deferred compensation plan are includible in gross income for the
taxable year in which such amounts are paid or otherwise made available.
EXCESS DISTRIBUTIONS--15% TAX
Certain persons, particularly those who participate in more than one
tax-qualified retirement plan, may be subject to an additional tax of 15% on
certain excess aggregate distributions from those plans. In general, excess
distributions are taxable distributions from all tax-qualified plans in excess
of a specified annual limit for payments made in the form of an annuity
(currently, $150,000) or five times the annual limit for lump sum distributions.
TERMS OF EXEMPTIVE RELIEF IN CONNECTION WITH MORTALITY AND EXPENSE RISK CHARGE
First Fortis and Fortis Investors have obtained exemptive relief from the
Securities and Exchange Commission in connection with deducting the mortality
and expense risk charge pursuant to the Contracts. In the application for the
exemption, First Fortis and Fortis Investors have represented and undertaken,
among other things, that:
- The level of the mortality and expense risk charge is within the range
of industry practice for comparable annuity contracts;
7
<PAGE>
- This conclusion is based upon a review that First Fortis and Fortis
Investors have conducted of publicly-available information regarding
annuity contracts of other companies and they will maintain at their
principal office, and make available on request to the Commission or its
staff, a memorandum setting forth the variable annuity products analyzed
and the methodology and results of the comparative review;
- There is reasonable likelihood that the proposed distribution financing
arrangements with respect to the Contracts will benefit the Variable
Account and investors in the Contract, and the basis for this conclusion
is set forth in a memorandum which will be maintained by First Fortis at
its principal office and will be available to the Commission or its
staff on request.
OTHER INFORMATION
A Registration Statement has been filed with the Securities and Exchange
Commission under the Securities Act of 1933 as amended, with respect to the
Contracts discussed in this Statement of Additional Information. Not all of the
information set forth in the Registration Statement, amendments and exhibits
thereto has been included in this Statement of Additional Information.
Statements contained in this Statement of Additional Information concerning the
content of the Contracts and other legal instruments are intended to be
summaries. For a complete statement of the terms of these documents, reference
should be made to the instruments filed with the Securities and Exchange
Commission.
FINANCIAL STATEMENTS
The financial statements of First Fortis that are included in this Statement of
Additional Information should be considered only as bearing on the ability of
First Fortis to meet its obligations under the Contracts. This Statement of
Additional Information contains no financial statements for the Separate
Account, because the Separate Account has not yet commenced operations, has no
assets or liabilities, and has received no income nor incurred any expenses as
of the date of this Statement of Additional Information.
8
<PAGE>
Financial Statements
First Fortis Life Insurance Company
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
WITH REPORT OF INDEPENDENT AUDITORS
<PAGE>
First Fortis Life Insurance Company
Financial Statements
Years ended December 31, 1995, 1994, and 1993
CONTENTS
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . 1
Financial Statements
Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Statements of Changes in Shareholder's Equity. . . . . . . . . . . . . . . . 4
Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . 6
<PAGE>
[ERNST & YOUNG LLP LETTERHEAD]
Report of Independent Auditors
Board of Directors
First Fortis Life Insurance Company
We have audited the accompanying balance sheets of First Fortis Life Insurance
Company (a wholly-owned subsidiary of Fortis AMEV) as of December 31, 1995 and
1994, and the related statements of operations, changes in shareholder's equity,
and cash flows for each of the three years in the period ended December 31,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of First Fortis Life Insurance
Company at December 31, 1995 and 1994, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
February 19, 1996
<PAGE>
First Fortis Life Insurance Company
Statements of Operations
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1995 1994 1993
-------------------------------------------
<S> <C> <C> <C>
REVENUES
Insurance operations (NOTE 7):
Life insurance premiums $ 18,879,246 $ 19,431,130 $ 19,541,946
Accident and health premiums 62,322,484 72,624,559 55,85O,949
Net investment income (NOTE 3) 7,465,751 6,261,593 6,073,726
Realized gains (losses) on
investments (NOTE 3) 2,683,100 (1,057,438) 3,062,050
Other income 297,767 287,426 533,390
-------------------------------------------
Total revenues 91,648,348 97,547,270 85,062,061
BENEFITS AND EXPENSES
Benefits to policyholders:
Life insurance 16,206,930 15,345,645 19,102,079
Accident and health 56,592,227 68,115,512 49,026,058
Amortization of deferred policy
acquisition costs (NOTE 2) 4,595,000 1,838,000 1,787,000
Insurance commissions 5,070,934 5,768,504 4,761,665
General and administrative
expenses (NOTES 1 AND 9) 13,906,043 13,514,820 10,493,066
-------------------------------------------
Total benefits and expenses 96,371,134 104,582,481 85,169,868
-------------------------------------------
Loss before federal income taxes (4,722,786) (7,035,211) (107,807)
Federal income taxes (benefit)
(NOTE 6) (1,562,943) (999,671) (686,000)
-------------------------------------------
Net (loss) income $ (3,159,843) (6,035,540) $ 578,193
-------------------------------------------
-------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
3
<PAGE>
First Fortis Life Insurance Company
Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1995 1994 1993
-------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ (3,159,843) $ (6,035,540) $ 578,193
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities:
Deferred tax valuation
allowance (177,708) 1,515,531 -
Increase in future policy
benefit reserves and
other policy claims and
benefits 3,481,220 7,835,342 8,696,790
Decrease in income taxes (1,569,235) (2,903,210) (2,289,946)
Amortization of policy
acquisition costs 4,595,000 1,838,000 1,787,000
Policy acquisition costs
deferred - (432,000) (364,000)
Increase (decrease) in other
liabilities 128,321 (2,118,752) 1,219,368
Depreciation, amortization and
accretion 750,029 716,129 838,727
(Increase) decrease in uncol-
ected premiums, accrued
investment income and other 112,767 2,258,061 (3,768,978)
(Increase) decrease in
reinsurance recoverable (460,598) 333,480 1,591,543
Net realized (gains) losses on
investments (2,683,100) 1,057,438 (3,062,050)
-------------------------------------------
Net cash provided by
operating activities 1,016,853 4,064,479 5,226,647
INVESTING ACTIVITIES
Purchases of fixed maturity
investments (122,289,460) (77,995,025) (120,655,536)
Sales and maturities of fixed
maturity investments 120,298,152 69,440,809 116,306,946
(Increase) decrease in equity
securities and short-term
investments (5,042,029) 3,731,866 (86,873)
Purchase of property and
equipment (321,460) (562,438) (519,408)
-------------------------------------------
Net cash used in investing
activities (7,354,797) (5,384,788) (4,954,871)
FINANCING ACTIVITIES
Proceeds from additional paid-in
capital 7,000,000 - -
-------------------------------------------
Net cash provided by financing
activities 7,000,000 - -
-------------------------------------------
Increase (decrease) in cash 662,056 (1,320,309) 271,776
Cash at beginning of year 483,075 1,803,384 1,531,608
-------------------------------------------
Cash at end of year $ 1,145,131 $ 483,075 $ 1,803,384
-------------------------------------------
-------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
5
<PAGE>
First Fortis Life Insurance Company
Notes to Financial Statements (Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
for claims and benefits payable is adequate. The methods of making such
estimates and establishing the related liabilities are continually reviewed
and updated, and any adjustments resulting therefrom are reflected in income
currently.
RESERVES FOR FUTURE POLICY BENEFITS
Active life reserves for future policy and contract benefits on life and
accident and health products are provided on the net level premium method.
The reserves are calculated based upon assumptions as to interest,
withdrawal, mortality, and morbidity that were appropriate at the date of
issue. Interest rate assumptions range principally from 3.0% to 5.5% for
traditional life products and 4.0% to 10.0% for annuity products. Withdrawal
assumptions are based on actual Company experience. Mortality and morbidity
assumptions are based upon industry standards adjusted as appropriate to
reflect actual Company experience. The assumptions vary by plan, year of
issue, and policy duration and include a provision for adverse deviation.
Disabled lives reserves for future policy and contract benefits on disability
income policies are calculated based upon assumptions as to interest and
claim termination rates that are currently appropriate. Disabled lives
reserves for group life policies are based on a 3.5% interest rate
assumption. For group long-term disability income policies, the interest
rate assumption on claims is 6.0%. Termination rate assumptions are based
upon industry standards adjusted as appropriate to reflect actual Company
experience. The assumptions vary by year of claim incurred.
INVESTMENTS
The Company's investment strategy is developed based on many factors
including insurance liability matching, rate of return, maturity, credit
risk, tax considerations, and regulatory requirements.
Available-for-sale securities are reported at fair value; short-term.
investments are reported at cost, which approximates fair value. Changes in
the fair values of available-for-sale securities, net of deferred income
taxes, are reported as unrealized appreciation or depreciation directly in
shareholder's equity and, accordingly, have no effect on net income.
Realized gains and losses on sales of investments, and declines in value
judged to be other-than-temporary, are recognized on the specific
identification basis.
7
<PAGE>
First Fortis Life Insurance Company
Notes to Financial Statements (Continued)
3. INVESTMENTS
FIXED MATURITIES
The following is a summary of the amortized cost and fair value of fixed
maturity securities:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized
Cost Gain Loss Fair Value
-------------------------------------------------------
<S> <C> <C> <C> <C>
December 31, 1995:
Governments $ 17,068,216 $ 1,025,440 $ - $ 18,093,656
Public utilities 4,906,703 262,773 - 5,169,476
Industrial and
miscellaneous 84,673,835 4,272,901 (26,416) 88,920,320
-------------------------------------------------------
Total $106,648,754 $ 5,561,114 $ (26,416) $112,183,452
-------------------------------------------------------
-------------------------------------------------------
December 31, 1994:
Governments $ 38,197,817 $ 33,725 $(1,700,807) $ 36,530,735
State and municipal 18,793,434 690 (901,799) 17,892,325
Public utilities 4,512,407 - (295,936) 4,216,471
Industrial and
miscellaneous 40,692,269 8,630 (2,002,966) 38,697,933
-------------------------------------------------------
Total $102,195,927 $ 43,045 $(4,901,508) $97,337,464
-------------------------------------------------------
-------------------------------------------------------
</TABLE>
The fair values for fixed maturity securities are based on quoted market prices,
where available. For fixed maturity securities not actively traded, fair values
are estimated using values obtained from independent pricing services or, in the
case of private placements, are estimated by discounting expected future cash
flows using a current market rate applicable to the yield, credit quality, and
maturity of the investments.
The amortized cost and fair value of fixed maturity securities at December 31,
1995, by contractual, maturity, are shown below. 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>
Amortized
Cost Fair Value
-----------------------------
<S> <C> <C>
Due in one year or less $ 2,084,737 $ 2,103,881
Due after one year through five years 23,936,241 24,692,303
Due after five years through ten years 54,663,995 57,329,162
Due after ten years 25,963,781 28,058,106
-----------------------------
$ 106,648,754 $ 112,183,452
-----------------------------
-----------------------------
</TABLE>
9
<PAGE>
First Fortis Life Insurance Company
Notes to Financial Statements (Continued)
5. UNPAID LOSSES AND LOSS EXPENSE ALLOWANCE
Activity for the liability for unpaid accident and health losses and related
loss expense allowance is summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1995 1994 1993
---------------------------------------------
<S> <C> <C> <C>
Balance as of January 1, net of
reinsurance recoverable $ 66,136,369 $ 58,646,889 $ 48,837,776
Add: Incurred losses related to:
Current year 57,400,613 66,066,609 49,505,698
Prior years (808,386) 2,048,903 (479,640)
---------------------------------------------
Total incurred losses 56,592,227 68,115,512 49,026,058
---------------------------------------------
Deduct: Paid losses related to:
Current year 35,779,078 40,892,341 26,688,924
Prior years 21,185,448 19,743,691 12,528,021
---------------------------------------------
Total paid losses 56,964,526 60,626,032 39,216,945
---------------------------------------------
Balance as of December 31, net
of reinsurance recoverable $ 65,764,070 $ 66,136,369 $ 58,646,889
---------------------------------------------
---------------------------------------------
</TABLE>
In 1994, lower than anticipated recovery rates on existing long-term disability
income claimants, offset by a favorable refinement in the claims reserve
estimates contributed to the "incurred losses related to prior years" result.
The liability for unpaid accident and health losses and loss expense allowance
includes $53,953,000, $47,489,000, and $42,474,000 of long-term disability
income reserves as of December 31, 1995, 1994, and 1993, respectively, which
were discounted for anticipated interest earnings assuming a 6.0% interest rate.
11
<PAGE>
First Fortis Life Insurance Company
Notes to Financial Statements (Continued)
6. FEDERAL INCOME TAXES (CONTINUED)
Tax payments of $251,591, $1,442,818, and $1,670,000 were made in 1995, 1994,
and 1993, respectively.
The differences between the benefit for income taxes at the federal statutory
income tax rate and the tax benefit were as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
---------------------------
<S> <C> <C> <C>
Federal statutory rate (340)% (34.0)% (34.0)%
---------------------------
---------------------------
Tax benefit at statutory rate $ (1,606) $(2,392) $ (38)
Tax exempt interest (188) (406) (603)
Other, net 409 283 (45)
Valuation allowance (178) 1,516 -
---------------------------
Tax benefit as reported $ (1,563) $ (999) $(686)
---------------------------
---------------------------
</TABLE>
At December 31, 1995, the Company has net operating loss carryforwards for
federal income tax purposes of $389,000 which are available to offset future
federal taxable income, if any, through 2010. The Company also has alternative
minimum tax credit carryforwards of $191,000, which are available to reduce
future federal regular income taxes, if any, over an indefinite period of time.
7. REINSURANCE
The maximum amounts that the Company retains on any one life are $500,000 for
group life; $250,000 for group accidental death; $10,000 net monthly benefit for
long-term disability; from 10% to 50% of possible benefits payable under credit
life and credit disability insurance; and 0% of a closed block of individual
life business. Amounts in excess of these limits are reinsured with various
insurance companies on a yearly renewable term, coinsurance or other basis.
Future policy benefits and other policy claims and benefits payable are reported
gross of reinsurance. The reinsured portion of future policy benefits and other
policy claims and benefits payable are $9,335,947 and $8,875,349 in 1995 and
1994, respectively. The Company remains contingently liable in the event the
reinsuring companies are unable to meet their obligations under such reinsurance
agreements.
13
<PAGE>
First Fortis Life insurance Company
Notes to Financial Statements (Continued)
9. TRANSACTIONS WITH AFFILIATED COMPANIES
Affiliates of the Company provide services, such as information systems,
actuarial and investment management, in return for payment representing the
costs incurred for such services. In 1995, 1994, and 1993, the Company incurred
$1,581,000, $1,443,000, and $1,491,000, respectively, in service fees under the
arrangements with the affiliates. In 1995, the Company received cash of
$7,000,000 representing additional paid-in capital from Fortis AMEV.
The Company participates in the Fortis, Inc. noncontributory defined benefit
pension plan and a contributory profit sharing plan covering substantially all
of its employees. Amounts expensed under these plans were $232,252, $171,519,
and $109,328 in 1995, 1994, and 1993, respectively.
10. STATUTORY ACCOUNTING PRACTICES
The Company prepares its statutory-basis financial statements in accordance with
accounting practices prescribed or permitted by insurance regulatory
authorities. Prescribed statutory accounting practices include a variety of
publications of the National Association of Insurance Commissioners ("NAIC"), as
well as state laws, regulations and general administrative rules. Permitted
statutory accounting practices encompass all accounting practices not so
prescribed; such practices may differ from state to state, may differ from
company to company within a state, and may change in the future. The NAIC is
currently in the process of recodifying statutory accounting practices. This
project, which is expected to be completed in 1997, may result in changes to the
accounting practices that insurance enterprises use to prepare their statutory-
basis financial statements.
Insurance enterprises are required by state insurance departments to adhere to
minimum risk-based capital ("RBC") requirements developed by the NAIC. The
Company exceeds minimum RBC requirements.
15
<PAGE>
APPENDIX A
PERFORMANCE INFORMATION
In advertising and other sales material for the Contracts, yield and total
return information for the Subaccounts of the Separate Account may be included.
The information below provides investment results for each of the Subaccounts of
Separate Account A. The results shown in this section are not an estimate or
guarantee of future investment performance, and do not represent the actual
experience of amounts invested by a particular Contract Owner. The investment
experience for each Subaccount reflects the investment performance of the
separate investment Portfolios currently funding such Subaccount for the periods
stated, except that for periods prior to the time when the Contracts became
available, such results were calculated by applying all applicable charges and
fees at the Separate Account level for the Contracts, as listed below, to the
historical Portfolio performance results for such prior periods.
YIELD CALCULATIONS
Yield information for the Money Market Subaccount will be based on the seven
days ended on a specified date. It will be computed by determining the net
change, exclusive of capital changes, in the value of a hypothetical pre-
existing account (after the deduction of all asset based charges) having a
balance of one Accumulation Unit at the beginning of the period, subtracting a
proportionate amount of the annual administrative charge (based on average
Contract size), 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), with the resulting yield figure carried to
the nearest hundredth of one percent. The seven day yield for the Money Market
Subaccount as of December 31, 1995 was 5.59%.
An effective yield may also be quoted for the Money Market Subaccount.
Effective yield is calculated by compounding the current yield as follows:
365/7
Effective Yield = [(Base Period Return + 1) ] - 1
The seven day effective yield for the Money Market Subaccount as of December 31,
1995 was 5.75%.
Yield information for the other Subaccounts will be based on the thirty days
ended on a specified date and carried to the nearest hundredth of a percent,
according to the following formula:
A-B 6
YIELD + 2 [( ----- +1) -1]
CD
Where: a = net investment income earned during the period by the Portfolio whose
shares are owned by the Subaccount.
b = expenses accrued for the period, including a proportionate amount of
the annual administrative charge (based on average Contract size),
c = the average daily number of Accumulation Units outstanding during the
period, and
d = the offering price per Accumulation Unit at the end of the last day
of the period.
A-1
<PAGE>
The following table sets forth yield figures for the thirty days ended December
31, 1994*:
<TABLE>
<CAPTION>
SUBACCOUNT YIELD
---------- -----
<S> <C>
U.S. Government Securities . . . . . . . . 9.38%
Diversified Income . . . . . . . . . . . . 7.76%
High Yield . . . . . . . . . . . . . . . . 4.37%
Global Bond. . . . . . . . . . . . . . . . 2.83%
</TABLE>
TOTAL RETURN CALCULATIONS
Total return information will be given for the one-year and five-year periods
ended on a specified date, provided that, if the registration statement has been
effective for a Subaccount only during a shorter period, then such shorter
period will be used.
AVERAGE ANNUAL TOTAL RETURN CALCULATIONS
Total average annual compounded rates of return for each period will be computed
to the nearest one hundredth of a percent, according to the following formula:
n
P(1 + T) = CSV
Where: P = a hypothetical initial purchase payment of $1,000,
T = average annual total return,
n = number of years, and
CSV = end of period Cash Surrender Value of hypothetical $1,000 purchase
payment made at the beginning of the period, assuming deduction of a
proportionate amount of the annual administrative charge (based on
average Contract size).
The following table shows total average annual rates of return for the periods
indicated:
<TABLE>
<CAPTION>
ONE YEAR PERIOD FIVE YEAR PERIOD COMMENCEMENT OF
ENDING ENDING PORTFOLIO (1) TO
SUBACCOUNT DEC. 31, 1995 DEC. 31, 1995(1) DEC. 31, 1995
- ----------- -------------- ---------------- ----------------
<S> <C> <C> <C>
Growth Stock 22.45% 12.70% 11.52%
U.S. Government Securities 13.71% 3.80% 4.43%
Diversified Income 12.19% 4.80% 5.19%
Asset Allocation 16.86% 8.85% 8.38%
Global Growth 25.24% N/A 10.35%
High Yield 12.25% N/A 1.44%
Growth & Income 24.76% N/A 12.67%
Aggressive Growth 23.70% N/A 10.50%
Global Bond 17.43% N/A 17.43%
Global Asset Allocation 12.42% N/A 12.42%
International Stock 9.22% N/A 9.22%
- --------------------------------
</TABLE>
(1) Commencing with effective date of registration statement for Global
Growth Subaccount on May 1, 1992, U.S. Government Securities Subaccount
on May 1, 1989, High Yield Subaccount, Growth & Income Subaccount, and
Aggressive Growth Subaccount on May 1, 1994, Global Bond Subaccount,
Global Asset
A-2
<PAGE>
Allocation Subaccount, and International Stock Subaccount on January 2,
1995, and for all other Subaccounts on May 2, 1988.
CUMULATIVE TOTAL RETURN CALCULATIONS
Total cumulative rates of return for each period will be computed to the nearest
one hundredth of a percent, according to the following formula:
CTR = ( CSV - P ) 100
-------
P
Where: P = a hypothetical initial purchase payment of $1,000,
CTR = cumulative total return, and
CSV = end of period Cash Surrender Value of hypothetical $1,000 purchase
payment made at the beginning of the period, assuming deduction of a
proportionate amount of the annual administrative charge (based on
average Contract size).
The following table shows cumulative total rates of return for the periods
indicated:
<TABLE>
<CAPTION>
ONE YEAR PERIOD FIVE YEAR PERIOD COMMENCEMENT OF
ENDING ENDING PORTFOLIO (1) TO
SUBACCOUNT DEC. 31, 1995 DEC. 31, 1995(1) DEC. 31, 1995
- ---------- ------------- ---------------- ----------------
<S> <C> <C> <C>
Growth Stock 22.45% 81.81% 130.70%
U.S. Government Securities 13.71% 20.49% 33.55%
Diversified Income 12.19% 26.39% 47.40%
Asset Allocation 16.86% 52.81% 85.40%
Global Growth 25.24% N/A 43.45%
High Yield 12.25% N/A 2.41%
Growth & Income 24.76% N/A 22.04%
Aggressive Growth 23.70% N/A 17.61%
Global Bond 17.43% N/A 17.43%
Global Asset Allocation 12.42% N/A 12.42%
International Stock 9.22% N/A 9.22%
- -------------------------------
</TABLE>
(1) Commencing with effective date of registration statement for Global
Growth Subaccount on May 1, 1992, U.S. Government Securities Subaccount
on May 1, 1989, High Yield Subaccount, Growth & Income Subaccount, and
Aggressive Growth Subaccount on May 1, 1994, Global Bond Subaccount,
Global Asset Allocation Subaccount, and International Stock Subaccount on
January 2, 1995, and for all other Subaccounts on May 2, 1988.
Yield figures do not reflect any surrender charge, and yield and total return
figures do not reflect any premium tax charge. Yield and total return figures
do reflect the reimbursement of certain Fortis Series expenses. Current Fixed
Account effective annual rates of interest may also be quoted in advertising and
other sales materials, and these rates do not reflect any deductions or charges.
First Fortis may advertise its relative performance as compiled by outside
organizations. Following is a list of ratings services which may be referred to
in advertisements, along with the category in which the applicable Subaccount is
included:
Global Growth Subaccount
Rating Service Category
-------------- --------
Morningstar Publications, Inc. international stock
Lipper Analytical Services, Inc. global
A-3
<PAGE>
Growth Stock Subaccount
Rating Service Category
-------------- --------
Morningstar Publications, Inc. growth
Lipper Analytical Services, Inc. capital appreciation
Asset Allocation Subaccount
Morningstar Publications, Inc. balanced
Lipper Analytical Services, Inc. flexible portfolios
Diversified Income Account
Morningstar Publications, Inc. corporate bond
Lipper Analytical Services, Inc. general bond
U.S. Government Subaccount
Morningstar Publications, Inc. U.S. government bond
Lipper Analytical Services, Inc. U.S. government
Money Market Subaccount
Morningstar Publications, Inc. money market
Lipper Analytical Services, Inc. money market
High Yield Subaccount
Morningstar Publications, Inc. high yield
Lipper Analytical Services, Inc. high current yield
Growth and Income Subaccount
Morningstar Publications, Inc. growth and income
Lipper Analytical Services, Inc. growth and income
Aggressive Growth Subaccount
Morningstar Publications, Inc. aggressive growth
Lipper Analytical Services, Inc. small company growth
International Stock Subaccount
Morningstar Publications, Inc. international stock
Lipper Analytical Services, Inc. international equity
A-4
<PAGE>
Global Asset Allocation Subaccount
Morningstar Publications, Inc. balanced
Lipper Analytical Services, Inc. global flexible
Global Bond Subaccount
Morningstar Publications, Inc. international bond
Lipper Analytical Services, Inc. world income
Aggressive Growth Subaccount
Morningstar Publications, Inc. aggressive growth
Lipper Analytical Services, Inc. small company growth
Growth and Income Subaccount
Morningstar Publications, Inc. growth and income
Lipper Analytical Services, Inc. growth and income
High Yield Subaccount
Morningstar Publications, Inc. high yield
Lipper Analytical Services, Inc. high current yield
Blue Chip Stock Subaccount
Morningstar Publications, Inc. growth
Lipper Analytical Services, Inc. growth
Value Subaccount
Morningstar Publications, Inc. growth
Lipper Analytical Services, Inc. growth
S & P 500 Index Subaccount
Morningstar Publications, Inc. growth & income
Lipper Analytical Services, Inc. S & P 500 Index
ADDITIONAL PERFORMANCE INFORMATION
Additionally, from time to time, First Fortis may include in advertising the net
effective annual yield of an investment in a Contract as compared with the
current before-tax and after-tax yield of CD's (insured fixed rate certificates
of deposit issued by financial institutions). While the yield may be compared
to that of CD's, the yield of a variable Subaccount is not fixed and an
investment in a Contract is not FDIC insured.
A-5
<PAGE>
PART C
OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
a. Financial Statements
Included in Part A:
None
Included in Part B:
With Respect to First Fortis Life Insurance Company:
Report of Independent Auditors
Balance Sheets as of December 31, 1995 and 1994
Statements of Operations for the years ended
December 31, 1995, 1994 and 1993
Statements of Changes in Shareholder's Equity for the
years ended December 31, 1995, 1994, and 1993
Statements of Cash Flows for the years ended December
31, 1995, 1994 and 1993
Notes to Financial Statements
With Respect to Separate Account A of First Fortis Life
Insurance Company:
None included because Separate Account A has not yet
commenced operations, has no assets or liabilities, and has
received no income nor incurred any expenses.
b. Exhibits:
1. Resolution of the Board of Directors of First Fortis
Life Insurance Company effecting the establishment of
Variable Account A. (Incorporated by reference from
registrant's Form N-4 registration statement, File
No. 33-71686, filed April 11, 1994.
2. Not applicable.
3. (a) Form of Principal Underwriter and Servicing
Agreement -- included as part of Pre-Effective
Amendment No. 1 to the Form N-4 Registration Statement
of the registrant filed April 11, 1994, File No.
33-71686, and incorporated herein by reference.
(b) Form of Dealer Sales Agreement -- included
as part of Pre-Effective Amendment No. 1 to the Form
N-4 Registration Statement of the registrant filed
April 11, 1994, File No. 33-71686, and incorporated
herein by reference.
<PAGE>
(c) Form of Supplement to Dealer Sales Agreement
-- included as part of Pre-Effective Amendment No. 1 to
the Form N-4 Registration Statement of the registration
filed April 11, 1994, File No. 33-71686, and
incorporated herein by reference.
4. (a) Form of Combination Fixed and Variable
Annuity Contract -- filed as a part of this Form N-4,
Registration Statement No. 33-71688 on April 27, 1995,
and incorporated by reference.
(b) Form of IRA Endorsement -- filed as a part
of this Form N-4, Registration Statement No. 33-71688
on April 27, 1995, and incorporated by reference.
(c) Form of Section 403(b) Annuity Endorsement --
filed as a part of this Form N-4, Registration
Statement No. 33-71688 on April 27, 1995, and
incorporated by reference.
(d) Form of Automatic Portfolio Rebalancing
Endorsement -- filed as a part of this Form N-4,
Registration Statement No. 33-71688 on April 27, 1995,
and incorporated by reference.
(e) Form of Systematic Withdrawal Option
Endorsement -- filed as a part of this Form N-4,
Registration Statement No. 33-71688 on April 27, 1995,
and incorporated by reference.
(f) Form of Systematic Transfer Endorsement --
filed as a part of this Form N-4, Registration
Statement No. 33-71688 on April 27, 1995, and
incorporated by reference.
5. Form of Application to be used in connection
with Contract filed as Exhibit 4 (a) -- filed as a part
of this Form N-4, Registration Statement No. 33-71688
on April 27, 1995, and incorporated by reference.
6. (a) Charter First Fortis Life Insurance Company
-- filed as a part of Form 10-K, File No. 33-71690 on
March 29, 1996, and incorporated by reference.
(b) By-laws of First Fortis Life Insurance
Company. (Incorporated by reference from Form N-4
Registration Statement No. 33-71686, filed on November
15, 1993.)
7. None.
8. Administrative Service Agreement -- filed as a part of
Form 10-K, File No. 33-71690 on March 29, 1996, and
incorporated by reference.
9. Opinion and consent of David A. Peterson, Esq.,
Corporate Counsel of Fortis Benefits Insurance Company, as
to the
<PAGE>
legality of the securities being registered -- filed as a
part of this Form N-4, Registration Statement No. 33-71688,
on November 15, 1993.
10. (a) Consent of Ernst & Young LLP.
(b) Power of Attorney for Messrs. Rutherfurd,
Freedman and Madame Gharib. (Incorporated by reference
from Form N-4 registration statement No. 33-71686 filed
on November 15, 1993.)
(c) Power of Attorney for Messrs. Gardner,
Nelson and Galston. (Incorporated by reference from
Form N-4 registration statement No. 33-71686 filed
April 11, 1994).
(d) Power of Attorney for Messrs. Keller and
Kopperud. (Incorporated by reference from Form N-4,
Registration Statement No. 33-71686, filed
simultaneously herewith.)
11. Not applicable.
12. Not applicable.
13. Schedules of computation of each performance quotation
provided in the registration statement pursuant to Item 21
-- filed herewith.
Item 25. DIRECTORS AND OFFICERS OF FIRST FORTIS
The directors, executive officers, and other officers of First Fortis are
listed below.
Name and Principal
Business Address
- ------------------
Officer-Director Office With Depositor
- ------------------ ---------------------
Allen R. Freedman (3) Chairman, Chief Executive
Officer and President
Terry J. Kryshak (2) Sr. Vice President and Chief
Administrative Officer
Larry M. Cains (3) Treasurer
Other Directors Office with Depositor
- --------------- ---------------------
Susie Gharib
CNBC
424 W. 33rd Street
New York, NY 1001
<PAGE>
Guy Gerard Rutherfurd, Jr.
Nomura Asset Management, Inc.
2 World Financial Center
Building B, 20th Floor
New York, NY 10281
Dale Edward Gardner
Gardner & Buhl
Bridge Street
Roxbury, NY 12474
Kenneth W. Nelson
Tech Products, Inc.
15 Beach Street
Staten Island, NY 10304
Robert B. Pollock
2323 Grand Boulevard
Kansas City, MO 44108
Clarence Elkus Galston
338 Woodbury Road
Cold Springs Harbor, NY 11724
Dean C. Kopperud (1)
Thomas M. Keller
501 W. Michigan
Milwaukee, WI 53201
Other Officers
- --------------
Robert O. Blaber
1633 Broadway, Suite 2020 Senior Vice President
New York, NY 10019
Jerome A. Atkinson (3) Secretary
Leanne F. Hughes (2) Assistant Treasurer and
Director of Accounting
Barbara R. Hege (3) Assistant Treasurer
Melissa J. Talham (3) Assistant Treasurer
Paula M. SeGuin (2) Assistant Secretary
Katherine L. Katsidhe (3) Assistant Secretary
- -----------------------------
(1) Address: Fortis Benefits Insurance Company, 500 Bielenberg
Drive, Woodbury, MN 55125.
(2) Address: 220 Salina Meadows Parkway, Suite 255, Syracuse, NY
13220.
(3) Address: Fortis, Inc., One Chase Manhattan Plaza, New York, NY
10005.
<PAGE>
Item 26. Persons Controlled by or Under Control with the Depositor or
Registrant
------------------------------------------------------------
Separate Account A of First Fortis Life Insurance Company is a separate
account of First Fortis. This separate account, and Fortis Series Fund, Inc.
may be deemed to be controlled by First Fortis, although First Fortis follows
voting instructions of variable insurance contract owners with respect to
voting on certain important matters in connection with these entities. This
separate account is created under New York law and is the funding media for
variable annuity contracts issued by First Fortis.
The chart indicating the persons controlled by or under common control
with First Fortis included as part of Pre-Effective Amendment No. 1 to the Form
N-4 Registration Statement of the registrant filed April 11, 1994, File 33-
71686 and is incorporated herein by reference. First Fortis has no
subsidiaries.
Items 27. NUMBER OF CONTRACT OWNERS
As of the date of filing there were no Contract Owners.
Item 28. INDEMNIFICATION
Pursuant to the Principal Underwriter and Administrative Servicing
Agreement filed as Exhibit 3(a) and (b) to this Registration Statement and
incorporated by this reference, First Fortis has agreed to indemnify Fortis
Investors (and its agents, employees, and controlling persons) for damages and
expenses arising out of certain material misstatements and omissions in
connection with the offer and sale of the Contracts, unless the misstatement or
omission was based on information supplied by Fortis Investors; provided,
however, that no such indemnity will be made to Fortis Investors or its
controlling persons for liabilities to which they would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence in the performance
of their duties or by reason of reckless disregard of their obligations under
such agreement. This indemnity could apply to certain directors, officers or
controlling persons of the Separate Account by virtue of the fact that they are
also agents, employees or controlling persons of Fortis Investors. Pursuant to
the Principal Underwriter and Servicing Agreement, Fortis Investors has agreed
to indemnify Separate Account A, First Fortis, and each of its officers,
directors and controlling persons for damages and expenses (1) arising out of
certain material misstatements and omissions in connection with the offer and
sale of the Contracts, if the misstatement or omission was based on information
furnished by Fortis Investors or (2) otherwise arising out of Fortis Investors'
negligence, bad faith, willful misfeasance or reckless disregard of its
responsibilities. Pursuant to its Dealer Sales Agreements, a form of which is
filed as Exhibit 3 (c) and (d) to this registration statement and is
incorporated herein by this reference, firms that sell the Contracts agree to
indemnify First Fortis, Fortis Investors, the Separate Account, and their
officers, directors, employees, agents, and controlling persons from
liabilities and expenses arising out of the wrongful conduct or omissions of
said selling firm or its officers, directors, employees, controlling persons or
agents.
Also, First Fortis' By-Laws (see Article VII, which is incorporated herein
by reference from Exhibit 6(b) to this Registration Statement) provide for
indemnity and payment of expenses of First Fortis' officers and directors in
connection with certain legal proceedings, judgments, and settlements arising
by reason of their service as such, all to the extent and in the manner
permitted by law. Applicable New York law generally permits payment of such
indemnification and expenses if the person seeking indemnification has acted in
good faith and for a purpose that he reasonably believed to be in, or not
opposed
<PAGE>
to, the best interests of the Company, and, in a criminal proceeding,
if the person seeking indemnification also has no reasonable cause to believe
his conduct was unlawful. No indemnification is further permitted if there has
been an adjudication, and a judgement rendered adverse to the individual
seeking indemnification, finding that the acts were committed in bad faith, as
the result of active and deliberate dishonesty, or that there was personal
gain, financial profit, or other advantage which he or she was not otherwise
legally entitled.
Insofar as indemnification for any liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
First Fortis or the Separate Account pursuant to the foregoing provisions, or
otherwise, First Fortis and the Separate Account have been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by First Fortis of expenses incurred or paid by a director,
officer or controlling person of First Fortis or the Separate Account in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
Item 29. PRINCIPAL UNDERWRITERS
(a) Fortis Investors, Inc. is the principal underwriter for Variable
Account A. Fortis Investors, Inc. also acts as the principal
underwriter for the following registered investment companies (in
addition to Separate Account A and Fortis Series Fund, Inc.):
Variable Account C and D of Fortis Benefits Insurance Company, Fortis
Advantage Portfolios, Inc., Fortis Equity Portfolios, Inc., Fortis
Fiduciary Fund, Inc., Fortis Growth Fund, Inc., Fortis Money
Portfolios, Inc., Fortis Tax-Free Portfolios, Inc., and Fortis Income
Portfolios, Inc.
(b) The following table sets forth certain information regarding the
officers and directors of the principal underwriter, Fortis
Investors, Inc.:
Name and Principal Positions and Offices
Business Address with Underwriter
- ------------------ ---------------------
Robert W. Beltz, Jr.* Vice President
James S. Byrd** Vice President
David G. Carroll** 2nd Vice President
Tamara L. Fagely* Fund Accounting Officer
Thomas D. Gualdoni* Vice President
Joanne M. Herron* Assistant Treasurer
John E. Hite* 2nd Vice President
Assistant Secretary
<PAGE>
Carol M. Houghtby* 2nd Vice President & Treasurer
Sharon R. Jibben** Assistant Secretary
Barbara W. Kirby* 2nd Vice President
Dean C. Kopperud* President and Director
Robert C. Lindberg** Vice President
Larry A. Medin* Senior Vice President - Sales
Chris J. Neuharth** 2nd Vice President
Jon H. Nicholson* Vice President--Product
Development
Counsel and Secretary
Michael D. O'Connor* Qualified Plan Officer
Dennis M. Ott** Senior Vice President
Stephen M. Poling** Director and Executive
Vice President
Richard P. Roche* Vice President--Sales
Anthony J. Rotondi* Senior Vice President
Rhonda J. Schwartz* Senior Vice President, General
Counsel & Secretary
Keith R. Thomson** Vice President
- --------------------------
* Address: 500 Bielenberg Drive, Woodbury, Mn 55125.
** Address: 5500 Wayzata Blvd, Suite 1150, Golden Valley, MN 55416.
(c) None.
Item 30. LOCATION OF ACCOUNTS AND RECORDS
The records required to be maintained by Section 31(a) of the Investment
Company Act of 1940 and Rules 31a-1 and 31a-3 thereunder are maintained by
First Fortis, Fortis Investors, Inc. and Fortis Advisers, Inc., at 500
Bielenberg Drive, Woodbury, Minnesota 55125 and 220 Salina Meadows Parkway,
Suite 255, Syracuse, New York 13220.
Item 31. MANAGEMENT SERVICES
First Fortis entered into an Administrative Services Agreement with Fortis
Benefits Insurance Company which is dated October 1, 1991 and which has been
subsequently amended. Pursuant to that agreement, Fortis Benefits provides
certain management and management support services, as generally described
below, to First Fortis and Fortis Benefits is reimbursed by First Fortis for
these services on the basis of Fortis Benefits' costs, apportioned on an
equitable basis, for providing those services. Those services which Fortis
Benefits
<PAGE>
provides pursuant to that agreement relating to First Fortis' group
life, health, and disability insurance business and its individual annuity
business are generally as follows: (1) in-house legal services, (2) computer
hardware and systems services for maintenance of corporate accounting and
policyholder records, and (3) training services for new products. Fortis
Benefits additionally provides actuarial services, including product
development, pricing, valuation and compliance services, relating to First
Fortis' individual annuity business. Prior to 1994, Fortis Benefits provided
more extensive services to First Fortis relating to its group life, health, and
disability insurance business. First Fortis paid Fortis Benefits the following
sums pursuant to this agreement for its fiscal years ending December 31, 1993,
December 31, 1994, and December 31, 1995, respectively: $1,099,000; $1,056,616
and $1,139,000.
Additionally, pursuant to an agreement with Fortis, Inc., Fortis, Inc. provides
First Fortis with investment and general management services and First Fortis
paid Fortis, Inc. the following sums for those services for its fiscal year
ended December 31, 1993, December 31, 1994, and December 31, 1995,
respectively: $392,000; $379,000, and $436,000.
Item 32. UNDERTAKINGS
The Registrant hereby undertakes:
(a) to file a post-effective amendment to this registration
statement as frequently as is necessary to ensure that the audited
financial statements in the registration statement are never more
than 16 months old for so long as payments under the variable annuity
contracts may be accepted;
(b) to include either (1) 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, or (2) a toll-
free phone number, postcard, or similar written communication affixed
to or included in the Prospectus that the applicant can call or
remove to send for a Statement of Additional Information;
(c) to deliver a Statement of Additional Information and any
financial statements required to be made available under this Form
promptly upon written or oral request.
The Registrant intends to rely on the no-action response dated November
28, 1988 from Ms. Angela C. Goelzer of the Commission staff to the American
Council of Life Insurance concerning the redeemability of Section 403(b)
annuity contracts and the Registrant has complied with the provisions of
paragraphs (1) -(4) thereof.
<PAGE>
EXHIBIT INDEX
10(a) Consent of Ernst & Young LLP
13 Schedules of Computation
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant has caused this Registration Statement to be signed on its
behalf in the Town of Salina, County of Onondaga, State of New York on this
26th day of April, 1996.
SEPARATE ACCOUNT A OF
FIRST FORTIS LIFE INSURANCE COMPANY
(Registrant)
By: FIRST FORTIS LIFE INSURANCE COMPANY
By: /s/ Terry J. Kryshak
--------------------------
Terry J. Kryshak
Sr. Vice President and
Chief Administrative Officer
(Principal Executive Officer)
FIRST FORTIS LIFE INSURANCE COMPANY
(Depositor)
By: /s/ Terry J. Kryshak
----------------------
Terry J. Kryshak
Sr. Vice President and
Chief Administrative Officer
(Principal Executive Officer)
As required by the Securities Act of 1933 and the Investment Company Act of
1940, this amended Registration Statement has been signed by the following
persons, in the capacities indicated, on April 26, 1996.
Signature Title with First Fortis
- --------- -----------------------
/s/ Terry J. Kryshak
- --------------------- Sr. Vice President and Chief
Terry J. Kryshak Administrative Officer and
Director(Principal Executive
Officer)
/s/ Larry M. Cains
- ------------------- Treasurer and Director
Larry M. Cains (Principal Financial Officer)
/s/ Leanne F. Hughes
- --------------------- Assistant Treasurer Director
Leanne F. Hughes of Accounting (Principal Accounting
Officer)
*
- ------------------------
Allen Royal Freedman President and Director
*
- ------------------------ Director
Susie Gharib
<PAGE>
*
- ------------------------- Director
Guy Gerard Rutherfurd, Jr.
*
- ------------------------- Director
Dale Edward Gardner
*
- -------------------------- Director
Kenneth Warwick Nelson
- --------------------------- Director
Robert B. Pollock
/s/
- --------------------------- Director
Dean C. Kopperud
*
- ---------------------------- Director
Thomas M. Keller
*
- --------------------------- Director
Clarence Elkus Galston
*By /s/
------------------------
Terry J. Kryshak
Attorney-in-fact
<PAGE>
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated February 19, 1996 in the Post-Effective Amendment No. 3
to the Registration Statement (Form N-4 No. 33-71688) and related Statement of
Additional Information of First Fortis Life Insurance Company for the
registration of flexible premium deferred variable annuity contracts.
Ernst & Young LLP
Syracuse, New York
April 24, 1996
<PAGE>
FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY
SEPARATE ACCOUNT PERFORMANCE CALCULATION
U.S. GOVERNMENT SECURITIES SUBACCOUNT
The subaccount's standardized yield for the 30 day period ended December
31, 1995 was computed by dividing the net investment income per accumulation
unit earned during the period by the maximum offering price per unit on the last
day of the period in accordance with the formula prescribed by the Securities
and Exchange Commission:
[(($2,736,375)) 6
2 * { ---------------------------- + 1] - 1} = 9.83%
[((10,989,914 * 15.805))
Total return is the percentage change between the public offering price
of one subaccount unit at the beginning of the period to the public offering
price of one subaccount unit at the end of the period. Ending total values are
calculated for any specific period and cumulative total returns are calculated
according to the following formula:
Cash Surrender Value - Initial Amount Invested
Total Return = ----------------------------------------------
Initial Amount Invested
Based on an initial investment made January 1, 1995 and unit information
shown on theattached page, and adjusting for the annual administration charge,
the value of such investment at December 31, 1995 and the total return for the
one year period are as follows:
Ending Value Total Return
------------ ------------
$1,137.13 $1,137.13 - $1,000
------------------ = 13.71%
$1,000
Cumlative total return for five years ended December 31, 1995, is as
follows:
$1,204.87 - $1,000
------------------ = 20.49%
$1,000
Cumulative total return since inception through December 31, 1995, is as
follows:
$1,335.50 - $1,000
------------------ = 33.55%
$1,000
<PAGE>
Average annual total return (T) equates the initial amount invested (P)
to the ending redeemable value (ERV) over the period (n) in accordance with the
formula prescribed by the Securities and Exchange Commission:
n
P(1 + T) = ERV
Average annual total return for the current one year period, five year
period and since commencement of the subaccount are as follows:
One year ended December 31, 1995:
$1,137.13/$1,000 - 1 = 13.73%
Five years ended December 31, 1995:
1/5
($1,204.87/$1,000) - 1 = 3.80%
Since inception through December 31, 1995:
1/7.67
($1,335.50/$1,000) - 1 = 4.43%
Unit Value Information
----------------------
Unit
Date Value
-------- -------
05/01/89 $10.000
12/31/89 10.756
12/31/90 11.454
12/31/91 12.922
12/31/92 13.529
12/31/93 14.609
12/31/94 13.484
12/31/95 15.805
<PAGE>
FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY
SEPARATE ACCOUNT PERFORMANCE CALCULATION
DIVERSIFIED INCOME SUBACCOUNT
The subaccount's standardized yield for the 30 day period ended December
31, 1995 was computed by dividing the net investment income per accumulation
unit earned during the period by the maximum offering price per unit on the last
day of the period in accordance with the formula prescribed by the Securities
and Exchange Commission:
[(($1,301,386)) 6
2 * { ---------------------------- + 1] - 1} = 7.76%
[((59,213,865 * 1.754))
Total return is the percentage change between the public offering price of one
subaccount unit at the beginning of the period to the public offering price of
one subaccount unit at the end of the period. Ending total values are
calculated for any specific period and cumulative total returns are calculated
according to the following formula:
Cash Surrender Value - Initial Amount Invested
Total Return = -----------------------------------------------
Initial Amount Invested
Based on an initial investment made January 1, 1995 and unit information
shown on the attached page, and adjusting for the annual administration charge,
the value of such investment at December 31, 1995 and the total return for the
one year period are as follows:
Ending Value Total Return
------------ ------------
$1,121.99 $1,121.99 - $1,000
------------------ = 12.19%
$1,000
Cumlative total return for five years ended December 31, 1995, is as
follows:
$1,263.88 - $1,000
------------------ = 26.39%
$1,000
Cumulative total return since inception through December 31, 1995, is as
follows:
$1,474.00 - $1,000
------------------ = 47.40%
$1,000
<PAGE>
Average annual total return (T) equates the initial amount invested (P)
to the ending redeemable value (ERV) over the period (n) in accordance with the
formula prescribed by the Securities and Exchange Commission:
n
P(1 + T) = ERV
Average annual total return for the current one year period, five year
period and since commencement of the subaccount are as follows:
One year ended December 31, 1995:
$1,121.99/$1,000 - 1 = 12.19%
Five years ended December 31, 1995:
1/5
($1,263.88/$1,000) - 1 = 4.80%
Since inception through December 31, 1995:
1/7.67
($1,474.00/$1,000) - 1 = 5.19%
Unit Value Information
----------------------
Unit
Date Value
---------- ----------
05/01/88 $1.000
12/31/88 1.025
12/31/89 1.135
12/31/90 1.219
12/31/91 1.379
12/31/92 1.457
12/31/93 1.621
12/31/94 1.516
12/31/95 1.754
<PAGE>
FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY
SEPARATE ACCOUNT PERFORMANCE CALCULATION
GROWTH STOCK SUBACCOUNT
Total return is the percentage change between the public offering price
of one subaccount unit at the beginning of the period to the public offering
price of one subaccount unit at the end of the period. Ending total values are
calculated for any specific period and cumulative total returns are calculated
according to the following formula:
Cash Surrender Value - Initial Amount Invested
Total Return = ----------------------------------------------
Initial Amount Invested
Based on an initial investment made January 1, 1995 and unit information
shown on the attached page, and adjusting for the annual administration charge,
the value of such investment at December 31, 1995 and the total return for the
one year period are as follows:
Ending Value Total Return
------------ ------------
$1,224.50 $1,224.50 - $1,000
------------------ = 22.45%
$1,000
Cumlative total return for five years ended December 31, 1995, is as
follows:
$1,818.07 - $1,000
------------------ = 81.81%
$1,000
Cumulative total return since inception through December 31, 1995, is as
follows:
$2,307.00 - $1,000
------------------ = 130.70%
$1,000
<PAGE>
Average annual total return (T) equates the initial amount invested (P)
to the ending redeemable value (ERV) over the period (n) in accordance with the
formula prescribed by the Securities and Exchange Commission:
n
P(1 + T) = ERV
Average annual total return for the current one year period, five year
period and since commencement of the subaccount are as follows:
One year ended December 31, 1995:
$1,224.50/$1,000 - 1 = 22.45%
Five years ended December 31, 1995:
1/5
($1,818.07/$1,000) - 1 = 12.70%
Since inception through December 31, 1995:
1/7.67
($2,307.00/$1,000) - 1 = 11.52%
Unit Value Information
----------------------
Unit
Date Value
-------- -------
05/01/88 $1.000
12/31/88 0.999
12/31/89 1.358
12/31/90 1.298
12/31/91 1.966
12/31/92 1.996
12/31/93 2.143
12/31/94 2.054
12/31/95 2.587
<PAGE>
FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY
SEPARATE ACCOUNT PERFORMANCE CALCULATION
ASSET ALLOCATION SUBACCOUNT
Total return is the percentage change between the public offering price
of one subaccount unit at the beginning of the period to the public offering
price of one subaccount unit at the end of the period. Ending total values are
calculated for any specific period and cumulative total returns are calculated
according to the following formula:
Cash Surrender Value - Initial Amount Invested
Total Return = ----------------------------------------------
Initial Amount Invested
Based on an initial investment made January 1, 1995 and unit information
shown on the attached page, and adjusting for the annual administration charge,
the value of such investment at December 31, 1995 and the total return for the
one year period are as follows:
Ending Value Total Return
------------- -------------
$1,168.61 $1,168.61 - $1,000
--------------- = 16.86%
$1,000
Cumlative total return for five years ended December 31, 1995, is as
follows:
$1,528.11 - $1,000
----------------------- = 52.81%
$1,000
Cumulative total return since inception through December 31, 1995, is as
follows:
$1,854.00 - $1,000
----------------------- = 85.40%
$1,000
<PAGE>
Average annual total return (T) equates the initial amount invested (P)
to the ending redeemable value (ERV) over the period (n) in accordance with the
formula prescribed by the Securities and Exchange Commission:
n
P(1 + T) = ERV
Average annual total return for the current one year period, five year
period and since commencement of the subaccount are as follows:
One year ended December 31, 1995:
$1,168.61/$1,000 - 1 = 16.86%
Five years ended December 31, 1995:
1/5
($1,528.11/$1,000) - 1 = 8.85%
Since inception through December 31, 1995:
1/7.67
($1,854.00/$1,000) - 1 = 8.38%
Unit Value Information
----------------------
Unit
Date Value
-------- ------
05/01/88 $1.000
12/31/88 1.020
12/31/89 1.245
12/31/90 1.253
12/31/91 1.578
12/31/92 1.665
12/31/93 1.797
12/31/94 1.773
12/31/95 2.134
<PAGE>
FLEXIBE PREMIUM DEFERRED VARIABLE ANNUITY
SEPARATE ACCOUNT PERFORMANCE CALCULATION
GLOBAL GROWTH SUBACCOUNT
Total return is the percentage change between the public offering price
of one subaccount unit at the beginning of the period to the public offering
price of one subaccount unit at the end of the period. Ending total values are
calculated for any specific period and cumulative total returns are calculated
according to the following formula:
Cash Surrender Value - Initial Amount Invested
Total Return = ----------------------------------------------
Initial Amount Invested
Based on an initial investment made January 1, 1995 and unit information
shown on the attached page, and adjusting for the annual administration charge,
the value of such investment at December 31, 1995 and the total return for the
one year period are as follows:
Ending Value Total Return
------------ ------------
$1,252.41 $1,252.41 - $1,000
--------------- = 25.24%
$1,000
Cumulative total return since inception through December 31, 1995, is as
follows:
$1,435.40 - $1,000
------------------ = 43.54%
$1,000
Average annual total return (T) equates the initial amount invested (P)
to the ending redeemable value (ERV) over the period (n) in accordance with the
formula prescribed by the Securities and Exchange Commission:
n
P(1 + T) = ERV
Average annual total return for the current one year period, five year
period and since commencement of the subaccount are as follows:
One year ended December 31, 1995:
$1,252.41/$1,000 - 1 = 25.24%
<PAGE>
Since inception through December 31, 1995:
1/3.67
($1,435.40/$1,000) - 1 = 10.35%
Unit Value Information
----------------------
Unit
Date Value
-------- ---------
05/01/92 $10.000
12/31/92 10.989
12/31/93 12.784
12/31/94 12.237
12/31/95 15.754
<PAGE>
FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY
SEPARATE ACCOUNT PERFORMANCE CALCULATION
MONEY MARKET SUBACCOUNT
The subaccount's standardized yield for the seven day period ended
December 31, 1995 was computed by dividing 1 by the unit price for December 24,
1995, then multiplying this by the unit price on December 31, 1995 to get a base
period return. The base period return is then multiplied by 365 days and then
divided by 7. This calculation for the seven day period ended December 31, 1995
was as follows:
((1 / 1.366126) x 1.367592) -1 = .001073 - Base Period Return
.001073 x (365 / 7) = .0559 or 5.59%
The compound or effective yield for this same period is calculated by taking the
base period return and adding 1, raising the sum to a power equal to 365 divided
by 7 and subtracting 1 from the result. This calculation for the seven day
period ended December 31, 1995 was as follows:
365/7
(.001073 + 1) -1 = .0575 or 5.75%
Date Unit Price
------ ----------
12/24/95 1.366126
12/31/95 1.367592
<PAGE>
FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY
SEPARATE ACCOUNT PERFORMANCE CALCULATION
AGGRESSIVE GROWTH SUBACCOUNT
Total return is the percentage change between the public offering price
of one subaccount unit at the beginning of the period to the public offering
price of one subaccount unit at the end of the period. Ending total values are
calculated for any specific period and cumulative total returns are calculated
according to the following formula:
Cash Surrender Value - Initial Amount Invested
Total Return = -----------------------------------------------
Initial Amount Invested
Based on an initial investment made January 1, 1995 and unit information
shown below, and adjusting for the annual administration charge, the value of
such investment at December 31, 1995 and the cumulative total return since
inception is as follows:
Ending Value Total Return
------------ ------------
$1,237.05 $1,237.05 - $1,000
--------------- = 23.70%
$1,000
Cumulative total return since inception through December 31, 1995, is as
follows:
$1,176.10 - $1,000
------------------ = 17.61%
$1,000
Average annual total return (T) equates the initial amount invested (P)
to the ending redeemable value (ERV) over the period (n) in accordance with the
formula prescribed by the Securities and Exchange Commission:
n
P(1 + T) = ERV
One year ended December 31, 1995:
$1,237.05/$1,000 - 1 = 23.70%
<PAGE>
Average annual total return since inception of the subaccount through
December 31, 1995 is as follows:
1/1.67
($1,176.10/$1,000) - 1 = 10.50%
Unit Value Information
----------------------
Unit
Date Value
-------- -------
05/01/94 $10.000
12/31/94 9.796
12/31/95 12.461
<PAGE>
FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY
SEPARATE ACCOUNT PERFORMANCE CALCULATION
GROWTH & INCOME SUBACCOUNT
Total return is the percentage change between the public offering price
of one subaccount unit at the beginning of the period to the public offering
price of one subaccount unit at the end of the period. Ending total values are
calculated for any specific period and cumulative total returns are calculated
according to the following formula:
Cash Surrender Value - Initial Amount Invested
Total Return = ----------------------------------------------
Initial Amount Invested
Based on an initial investment made January 1, 1995 and unit information
shown below, and adjusting for the annual administration charge, the value of
such investment at December 31, 1995 and the cumulative total return since
inception is as follows:
Ending Value Total Return
------------ ------------
$1,247.59 $1,247.59 - $1,000
------------------ = 24.76%
$1,000
Cumulative total return since inception through December 31, 1995, is as
follows:
$1,220.40 - $1,000
------------------ = 22.04%
$1,000
Average annual total return (T) equates the initial amount invested (P)
to the ending redeemable value (ERV) over the period (n) in accordance with the
formula prescribed by the Securities and Exchange Commission:
n
P(1 + T) = ERV
One year ended December 31, 1995:
$1,247.59/$1,000 - 1 = 24.76%
<PAGE>
Average annual total return since inception of the subaccount through
December 31, 1995 is as follows:
1/1.67
($1,220.40/$1,000) - 1 = 12.67%
Unit Value Information
----------------------
Unit
Date Value
-------- -------
05/01/94 $10.000
12/31/94 10.069
12/31/95 12.904
<PAGE>
FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY
SEPARATE ACCOUNT PERFORMANCE CALCULATION
HIGH YIELD SUBACCOUNT
The subaccount's standardized yield for the 30 day period ended December
31, 1995 was computed by dividing the net investment income per accumulation
unit earned during the period by the maximum offering price per unit on the last
day of the period in accordance with the formula prescribed by the Securities
and Exchange Commission:
[ $181,896 6
2 * { ---------------------- + 1] - 1} = 4.37%
[((2,321,419 * 10.941))
Total return is the percentage change between the public offering price
of one subaccount unit at the beginning of the period to the public offering
price of one subaccount unit at the end of the period. Ending total values are
calculated for any specific period and cumulative total returns are calculated
according to the following formula:
Cash Surrender Value - Initial Amount Invested
Total Return = ----------------------------------------------
Initial Amount Invested
Based on an initial investment made January 1, 1995 and unit information
shown below, and adjusting for the annual administration charge, the value of
such investment at December 31, 1995 and the cumulative total return since
inception is as follows:
Ending Value Total Return
------------ ---------------
$1,122.53 $1,122.53 - $1,000
------------------ = 12.25%
$1,000
Cumulative total return since inception through December 31, 1995, is as
follows:
$1,024.10 - $1,000
------------------ = 2.41%
$1,000
<PAGE>
Average annual total return (T) equates the initial amount invested (P)
to the ending redeemable value (ERV) over the period (n) in accordance with the
formula prescribed by the Securities and Exchange Commission:
n
P(1 + T) = ERV
One year ended December 31, 1995:
$1,122.53/$1,000 - 1 = 12.25%
Average annual total return since inception of the subaccount through
December 31, 1995 is as follows:
1/1.67
($1,024.10/$1,000) - 1 = 1.44%
Unit Value Information
----------------------
Unit
Date Value
-------- -------
05/01/94 $10.000
12/31/94 9.452
<PAGE>
FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY
SEPARATE ACCOUNT PERFORMANCE CALCULATION
GLOBAL ASSET ALLOCATION SUBACCOUNT
Total return is the percentage change between the public offering price
of one subaccount unit at the beginning of the period to the public offering
price of one subaccount unit at the end of the period. Ending total values are
calculated for any specific period and cumulative total returns are calculated
according to the following formula:
Cash Surrender Value - Initial Amount Invested
Total Return = ----------------------------------------------
Initial Amount Invested
Based on an initial investment made January 1, 1995 and unit information
shown below, and adjusting for the annual administration charge, the value of
such investment at December 31, 1995 and the cumulative total return since
inception is as follows:
Ending Value Total Return
------------ -------------
$1,124.00 $1,124.00 - $1,000
------------------ = 12.42%
$1,000
Average annual total return (T) equates the initial amount invested (P)
to the ending redeemable value (ERV) over the period (n) in accordance with the
formula prescribed by the Securities and Exchange Commission:
n
P(1 + T) = ERV
Average annual total return since inception of the subaccount through
December 31, 1995 is as follows:
1/1
($1,124.00/$1,000) - 1 = 12.42%
Unit Value Information
----------------------
Unit
Date Value
-------- -------
01/01/95 $10.000
12/31/95 11.590
<PAGE>
FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY
SEPARATE ACCOUNT PERFORMANCE CALCULATION
INTERNATIONAL STOCK SUBACCOUNT
Total return is the percentage change between the public offering price
of one subaccount unit at the beginning of the period to the public offering
price of one subaccount unit at the end of the period. Ending total values are
calculated for any specific period and cumulative total returns are calculated
according to the following formula:
Cash Surrender Value - Initial Amount Invested
Total Return = ----------------------------------------------
Initial Amount Invested
Based on an initial investment made January 1, 1995 and unit information
shown below, and adjusting for the annual administration charge, the value of
such investment at December 31, 1995 and the cumulative total return since
inception is as follows:
Ending Value Total Return
------------ --------------
$1,092.20 $1,092.20 - $1,000
------------------ = 9.22%
$1,000
Average annual total return (T) equates the initial amount invested (P)
to the ending redeemable value (ERV) over the period (n) in accordance with the
formula prescribed by the Securities and Exchange Commission:
n
P(1 + T) = ERV
Average annual total return since inception of the subaccount through
December 31, 1995 is as follows:
1/1
($1,092.20/$1,000) - 1 = 9.22%
Unit Value Information
----------------------
Unit
Date Value
-------- -------
01/01/95 $10.000
12/31/95 11.272
<PAGE>
FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY
SEPARATE ACCOUNT PERFORMANCE CALCULATION
GLOBAL BOND SUBACCOUNT
The subaccount's standardized yield for the 30 day period ended December
31, 1995 was computed by dividing the net investment income per accumulation
unit earned during the period by the maximum offering price per unit on the last
day of the period in accordance with the formula prescribed by the Securities
and Exchange Commission:
[ $31,423 6
2 * { ------------------------ + 1] - 1} = 2.83%
[ ((574,142 * 11.743))
Total return is the percentage change between the public offering price
of one subaccount unit at the beginning of the period to the public offering
price of one subaccount unit at the end of the period. Ending total values are
calculated for any specific period and cumulative total returns are calculated
according to the following formula:
Cash Surrender Value - Initial Amount Invested
Total Return = ----------------------------------------------
Initial Amount Invested
Based on an initial investment made January 1, 1995 and unit information
shown below, and adjusting for the annual administration charge, the value of
such investment at December 31, 1995 and the cumulative total return since
inception is as follows:
Ending Value Total Return
------------ --------------
$1,174.30 $1,174.30 - $1,000
------------------ = 17.43%
$1,000
Average annual total return (T) equates the initial amount invested (P)
to the ending redeemable value (ERV) over the period (n) in accordance with the
formula prescribed by the Securities and Exchange Commission:
n
P(1 + T) = ERV
<PAGE>
Average annual total return since inception of the subaccount through
December 31, 1995 is as follows:
1/1
($1,174.30/$1,000) - 1 = 17.43%
Unit Value Information
----------------------
Unit
Date Value
-------- -------
01/01/95 $10.000
12/31/95 11.743
