<PAGE>
FOR USE IN CALIFORNIA ONLY
Supplement Dated August 30, 1995 to Prospectus
Dated May 1, 1995
CHUBB SEPARATE ACCOUNT C
OF
CHUBB LIFE INSURANCE COMPANY OF AMERICA
This supplement updated certain information contained in your Prospectus. Please
read this supplement and keep it with your Prospectus for future reference.
The definition of Net Premium on page 3 of the Prospectus is hereby deleted and
amended to read as follows:
Net Premium -- The gross premium less a 2.35% state premium tax charge, a
1.25% Federal deferred acquisition cost tax charge and a 3% sales charge.
The section State Premium Tax Charge and Federal DAC Tax Charge on page 5 of the
Prospectus is hereby deleted and amended to read as follows:
These charges are deducted from each premium payment, currently 2.35% for
state premium taxes and 1.25% as a Federal deferred acquisition cost
("DAC") tax charge.
The first paragraph of the section Premium Charges on page 14 of the Prospectus
is hereby deleted and amended to read as follows:
Upon receipt of each premium payment and before allocation of payment among
the Divisions and the General Account, Chubb Life will deduct a state
premium tax charge of 2.35%. Chubb Life does not expect to derive a profit
from this charge.
FOR POLICYOWNERS AGE 60 AND OVER ONLY, the section Is there a short-term
cancellation right? on page 7 of the Prospectus and Policy "Free Look" on page
14 are hereby deleted and amended to read as follows:
The Policyowner has the limited right to return a Policy for cancellation
and refund. Chubb Life will cancel the Policy if it is returned by mail or
personal delivery to Chubb Life, or to the agent who sold the Policy,
within 30 days after the delivery of the Policy to the Policyowner. Chubb
Life will return to the Policyowner, within seven days of the notice to
return the Policy, the Accumulation Value of the Policy, plus any amounts
deducted as a premium charge, as of the day the Policy is returned. Prior
to the Allocation Date the initial Net Premium will be held in Chubb Life's
General Account.
<PAGE>
THE CHUBB HERITAGE SERIES
CHUBB SEPARATE ACCOUNT C
INDIVIDUAL AND SURVIVORSHIP FLEXIBLE
PREMIUM VARIABLE LIFE INSURANCE POLICIES
ISSUED BY
CHUBB LIFE INSURANCE COMPANY OF AMERICA
ONE GRANITE PLACE
CONCORD, NEW HAMPSHIRE 03301
(603) 226-5000
This Prospectus describes two forms of a flexible premium variable life
insurance policy issued by Chubb Life Insurance Company of America ("Chubb
Life"): an individual flexible premium variable life insurance policy form
("Chubb Heritage I") and a survivorship flexible premium variable life
insurance policy form ("Chubb Heritage II") (collectively the "Policy" or
"Policies"). The Policies are designed to provide a Policyowner with both
lifetime insurance protection and maximum flexibility in connection with
premium payments and death benefits, together with the opportunity to
participate in the investment experience of Chubb Separate Account C
("Separate Account C"). Although each Policy contains a schedule of intended
premium payments ("Planned Periodic Premiums"), and an intended frequency of
premium payments ("Premium Frequency"), a Policyowner may, subject to certain
restrictions, vary the frequency and amount of the premium payments and
increase or decrease the level of life insurance benefits payable under the
Policy. The flexibility allows a Policyowner to provide for changing insurance
needs within the framework of a single insurance policy. Unlike traditional
insurance protection providing fixed benefits, the Policyowner participates in
the investment experience of Separate Account C. Accumulation Value under the
Policies will increase with positive investment experience and decrease with
negative investment experience. Accumulation Value in Separate Account C is
not guaranteed and could decline to zero.
Chubb Heritage I provides life insurance coverage on one Insured, with the
Death Benefit payable at the Insured's death. Chubb Heritage II provides life
insurance coverage on two Insureds, with the Death Benefit payable upon the
death of the last surviving Insured. If Net Premiums are allocated to Separate
Account C, the amount of the Death Benefit may reflect the investment
experience of the chosen Divisions, as well as the frequency and amount of
premiums, any withdrawals of Cash Value ("withdrawal"), and the charges
assessed in connection with the Policy. As long as the Policy remains in
force, the Death Benefit will not be less than the current Specified Amount of
the Policy, reduced by any outstanding indebtedness and any due and unpaid
fees and charges. The minimum initial Specified Amount is $500,000 for Chubb
Heritage I and $2,000,000 for Chubb Heritage II. After a withdrawal, the
Specified Amount may not be reduced to less than $250,000 for Chubb Heritage I
and $500,000 for Chubb Heritage II Policy.
The Policy provides two death benefit options which may be chosen by the
Policyowner. Under Option I, the Death Benefit payable under the Policy is
equal to the greater of (i) the Specified Amount or (ii) the Policy's
Accumulation Value on the date of death multiplied by the "corridor
percentage". The corridor percentage is a tax law concept which defines the
minimum Death Benefit required in connection with the Policy's Accumulation
Value in order for the Policy to qualify as life insurance. Under Option II,
the Death Benefit equals the Specified Amount plus the Accumulation Value of
the Policy on the date of death, but not less than the Policy's Accumulation
Value multiplied by the corridor percentage. The Policyowner may, subject to
certain restrictions, change from one death benefit option to the other after
the Policy has been issued.
There is a minimum initial premium, based on Issue Age, underwriting class
and Specified Amount, that must be paid at issue. If a Policyowner chooses the
Guaranteed Death Benefit Rider, the Death Benefit will be guaranteed to never
be less than the Specified Amount, provided that a cumulative minimum premium
requirement is met. No premium payment may be less than $500.
The Policy will remain in force so long as Cash Value exceeds indebtedness
and Cash Value less indebtedness is sufficient to pay certain monthly charges
imposed in connection with the Policy. The Cash Value equals the Accumulation
Value less any Surrender Charge. Accumulation Value in Separate Account C will
reflect the investment experience of the chosen Divisions, the amount and
frequency of premium payments, any withdrawals, and charges imposed in
connection with the Policy. Adherence to the schedule of Planned Periodic
Premiums will not assure the Policy will remain in force. The Policyowner
bears the entire investment risk for all amounts allocated to Separate Account
C; no minimum Accumulation Value is guaranteed and the Accumulation Value
could decline to zero. So long as Cash Value exceeds indebtedness and subject
to certain conditions described in this Prospectus, a Policyowner may obtain
policy loans at any time after the first policy anniversary and may make
withdrawals at any time. Both withdrawals and policy loans must be made prior
to the Policy's Maturity Date.
The Policyowner may allocate Net Premiums to one or more of the Divisions or
to Chubb Life's General Account on the Allocation Date. Each Division will
invest solely in a corresponding portfolio (a "Portfolio") of Chubb Series
Trust (the "Trust"). Prior to the Allocation Date the Net Premiums paid will
be deposited in Chubb Life's General Account. There is a "free look" period
during which the Policyowner may cancel the Policy. If the Policyowner elects
during this "free look" period to cancel the Policy, Chubb Life will
reimburse, within seven days from the date the Policy is surrendered to Chubb
Life, the full amount of premium paid. The accompanying Prospectus for the
Trust and the Statement of Additional Information, available on request,
describe the investment objectives and risks of the five Portfolios of the
Trust. The Policies described in this Prospectus are not available in all
states.
Chubb Life believes the Policy will in general receive favorable tax
treatment under the Internal Revenue Code of 1986 ("the Code"). However,
because there are issues as to which the law is developing or changing, there
can be no guarantees. Information in this Prospectus is not intended as tax
advice and Chubb Life recommends that prospective purchasers rely only on the
advice of a qualified tax adviser. Prospective purchasers of this Policy are
advised that replacement of existing insurance coverage may not be financially
advantageous and should consult with their financial advisers with respect to
the Policy. It may also not be advantageous to purchase this Policy if the
prospective purchaser already owns a flexible premium variable life insurance
policy.
This Prospectus generally describes only the portion of the Policy involving
Separate Account C. For a brief summary of Chubb Life's General Account, see
"THE GENERAL ACCOUNT."
THIS PROSPECTUS IS VALID ONLY IF ACCOMPANIED OR
PRECEDED BY A CURRENT PROSPECTUS FOR
CHUBB SERIES TRUST
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES DIVISION, NOR HAS THE COMMISSION
OR ANY STATE SECURITIES DIVISION, PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PLEASE READ THIS PROSPECTUS CAREFULLY AND RETAIN IT FOR FUTURE REFERENCE.
THE DATE OF THIS PROSPECTUS IS MAY 1, 1995.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DEFINITIONS................................................................ 3
SUMMARY.................................................................... 4
CHUBB LIFE INSURANCE COMPANY OF AMERICA.................................... 9
CHUBB SEPARATE ACCOUNT C................................................... 9
Divisions................................................................ 9
CHUBB SERIES TRUST......................................................... 9
THE POLICIES............................................................... 11
General.................................................................. 11
Payment of Premiums...................................................... 11
Guaranteed Death Benefit Premiums........................................ 11
Premium Limitations...................................................... 11
Allocation of Premiums................................................... 12
Transfers................................................................ 12
Telephone Transfers, Loans and Reallocations............................. 13
Policy Lapse............................................................. 14
Reinstatement............................................................ 14
Policy "Free Look"....................................................... 14
CHARGES AND DEDUCTIONS..................................................... 14
Premium Charges.......................................................... 14
Monthly Deduction........................................................ 15
Risk Charge.............................................................. 16
Surrender Charge......................................................... 16
Administrative Fees...................................................... 16
Other Charges............................................................ 16
POLICY BENEFITS AND RIGHTS................................................. 16
Death Benefits........................................................... 16
Guaranteed Death Benefit................................................. 18
Combined Requests........................................................ 18
Maturity of the Policy................................................... 18
Optional Insurance Benefits.............................................. 18
Settlement Options....................................................... 19
CALCULATION OF ACCUMULATION VALUE.......................................... 19
Unit Values.............................................................. 20
Net Investment Factor.................................................... 20
CASH VALUE BENEFITS........................................................ 21
Surrender Privileges..................................................... 21
Policy Loans............................................................. 21
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
OTHER MATTERS.............................................................. 23
Voting Rights............................................................ 23
Additions, Deletions or Substitutions of Investments..................... 23
Annual Report............................................................ 23
Confirmation............................................................. 23
Limitation on Right to Contest........................................... 24
Misstatements............................................................ 24
Suicide.................................................................. 24
Beneficiaries............................................................ 24
Postponement of Payments................................................. 24
Assignment............................................................... 24
Illustration of Benefits and Values...................................... 24
Non-Participating Policy................................................. 24
THE GENERAL ACCOUNT........................................................ 25
General Description...................................................... 25
General Account Accumulation Value....................................... 25
Determination of Charges................................................. 25
Premium Deposit Fund..................................................... 25
DISTRIBUTION OF THE POLICY................................................. 26
Group or Sponsored Arrangements.......................................... 26
MANAGEMENT OF CHUBB LIFE................................................... 27
Executive Officers and Directors of Chubb Life........................... 27
Executive Officers (Other Than Directors)................................ 28
STATE REGULATION OF CHUBB LIFE............................................. 29
FEDERAL TAX MATTERS........................................................ 29
Tax Considerations....................................................... 29
Policy Proceeds.......................................................... 29
Charge for Chubb Life Income Taxes....................................... 32
EMPLOYEE BENEFIT PLANS..................................................... 32
LEGAL PROCEEDINGS.......................................................... 32
EXPERTS.................................................................... 32
REGISTRATION STATEMENT..................................................... 32
FINANCIAL STATEMENTS....................................................... 33
ILLUSTRATIONS.............................................................. A-1
</TABLE>
[THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. CHUBB LIFE DOES NOT AUTHORIZE ANY
INFORMATION OR REPRESENTATIONS REGARDING THE OFFERING DESCRIBED IN THIS
PROSPECTUS OTHER THAN AS CONTAINED IN THIS PROSPECTUS, THE PROSPECTUS OF THE
TRUST OR THE STATEMENT OF ADDITIONAL INFORMATION OF THE TRUST.]
2
<PAGE>
DEFINITIONS
In addition to terms which are defined elsewhere in this Prospectus, the fol-
lowing words and phrases shall have the indicated meanings:
ACCUMULATION VALUE--The total amount that a Policy provides for investment at
any time plus the amount held as collateral for Policy Debt.
AGE--The Insured's age at his or her nearest birthday.
ALLOCATION DATE--The date when the initial premium is placed in the Divisions
and the General Account in accordance with the Policyowner's allocation in-
structions in the application. The Allocation Date is 20 days from the date the
Policy is issued.
ATTAINED AGE--The age of the Insured at the last policy anniversary.
BENEFICIARY--The person designated by the Policyowner in the application to
receive the Death Benefit proceeds. If changed, the Beneficiary is as shown in
the latest change filed with Chubb Life. If no Beneficiary survives the In-
sured, the Policyowner or the Policyowner's estate will be the Beneficiary. The
interest of any Beneficiary is subject to that of any assignee.
CASH VALUE--The Accumulation Value less any applicable Surrender Charge. This
amount less the amount of Policy Debt is payable to the Policyowner on the ear-
lier of surrender of the Policy or the Maturity Date.
DATE OF RECEIPT--Any business day of Chubb Life prior to 4:00 P.M. Eastern
time, on which a notice or premium payment is received at Chubb Life's service
center or home office.
DEATH BENEFIT--The amount, less the amount of Policy Debt, which is payable
to the Beneficiary under the Policy upon the death of the Insured under Chubb
Heritage I and the death of the last surviving Insured under Chubb Heritage II.
DIVISION--A separate division of Separate Account C which invests exclusively
in the shares of a specified Portfolio of the Trust.
GENERAL ACCOUNT--The assets of Chubb Life other than those allocated to Sepa-
rate Account C or any other separate account.
INSURED(S)--The person(s) upon whose life the Policy is issued.
ISSUE AGE--The Insured's age at his or her nearest birthday on the Policy
Date.
JOINT EQUAL AGE--On Chubb Heritage II, this will be calculated pursuant to a
formula which converts the specific age, gender and underwriting classifica-
tions of the two Insureds into one age. The Joint Equal Age is used in deter-
mining issue age limitations, minimum premiums and guaranteed death benefit
premiums.
LOAN VALUE--Generally, 90% of a Policy's Cash Value on the date of a loan.
MATURITY DATE--Unless otherwise specified, the Maturity Date will be the pol-
icy anniversary nearest to the Insured's 100th birthday for Chubb Heritage I
and the younger Insured's 100th birthday for Chubb Heritage II.
MONTHLY ANNIVERSARY DATE--The same day in each month as the Policy Date.
NET PREMIUM--The gross premium less a 2.5% state premium tax charge, a 1.25%
Federal deferred acquisition cost tax charge and a 3% sales charge.
OWNER (POLICYOWNER)--The person or entity so designated in the application or
as subsequently changed.
POLICY DATE--The date set forth in the Policy, which is the date requested by
the Owner. If no date is requested, it is the date the Policy is issued. The
Policy Date is the date from which policy years, policy months, and policy an-
niversaries will be determined. If the Policy Date should fall on the 29th,
30th, or 31st of a month, the Policy Date will be the 1st of the following
month.
POLICY DEBT--The sum of all unpaid policy loans and accrued interest thereon.
PORTFOLIO--A separate investment Portfolio of the Trust.
PROOF OF DEATH--One or more of the following:
(a) A copy of a certified death certificate.
(b) A copy of a certified decree of a court of competent jurisdiction as
to the finding of death.
(c) A written statement by a medical doctor who attended the Insured.
(d) Any other proof satisfactory to Chubb Life.
SEPARATE ACCOUNT C--Chubb Separate Account C, a separate investment account
created by Chubb Life to receive and invest Net Premiums paid under the Policy
and other flexible premium variable life insurance policies offered by Chubb
Life.
SPECIFIED AMOUNT--The face amount of the Policy which is the minimum death
benefit payable under the Policy.
SURRENDER CHARGE--A sales charge assessed only upon surrender or withdrawal.
TRUST--Chubb Series Trust, a series mutual fund.
VALUATION DATE--Each day, as of the close of regular trading on the New York
Stock Exchange, which is currently 4:00 P.M. Eastern time, or any other days as
may be required.
VALUATION PERIOD--The period between two successive Valuation Dates, commenc-
ing at the close of regular trading on the New York Stock Exchange on each Val-
uation Date and ending at the close of regular trading on the New York Stock
Exchange on the next succeeding Valuation Date.
3
<PAGE>
SUMMARY
The discussion in this Prospectus assumes that there is no policy loan
outstanding and that state variations will be covered by prospectus supplement
or policy endorsement, as appropriate. The terms under which the Policies are
issued may also vary from those described in this Prospectus based on
particular circumstances. The description of the Policies in this Prospectus is
subject to the terms of the Policy purchased by a Policyowner and any
supplement or endorsement to it. An applicant may review a copy of the Policy
and any supplement or endorsement to it on request.
WHAT ARE THE VARIABLE LIFE POLICIES BEING OFFERED?
This Prospectus describes two forms of a flexible premium variable life
insurance policy issued by Chubb Life Insurance Company of America ("Chubb
Life"). Chubb Heritage I provides life insurance coverage on one Insured, with
the Death Benefit payable upon the death of such Insured. Chubb Heritage II
provides life insurance coverage on two Insureds, with a Death Benefit payable
only when the last surviving Insured dies. The Policyowner may, subject to
certain limitations, make premium payments in any amount at any frequency. The
Policies are life insurance contracts with death benefits, cash values, and
other features traditionally associated with life insurance. They are called
"flexible premium" because, unlike many insurance contracts, there are no fixed
schedules for premium payments, although each Policyowner may establish a
schedule of premium payments ("Planned Periodic Premiums"). This flexibility
permits a Policyowner to provide for evolving insurance needs within a single
insurance product. The minimum initial Specified Amount is $500,000 for Chubb
Heritage I and $2,000,000 for Chubb Heritage II. A Policyowner may increase or
decrease coverage. Increasing coverage under the Policy, rather than purchasing
another policy, may save additional administrative costs. Increasing coverage
under the Policy or purchasing another policy may require new evidence of
insurability. Increasing or decreasing coverage may have certain tax
consequences. See "FEDERAL TAX MATTERS".
The Policies generally work as follows: a Policyowner periodically pays a
premium to Chubb Life. Chubb Life subtracts an amount for state premium taxes,
the Federal deferred acquisition cost tax charge and the sales charge from each
premium. Chubb Life then places the Net Premium into one or more of the five
Divisions and/or Chubb Life's General Account as directed by the Policyowner.
Each Division invests its assets in a corresponding Portfolio of the Trust.
During the year, Chubb Life takes charges from each Division and credits or
charges each Division with its respective investment experience. The cost of
insurance charge, which is deducted from each Policy's Accumulation Value,
varies monthly based on the sex, Issue Age, policy year, rating class of the
Insured(s), Specified Amount of the Policy, Death Benefit option and applicable
corridor percentage. A policyowner will incur a Surrender Charge for a
surrender or withdrawal during the first five policy years. See "CHARGES AND
DEDUCTIONS--Surrender Charge".
The Death Benefit is payable under two options. Under Option I, the Death
Benefit is equal to the greater of the Specified Amount or the Accumulation
Value of the Policy on the date of death of the Insured under Chubb Heritage I
and of the last surviving Insured under Chubb Heritage II multiplied by the
corridor percentage. Under Option II, the Death Benefit is equal to the sum of
the Specified Amount plus the Policy's Accumulation Value on the date of death
of the Insured under Chubb Heritage I and of the last surviving Insured under
Chubb Heritage II, subject to adjustment by the corridor percentage. The
corridor percentage is a tax law concept which defines the minimum Death
Benefit required in connection with the Policy's Accumulation Value in order
for the Policy to qualify as life insurance. Prospective Policyowners should be
aware that there is no guarantee of Accumulation Value in Separate Account C.
See "POLICY BENEFITS AND RIGHTS--Death Benefits".
All persons insured must meet specified age limits and certain health and
other standards called "Underwriting Standards". The smoking status of the
Insureds is generally reflected in the cost of insurance rates. However, for
Chubb Heritage I, distinctions between smokers and nonsmokers are only made for
Insureds age 15 and over. Policies issued in certain jurisdictions will not
directly reflect the sexes of the Insureds in either the premium rates or the
charges and values under the Policy.
WHAT IS THE AMOUNT OF THE PREMIUMS?
Premiums are flexible and the Policyowner may choose the amount and frequency
of premium payments provided each premium is at least $500. Chubb Life reserves
the right to limit the amount of any increase in premium payment.
4
<PAGE>
The first premium is due on the Policy Date. The amount of the first premium
is determined by Chubb Life and is based on Issue Age, underwriting class and
Specified Amount for Chubb Heritage I and on Joint Equal Age and Specified
Amount for Chubb Heritage II. Premiums are paid in advance, generally one year
at a time; however, Chubb Life permits semi-annual, quarterly and monthly
premium payments. Changes in Premium Frequency and increases or decreases in
the amount of Planned Periodic Premiums may be made by the Policyowner. Chubb
Life will notify Policyowners annually if any premiums would cause their
Policies to be deemed to be modified endowment contracts and allow for a refund
of the excess premium. See "FEDERAL TAX MATTERS --Policy Proceeds".
Failure to pay premiums in accordance with the schedule of Planned Periodic
Premiums will not automatically cause the Policy to lapse. Unless the
Guaranteed Death Benefit Rider is in force and the conditions under the Rider
satisfied, it will lapse when the Cash Value less outstanding Policy Debt is
insufficient to pay the monthly deduction for certain charges ("monthly
deduction") and a grace period expires without a sufficient payment by the
Policyowner. Conversely, payment of premiums in accordance with the schedule of
Planned Periodic Premiums does not necessarily mean that the Policy will remain
in force. See "THE POLICIES--Policy Lapse".
The Guaranteed Death Benefit Rider guarantees that the Death Benefit will
never be less than the Specified Amount provided that a cumulative minimum
premium requirement is met.
WHAT IS CHUBB SEPARATE ACCOUNT C?
Separate Account C is a separate account established by Chubb Life pursuant
to the insurance laws of the State of New Hampshire and organized as a
registered unit investment trust under the Investment Company Act of 1940 (the
"1940 Act"). Such registration does not involve any supervision by the
Securities and Exchange Commission (the "Commission") of the management or
investment practices or policies of Separate Account C. Separate Account C is
presently comprised of five Divisions, each of which buys shares at net asset
value of the corresponding portfolio (a "Portfolio") of Chubb Series Trust (the
"Trust").
WHAT IS CHUBB SERIES TRUST?
The Trust is registered as an open-end diversified management company under
the 1940 Act. Its shares are offered only to the Divisions, whether now in
existence or to be established by Chubb Life. The Trust's shares may also be
offered to other separate accounts which may be established by Chubb Life or
its affiliated insurance companies to fund variable life insurance policies and
variable annuity contracts.
The Trust presently has five classes of shares, each representing a Portfolio
having a specific investment objective. The present Portfolios of the Trust are
the Resolute Treasury Money Market Portfolio, the Resolute Bond Portfolio, the
Resolute Equity Portfolio, the Resolute Small Company Portfolio and the
Resolute International Equity Portfolio.
The investment manager to the Trust is Chubb Investment Advisory Corporation
("Chubb Investment Advisory"), a subsidiary of Chubb Life. Chubb Investment
receives fees from the Trust for providing investment management services. The
fees range from .40 percent to .80 percent of average daily net assets of the
Portfolios. Morgan Guaranty Trust Company of New York ("Morgan") provides sub-
investment advisory services to the Trust. Morgan receives an annual percentage
fee from Chubb Investment for its services which in no way increases the costs
borne by the Trust, Separate Account C or the Policyowner. See "CHUBB SERIES
TRUST".
WHAT ARE THE CHARGES MADE BY CHUBB LIFE?
STATE PREMIUM TAX CHARGE AND FEDERAL DAC TAX CHARGE. These charges are
deducted from each premium payment, currently 2.5% for state premium taxes and
1.25% as a Federal deferred acquisition cost ("DAC") tax charge.
SALES CHARGE. A 3% sales charge is deducted from each premium payment. Also
see below "Surrender or Withdrawal Charges".
COST OF INSURANCE CHARGE. This charge is calculated on each Monthly
Anniversary Date and deducted from each Policy's Accumulation Value. The charge
is based on the sex, Issue Age, policy year, rating class of the Insured(s),
Specified Amount, Death Benefit option and applicable corridor percentage.
Monthly cost of insurance rates will be
5
<PAGE>
determined by Chubb Life based upon its expectations as to future mortality
experience. Cost of insurance rates are guaranteed not to exceed or be
increased above the maximum charge based upon the Commissioner's 1980 Standard
Ordinary Mortality Table.
CHARGE FOR MORTALITY AND EXPENSE RISKS. This charge is imposed daily at an
annual rate of .65% on the assets of each Division. Chubb Life will realize
income from this charge to the extent it is not needed to provide benefits and
pay expenses under the Policies.
SURRENDER OR WITHDRAWAL CHARGES. This sales charge is imposed at the time of
surrender or withdrawal during the first five policy years. It declines
annually from 5% to 0% of premiums paid in the first policy year.
ADMINISTRATIVE CHARGE FOR WITHDRAWAL OR TRANSFER. Chubb Life charges $100 for
each withdrawal and for certain transfers between Divisions or between the
Divisions and the General Account. See "THE POLICIES -Transfers" for a
description of situations in which the transfer charge will be imposed.
GUARANTEED DEATH BENEFIT CHARGE. If the Guaranteed Death Benefit Rider is
added to the Policy, a monthly charge of $.01 per $1,000 of Specified Amount
will be deducted each month from the Accumulation Value of the Policy.
CHARGE FOR OPTIONAL RIDER BENEFITS. An additional charge is required if the
Policyowner elects to purchase certain optional insurance benefits by rider.
Charges are deducted monthly from a Policy's Accumulation Value. See "POLICY
BENEFITS AND RIGHTS--Optional Insurance Benefits".
See "CHARGES AND EXPENSES" for a fuller description of charges under the
Policies.
IS THERE A CHARGE AGAINST SEPARATE ACCOUNT C FOR FEDERAL INCOME TAX?
Currently no charge is made against any Division for Federal income taxes.
However, if Chubb Life incurs, or expects to incur, income taxes attributable
to any Division of this class of Policies in future years, it reserves the
right to make a charge. See the discussion of the Federal DAC tax charge under
"CHARGES AND DEDUCTIONS--Premium Charges".
HOW ARE AMOUNTS ALLOCATED TO EACH DIVISION OR THE GENERAL ACCOUNT?
The Policyowner indicates in the application the allocation of Net Premium
payments among the Divisions and the General Account. The initial Net Premium
is allocated on the Allocation Date and Net Premiums received after the
Allocation Date are allocated generally on the Date of Receipt. The minimum
percentage of any Net Premium payment allocated to any Division or the General
Account is 1%. The Policyowner may change his or her allocation of future
premium payments by written notice to Chubb Life or by telephone, if the proper
telephone authorization is on file, without payment of any fee or penalty.
WHAT IS THE RELATIONSHIP BETWEEN THE PREMIUM AND THE AMOUNT ALLOCATED TO THE
DIVISIONS?
The initial Net Premium is allocated by Chubb Life on the Allocation Date
among the Divisions and the General Account as directed by the Policyowner.
Prior to the Allocation Date the initial Net Premium is held in Chubb Life's
General Account. The initial Net Premium is the initial gross premium, plus any
additional premium paid prior to the Allocation Date, less the state premium
tax charge, the Federal DAC tax charge and the sales charge. These charges also
apply to subsequent premium payments.
WHAT COMMISSIONS ARE PAID TO AGENTS?
The Policies are sold by agents who represent Chubb Life and are registered
representatives of Chubb Securities Corporation or other registered broker-
dealers. Commissions payable to agents are described under "DISTRIBUTION OF THE
POLICY".
WHAT IS THE DEATH BENEFIT?
The Death Benefit under Chubb Heritage I is the amount payable to the named
Beneficiary when the person insured under the Policy dies. The Death Benefit
under Chubb Heritage II is the amount payable to the named Beneficiary when
6
<PAGE>
the last surviving Insured dies. The Death Benefit proceeds will equal the
Death Benefit of the Policy, plus any additional rider benefits included and
then due, minus any outstanding Policy Debt or unpaid cost of insurance charges
or charges for riders.
Under Option I, the Death Benefit will be equal to the greater of the
Specified Amount or the Accumulation Value of the Policy on the date of death
multiplied by the corridor percentage. Under Option II, the Death Benefit is
equal to the Specified Amount plus the Accumulation Value of the Policy on the
date of death; provided, however, that under Option II, the Death Benefit can
never be less than the Accumulation Value on the date of death multiplied by
the corridor percentage. See "POLICY BENEFITS AND RIGHTS--Death Benefits".
Under the Guaranteed Death Benefit Rider the Death Benefit is guaranteed to
never be less than the Specified Amount provided that a cumulative minimum
premium requirement is met.
HOW DOES THE ACCUMULATION VALUE OF A POLICY VARY IN RELATION TO THE DIVISIONS'
INVESTMENT EXPERIENCE?
The Policy provides for Accumulation Value equal to the total of the Policy's
Accumulation Value in the Divisions and Accumulation Value in the General
Account. The Policy's Accumulation Value will reflect the amount and frequency
of premium payments, the investment experience of the Divisions, the value of
Net Premiums (Net Premiums plus credited interest), if any, allocated to the
General Account, policy loans, any withdrawals, and any charges imposed in
connection with the Policy. There is no minimum guaranteed Accumulation Value.
WHAT IS THE LOAN PROVISION AND HOW DOES A LOAN AFFECT THE DEATH BENEFIT,
ACCUMULATION VALUE AND CASH VALUE?
After the first policy anniversary, a Policyowner may borrow against the Cash
Value of his or her Policy. Generally, the maximum loan amount is 90% of the
Cash Value of the Policy on the date of the loan. Loan interest is payable at
the end of each policy year and all Policy Debt outstanding will be deducted
from proceeds payable at the Insured's death for Chubb Heritage I and at the
death of the last surviving Insured for Chubb Heritage II, upon maturity, or
upon surrender.
When a policy loan is made, a portion of the Policy's Accumulation Value
sufficient to secure the loan will be transferred to the General Account. A
policy loan removes the proceeds from the investment experience of Separate
Account C which will have a permanent effect on the Accumulation Value, the
Cash Value and the Death Benefit even if the loan is repaid.
There are two types of loans available. See "CASH VALUE BENEFITS--Policy
Loans" for a description of the two types of loans and their applicable
interest rates.
IS THERE A SHORT-TERM CANCELLATION RIGHT?
The Policyowner has the limited right to return a Policy for cancellation and
full refund of all premiums paid. Chubb Life will cancel the Policy if it is
returned by mail or personal delivery to Chubb Life, or to the agent who sold
the Policy, within 20 days after the delivery of the Policy to the Policyowner.
Chubb Life will return to the Policyowner, within seven days, all payments
received on the Policy.
WHAT TRANSFERS IS A POLICYOWNER ALLOWED?
A Policyowner may transfer Accumulation Value among the Divisions and among
the Divisions and the General Account. However, transfers out of the General
Account are subject to restrictions. Chubb Life currently permits up to 24
transfers per policy year, twelve of which will not incur a transfer charge.
See "THE POLICIES--Transfers" for a more complete description of the terms and
conditions of the transfer privileges under the Policies.
ARE THE BENEFITS UNDER THE POLICIES SUBJECT TO FEDERAL INCOME TAX?
Under current interpretations of the tax laws, all Death Benefits paid under
the Policies will generally be fully excludable from the gross income of the
Beneficiary for Federal income tax purposes. Treasury regulations require that
investments underlying the Policies be adequately diversified. Chubb Life
believes it is presently in compliance with the regulations and intends to
remain in compliance with such regulations and other Federal tax law
requirements.
7
<PAGE>
If a Policyowner elects to make certain transactions, including a withdrawal,
surrender or exchange of the Policy, the Policyowner may be taxed on a portion
of any amounts paid to the Policyowner (which may include any prior policy
loans cancelled in the transaction). Also, if premiums paid by a Policyowner
exceed certain limits and the Policy is deemed a modified endowment contract,
then any pre-death distributions, including loans, surrenders and partial
withdrawals, may be treated as income taxable to the Policyowner and may also
cause the Policyowner to incur a penalty tax of 10%. Policyowners are advised
to consult with their own tax advisers with regard to the tax consequences of
the Policy. See "FEDERAL TAX MATTERS".
8
<PAGE>
CHUBB LIFE INSURANCE COMPANY OF AMERICA
Chubb Life is a stock life insurance company originally chartered in
Tennessee and redomesticated to the State of New Hampshire in 1991. It has been
continuously engaged in the insurance business since 1903. It is licensed to do
life insurance business in forty-nine states of the United States, Puerto Rico,
the U.S. Virgin Islands, Guam and in the District of Columbia. Chubb Life is a
wholly-owned subsidiary of The Chubb Corporation, a New Jersey corporation. The
principal offices of The Chubb Corporation are located at 15 Mountain View
Road, Warren, New Jersey. Its telephone number is 908/903-2000. Chubb Life's
home office is located at One Granite Place, Concord, New Hampshire 03301,
telephone number 603/226-5000.
Chubb Life and its subsidiaries had total assets, at December 31, 1994, of
$3,760,079,000 and had over $61 billion of insurance in force, while total
assets of The Chubb Corporation and its subsidiaries (including Chubb Life), as
of the same date, were $20,723,055,000.
Chubb Life writes individual life and disability insurance and annuities. It
is subject to New Hampshire law governing insurance, and is regulated and
supervised by the New Hampshire Insurance Commissioner. Chubb Life is currently
rated AAA (Superior) by Standard & Poors's Corporation and A+ (Superior) by
A.M. Best and Company. These ratings do not apply to Separate Account C, but
reflect the opinion of the rating company as to Chubb Life's ability to meet
its contractual obligations to its policyowners and its relative financial
strength. Even though assets in Separate Account C are held separately from
Chubb Life's other assets, ratings of Chubb Life may still be relevant to
Policyowners since not all of Chubb Life's contractual obligations relate to
payments based on those segregated assets.
CHUBB SEPARATE ACCOUNT C
Separate Account C is a separate account of Chubb Life established under New
Hampshire law on August 4, 1993. Separate Account C is registered as a unit
investment trust with the Commission under the 1940 Act and is subject to that
Act's requirements. Such registration does not involve supervision of the
management or investment policies of Separate Account C or Chubb Life by the
Commission. Chubb Life is the depositor of Separate Account C. Under New
Hampshire law, the assets of Separate Account C are held exclusively for the
benefit of Policyowners and persons entitled to payments under this Policy and
other variable life insurance policies funded by Separate Account C. The
income, realized or unrealized capital gains, or capital losses of Separate
Account C are credited to or charged against the assets held in Separate
Account C in accordance with the terms of the Policy, without regard to other
income or capital gains or losses of any other account arising out of any other
business Chubb Life conducts. Separate Account C is administered and accounted
for as a part of the general business of Chubb Life, but the assets of Separate
Account C are not chargeable with liabilities arising out of any other business
which Chubb Life may conduct.
Chubb Life holds the assets of Separate Account C physically segregated and
separate and apart from the General Account. Chubb Life maintains records of
all purchases and redemptions of Trust shares by each of the Divisions.
DIVISIONS. Separate Account C presently has five Divisions but may, in the
future, add or delete Divisions. Each Division will invest exclusively in
shares representing an interest in a Portfolio of the Trust.
Investment income and other distributions to each Division arising from the
applicable underlying Portfolio of the Trust increase the assets of the
corresponding Division. The income and both realized and unrealized gains or
losses on the assets of each Division are credited to or charged against that
Division without regard to income, gains or losses from any other Division.
CHUBB SERIES TRUST
Separate Account C invests in shares of the Trust which is organized as a
Delaware business trust and is registered as an open-end diversified management
company under the 1940 Act. The Trust currently has five Portfolios each of
which has different objectives. The shares of each Portfolio are presently
offered only to the Divisions, but may also be offered to other separate
accounts that may be established by Chubb Life or any of its affiliated
insurance companies. The assets of each Portfolio are maintained separately
from the assets of the other Portfolios and each Portfolio has investment
objectives and policies which are different from those of the other Portfolios.
Thus, each Portfolio operates as
9
<PAGE>
a separate investment fund, and the income, gains or losses of one Portfolio
has no effect on the investment performance of any other Portfolio.
The investment manager to the Trust is Chubb Investment Advisory Corporation
("Chubb Investment Advisory") which is a subsidiary of Chubb Life. Chubb
Investment Advisory has in turn retained Morgan Guaranty Trust Company of New
York ("Morgan") to provide sub-investment advisory services to each Portfolio.
An investment management fee is charged monthly against each Portfolio by
Chubb Investment Advisory at the annual rate of .40 percent of the average
daily net asset value of the Resolute Treasury Money Market Portfolio, .50
percent of the average daily net asset value of the Resolute Bond Portfolio,
.60 percent of the average daily net asset value of the Resolute Equity
Portfolio, and .80 percent of the average daily net asset value of the Resolute
Small Company Portfolio and the Resolute International Equity Portfolio. The
compensation of Morgan is set at the annual rate of .20 percent of the average
daily net asset value of the Resolute Treasury Money Market Portfolio, .30
percent of the average daily net asset value of the Resolute Bond Portfolio,
.40 percent of the average daily net asset value of the Resolute Equity
Portfolio, and .60 percent of the average daily net asset value of the Resolute
Small Company Portfolio and the Resolute International Equity Portfolio. Chubb
Investment Advisory is solely responsible for paying such sub-investment
advisory fees out of its investment management fee described above.
The investment objectives of each Portfolio are set forth below. There can be
no assurance that any of the Portfolios will achieve its stated objectives. The
specialized nature of each Portfolio gives rise to significant differences in
the relative investment potential and market and financial risks of each
Portfolio. Policyowners should consider the unique features of each Portfolio
before investing in any corresponding Division. For more detailed information
concerning each Portfolio, including a description of the investment risks,
reference is made to the Prospectus for the Trust which accompanies this
Prospectus, or the Statement of Additional Information for the Trust, available
upon request.
The RESOLUTE TREASURY MONEY MARKET PORTFOLIO seeks to provide current income,
maintain a high level of liquidity and preserve capital.
The RESOLUTE BOND PORTFOLIO seeks to provide a high total return consistent
with moderate risk of capital and maintenance of liquidity.
The RESOLUTE EQUITY PORTFOLIO seeks to provide a high total return from a
portfolio comprised of selected equity securities.
The RESOLUTE SMALL COMPANY PORTFOLIO seeks to provide a high total return
from a portfolio of equity securities of small companies.
The RESOLUTE INTERNATIONAL EQUITY PORTFOLIO seeks to provide a high total
return from a portfolio of equity securities of foreign corporations.
The Trust may find it necessary to take action to assure that the Policy
continues to qualify as a life insurance policy under federal tax laws. The
Trust, for example, may alter the investment objectives of any Portfolio or
take other appropriate actions. See "OTHER MATTERS--Additions, Deletions or
Substitutions of Investments" and "FEDERAL TAX MATTERS".
Separate Account C will purchase shares of the Trust at net asset value in
connection with premium payments, transfers and loan repayments allocated to
the Divisions in accordance with the Policyowner's directions and will redeem
shares of the Trust to process transfers, policy loans, surrenders or
withdrawals and generally to meet contract obligations or make adjustments in
reserves. The Trust will sell and redeem its shares at net asset value as of
the Date of Receipt by Separate Account C of premium payments or notifications
by a Policyowner.
10
<PAGE>
THE POLICIES
GENERAL. Each form of the Policy is designed to provide the Policyowner with
lifetime insurance protection and flexibility in connection with the amount and
frequency of premium payments and the level of life insurance proceeds payable
under the Policy. Chubb Heritage I is an individual flexible premium variable
life insurance policy which provides life insurance coverage on one Insured,
with the Death Benefit payable upon the death of such Insured. Chubb Heritage
II is a flexible premium survivorship variable life insurance policy which
provides life insurance coverage on two Insureds, with a Death Benefit payable
only when the last surviving Insured dies. The Policyowner is not required to
pay scheduled premiums to keep a Policy in force but may, subject to certain
limitations, vary the frequency and amount of premium payments. Moreover,
subject to certain limitations, a Policy allows a Policyowner to adjust the
level of life insurance payable under the Policy without having to purchase a
new Policy by increasing or decreasing the Specified Amount. Thus, as insurance
needs or financial conditions change, the policyowner has the flexibility to
adjust coverage and vary the premium payments. Death Benefits are payable under
two options as described in "POLICY BENEFITS AND RIGHTS--Death Benefits".
To purchase a Policy, a completed application must be submitted to Chubb Life
through the agent selling the Policy. Applicants for insurance must furnish
satisfactory evidence of insurability. An Insured under Chubb Heritage I must
generally be between the ages of 0 and 80 and the Insureds under Chubb Heritage
II must generally be between 20 and 85 with only one Insured over the age of
80. The Joint Equal Age of the Insureds under Chubb Heritage II cannot be over
age 80. The smoking status of each Insured is reflected in the cost of
insurance rates; provided, however, that under Chubb Heritage I distinctions
between smokers and nonsmokers are only made for Insureds age 15 and over.
Policies issued in certain jurisdictions will not directly reflect the sex of
the Insured in either the premium rates or the charges or values under the
Policy. Accordingly, illustrations set forth in this Prospectus may differ for
such Policies.
The minimum Specified Amount at issue is $500,000 for Chubb Heritage I and
$2,000,000 for Chubb Heritage II. Chubb Life reserves the right to revise its
rules from time to time to specify different minimum Specified Amounts at
issue. If the Specified Amount applied for plus all other insurance in force
which is underwritten by Chubb Life or its affiliates exceeds an amount which
varies between $300,000 and $2,000,000 based on various factors, Chubb Life
will reinsure all or a portion of the Policy. Acceptance of an application or
revocation of a Policy during the contestable period is subject to Chubb Life's
insurance underwriting rules and Chubb Life may, in its sole discretion, reject
any application or related premium for any good reason or contest a Policy.
PAYMENT OF PREMIUMS. Premiums must be paid to Chubb Life at its home office
or through an authorized agent of Chubb Life for forwarding to Chubb Life's
home office. The initial premium may be wired to Chubb Life's bank upon
notification that the application has been approved by Chubb Life. Subsequent
premium payments may also be wired to Chubb Life's bank. The financial
institution transmitting the wired funds may impose a charge for this service.
In addition, Chubb Life has administrative procedures whereby premium payments
in response to billing notices are sent directly to Chubb Life's bank. Unlike
traditional insurance contracts, there is no fixed schedule of premium payments
on a Policy either as to the amount or the timing of the payment. A Policyowner
may determine, within specified limits, his or her own premium payment
schedule. These limits will be set forth by Chubb Life and will include a
minimum initial premium payment and may also include limits on the total amount
and frequency of payments in each policy year. No premium payment may be less
than $500. In order to help the Policyowner obtain the insurance benefits
desired, a Planned Periodic Premium and Premium Frequency will be stated in
each Policy. This premium will usually be based upon the Policyowner's
insurance needs and financial abilities, the current financial climate, the
Specified Amount of the Policy, and the Insured's age, sex and risk class, as
discussed with the agent. The Policyowner is not required to pay such premiums
and failure to make any premium payment will not necessarily result in lapse of
the Policy, provided the Policy's Cash Value, less Policy Debt, if any, is
sufficient to pay monthly deductions. Conversely, adherence to the schedule of
Planned Periodic Premiums will not assure that the Policy will remain in force.
See "THE POLICIES --Policy Lapse".
GUARANTEED DEATH BENEFIT PREMIUMS. If the Guaranteed Death Benefit Rider is
added to the Policy, the Death Benefit is guaranteed to never be less than the
Specified Amount, provided the Policyowner pays a cumulative minimum premium.
This cumulative minimum premium is based on Issue Age, sex, smoking status and
underwriting class of the Insured(s) as well as the Specified Amount and Death
Benefit option. The premium is increased for increases in the Specified Amount.
See "POLICY BENEFITS AND RIGHTS--Optional Insurance Benefits".
PREMIUM LIMITATIONS. If, at any time during the year, a premium has been paid
which would result in a Policy being deemed a modified endowment contract,
Chubb Life will so notify the Policyowner on the Policy's anniversary
11
<PAGE>
date and allow the Policyowner to request a refund of the excess premium, or
other action, in order to avoid having the Policy be deemed to be a modified
endowment contract. A Policyowner, however, may choose to have the Policy be
deemed a modified endowment contract, and, in that case, Chubb Life will not
refund the premiums. See "FEDERAL TAX MATTERS--Policy Proceeds". Premium
payments less than the minimum amount of $500 will be returned to the
Policyowner.
ALLOCATION OF PREMIUMS. Premium payments, net of the state premium tax
charge, the Federal DAC tax charge and the sales charge plus interest earned
prior to the Allocation Date, will be allocated on the Allocation Date among
the Divisions and the General Account in accordance with the directions of the
Policyowner, as contained in the application. Prior to the Allocation Date the
initial Net Premium will be held in Chubb Life's General Account. Any other
premiums received prior to the Allocation Date will also be held in the General
Account. If the Policy issued as applied for is not accepted or the "free look"
is exercised, no interest will be credited and Chubb Life will retain any
interest earned on the initial Net Premium. The minimum percentage of any Net
Premium payment allocated to any Division or the General Account is 1%. The
Policyowner may change his or her allocation of future premium payments among
the Divisions and the General Account by written notice to Chubb Life or by
telephone without payment of any fee or penalty.
The allocation of each Net Premium payment to a Division will be determined
first by multiplying the Net Premium payment by the fraction to be allocated to
each Division as the Policyowner directs to determine the portion to be
invested in the Division. Each portion to be invested in each Division is then
divided by the unit value of that particular Division to determine the number
of units to be credited to a Policyowner. The unit value of each Division will
vary to reflect the investment experience of the corresponding underlying
Portfolio shares. For a description of the method of determining unit values
see "CALCULATION OF ACCUMULATION VALUE--Unit Values". Applicants should refer
to the Prospectus for the Trust which accompanies this Prospectus for a
description of how the assets of each Portfolio are valued.
All valuations in connection with the Policy, e.g., with respect to
determining Cash Value in connection with policy loans or withdrawals, with
respect to determining Accumulation Value in connection with transfers or
payment of Death Benefits, and with respect to determining a Division's unit
value at the time of each Net Premium payment, will be made on the Date of
Receipt of the premium or the request for payment, loan, withdrawal or transfer
if such date is a Valuation Date; otherwise, such determination will be made on
the next succeeding day which is a Valuation Date. The Date of Receipt of a
premium payment sent directly to Chubb Life's bank pursuant to a billing notice
will be the date the payment is received at the bank and the value of any
Division to which the payment is allocated will be determined as of such date
provided such date is a Valuation Date; otherwise, such determination will be
made on the next succeeding day which is a Valuation Date.
TRANSFERS. Accumulation Value may be transferred among the Divisions and
between the Divisions and the General Account. In addition to individual
transfer requests, Policyowners may elect either a Dollar Cost Averaging
feature or an Automatic Portfolio Re-Balancing feature which provides for
systematic transfers as described below. Transfer requests may be made in
writing or by telephone. The total amount transferred each time must be at
least $1,000 unless a lesser amount constitutes the entire Accumulation Value
in a Division or in the General Account. Accumulation Value transferred from
one Division or from the General Account into more than one Division, and/or
into the General Account, counts as one transfer. Similarly, transferring
Accumulation Value from more than one Division, and/or the General Account,
into one other Division or the General Account, counts as one transfer.
Chubb Life currently permits 12 transfers per policy year without imposing a
transfer charge. For transfers in excess of 12 in any Policy year, a transfer
charge of $100 to cover administrative costs will be imposed each time amounts
are transferred and will be deducted on a pro-rata basis from the Division or
Divisions or the General Account into which the amount is transferred. However,
no transfer charge will be imposed on the transfer of the initial Net Premium
payments, plus interest earned, from the General Account to the Divisions on
the Allocation Date or on loan repayments. No transfer charge will be imposed
for transfers pursuant to the Dollar Cost Averaging or Automatic Portfolio Re-
Balancing features. Currently, a Policyowner may make up to 24 transfers per
policy year. Chubb Life reserves the right to revoke or modify transfer
privileges and charges.
12
<PAGE>
At any time the Policyowner may transfer 100% of the Policy's Accumulation
Value to the General Account and elect to have all future premium payments
allocated to the General Account. While 100% of the Policy's Accumulation Value
and all future premium payments are allocated to the General Account, the
minimum period the Policy will be in force will be fixed and guaranteed. The
minimum period will depend on the amount of Accumulation Value, the Specified
Amount, the sex, the Attained Age, and rating class of the Insured at the time
of transfer. The minimum period will decrease if the Policyowner subsequently
elects to increase the Specified Amount, elects to surrender the Policy, or
elects to make a withdrawal. The minimum period will increase if the
Policyowner elects to decrease the Specified Amount, additional premium
payments are received, or Chubb Life credits a higher interest rate or charges
a lower cost of insurance rate than those guaranteed for the General Account.
Except for transfers in connection with Dollar Cost Averaging, Automatic
Portfolio Re-Balancing and loan repayments, transfers out of the General
Account to the Divisions are permitted only once every 180 days and are limited
in amount to the lesser of (a) 25% of the Accumulation Value in the General
Account not being held as loan collateral or (b) $100,000. In addition, any
other transfer rules, including minimum transfer amounts, also apply. Chubb
Life reserves the right to modify these restrictions.
No transfer charge will be imposed for a transfer of all Accumulation Value
in Separate Account C to the General Account. However, any transfer from the
General Account to the Division(s) will be subject to the transfer charge,
unless it is one of the first 12 transfers in a policy year and except for the
transfer of the initial Net Premium payments, plus interest earned, from the
General Account, loan repayments, and transfers pursuant to the Dollar Cost
Averaging or Automatic Portfolio Re-Balancing features.
A feature called Dollar Cost Averaging is available to Policyowners under
which a Policyowner deposits or designates an amount, subject to a minimum of
$6,000, in the Resolute Treasury Money Market Division or the General Account
and elects to have a specified dollar amount (the "Periodic Transfer Amount")
automatically transferred to one or more of the Divisions on a monthly,
quarterly, or semi-annual basis. This feature allows Policyowners to
systematically invest in the Divisions at various prices which may be higher or
lower than the price a Policyowner would pay when investing the entire amount
at one time and at one price. Each Periodic Transfer Amount is subject to a
minimum amount of $500. A minimum of 1% of the Periodic Transfer Amount must be
transferred to any specified Division. These amounts are subject to change at
Chubb Life's discretion. If a transfer would reduce Accumulation Value in the
Resolute Treasury Money Market Division or the General Account to less than the
Periodic Transfer Amount, Chubb Life reserves the right to include such
remaining Accumulation Value in the amount transferred. Automatic transfers
will continue until the amount designated for Dollar Cost Averaging has been
transferred, or until the Policyowner gives notification of a change in
allocation or cancellation of the feature. Dollar Cost Averaging is currently
available at no charge to Policyowners. Although Chubb Life reserves the right
to assess a charge, no greater than cost and with 30 days advance notice to
Policyowners, it has no present intention to do so.
An Automatic Portfolio Re-Balancing feature is also available to
Policyowners. This feature provides a method for re-establishing fixed
proportions between various types of investments on a systematic basis. Under
this feature, the allocation between Divisions and the General Account will be
automatically re-adjusted to the desired allocation, subject to a minimum of 1%
per Division or General Account, on a quarterly, semi-annual or annual basis.
A Policyowner may choose one of the two features. Transfers and adjustments
pursuant to these features will occur on a Policy's Monthly Anniversary Date in
the month in which the transaction is to take place or the next succeeding
business day if the Monthly Anniversary Date falls on a holiday or a weekend.
The applicable authorization form must be on file at Chubb Life before either
feature may begin. Neither feature guarantees profits nor protects against
losses. Transfers under these features do not count toward the 12 free
transfers or the 24 transfers currently allowed per year. Chubb Life reserves
the right to modify the terms and conditions of these features upon 30 days
advance notice to Policyowners.
TELEPHONE TRANSFERS, LOANS AND REALLOCATIONS. Policyowners may request by
telephone transfers of Accumulation Value or reallocation of premiums
(including allocation changes pursuant to existing Dollar Cost Averaging and
Automatic Portfolio Re-Balancing programs), provided that the appropriate
authorization form is on file with Chubb Life. Chubb Life may also, in its
discretion, permit loans to be made by telephone, provided that the proper
authorization form is on file with Chubb Life. During periods of heavy
telephone transfers, implementing a telephone transfer may be
13
<PAGE>
difficult. If a Policyowner is unable to reach Chubb Life via telephone, the
Policyowner should send a written request to Chubb Life via an express mailing
service or via the Chubb Life telecopier machine at (603) 226-5155. (Any
transfer requests received via telecopier are considered telephone transfers
and are bound by the conditions outlined in the signed authorization form.)
Chubb Life reserves the right to discontinue telephone transfers at any time
without notice to the Policyowners. Procedures have been established that are
reasonably designed to reduce the risk of unauthorized telephone transfers,
loan requests or allocation changes. These procedures include requiring
personal identification information, tape recording calls and providing written
confirmations to Policyowners. However, there still exists some risk. Neither
Chubb Life, Chubb Securities Corporation, nor any of their affiliates are
liable for any loss resulting from unauthorized telephone transfers, loan
requests or premium allocation changes if its procedures have been followed,
and a Policyowner bears the risk of loss in such situation.
POLICY LAPSE. Failure to make a premium payment on a Policy will not
necessarily cause the Policy to lapse. The duration of a Policy depends upon
its Cash Value. The Policy will remain in force so long as the Cash Value, less
any outstanding Policy Debt, is sufficient to cover cost of insurance and any
rider charges. In the event the Cash Value, less any outstanding Policy Debt,
is insufficient to pay these monthly cost of insurance and rider charges
("monthly deduction") the Policyowner will be given a sixty-one day period
("grace period") within which to make a premium payment to avoid lapse. The
premium required to avoid lapse must be sufficient in amount, after the
deduction of the state premium tax charge, the Federal DAC tax charge and the
sales charge, to cover the monthly deduction for at least three policy months.
This required premium will be set forth in a written notice which Chubb Life
will send to the Policyowner thirty-one days prior to the end of the grace
period. The Policy will continue in force through the grace period, but if no
payment is forthcoming, the Policy will terminate without value at the end of
the grace period. If the Insured under Chubb Heritage I or the last surviving
Insured under Chubb Heritage II dies during the grace period, the Death Benefit
payable under the Policy will be reduced by the amount of the monthly deduction
due and unpaid and the amount of any outstanding Policy Debt. In addition, if
the Cash Value of the Policy at any time should decrease so the aggregate
amount of outstanding Policy Debt secured by the Policy exceeds the Cash Value
shown in the Policy and an additional payment is not made within sixty-one days
the Policy will lapse.
REINSTATEMENT. If the Policy lapses, the Policyowner may reinstate the
Policy. The terms of the original contract will apply upon reinstatement. The
Accumulation Value, before payment of the required reinstatement premium, will
equal the Accumulation Value on the date of termination. The policy year on
reinstatement will be measured from the Policy Date. An application for
reinstatement may be made any time within five years of lapse and before the
Maturity Date, but satisfactory proof of insurability of the Insured under
Chubb Heritage I or the Insureds or surviving Insured under Chubb Heritage II
and payment of a reinstatement premium is required. The reinstatement premium,
after deduction of the state premium tax charge, the Federal DAC tax charge and
the sales charge, must be sufficient to cover the monthly deduction for three
policy months following the effective date of reinstatement. If a loan was
outstanding at the time of lapse, Chubb Life will require, at the election of
the Policyowner, repayment or reinstatement of the loan before permitting
reinstatement of the Policy. The effective date will be the date of approval of
the reinstatement application, which will be as of a Monthly Anniversary Date.
POLICY "FREE LOOK". The Policyowner has a limited right to return a Policy
for cancellation and a full refund of all premiums paid. Chubb Life will cancel
the Policy if it is returned by mail or personal delivery to Chubb Life, or to
the agent who sold the Policy, within 20 days after the delivery of the Policy
to the Policyowner. Chubb Life will return to the Policyowner within seven days
all payments received on the Policy. Prior to the Allocation Date the initial
Net Premium will be held in Chubb Life's General Account; Chubb Life will
retain any interest earned if the "free look" right is exercised.
CHARGES AND DEDUCTIONS
PREMIUM CHARGES. Upon receipt of each premium payment and before allocation
of payment among the Divisions and the General Account, Chubb Life will deduct
a state premium tax charge of 2.5% (which represents an average of actual
premium taxes imposed), unless otherwise required by state law. Currently, the
taxes imposed by states on premiums range up to 4% of premiums paid, while some
states do not impose a premium tax. The 2.5% state premium tax charge may
therefore be higher or lower than the actual premium tax imposed by states in
which a particular Policyholder resides. Chubb Life will not increase this
charge under outstanding Policies, but reserves the right to change this charge
for Policies not yet issued in order to correspond with changes in the state
premium tax levels. Chubb Life does not expect to derive a profit from this
charge.
14
<PAGE>
Chubb Life will also deduct from each premium a charge currently equal to
1.25% to cover the estimated cost to Chubb Life of the Federal income tax
treatment of the Policies' deferred acquisition costs ("Federal DAC tax
charge"). Chubb Life has determined that this charge is reasonable in relation
to Chubb Life's increased Federal income tax burden under the Code resulting
from the receipt of premiums. Chubb Life will not increase this charge under
outstanding Policies, but reserves the right, subject to any required
regulatory approval, to change this charge for Policies not yet issued in order
to correspond with changes in the DAC tax.
Chubb Life will deduct a sales charge of 3% from each premium payment to
compensate Chubb Life for the cost of selling the Policy. The cost of selling
the Policy includes, among other things, agents' commissions, commission
overrides, advertising and the printing of prospectuses and sales literature.
Under normal circumstances, the amount of this charge, plus the Surrender
Charge discussed below, are expected to compensate Chubb Life for total sales
expenses for that year. To the extent sales expenses in any one policy year are
not recovered by this 3% sales charge and the sales charge imposed upon
surrenders or withdrawals during the first five policy years, the sales
expenses may be recovered from other sources, including surplus, which may
include profits, if any, from the mortality and expense risk charge.
MONTHLY DEDUCTION. On each Monthly Anniversary Date and on the Policy Date,
Chubb Life will deduct from the Accumulation Value of a Policy an amount to
cover certain charges and expenses incurred in connection with the Policy. The
amount of the monthly deduction is equal to the cost of insurance for the
Policy as described below, and the cost of any optional benefits added by
rider. The amount deducted will be deducted pro rata from each of the Divisions
and the General Account, excluding the amount held in the General Account as
loan collateral, in which the Policyowner is invested.
The cost of insurance is determined on a monthly basis, and is determined
separately for the initial Specified Amount and each subsequent increase in the
Specified Amount. The monthly current cost of insurance rate is based on the
sex, Issue Age, policy year, smoking status and rating class of the Insured(s),
Specified Amount, Death Benefit option and applicable corridor percentage.
The cost of insurance is calculated as (i) multiplied by the result of (ii)
minus (iii) where:
(i) is the cost of insurance rate as described in the Cost of Insurance
Rates provision contained in the Policy.
(ii) is the Death Benefit at the beginning of the policy month divided by
1.00327374, to arrive at the proper values for the beginning of the month
assuming the guaranteed interest rate of 4% that is applicable to the
General Account portion of the Policy; and
(iii) is the Accumulation Value at the beginning of the policy month.
If the corridor percentage is applicable, the Death Benefit used in the
foregoing calculation will reflect the corridor percentage. The cost of
insurance charge is not affected by the death of the first Insured to die under
Chubb Heritage II.
The monthly cost of insurance rate will be determined by Chubb Life based
upon expectations as to future mortality experience, but can never exceed the
rates shown in the table of Monthly Guaranteed Cost of Insurance Rates set
forth in the Policy. Such guaranteed maximum rates are based on the
Commissioner's 1980 Standard Ordinary Mortality Table.
A guaranteed cost of insurance discount will be calculated at the beginning
of each policy year and subtracted from the cost of insurance for each month of
that policy year during which the discount is in effect. The discount will be
allocated between the Divisions and the General Account in the same proportion
as premium payments. The discount is calculated as (i) multiplied by the result
of (ii) minus (iii) minus (iv), but not less than zero, where:
(i) is a factor that varies by Specified Amount as follows:
<TABLE>
<S> <C>
Under $5,000,000 .0001250
$5,000,000 to $9,999,999 .0002500
$10,000,000 to $14,999,999 .0003750
$15,000,000 and Above .0004583
</TABLE>
(ii) is the Accumulation Value at the beginning of the policy year;
(iii) is the Guideline Single Premium at issue under Section 7702 of the
Code, increased on a pro-rata basis for any increase in Specified Amount;
and
15
<PAGE>
(iv) is the outstanding Type A loan balance at the beginning of the
policy year. See "CASH VALUE BENEFITS--Policy Loans" for a description of
Type A loans.
The cost of insurance discount is the mechanism whereby Chubb Life annually
evaluates its mortality risk exposure on individual Policies based on, among
other factors, the proceeds from all mortality charges, including the cost of
insurance charge and the mortality risk portion of the Risk Charge. The
insurance charges are set at rates designed to cover total anticipated
mortality experience, i.e., Death Benefit payments, taking into consideration
the risk that actual experience may exceed Chubb Life's expectation. Of course,
as the amount at risk under any one Policy decreases, i.e., Accumulation Value
increases, Chubb Life's exposure on such Policy will be reduced. Moreover,
Chubb Life's risk decreases as the Specified Amount increases. The cost of
insurance discount formula factors in Accumulation Value and Specified Amount.
Thus, the cost of insurance discount may be translated into a net reduction of
the Risk Charge which is applied to the Accumulation Value. As shown in the
following table, the cost of insurance discount may be expressed as a reduction
in the mortality portion of the Risk Charge.
<TABLE>
<CAPTION>
MORTALITY MORTALITY
RISK RISK
MORTALITY CHARGE CHARGE EFFECTIVE
SPECIFIED RISK COI BELOW ABOVE MORTALITY
AMOUNT CHARGE DISCOUNT GSP GSP RISK CHARGE*
--------- --------- -------- --------- --------- ------------
<S> <C> <C> <C> <C> <C>
$ 500,000--$ 4,999,999... .55% .15% .55% .40% .475%
$ 5,000,000--$ 9,999,999... .55% .30% .55% .25% .40%
$10,000,000--$14,999,999... .55% .45% .55% .10% .325%
$15,000,000 and Above...... .55% .55% .55% .0% .275%
</TABLE>
-------
* Assumes that Accumulation Value, less any Type A loans, at the beginning of
the policy year is twice the Guideline Single Premium ("GSP").
RISK CHARGE. Chubb Life will also assess a charge on a daily basis against
each Division at an annual rate of .65% of the value of the Division to
compensate Chubb Life for its assumption of certain mortality and expense risks
in connection with the Policy. Specifically, Chubb Life bears the risk that the
total amount of Death Benefit payable under the Policy will be greater than
anticipated and Chubb Life also assumes the risk that the actual cost incurred
by it to administer the Policy will not be covered by charges assessed under
the Policy.
SURRENDER CHARGE. Upon surrender during the first five policy years, Chubb
Life will assess a contingent deferred sales charge. This contingent deferred
sales charge will be 5% of first year premiums for surrender during the first
policy year, 4% of first year premiums for surrender during the second policy
year, 3% of first year premiums for surrender during the third policy year, 2%
of first year premiums for surrender during the fourth policy year and 1% of
first year premiums for surrender during the fifth policy year. There is no
Surrender Charge assessed for surrender after the fifth policy year. A pro rata
portion of any Surrender Charge will be assessed upon a withdrawal. The
Policy's Accumulation Value will be reduced by the amount of any withdrawal
plus any applicable pro-rata Surrender Charge.
The Surrender Charge helps to compensate Chubb Life for the cost of selling
the Policy, including the cost of advertising and the printing of the
Prospectus and sales literature.
ADMINISTRATIVE FEES. An administrative fee equal to $100 is imposed for each
transfer among the Divisions or the General Account, after the first 12
transfers in a policy year and except for the transfer of the initial Net
Premium payments, plus interest, from the General Account on the Allocation
Date, loan repayments and transfers pursuant to the Dollar Cost Averaging and
Automatic Portfolio Re-Balancing features. For withdrawals, an administrative
fee equal to $100 will be charged. All administrative fees are no greater than
the anticipated expenses of providing such services.
OTHER CHARGES. Chubb Life also reserves the right to charge the assets of
each Division to provide for any income taxes or other taxes payable by Chubb
Life on the assets attributable to that Division. An investment advisory fee
for services provided by the Trust's investment manager and sub-investment
adviser and certain other operating expenses are deducted from the assets of
each Portfolio of the Trust. See "CHUBB SERIES TRUST".
POLICY BENEFITS AND RIGHTS
DEATH BENEFITS. So long as it remains in force, Chubb Heritage I provides for
the payment of life insurance proceeds upon the death of the Insured and Chubb
Heritage II provides for a Death Benefit payable upon the death of
16
<PAGE>
the last surviving Insured. Proceeds will be paid to a named Beneficiary or
contingent Beneficiary. One or more Beneficiaries or contingent Beneficiaries
may be named. Life insurance proceeds may be paid in a lump sum or under an
optional payment plan. (See "SETTLEMENT OPTIONS" below.) Proceeds of the Policy
will be reduced by any outstanding Policy Debt and any due and unpaid charges
and increased by any benefits added by rider. Proceeds that are payable in a
lump sum will be increased to include interest as required by applicable state
law. Proceeds will ordinarily be paid within seven days after Chubb Life
receives due Proof of Death. Under Chubb Heritage II, due Proof of Death must
also be submitted at the time of the first death.
Policyowners designate in the initial application one of two Death Benefit
options offered under the Policies. The amount of life insurance proceeds
payable under a Policy will depend upon the option in effect, as follows:
Option I: The Death Benefit equals the greater of the current Specified
Amount or the Accumulation Value of the Policy at the date of death
multiplied by the corridor percentage, as described below.
Option II: The Death Benefit equals the current Specified Amount plus the
Accumulation Value of the Policy on the date of death. The Death Benefit
will not be less than the Accumulation Value on the date of death
multiplied by the corridor percentage.
Option I emphasizes the impact of investment experience on Accumulation Value
rather than insurance coverage because the Specified Amount and the Death
Benefit, generally, remain stable. Under Option I, as Accumulation Value
increases and the Death Benefit does not increase, the amount at risk
decreases. Thus, the cost of insurance charges are imposed on a decreasing
amount. Option II emphasizes insurance coverage because favorable investment
experience adds to the Accumulation Value that provides an addition to the
total Death Benefit. Under Option II, favorable investment experience does not
reduce the amount at risk upon which cost of insurance charges are based.
The corridor percentage is a minimum ratio of Death Benefit to Accumulation
Value required pursuant to the cash value corridor test under Section 7702 of
the Code. The Policyowner has the option to select this minimum corridor
percentage under the Code or an alternative corridor percentage that produces a
higher corridor percentage beginning in policy year 25 which grades back to the
minimum corridor percentage at the Maturity Date. Use of the alternative
corridor percentage results in a higher ratio of Death Benefit to Accumulation
Value than that resulting from the use of the minimum corridor percentage
beginning in policy year 25. This higher ratio then gradually reduces until, by
the Maturity Date, it is equal to the ratio produced by use of the minimum
corridor percentage. Although use of the alternative corridor percentage
results in a higher Death Benefit than the minimum corridor percentage
beginning in policy year 25, this higher Death Benefit results in higher cost
of insurance charges which has the effect of reducing Accumulation Value and
consequently future Death Benefits.
The Death Benefit option in effect may be changed by sending Chubb Life a
written request for change. The effective date of the change will be the first
Monthly Anniversary Date that coincides with or next follows the Date of
Receipt of such request. If the Death Benefit option is changed from Option II
to Option I, the Specified Amount will be increased by the Policy's
Accumulation Value on the effective date of the change. Conversely, if the
Death Benefit option is changed from Option I to Option II, the Specified
Amount will be decreased by the Policy's Accumulation Value on the effective
date of the change. Evidence of insurability satisfactory to Chubb Life will be
required on a change from Option I to Option II. A change in the Death Benefit
option may not be made if it would result in a Specified Amount which is less
than a minimum Specified Amount of $250,000 on Chubb Heritage I and $500,000 on
Chubb Heritage II. A change in Death Benefit options will affect the cost of
insurance.
After a Policy has been in force for one year, the Policyowner may adjust the
existing insurance coverage by increasing or decreasing the Specified Amount.
The increase or decrease must be at least $250,000 on Chubb Heritage I and
$500,000 on Chubb Heritage II. To make a change, the Policyowner must send a
written request and the Policy to Chubb's home office. Any change in the
Specified Amount will affect a Policyowner's cost of insurance charge. An
increase in the Specified Amount will affect the determination of the amount
available for a Type A loan, as explained below, and will affect the cost of
insurance discount, if any. Decreases in the Specified Amount may affect the
cost of insurance discount but will have no affect on the determination of the
amount available for a Type A loan. Any decrease in the Specified Amount will
become effective on the Monthly Anniversary Date after the Date of Receipt of
the request. Any decrease in Specified Amount will first apply to coverage
provided by the most recent Specified Amount increase, then to the next most
recent increases successively and finally to the coverage under the original
application. By applying decreases in this manner, savings, generally, may be
realized by a Policyowner since additional costs and limitations associated
with increases in Specified Amounts would be eliminated first. To apply for an
increase in the Specified
17
<PAGE>
Amount, a supplemental application must be completed and evidence satisfactory
to Chubb Life that each Insured is insurable must be submitted. Any approved
increase in the Specified Amount will become effective on the date shown in the
Supplemental Policy Specifications Page. Such increase will not become
effective, however, if the Policy's Cash Value is insufficient to cover the
deduction for the cost of the increased insurance for the policy month
following the increase. Such an increase may require a payment or future
increased Planned Periodic Premiums.
GUARANTEED DEATH BENEFIT. The Policyowner may add a Guaranteed Death Benefit
Rider to the Policy under which the Death Benefit is guaranteed to never be
less than the Specified Amount provided that a cumulative minimum premium
requirement is met. The premium requirement is based on Issue Age, sex, smoking
status, underwriting class, Specified Amount and Death Benefit Option. If the
Specified Amount is increased, an additional premium, based on Attained Age,
will be required for such increase. There is a monthly charge for this Death
Benefit Rider. See " Optional Insurance Benefits".
COMBINED REQUESTS. Policyowners may combine requests for changes in the
Specified Amount and the Death Benefit option and requests for withdrawals. The
requirements and limitations that apply to each change will apply to the
combined transactions, including any required evidence of insurability,
Specified Amount and premium limitations, effectiveness on the Monthly
Anniversary Date following the Date of Receipt of the request, and the
sufficiency of Cash Value to keep the Policy in force for the month following
the transaction.
The effect of a combined transaction on the cost of insurance, the amount of
the Death Benefit proceeds and the premium limitations will be the net result
of such effects for each such transaction considered separately. Policyowners
should consider the net result of a combined transaction in light of insurance
needs, financial circumstances and tax consequences.
MATURITY OF THE POLICY. As long as the Policy remains in force, Chubb Life
will pay the Policy's Cash Value, less outstanding Policy Debt, if any, on the
Maturity Date. Benefits at maturity may be paid in a lump sum or under an
optional payment plan. The Maturity Date is the date shown in the Policy. To
change the Maturity Date, a written request and the Policy must be sent to
Chubb Life. The Date of Receipt for any request must be before the Maturity
Date then in effect. The requested Maturity Date must be (i) on a policy
anniversary, (ii) at least one year from the Date of Receipt of the request,
(iii) after the tenth policy year and (iv) on or before the policy anniversary
nearest to the Insured's 100th birthday for Chubb Heritage I and the younger
Insured's 100th birthday for Chubb Heritage II.
OPTIONAL INSURANCE BENEFITS. Subject to certain requirements, one or more of
the following optional insurance benefits may be added to a Policy by rider.
More detailed information concerning such riders may be obtained from the agent
selling the Policy. Additional riders, developed after the effective date of
this Prospectus, may also be available as optional insurance benefits to the
Policy. The agent selling the Policy should be consulted regarding the
availability of any such additional riders. The cost of any optional insurance
benefits will be deducted as part of the monthly deduction. See "CHARGES AND
DEDUCTIONS."
(a) GUARANTEED DEATH BENEFIT RIDER. This rider guarantees that the Policy
will stay in force with a Death Benefit equal to the Specified Amount, even if
the Cash Value less Policy Debt is not sufficient to pay the monthly deduction,
provided that cumulative premiums paid, less loans and withdrawals, are greater
than or equal to the guaranteed death benefit premium multiplied by the number
of months the policy has been in force. This cumulative premium requirement
must be met at all times for the rider to stay in force. A monthly charge of
$.01 per $1,000 of Specified Amount will be deducted from the Policy's
Accumulation Value.
(b) AUTOMATIC INCREASE RIDER. This rider allows for scheduled annual
increases in Specified Amount of from 1% to 7%, subject to certain limitations
set forth in the rider. There is an annual charge per unit of Specified Amount
which varies by Issue Age on Chubb Heritage I and by Joint Equal Age at issue
on Chubb Heritage II.
(c) POLICY EXCHANGE OPTION RIDER. This rider is available on Chubb Heritage
II provided both Insureds are insurable. It allows Chubb Heritage II to be
exchanged for two individual Chubb Heritage I policies, without evidence of
insurability, each with a face amount equal to one half of the Death Benefit
under Chubb Heritage II at the time of exchange, upon the Insureds' divorce or
the occurrence of certain Federal tax law changes as specified in the rider.
There is no charge for this rider.
(d) EXTENSION OF MATURITY DATE RIDER. This rider allows the Policyowner to
extend the original Maturity Date of the Policy under the terms set forth in
the rider.
18
<PAGE>
SETTLEMENT OPTIONS. In addition to a lump sum payment of benefits under the
Policy, any proceeds to be paid under the Policy may be paid in any of four
methods. A settlement option may be designated by notifying Chubb Life in
writing. A lump sum payment of proceeds under the Policy will be made if a
settlement option is not designated. Any amount left with Chubb Life for
payment under an optional payment plan will be transferred to the account of
the Beneficiary in the General Account on the date Chubb Life receives written
instructions. During the life of the Insured, the Policyowner may select a
plan. If a payment plan has not been chosen at the time the Death Benefit
becomes payable, a Beneficiary can choose a plan. If a Beneficiary is changed,
the payment plan selection will no longer be in effect unless the Policyowner
requests that it continue. An option may be elected only if the amount of the
proceeds is $2,000 or more. Chubb Life reserves the right to change the
interval of payments to 3, 6 or 12 months, if necessary, to increase the
guaranteed payments to at least $20 each.
OPTION A.
INSTALLMENTS OF A SPECIFIED AMOUNT. Payments of an agreed amount to be made
each month until the proceeds and interest are exhausted.
OPTION B.
INSTALLMENTS FOR A SPECIFIED PERIOD. Payments to be made each month for an
agreed number of years.
OPTION C.
LIFE INCOME. Payments to be made each month for the lifetime of the payee. It
is guaranteed that payments will be made for a minimum of 10, 15, or 20 years,
as agreed upon.
OPTION D.
INTEREST. Payment of interest on the proceeds held by Chubb Life calculated
at the compound rate of 3% per year. Interest payments will be made at 12, 6, 3
or 1 month intervals, as agreed upon.
The interest rate for Options A, B, and D will not be less than 3% per year.
The interest rate for Option C will not be less than 2 1/2% per year. Interest
in addition to that stated may be paid or credited from time to time under any
option, but only in the sole discretion of Chubb Life.
Unless otherwise stated in the election of an option, the payee of policy
benefits shall have the right to receive the withdrawal value under that
option. For Options A and D, the withdrawal value shall be any unpaid balance
of proceeds plus accrued interest. For Option B, the withdrawal value shall be
the commuted value of the remaining payments. Such value will be calculated on
the same basis as the original payments. For Option C, the withdrawal value
will be the commuted value of the remaining payments. Such value will be
calculated on the same basis as the original payments. To receive this value,
the payee must submit evidence of insurability acceptable to Chubb Life.
Otherwise, the withdrawal value shall be the commuted value of any remaining
guaranteed payments. If the payee should be alive at the end of the guaranteed
period, the payment will be resumed on that date. The payment will then
continue for the lifetime of the payee.
If a payee of policy benefits dies before the proceeds are exhausted or the
prescribed payments made, a final payment will be made in one sum to the estate
of the last surviving payee. The amount to be paid will be calculated as
described for the applicable option in the Withdrawal Value provision of the
Policy.
CALCULATION OF ACCUMULATION VALUE
The Policy provides for an Accumulation Value, which will be determined on a
daily basis. Accumulation Value is the sum of the values in the Divisions plus
the value in the General Account. The Policy's Accumulation Value in the
Divisions is calculated by units and unit values under the Policies, as
described below. The Policy's Accumulation Value will reflect a number of
factors, including the investment experience of the Divisions that are invested
in the Portfolios, any additional net premiums paid, any withdrawals, any
policy loans, and any charges assessed in connection with the Policy.
Accumulation Values in Separate Account C are not guaranteed as to dollar
amount.
On the Allocation Date, the Accumulation Value in Separate Account C is the
initial premium payments, reduced by the state premium tax charge, the Federal
DAC tax charge and the sales charge, plus interest earned prior to the
19
<PAGE>
Allocation Date, and less the monthly deduction for the first policy month. On
the Allocation Date, the initial number of units credited to Separate Account C
for the Policy will be established. At the end of each Valuation Period
thereafter, the Accumulation Value in a Division is (i) plus (ii) plus (iii)
minus (iv) minus (v) where:
(i) is the Accumulation Value in the Division on the preceding Valuation
Date multiplied by the net investment factor, as described below, for the
current Valuation Period,
(ii) is any Net Premium received during the current Valuation Period
which is allocated to the Division,
(iii) is all Accumulation Values transferred to the Division from another
Division or the General Account during the current Valuation Period,
(iv) is the Accumulation Values transferred from the Division to another
Division or the General Account and Accumulation Values transferred to
secure a Policy Debt during the current Valuation Period, and
(v) is all withdrawals from the Division during the current Valuation
Period.
In addition, whenever a Valuation Period includes the Monthly Anniversary
Date, the Accumulation Value at the end of such period is reduced by the
portion of the monthly deduction allocated to the Division.
The Policy's total Accumulation Value in Separate Account C equals the sum of
the Policy's Accumulation Value in each Division thereof.
UNIT VALUES. Units are credited to a Policyowner upon allocation of Net
Premiums to a Division. Each Net Premium payment allocated to a Division will
increase the number of units in that Division. Both full and fractional units
are credited. The number of units and fractional units is determined by
dividing the Net Premium payment by the unit value of the Division to which the
payment has been allocated. The unit value of each Division is determined on
each Valuation Date. The number of units credited will not change because of
subsequent changes in unit value. The dollar value of each Division's units
will vary depending upon the investment performance of the corresponding
Portfolio of the Trust.
Certain transactions affect the number of units in a Division under a Policy.
Loans, surrenders and withdrawals, withdrawal and transfer fees and charges,
the Surrender Charge, and monthly deductions involve the redemption of units
and will decrease the number of units. Transfers of Accumulation Value among
Divisions will reduce or increase the number of units in a Division, as
appropriate.
The unit value of each Division's units initially under the Policies was
$10.00. Thereafter, the unit value of a Division on any Valuation Date is
calculated by multiplying (1) by (2) where:
(1) is the Division's unit value on the previous Valuation Date; and
(2) is the net investment factor for the Valuation Period then ended.
The unit value of each Division's units on any day other than a Valuation
Date is the unit value as of the next Valuation Date and is used for the
purpose of processing transactions.
NET INVESTMENT FACTOR. The net investment factor measures the investment
experience of each Division and is used to determine changes in unit value from
one Valuation Period to the next Valuation Period. The net investment factor
for a Valuation Period is (i) divided by (ii) minus (iii) where:
(i) is (a) the value of the assets of the Division at the end of the
preceding Valuation Period, plus (b) the investment income and capital
gains, realized or unrealized, credited to the assets of the Division
during the Valuation Period for which the net investment factor is being
determined, minus (c) capital losses, realized or unrealized, charged
against those assets during the Valuation Period, minus (d) any amount
charged against the Division for taxes or any amount set aside during the
Valuation Period by Chubb Life to provide for taxes attributable to the
operation or maintenance of that Division, and
(ii) is the value of the assets of the Division at the end of the
preceding Valuation Period, and
(iii) is a charge no greater than .0017808% on a daily basis. This
corresponds to .65% on an annual basis for mortality and expense risks.
20
<PAGE>
CASH VALUE BENEFITS
So long as it remains in force, the Policy provides for certain benefits
prior to the Maturity Date. Subject to certain limitations, the Policyowner may
at any time obtain Cash Value by surrendering the Policy or making withdrawals
from the Policy. The Cash Value equals the Accumulation Value less any
Surrender Charge. In addition, the Policyowner has certain policy loan
privileges under the Policy.
SURRENDER PRIVILEGES. As long as the Policy is in force, a Policyowner may
surrender the Policy or make a withdrawal from the Policy at any time by
sending a written request along with the Policy to Chubb Life. See "FEDERAL TAX
MATTERS--Policy Proceeds."
The surrender value of the Policy equals the Cash Value less any outstanding
Policy Debt. The amount payable upon surrender of the Policy is the surrender
value at the end of the Valuation Period during which the request is received.
The surrender value may be paid in a lump sum or under one of the optional
payment plans specified in the Policy. Proceeds will generally be paid within
seven days of the Date of Receipt of a request for surrender or withdrawal. See
"POLICY BENEFITS AND RIGHTS--Settlement Options."
A Policyowner can obtain a portion of the Policy's Cash Value by withdrawal
of Cash Value from the Policy. A withdrawal from a Policy is subject to the
following conditions:
A. The amount withdrawn may not exceed the Cash Value less any
outstanding debt.
B. The minimum amount that may be withdrawn is $5,000.
C. A charge equal to $100 will be deducted from the amount of each
withdrawal.
Withdrawals generally will affect the Policy's Accumulation Value, Cash Value
and the life insurance proceeds payable under the Policy. The Policy's Cash
Value will be reduced by the amount of the withdrawal. The Policy's
Accumulation Value will be reduced by the amount of the withdrawal plus any
applicable pro-rata Surrender Charge. Life insurance proceeds payable under the
Policy will generally be reduced by the amount of the withdrawal plus any
applicable pro-rata Surrender Charge, unless the withdrawal is combined with a
request to maintain or increase the Specified Amount. See "POLICY BENEFITS AND
RIGHTS--Combined Requests".
Under Option I, which provides for life insurance proceeds equal to the
greater of the Specified Amount or the Accumulation Value of the Policy at the
date of death multiplied by the corridor percentage, the Specified Amount will
be reduced by the amount of the withdrawal plus any applicable pro-rata
Surrender Charge. The Specified Amount remaining after a withdrawal may not be
less than $250,000 for Chubb Heritage I and $500,000 for Chubb Heritage II. As
a result, Chubb Life will not effectuate any withdrawal that would reduce the
Specified Amount below these minimums. If increases in Specified Amount
previously have occurred, a withdrawal will first reduce the Specified Amount
of the most recent increase, then the most recent increases successively, then
the coverage under the original application. If the life insurance proceeds
payable under either Death Benefit option, both before and after the
withdrawal, is the Accumulation Value multiplied by the corridor percentage, a
withdrawal generally will result in a reduction in life insurance proceeds
equal to the amount paid upon withdrawal, multiplied by the corridor percentage
then in effect.
Under Option II, which provides for life insurance proceeds equal to the
Specified Amount plus Accumulation Value, a reduction in Accumulation Value as
a result of a withdrawal will typically result in a dollar per dollar reduction
in the life insurance proceeds payable under the Policy.
A Policyowner may allocate a withdrawal among the Divisions and the General
Account. If no such allocation is made, a withdrawal will be allocated among
the Divisions and the General Account in the same proportion that the
Accumulation Value in each Division and the Accumulation Value in the General
Account, less any Policy Debt bears to the total Accumulation Value of the
Policy, less any Policy Debt, on the date of withdrawal. See "FEDERAL TAX
MATTERS--Policy Proceeds".
POLICY LOANS. So long as the Policy remains in force, a Policyowner may
borrow money from Chubb Life at any time after the first policy anniversary
using the Policy as the only security for the loan. Loans have priority over
the claims of any assignee or any other person. Generally, the maximum loan
amount is 90% of the Cash Value at the end
21
<PAGE>
of the Valuation Period during which the loan request is received. The maximum
amount which may be borrowed at any given time is the maximum loan amount
reduced by any outstanding Policy Debt.
Proceeds of policy loans ordinarily will be disbursed within seven days from
the Date of Receipt of a request for a loan by Chubb Life, although payments
may be postponed under certain circumstances. See "OTHER MATTERS--Postponement
of Payments". Chubb Life may, in its discretion, permit loans to be made by
telephone if the proper authorization form is on file with Chubb Life. So long
as the Policy remains in force, the loan may be repaid in whole or in part
without penalty at any time while an Insured is living.
When a policy loan is made, a portion of the Policy's Accumulation Value
sufficient to secure the loan will be transferred to the General Account. A
policy loan removes the proceeds from the investment experience of Separate
Account C which will have a permanent effect on the Accumulation Value and
Death Benefit even if the loan is repaid. Any loan interest that is due and
unpaid will also be so transferred. Accumulation Value equal to Policy Debt in
the General Account will accrue interest daily at an annual rate of 6%. The
Policyowner may allocate a policy loan among the Divisions and the General
Account. If no such allocation is made the loan will be allocated among the
Divisions and the General Account in the same proportion that the Accumulation
Value in each Division and the Accumulation Value in the General Account less
Policy Debt bears to the total Accumulation Value of the Policy, less Policy
Debt, on the date of the loan.
Chubb Life will charge interest on any outstanding policy loan with such
interest compounded annually. There are two types of loans available. A Type A
loan is charged the same interest rate as the interest credited to the amount
of Accumulation Value held in the General Account to secure loans. The amount
available at any time for a Type A loan equals the maximum loan amount less the
Guideline Single Premium at issue, as set forth in the Code, less any
outstanding Type A loans. Any other loans are Type B loans. A Type B loan is
charged an interest rate of 6.85%. It is possible for one loan request to
result in both a Type A and a Type B loan. A request for a loan will be granted
first as a Type A loan, to the extent available, and then as a Type B loan.
Once a policy loan is granted, it remains a Type A or Type B until it is
repaid. Increases in the Specified Amount will affect the determination of the
amount available for a Type A loan; however, decreases in the Specified Amount
will not have any such effect. Interest is due and payable at the end of each
policy year, and any interest not paid when due becomes loan principal.
Where applicable, loans are subject to conditions and requirements of the
Employee Retirement Income Security Act of 1974 ("ERISA"), as well as the terms
of any retirement plan in connection with which the Policy has been purchased.
The ERISA rules relating to loans are complex and vary depending on the
individual circumstances of each Policy. Employers and Policyowners should
consult with qualified advisers before exercising the loan privileges.
Policy Debt equals the total of all outstanding policy loans and accrued
interest on policy loans. If Policy Debt exceeds Cash Value, Chubb Life will
notify the Policyowner and any assignee of record. A payment at least equal to
the amount of excess Policy Debt above the Cash Value must be made to Chubb
Life within 61 days from the date Policy Debt exceeds Cash Value, otherwise,
the Policy will lapse and terminate without value. In such event, the
Policyowner may be taxed on the total appreciation under the Policy. The Policy
may, however, later be reinstated, subject to satisfactory proof of
insurability and the payment of a reinstatement premium. See "THE POLICIES--
Reinstatement".
So long as the Policy remains in force, Policy Debt may be repaid in whole or
in part at any time during an Insured's life. If there is any existing Policy
Debt, premium payments in the amount of the Planned Periodic Premium, received
at the Premium Frequency, will be applied as premium. Premium payments in
excess of the Planned Periodic Premium or premium payments received other than
at the Premium Frequency, will first be applied as policy loan repayments, then
as premium when the Policy Debt is repaid. For Policyowners with both Type A
and Type B loans, repayments of the loan will be applied first to Type B loans
and then to Type A loans. Upon repayment, the Policy's Accumulation Value
securing the repaid portion of the debt in the General Account will be
transferred to the Divisions and the General Account using the same percentages
used to allocate Net Premiums. Any outstanding Policy Debt is subtracted from
life insurance proceeds payable at the Insured's or last surviving Insured's
death, from Accumulation Value upon surrender, and from Cash Value payable at
maturity.
22
<PAGE>
OTHER MATTERS
VOTING RIGHTS. To the extent required by law, Chubb Life will vote the Trust
shares held in the various Divisions at regular and special shareholder
meetings of the Trust in accordance with instructions received from persons
having voting interests in Separate Account C. If, however, the 1940 Act or any
regulation thereunder should be amended or if the present interpretation
thereof should change and, as a result, Chubb Life determines that it is
permissible to vote the Trust shares in its own right, it may elect to do so.
The number of votes on which each Policyowner has the right to instruct will be
determined by dividing the Policy's Accumulation Value in a Division by the net
asset value per share of the corresponding Portfolio in which the Division
invests, or as otherwise required by law. Fractional shares will be counted.
The number of votes on which the Policyowner has the right to instruct will be
determined as of the date coincident with the date established by the Trust for
determining shareholders eligible to vote at the meeting of the Trust. Voting
instructions will be solicited by written communications prior to such meeting
in accordance with procedures established by the Trust. Chubb Life will vote
Trust shares as to which no instructions are received in proportion to the
voting instructions which are received with respect to all Policies
participating in the Trust in accordance with applicable law. Each person
having a voting interest will receive proxy material, reports and other
materials relating to the Trust. The shares held by Chubb Life, including
shares for which no voting instructions have been received, shares held in
Separate Account C representing charges imposed by Chubb Life against Separate
Account C under the Policies and shares held by Chubb Life that are not
otherwise attributable to Policies, will also be voted by Chubb Life in
proportion to instructions received from the owners of variable life insurance
policies funded through Separate Account C. Chubb Life reserves the right to
vote any or all such shares at its discretion to the extent consistent with
then current interpretations of the 1940 Act and rules thereunder.
Chubb Life may, when required by state insurance regulatory authorities,
disregard voting instructions if the instructions require that shares be voted
so as to cause a change in subclassification or investment objective of the
Trust or disapprove an investment advisory contract of the Trust. In addition,
Chubb Life may disregard voting instructions in favor of changes initiated by a
Policyowner in the investment policy or the investment adviser of the Trust if
Chubb Life reasonably disapproves of such changes. A change would be
disapproved only if the proposed change is contrary to state law or prohibited
by state regulatory authorities or Chubb Life determined that the change would
be inconsistent with the investment objectives of Separate Account C or would
result in the purchase of securities for Separate Account C which vary from the
general quality and nature of investments and investment techniques utilized by
other separate accounts created by Chubb Life or any affiliate of Chubb Life
which have similar investment objectives. In the event that Chubb Life does
disregard voting instructions, a summary of that action and the reason for such
actions will be included in the next semi-annual report to the Policyowner.
ADDITIONS, DELETIONS OR SUBSTITUTIONS OF INVESTMENTS. Chubb Life reserves the
right, subject to compliance with applicable law, to make additions to,
deletions from, or substitutions for the shares held by any Division or which
any Division may purchase. If shares of the Trust should no longer be available
for investment or if, in the judgment of Chubb Life's management, further
investment in shares of the Trust should become inappropriate in view of the
purposes of the Policy, Chubb Life may substitute shares of any other
investment company for shares already purchased, or to be purchased in the
future under the Policies. No substitution of securities will take place
without notice to and consent of Policyowners and without prior approval of the
Commission, all to the extent required by the 1940 Act. Any surrender due to a
change in a Portfolio's investment policy will incur any applicable Surrender
Charges.
Each class of Trust shares is subject to certain investment restrictions
which may not be changed without the approval of the majority of the holders of
such class. See the accompanying Prospectus for the Trust.
ANNUAL REPORT. Each year a report will be sent to the Policyowner which shows
the current Accumulation Value, Cash Value, premiums paid and all charges since
the last annual report as well as the balance of outstanding policy loans.
Chubb Life will also send to the Policyowner the reports required by the 1940
Act.
CONFIRMATION. Confirmation notices (or other appropriate notification) will
be mailed promptly at the time of the following transactions:
(1) policy issue;
(2) receipt of premium payments;
(3) initial allocation among Divisions on the Allocation Date;
(4) transfers among Divisions;
23
<PAGE>
(5) change of premium allocation;
(6) change between Option I and Option II;
(7) increases or decreases in Specified Amount;
(8) withdrawals, surrenders or loans;
(9) receipt of loan repayments; and
(10) reinstatements; and
(11) redemptions due to insufficient funds.
LIMITATION ON RIGHT TO CONTEST. Chubb Life will not contest or revoke the
insurance coverage provided under the Policy, except for any subsequent
increase in Specified Amount, after the Policy has been in force during the
lifetime of each Insured for a period of two years from the date it is issued.
Any increase in the Specified Amount will not be contested after such increase
has been in force during the lifetime of each Insured for two years following
the effective date of the increase. Any increase will be contestable within the
two year period only with regard to statements concerning this increase.
MISSTATEMENTS. If the age or sex of an Insured has been misstated in an
application, including a reinstatement application, Chubb Life will adjust the
benefits payable to reflect the correct age or sex.
SUICIDE. The Policy does not cover the risk of suicide within two years from
the date the Policy is issued or two years from the date of any increase in
Specified Amount with respect to such increase, whether the Insured is sane or
insane, unless otherwise specified by state law. In the event of suicide of any
Insured within two years of the date the Policy is issued, the only liability
of Chubb Life will be a refund of premiums paid, without interest, less any
Policy Debt and less any withdrawal. In the event of suicide by any Insured
within two years of an increase in Specified Amount, the only liability of
Chubb Life with respect to the increase will be a refund of the cost of
insurance for such increase.
Under Chubb Heritage II, if the first death is by suicide and the surviving
Insured is classified by Chubb Life as insurable on the Policy Date, Chubb Life
will issue, upon request of the Policyowner and without evidence of
insurability, an individual policy providing coverage on the life of the
surviving Insured equal to the coverage on the Insureds for which premiums or
cost of insurance was refunded.
BENEFICIARIES. The original Beneficiaries and contingent Beneficiaries are
designated by the Policyowner on the application. If changed, the primary
Beneficiary or contingent Beneficiary is as shown in the latest change filed
with Chubb Life. One or more primary or contingent Beneficiaries may be named
in the application. In such case, the proceeds of the Policy will be paid in
equal shares to the survivors in the appropriate beneficiary class unless
requested otherwise by the Policyowner.
POSTPONEMENT OF PAYMENTS. Payment of any amount upon surrender, withdrawal,
policy loan, or benefits payable at death or maturity may be postponed
whenever: (i) the New York Stock Exchange is closed other than customary week-
end and holiday closings, or trading on the New York Stock Exchange is
restricted as determined by the Commission; (ii) the Commission by order
permits postponement for the protection of Policyowners; or (iii) an emergency
exists, as determined by the Commission, as a result of which disposal of
securities is not reasonably practical or it is not reasonably practicable to
determine the value of net assets in Separate Account C.
ASSIGNMENT. Ownership of the Policy can be assigned or the Policy can be
assigned as collateral security. Chubb Life must be notified in writing if the
Policy has been assigned. Each assignment will be subject to any payments made
or action taken by Chubb Life prior to its notification of such assignment.
Chubb Life is not responsible for the validity of an assignment. A
Policyowner's rights and the rights of the Beneficiary may be affected by an
assignment.
ILLUSTRATION OF BENEFITS AND VALUES. The Policyowner may request
illustrations of Death Benefits, Accumulation Values and Cash Values at any
time after the Policy Date. Illustrations will be based on the existing
Accumulation Value and Cash Value at the time of the request and both the
maximum and the then current costs of insurance rates. Although Chubb Life does
not currently charge a fee for such illustrations, it reserves the right to
charge an administrative fee, not to exceed $25, to cover the cost of preparing
the illustrations.
NON-PARTICIPATING POLICY. The Policy does not share in any surplus
distributions of Chubb Life. No dividends are payable with respect to the
Policy.
24
<PAGE>
THE GENERAL ACCOUNT
POLICYOWNERS MAY ALLOCATE NET PREMIUMS AND TRANSFER ACCUMULATION VALUE TO THE
GENERAL ACCOUNT. BECAUSE OF EXEMPTIVE AND EXCLUSIONARY PROVISIONS, INTERESTS IN
THE GENERAL ACCOUNT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
AND THE GENERAL ACCOUNT HAS NOT BEEN REGISTERED AS AN INVESTMENT COMPANY UNDER
THE 1940 ACT. ACCORDINGLY, NEITHER THE GENERAL ACCOUNT NOR ANY INTERESTS
THEREIN ARE SUBJECT TO THE PROVISIONS OF THESE ACTS, AND CHUBB LIFE HAS BEEN
ADVISED THAT THE STAFF OF THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
REVIEWED THE DISCLOSURES IN THIS PROSPECTUS RELATING TO THE GENERAL ACCOUNT.
DISCLOSURES REGARDING THE GENERAL 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.
GENERAL DESCRIPTION. The General Account consists of all assets owned by
Chubb Life other than those in Separate Account C and other separate accounts
which have been or may be established by Chubb Life. Subject to applicable law,
Chubb Life has sole discretion over the investment of the assets of the General
Account.
A Policyowner may elect to allocate Net Premiums to the General Account or to
transfer Accumulation Value to or from the Divisions and the General Account.
The allocation or transfer of funds to the General Account does not entitle a
Policyowner to share in the investment experience of the General Account.
Instead, Chubb Life guarantees that Accumulation Value in the General Account
will accrue interest daily at an effective annual rate of at least 4%,
independent of the actual investment experience of the General Account. Chubb
Life is not obligated to credit interest at any higher rate, although Chubb
Life may, in its sole discretion, do so.
If the Policy issued as applied for is not accepted or the "free look" is
exercised, no interest will be credited and Chubb Life will retain any interest
earned on the initial Net Premium.
GENERAL ACCOUNT ACCUMULATION VALUE. The Accumulation Value in the General
Account on the Allocation Date is equal to the portion of the Net Premium
payments, plus interest earned, which have been paid and allocated to the
General Account, less the portion of the first monthly deduction allocated to
the General Account.
Chubb Life guarantees that interest credited to each Policyowner's
Accumulation Value in the General Account will not be less than an effective
annual rate of at least 4%. Chubb Life may, IN ITS SOLE DISCRETION, credit a
higher rate of interest, although it is not obligated to credit interest in
excess of 4% per year, and might not do so. ANY INTEREST CREDITED ON THE
POLICY'S ACCUMULATION VALUE IN THE GENERAL ACCOUNT IN EXCESS OF THE GUARANTEED
RATE OF 4% PER YEAR WILL BE DETERMINED IN THE SOLE DISCRETION OF CHUBB LIFE.
THE POLICYOWNER ASSUMES THE RISK THAT INTEREST CREDITED MAY NOT EXCEED THE
GUARANTEED MINIMUM RATE OF 4% PER YEAR. Accumulation Value in the General
Account that equals indebtedness will be credited interest daily at an
effective annual rate of 6%. The Accumulation Value in the General Account will
be calculated on each Monthly Anniversary Date of the Policy, or on any other
date with consistent adjustments.
Chubb Life guarantees that, at any time prior to the Maturity Date, the
Accumulation Value in the General Account will not be less than the amount of
the Net Premiums allocated or Accumulation Value transferred to the General
Account, plus interest at the rate of 4% per year, plus any excess interest
which Chubb Life credits and any amounts transferred into the General Account,
less the sum of all charges allocable to the General Account and any amounts
deducted from the General Account in connection with withdrawals or transfers
to Separate Account C.
DETERMINATION OF CHARGES. The portion of the monthly deduction attributable
to the General Account will be determined as of the actual Monthly Anniversary
Date, even if the Monthly Anniversary Date does not fall on a Valuation Date.
PREMIUM DEPOSIT FUND. As a convenience to Policyowners, Chubb Life permits
Policyowners to deposit funds in a premium deposit fund ("PDF"), subject to the
terms and conditions of the appropriate agreement. Funds deposited in
the PDF earn interest at a minimum annual rates of 4%, with interest credited
on each monthly anniversary date. Interest on these funds is not tax deferred
and will be annually reported on Form 1099 to the Policyowner. An amount equal
to the Planned Periodic Premium will be transferred on the Policy date to pay
premiums on the Policy. Policyowners may withdraw all or part of the funds from
the PDF at any time. No commissions are earned or paid until premium payments
are made pursuant to transfers from the PDF.
25
<PAGE>
DISTRIBUTION OF THE POLICY
The Policy will be sold by individuals who, in addition to being licensed as
life insurance agents for Chubb Life, are also registered representatives of
Chubb Securities Corporation, the principal underwriter of the policies, or of
broker-dealers who have entered into written sales agreements with the
principal underwriter. Chubb Securities Corporation is a New Hampshire
corporation organized in 1969. Chubb Securities Corporation is registered with
the Securities and Exchange Commission under the Securities and Exchange Act
of 1934 as a broker-dealer and is a member of the National Association of
Securities Dealers, Inc. Each broker-dealer with whom Chubb Securities
Corporation has executed a selling agreement will receive as a commission the
full charge of 3% imposed on premiums. Any such broker-dealers will be
registered under the Securities Exchange Act of 1934 and their representatives
selling the Policies will be authorized under applicable insurance laws and
regulations to sell insurance products of this type. It is not expected that
the compensation paid by Chubb Life in connection with such sales will exceed
that described above for sales by Chubb Securities Corporation's registered
representatives.
Chubb Life and Separate Account C have entered into a Distribution Agreement
with Chubb Securities Corporation which continues until terminated by any
party on 60 days notice. Chubb Securities Corporation is not obligated to sell
any specified amount of Policies and may not assign its responsibilities under
the Distribution Agreement. Chubb Life reimburses Chubb Securities Corporation
for its expenses under the Distribution Agreement.
Chubb Securities Corporation is engaged in the sale and distribution of
various other securities, including other flexible premium variable life
policies. It acts as principal underwriter for other flexible premium variable
life policies and variable annuity contracts issued by Chubb Life (and its
affiliated insurance companies) and for the Chubb America Fund, Inc. and the
Chubb Investment Funds, Inc. mutual funds. It sells a number of mutual fund
shares as well as shares of other securities and limited partnership interests
in both public and private limited partnerships. Mutual fund shares available
for sale by Chubb Securities Corporation are sold pursuant to non-exclusive
selling agreements with the distributors of the mutual funds.
GROUP OR SPONSORED ARRANGEMENTS. Policies may be purchased under group or
sponsored arrangements, as well as on an individual basis. A "group
arrangement" includes a program under which a trustee, employer or similar
entity purchases individual Policies covering a group of individuals on a
group basis. Examples of such arrangements are employer-sponsored benefit
plans and deferred compensation plans. A "sponsored arrangement" includes a
program under which an employer permits group solicitation of its employees or
an association permits group solicitation of its members for the purchase of
Policies on an individual basis.
Chubb Life may reduce the following types of charges for Policies issued in
connection with group or sponsored arrangements: the sales charge, the cost of
insurance charge, surrender or withdrawal charges, administrative charges for
withdrawal or transfer, the guaranteed death benefit charge and charges for
optional rider benefits. Chubb Life may also issue Policies in connection with
group or sponsored arrangements on a "non-medical" or guaranteed issue basis.
Due to the underwriting criteria established for Policies issued on a non-
medical, guaranteed issue basis, actual monthly cost of insurance charges may
be higher than the current cost of insurance charges under otherwise identical
Policies that are medically underwritten. In addition, Chubb Life may also
specify different minimum Specified Amounts at issue for Policies issued in
connection with group or sponsored arrangements.
Certain charges or underwriting requirements set forth in this Prospectus
may also be reduced or eliminated for Policies issued in connection with an
exchange of another Chubb Life policy or contract or policies or contracts of
any affiliates of Chubb Life.
The amounts of any reduction, the charges to be reduced, the elimination or
modification of underwriting requirements, and the criteria for applying a
reduction or modification will generally reflect the reduced sales and
administrative effort, costs and differing mortality experience appropriate to
the circumstances giving rise to the reduction or modification. The charges
will be reduced in accordance with Chubb Life's company practice in effect
when the Policy is issued. The elimination or modification of underwriting
requirements will be done in accordance with Chubb Life's administrative
procedures with respect to underwriting when the Policy is issued. Reductions
and modifications will not be made where prohibited by applicable law and will
not be unfairly discriminatory against any person including the purchasers to
whom the reduction or modification applies and all other Owners of the Policy.
26
<PAGE>
MANAGEMENT OF CHUBB LIFE
Executive Officers and Directors of Chubb Life
DIRECTORS
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND
NAME BUSINESS ADDRESS
---- ------------------------
<C> <S>
John C. Beck.................... Managing Partner
Beck, Mack & Oliver
330 Madison Avenue-31st Floor
New York, NY 10017-5001
*Percy Chubb, III................ Vice Chairman
The Chubb Corporation
(also serves as Vice Chairman of Chubb Life
Insurance Company of America)
15 Mountain View Road
P.O. Box 1615
Warren, New Jersey 07061-1615
Joel J. Cohen................... Managing Director
Donaldson, Lufkin & Jenrette Securities
Corporation
140 Broadway, 49th Floor
New York, NY 10005
Henry U. Harder................. Retired, Former Chairman
The Chubb Corporation
15 Mountain View Road
P.O. Box 1615
Warren, New Jersey 07061-1615
David H. Hoag................... Chairman, President & CEO
The LTV Corporation
25 West Prospect Avenue
Cleveland, OH 44115
Robert V. Lindsay............... Former President
J.P. Morgan & Co., Inc.
Altamont Road
Millbrook, NY 12545
Thomas C. MacAvoy............... Professor
Darden Graduate School of Business
Administration
University of Virginia
Box 6550
Charlottesville, VA 22906-6550
Gertrude G. Michelson........... R.H. Macy & Co., Inc.
Herald Square--13th Floor
New York, NY 10001
*Dean R. O'Hare.................. Chairman and President
The Chubb Corporation
(also serves as Chairman of Chubb Life
Insurance Company of America)
15 Mountain View Road
P.O. Box 1615
Warren, NJ 07061-1615
Ernesta G. Procope.............. President and Chief Executive Officer
E.G. Bowman Co., Inc.
97 Wall Street
New York, NY 10005
Warren B. Rudman................ Partner
Paul, Weiss, Rifkind, Wharton & Garrison
1615 L Street, N.W.,
Suite 1300
Washington, D.C. 20036
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND
NAME BUSINESS ADDRESS
---- ------------------------
<S> <C>
Sir David G. Scholey, CBE....... Chairman
S.G. Warburg Group plc
One Finsbury Avenue
London EC2M 2PA England
Raymond G.H. Seitz.............. Former Ambassador of the United States of America
10 Trevor Square
London SW7 IDT, England
Lawrence M. Small............... President and Chief Operating Officer
Federal National Mortgage Association
3900 Wisconsin Avenue, N.W.
Washington, DC 20016
Robert G. Stone, Jr............. Chairman
Kirby Corporation
405 Lexington Avenue, 39th Floor
New York, NY 10174
Richard D. Wood................. Former Chairman
Eli Lilly and Company
Lilly Corporate Center
Indianapolis, IN 46285
</TABLE>
-------
* Executive Officer of Chubb Life
EXECUTIVE OFFICERS (OTHER THAN DIRECTORS)
<TABLE>
<CAPTION>
NAME
----
<C> <S>
Theresa M. Stone................. President and Chief Executive Officer
David S. Fowler.................. Vice Chairman
Executive Vice President and Chief
Randell G. Craig................. Operating Officer
Executive Vice President and Chief
Richard V. Werner................ Financial Officer
Ronald R. Angarella.............. Senior Vice President
Senior Vice President, General Counsel and
Frederick H. Condon.............. Secretary
Senior Vice President, Assistant Secretary
Charles C. Cornelio.............. and Chief Administrative Officer
Ronald H. Emery.................. Senior Vice President and Controller
Gregory W. Johnson............... Senior Vice President
Vincent G. Mace, Jr. ............ Senior Vice President and Group Actuary
Mary Ann Peltier................. Senior Vice President and Corporate Actuary
Warren L. Reynolds............... Senior Vice President
John F. Ritchie.................. Senior Vice President
Bruce R. Stefany................. Senior Vice President
James R. Wagner, Jr. ............ Senior Vice President
Arthur V. Anderson............... Vice President
Frederick N. Bailey, MD.......... Vice President
Douglas H. Blampied.............. Vice President
Thomas M. Bodrogi................ Vice President
Mark Connolly.................... Vice President
Edwin E. Creter.................. Vice President
Richard A. Croak................. Vice President and Assistant Secretary
Ned I. Gerstman.................. Vice President
Glenn Hilsinger.................. Vice President
Donald M. Kane................... Vice President
Patrick A. Lang.................. Vice President
Deborah A. Leitch................ Vice President
Bonnie L. Lyons.................. Vice President
Justin J. Manjorin............... Vice President
Donna L. Metcalf................. Vice President
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
NAME
----
<S> <C>
Christopher J. Moakley........ Vice President
Thomas E. Murphy, Jr. M.D. ... Vice President and Associate Medical Director
Herbert B. Olson.............. Vice President and Group Actuary
Patrick Ramotar............... Vice President
Richard D. Reed............... Vice President
Kenneth L. Robinson, Jr. ..... Vice President
Robert R. Rodgers............. Vice President
Russell C. Simpson............ Vice President and Treasurer
James S. Smith................ Vice President
William A. Spencer............ Vice President
Donald L. Stevens............. Vice President
John A. Thomas................ Vice President
Ernest J. Tsouros............. Vice President
David G. Underwood, MD........ Vice President and Medical Director
Charles A. Van Buskirk........ Vice President
John W. Wells................. Vice President
</TABLE>
The officers and employees of Chubb Life who have access to the assets of
Separate Account C are covered by a fidelity bond issued by Aetna Casualty and
Surety Company in the amount of $35,000,000.
STATE REGULATION OF CHUBB LIFE
Chubb Life Insurance Company of America is governed under the laws of the
state of New Hampshire and is subject to regulation by the Insurance
Commissioner of New Hampshire. An annual statement is filed with the New
Hampshire Insurance Commissioner on or before March 1 of each year covering the
operations and reporting on the financial condition of Chubb Life as of
December 31 of the preceding year. Periodically, the Commissioner examines the
assets and liabilities of Chubb Life and Separate Account C and verifies their
adequacy and a full examination of Chubb Life's operations is conducted by the
Commissioner at least every five years.
In addition, Chubb Life is subject to the insurance laws and regulations of
other states within which it is licensed to operate. Generally, the insurance
department of any other state applies the laws of the state of domicile in
determining permissible investments.
FEDERAL TAX MATTERS
TAX CONSIDERATIONS. The following description is a brief summary of some of
the tax rules, primarily related to federal income taxes under the Code, which,
in the opinion of Chubb Life, are currently in effect and is not intended as
tax advice. Chubb Life believes that, as discussed below, the Policy will in
general receive favorable tax treatment under the Code. Because there are
issues as to which the law is still developing or may change, however, and
because this information is not intended as tax advice, Chubb Life recommends
that the Policyowner or prospective Policyowner rely only on the advice of a
qualified tax adviser.
POLICY PROCEEDS. The Policy contains provisions not found in traditional life
insurance policies providing only for fixed benefits. However, under the Code,
the Policy should qualify as a life insurance contract for federal income tax
purposes, with the result that all Death Benefits paid under the Policy will
generally be fully excludable from the gross income of the Policy's Beneficiary
for federal income tax purposes and, as long as the Policy remains in force,
income earned on the Policy will not be subject to federal income tax unless
and until there is a distribution from the Policy. Policyowners should consult
with their own tax advisers in this regard.
The federal income tax treatment of a distribution from the Policy will
depend on whether a Policy is a life insurance policy and also if it is
determined to be a "modified endowment contract," as defined by the Code. Chubb
Life will notify a Policyowner if the amount of premiums paid in would cause a
Policy to be a modified endowment contract and
29
<PAGE>
will allow a refund of the excess premium. Thus, the Policyowner may choose to
have the Policy treated as a modified endowment contract.
A modified endowment contract is a life insurance policy under which premiums
are paid that exceed the sum of net level premiums that would be paid under a
policy that provides for paid-up insurance after the payment of seven level
annual premiums (the "seven-pay test"). A policy will be treated as a modified
endowment contract unless the cumulative premiums actually paid under a policy,
at all times during the first seven policy years, are less than or equal to the
cumulative seven-pay premiums which would have been paid under the hypothetical
policy on or before such times.
If a Policyowner reduces the Death Benefit during the first seven policy
years by requesting a decrease in the Specified Amount or a partial withdrawal,
the seven-pay test will be redetermined based on the new Death Benefit and
applied retrospectively for purposes of the seven-pay test. If the premiums
previously paid are greater than the seven-pay premium test limits, the Policy
will become a modified endowment contract. Generally, a life insurance policy
which is received in exchange for a modified endowment contract will also be
considered a modified endowment contract.
If a policy is deemed to be a modified endowment contract, any distribution
from the policy will be taxed in a manner comparable to distributions from
annuities (i.e., on an "income-first" basis); distributions for this purpose
include a loan or partial withdrawal. Any such distributions will be considered
taxable income to the extent accumulation value under the policy exceeds
investment in the policy.
A 10% penalty tax will apply to the taxable portion of such a distribution.
No penalty will apply to distributions (i) to taxpayers 59 1/2 years of age or
older, (ii) in the case of a disability which can be expected to result in
death or to be of indefinite duration or (iii) received as part of a series of
substantially equal periodic annuity payments for the life (or life expectancy)
of the taxpayer or the joint lives (or joint life expectancies) of the taxpayer
and his beneficiary.
To the extent a policy becomes a modified endowment contract, any
distribution, including any loan, which occurs in the policy year it becomes a
modified endowment contract and in any year thereafter, will be taxable income
to the policyowner. Also, any distributions within two years before a policy
becomes a modified endowment contract will also be income taxable to the
policyowner. The Secretary of the Treasury has been authorized to prescribe
rules which would similarly treat other distributions made in anticipation of a
policy becoming a modified endowment contract. For purposes of determining the
amount of any distribution includable in income, all modified endowment
contract policies that fail the above-described tests which are issued by the
same insurer, or its affiliates, to the same policyowner during any calendar
year are treated as one contract. The Secretary of the Treasury is also
authorized to issue regulations in this connection.
In addition to the distribution rules for modified endowment contracts, the
Code and proposed regulations thereunder require that reasonable mortality and
other charges be used in satisfying the definition of life insurance. The death
benefit under a policy which meets this definition will continue to be excluded
from the beneficiary's gross income. Chubb Life believes that the Policies meet
this definition. However, there is uncertainty as to the meaning of "reasonable
mortality charges" and resultant uncertainties as to Chubb Heritage II's
qualification if a different definition is adopted by the Treasury Department.
As long as a Policy does not violate the tests described above, it will not
fail to meet the tests of the Code and the general tax provisions described
herein still apply.
The foregoing summary does not purport to be complete or to cover all
situations, and, as always, there is some degree of uncertainty with respect to
the application of the current tax laws. In particular, prior to the issuance
of final regulations or other clarifications under certain sections of the
Code, there may be some uncertainties about the tax treatment of the Policy
with respect to the mortality charges, substandard risks and any extension of
the Maturity Date. In addition to the provisions discussed above, the United
States Congress may consider other legislation which, if enacted, could
adversely affect the tax treatment of life insurance policies. Also, the
Treasury Department may amend current regulations or adopt new regulations with
respect to this and other Code provisions. Therefore, Policyowners are advised
to consult a tax adviser or attorney for more complete tax information,
specifically regarding the applicability of the Code provisions to an
individual Policyowner's situation.
Under normal circumstances, the Policy is not a modified endowment contract
and loans received under the Policy will be construed as indebtedness of the
Policyowner in the same manner as loans under a fixed benefit life insurance
policy and no part of any loan under the Policy is expected to constitute
income to the Policyowner. Policyholders are advised to consult a tax adviser
or attorney regarding the deduction of interest paid on loans.
30
<PAGE>
Even if the Policy is not a modified endowment contract, a partial withdrawal
together with a reduction in death benefits during the first 15 policy years
may create taxable income for the Policyowner. The amount of that taxable
income is determined under a complex formula and it may be equal to part or all
of, but not greater than, the income on the contract. A partial withdrawal made
after the first 15 policy years will be taxed on a recovery of premium-first
basis, and will only be subject to federal income tax to the extent such
proceeds exceed the total amount of premiums the Policyowner has paid that have
not been previously withdrawn.
If a Policyowner makes a partial withdrawal, surrender, loan or exchange of
the Policy, Chubb Life may be required to withhold federal income tax from the
portion of the money received by the Policyowner that is includable in the
Policyowner's federal gross income. A Policyowner who is not a corporation may
elect not to have such tax withheld; however, such election must be made before
Chubb Life makes the payment. In addition, if a Policyowner fails to provide
Chubb Life with a correct taxpayer identification number (usually a social
security number) or if the Treasury notifies Chubb Life that the taxpayer
identification number which has been provided is not correct, the election not
to have such taxes withheld will not be effective. In any case, a Policyowner
is liable for payment of the federal income tax on the taxable portion of money
received, whether or not an election to have federal income tax withheld is
made. If a Policyowner elects not to have federal income tax withheld, or if
the amount withheld is insufficient, then the Policyowner may be responsible
for payment of estimated tax. A Policyowner may also incur penalties under the
estimated tax rules if the withholding and estimated tax payments are
insufficient. Chubb Life suggests that Policyowners consult with a tax adviser
or attorney as to the tax implications of these matters.
In the event that a Policy is owned by the trustee under a pension or profit
sharing plan, or similar deferred compensation arrangement, the tax
consequences of ownership or receipt of proceeds under the Policy could differ
from those stated herein. However, if ownership of such a Policy is transferred
from the plan to a plan participant (upon termination of employment, for
example), the Policy will be subject to all of the federal tax rules described
above. A Policy owned by a trustee under such a plan may be subject to
restrictions under ERISA and a tax adviser should be consulted regarding any
applicable ERISA requirements.
The Policy may also be used in various arrangements, including nonqualified
deferred compensation or salary continuation plans, split dollar insurance
plans, executive bonus plans and others, where the tax consequences may vary
depending on the particular facts and circumstances of each individual
arrangement. A tax adviser should be consulted regarding the tax attributes of
any particular arrangement where the value of it depends in part on its tax
consequences.
Federal estate and local estate, inheritance and other tax consequences of
ownership or receipt of policy proceeds depend upon the circumstances of each
Policyowner and Beneficiary.
Current Treasury regulations set standards for diversification of the
investments underlying variable life insurance policies in order for such
policies to be treated as life insurance. Chubb Life believes it presently is
in compliance with the diversification requirements as set forth in the
regulations and intends to remain in compliance with such diversification
requirements. If the diversification requirements are not satisfied, the Policy
would not be treated as a life insurance contract. As a consequence to the
Policyowner, income earned on a Policy would be taxable to the Policyowner in
the calendar quarter in which the diversification requirements were not
satisfied, and for all subsequent calendar quarters.
The Secretary of the Treasury may issue a regulation or a ruling which will
prescribe the circumstances in which a policyowner's control of the investments
of a segregated asset account may cause the policyowner, rather than the
insurance company, to be treated as the owner of the assets of the account. The
regulation or ruling could impose requirements that are not reflected in the
Policy, relating, for example, to such elements of policyowner control as
premium allocation, investment selection, transfer privileges and investments
in a division focusing on a particular investment sector. It has also been
suggested that, in certain circumstances, control over the investment adviser
might constitute prohibited policyowner control. Chubb Life believes that
policyowner control will not exist under the Policy. Because failure to comply
with any such regulation or ruling presumably would cause earnings on a
Policyowner's interest in Separate Account C to be includable in the
Policyowner's gross income in the year earned, Chubb Life has reserved certain
rights to alter the Policy and investment alternatives so as to comply with
such regulation or ruling. Chubb Life believes that any such regulation or
ruling would apply prospectively. Since the regulation or ruling has not been
issued, there can be no assurance as to the content of such regulation or
ruling or even whether application of the regulation or ruling will be
prospective. For these reasons, Policyowners are urged to consult with their
own tax advisers.
31
<PAGE>
A Policyowner may elect to exchange Chubb Heritage II for two individual
Chubb Heritage I policies provided the conditions under the Policy Exchange
Option Rider are met. This could have adverse tax consequences including, but
not limited to, the recognition of taxable income in an amount up to any
taxable gain in the Policy at the time of the exchange.
CHARGE FOR CHUBB LIFE INCOME TAXES. Chubb Life is presently taxed as a life
insurance company under the provisions of the Code. The Code specifically
provides for adjustments in reserves for variable policies, and Chubb Life will
include flexible premium life insurance operations in its tax return in
accordance with these rules.
Currently no charge is made against Separate Account C for Chubb Life's
federal income taxes, or provisions for such taxes, that may be attributable to
Separate Account C. Chubb Life may charge each Division for its portion of any
income tax charged to Chubb Life on the Division or its assets. See "CHARGES
AND DEDUCTIONS--Premium Charges" for a description of the Federal DAC tax
charge deducted from premium payments. Under present laws, Chubb Life may incur
state and local taxes (in addition to premium taxes) in several states. At
present, these taxes are not significant. If they increase, however, Chubb Life
may decide to make charges for such taxes or provisions for such taxes against
Separate Account C. Chubb Life would retain any investment earnings on any tax
charges accumulated in a Division. Any such charges against Separate Account C
or its Divisions could have an adverse effect on the investment experience of
such Division.
EMPLOYMENT BENEFIT PLANS
Employers and employee organizations should consider, in consultation with
counsel, the impact of Title VII of the Civil Rights Act of 1964 on the
purchase of a Policy in connection with an employment-related insurance or
benefit plan. The United States Supreme Court held, in a 1983 decision, that,
under Title VII, optional annuity benefits under a deferred compensation plan
could not vary on the basis of sex.
LEGAL PROCEEDINGS
There are no legal proceedings to which Separate Account C is a party or to
which the assets of any of the Divisions are subject. Chubb Life is not
involved in any litigation that is of material importance in relation to its
total assets or that relate to Separate Account C.
EXPERTS
The financial statements of Chubb Life as of December 31, 1994 and for the
year then ended, appearing in this Prospectus and Registration Statement have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon appearing elsewhere herein and in the Registration Statement,
and are included in reliance upon such report given upon the authority of such
firm as experts in accounting and auditing.
Actuarial matters included in this Prospectus have been examined by Michael
J. LeBoeuf, FSA, MAAA as stated in the opinion filed as an exhibit to the
Registration Statement.
REGISTRATION STATEMENT
A Registration Statement has been filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, with respect to the
Policy offered hereby. This Prospectus does not contain all the information set
forth in the Registration Statement and the amendments and exhibits to the
Registration Statement to all of which reference is made for further
information concerning Separate Account C, Chubb Life and the Policy offered
hereby. Statements contained in this Prospectus as to the contents of the
Policy and other legal instruments are summaries. For a complete statement of
the terms thereof reference is made to such instruments as filed.
32
<PAGE>
FINANCIAL STATEMENTS
The financial statements of Chubb Life which are included in the Prospectus
should be considered only as bearing on the ability of Chubb Life to meet its
obligations under the Policy. They should not be considered as bearing on the
investment experience of the assets held in Separate Account C.
No financial statements of Separate Account C are included in this Prospectus
because, as of December 31, 1994, the end of Separate Account C's most recent
fiscal year, Separate Account C had no assets or liabilities and had not yet
commenced operations.
33
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors
Chubb Life Insurance Company of America
We have audited the accompanying consolidated balance sheet of Chubb Life
Insurance Company of America and subsidiaries as of December 31, 1994, and the
related consolidated statements of income, shareholder's equity, and cash flows
for the year then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Chubb Life
Insurance Company of America and subsidiaries at December 31, 1994, and the
consolidated results of their operations and their cash flows for the year then
ended, in conformity with generally accepted accounting principles.
As described in Note 2 to the financial statements, the Company changed its
method of accounting for certain investments in debt and equity securities in
1994.
Ernst & Young LLP
Boston, Massachusetts
February 3, 1995
F-1
<PAGE>
CONSOLIDATED BALANCE SHEET
CHUBB LIFE INSURANCE COMPANY OF AMERICA AND SUBSIDIARIES
DECEMBER 31, 1994
(IN THOUSANDS)
<TABLE>
<S> <C>
ASSETS
Invested assets (Note 3)
Fixed maturities
Held-to-maturity, at amortized cost............................ $ 620,935
Available-for-sale, at market.................................. 1,537,409
Equity securities, at market..................................... 86,768
Short term investments, at cost.................................. 112,393
Policy loans..................................................... 190,694
Mortgage loans on real estate.................................... 11,985
----------
Total invested assets.............................................. 2,560,184
Accrued investment income.......................................... 42,074
Uncollected premiums............................................... 23,045
Reinsurance recoverable on life and health policy liabilities...... 191,070
Deferred policy acquisition costs (Note 4)......................... 558,345
Value assigned purchased insurance in force (Note 4)............... 48,148
Goodwill, net of accumulated amortization of $19,881............... 67,568
Property and equipment, net of accumulated depreciation of $64,759. 47,822
Separate account assets............................................ 153,101
Other assets....................................................... 68,722
----------
1,199,895
----------
Total assets....................................................... $3,760,079
==========
LIABILITIES
Policy liabilities
Policy fund balances............................................. $1,858,813
Future policy benefits........................................... 597,919
Policy and contract claims....................................... 135,386
Premiums paid in advance......................................... 2,877
Other policyholders' funds....................................... 64,588
----------
2,659,583
Mortgage loan payable (Note 12)................................... 5,965
Short term debt (Note 12)......................................... 36,000
Federal income taxes payable (Note 5)............................. 5,212
Deferred federal income taxes (Note 5)............................ 66,182
Separate account liabilities...................................... 153,101
Accrued expenses and other liabilities (Note 6)................... 100,452
----------
Total liabilities.................................................. 3,026,495
Commitments and contingent liabilities (Notes 7, 10 and 15)
Minority interest in consolidated subsidiary (Note 1).............. 1,774
SHAREHOLDER'S EQUITY
Common stock--$5 par value, 600,000 shares authorized, issued and
outstanding...................................................... 3,000
Paid in capital................................................... 249,872
Unrealized appreciation (depreciation) of investments, net (Note
3)............................................................... (33,907)
Retained earnings................................................. 512,845
----------
Total shareholder's equity......................................... 731,810
----------
Total liabilities and shareholder's equity......................... $3,760,079
==========
</TABLE>
See accompanying notes.
F-2
<PAGE>
CONSOLIDATED STATEMENT OF INCOME
CHUBB LIFE INSURANCE COMPANY OF AMERICA AND SUBSIDIARIES
YEAR ENDED DECEMBER 31, 1994
(IN THOUSANDS)
<TABLE>
<S> <C>
REVENUES
Universal life and investment product policy charges.............. $ 164,246
Traditional life insurance premiums............................... 132,576
Accident and health premiums...................................... 539,471
Net investment income............................................. 206,315
Realized investment gains......................................... 9,304
Other income...................................................... 4,139
----------
Total revenues...................................................... 1,056,051
BENEFITS, CLAIMS AND EXPENSES
Policy benefits and claims
Death............................................................. 108,880
Accident and health............................................... 478,231
Other............................................................. 145,549
Change in reserves for future policy benefits
Traditional life insurance........................................ 17,009
Accident and health insurance..................................... 2,536
----------
752,205
EXPENSES
Commissions and other operating expenses............................ 201,788
Amortization
Deferred policy acquisition costs................................. 68,521
Value assigned purchased insurance in force, net.................. 3,729
Goodwill.......................................................... 2,186
----------
276,224
----------
Total benefits, claims and expenses................................. 1,028,429
----------
Income before federal income tax.................................... 27,622
Federal income tax (benefit)
Current........................................................... 9,808
Deferred.......................................................... (2,301)
----------
7,507
----------
Income before minority interest..................................... 20,115
Minority interest in net loss of consolidated subsidiary.......... (436)
----------
Net Income.......................................................... $ 20,551
==========
</TABLE>
See accompanying notes.
F-3
<PAGE>
CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY
CHUBB LIFE INSURANCE COMPANY OF AMERICA AND SUBSIDIARIES
YEAR ENDED DECEMBER 31, 1994
(IN THOUSANDS)
<TABLE>
<S> <C>
Common stock
Balance, beginning and end of year................................. $ 3,000
--------
Paid in capital
Balance, beginning and end of year................................. 249,872
--------
Unrealized appreciation (depreciation) of investments, net
Balance, beginning of year......................................... 9,245
Cumulative effect, as of January 1, 1994, of change in accounting
principle, net (Note 2)........................................... 25,140
Change, net (Note 3)............................................... (68,292)
--------
Balance, end of year............................................... (33,907)
--------
Retained earnings
Balance, beginning of year......................................... 496,302
Net income......................................................... 20,551
Dividends to parent................................................ (4,008)
--------
Balance, end of year............................................... 512,845
--------
Total shareholder's equity........................................... $731,810
========
</TABLE>
See accompanying notes.
F-4
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
CHUBB LIFE INSURANCE COMPANY OF AMERICA AND SUBSIDIARIES
YEAR ENDED DECEMBER 31, 1994
(IN THOUSANDS)
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net income.......................................................... $ 20,551
Adjustments to reconcile net income to net cash used in operating
activities:
Decrease in future policy benefits, policy and contract claims and
premiums paid in advance, net.................................... (10,763)
Decrease in uncollected premiums.................................. 5,141
Increase in deferred policy acquisition costs..................... (60,695)
Net amortization of value assigned purchased insurance in force... 3,729
Decrease in accrued investment income............................. 874
Realized investment gains......................................... (9,304)
Accretion of investment discounts................................. (4,337)
Provision for depreciation........................................ 8,768
Provision for deferred income tax................................. (2,301)
Decrease in federal income tax payable............................ (3,769)
Other, net........................................................ (18,469)
---------
Net cash used in operating activities............................... (70,575)
INVESTING ACTIVITIES
Proceeds from sales of fixed maturities............................. 186,113
Proceeds from maturities of fixed maturities........................ 172,647
Proceeds from sales of equity securities............................ 56,312
Purchases of fixed maturities....................................... (450,900)
Purchases of equity securities...................................... (39,015)
Increase in short term investments, net............................. (55,917)
Policy loans issued, net of repayments.............................. (11,499)
Mortgage loans, net................................................. 3,136
Other, net.......................................................... (6,218)
---------
Net cash used for investing activities.............................. (145,341)
FINANCING ACTIVITIES
Deposits credited to policyholders' funds........................... 336,759
Withdrawals from policyholders' funds............................... (122,502)
Mortgage debt principal payments.................................... (672)
Dividends to Parent................................................. (4,008)
Increase in short term debt......................................... 4,700
Decrease in cash overdraft.......................................... (611)
Capital contribution by minority shareholder........................ 2,250
---------
Net cash provided by financing activities........................... 215,916
Increase in cash.................................................... 0
---------
Cash, beginning and end of year (Note 1)............................ $ 0
=========
</TABLE>
See accompanying notes.
F-5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CHUBB LIFE INSURANCE COMPANY OF AMERICA AND SUBSIDIARIES
DECEMBER 31, 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying financial statements reflect the consolidated life and
health insurance operations of Chubb Life Insurance Company of America and its
subsidiaries (the Company). Wholly-owned subsidiaries include Chubb America
Service Corporation, The Colonial Life Insurance Company of America (Colonial),
Chubb Investment Advisory Corporation, and Chubb Sovereign Life Insurance
Company (Sovereign). Majority-owned subsidiaries include ChubbHealth Holdings,
Inc (ChubbHealth). All significant intercompany accounts and transactions have
been eliminated in consolidation. Chubb Life Insurance Company of America is
wholly-owned by The Chubb Corporation (the Parent).
ChubbHealth is an insurance holding company which owns 100% of ChubbHealth,
Inc. (CHI), a health maintenance organization (HMO). CHI commenced operations
in the New York City metropolitan area on June 1, 1994. ChubbHealth is jointly
owned by the Company and Healthsource, New York, Inc. (Healthsource). The
Company owns 85% of the outstanding stock of ChubbHealth.
BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles (GAAP).
RECOGNITION OF REVENUES, BENEFITS, CLAIMS AND EXPENSES:
Universal Life Products Universal life products include universal life
insurance, variable universal life insurance, and other interest-sensitive life
insurance policies. Revenues for universal life products consist of policy
charges for the cost of insurance, policy administration and surrenders that
have been assessed against policy account balances during the period.
Policy fund liabilities for universal life and other interest-sensitive life
insurance policies are computed in accordance with the retrospective deposit
method and represent policy account balances before surrender charges. Policy
fund assets and liabilities for variable universal life insurance are
segregated and recorded as separate account assets and liabilities. Separate
account assets are carried at market values as of the balance sheet date and
are invested by the Company at the direction of the policyholder. Investments
are made in one or more of eight portfolios in a series fund. Each of the
portfolios has specific investment objectives and the investment income and
investment gains and losses accrue directly to, and investment risk is borne
by, the policyholders. Accordingly, operating results of the separate account
are not included in the consolidated statements of income.
Policy claims that are charged to expense include claims incurred in the
period in excess of related policy account balances. Other policy benefits
include interest credited to universal life and other interest-sensitive life
insurance policies. Interest crediting rates ranged from 4 1/2% to 7 5/8%.
Investment Products Investment products include flexible premium annuities,
structured settlement annuities and other supplementary contracts without life
contingencies. Revenues for investment products consist of policy charges for
the cost of insurance, policy administration and surrenders that have been
assessed against policy account balances during the period. Deposits for these
products are recorded as policy fund liabilities, which are increased by
interest credited to the liabilities and decreased by withdrawals and
administrative charges assessed against the contract holders. Interest
crediting rates ranged from 3 1/2% to 8 7/8%.
Traditional Life Insurance Products Traditional life insurance products
include those products with fixed and guaranteed premiums and benefits. Premium
revenues for traditional life insurance are recognized as revenues when due.
The liabilities for future policy benefits have been computed by the net level
premium method based on estimated future investment yield, mortality and
withdrawal experience. Interest rate assumptions ranged from 3% to 9%.
Mortality has been calculated principally on an experience multiple applied to
select and ultimate tables in common usage in the
F-6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CHUBB LIFE INSURANCE COMPANY OF AMERICA AND SUBSIDIARIES
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
industry. Estimated withdrawals have been determined principally based on
industry tables. Policy benefits and claims are charged to expense as incurred.
Accident and Health Insurance Accident and health insurance premiums are
earned on a monthly pro rata basis over the terms of the policies. Benefits
include paid claims plus an estimate for known claims and claims incurred but
not reported as of the balance sheet date.
Reinsurance In the ordinary course of business, the Company and its insurance
subsidiaries assume and cede reinsurance with other insurance companies. These
arrangements minimize the maximum net loss potential arising from large risks.
Reinsurance contracts do not relieve the Company and its insurance subsidiaries
from their obligation to policyholders. The Company evaluates the financial
condition of its reinsurers and monitors concentrations of credit risk arising
from similar activities or economic characteristics of the reinsurers to
minimize its exposure to significant losses from reinsurer insolvencies.
Reinsurance recoverable on life and health policy liabilities represent
estimates of the portion of such liabilities that will be recovered from
reinsurers, determined in a manner consistent with the liabilities associated
with the reinsured policies.
Deferred Policy Acquisition Costs Certain costs of acquiring insurance
contracts, principally commissions, underwriting costs and certain variable
field office expenses have been deferred. Deferred policy acquisition costs for
universal life and investment contracts are being amortized over the lives of
the contracts in relation to the present value of estimated gross profits
expected to be realized. Beginning in 1994, deferred policy acquisition costs
related to universal life and investment contracts are also adjusted to reflect
the effects that the unrealized gains or losses on investments classified as
available-for-sale would have had on the present value of estimated gross
profits had such gains or losses actually been realized. This adjustment is
excluded from income and charged or credited directly to the unrealized
appreciation or depreciation of the investments component of shareholder's
equity, net of applicable deferred income tax.
Traditional life insurance deferred policy acquisition costs are being
amortized over the premium-payment period of the related policies using
assumptions consistent with those used in computing policy benefit reserves.
Value Assigned Purchased Insurance In Force The value assigned purchased
insurance in force is being amortized principally over the estimated life of
the insurance in force at the date of acquisition in proportion to the
emergence of profit using assumptions consistent with those used in the
amortization of the deferred policy acquisition costs. Interest accrues on the
unamortized balance at rates ranging from 7 1/2% to 9 1/2%. Beginning in 1994,
value assigned purchased insurance in force related to universal life and
investment contracts is also adjusted to reflect the effects that the
unrealized gains or losses on investments classified as available-for-sale
would have had on the present value of estimated gross profits had such gains
or losses actually been realized. This adjustment is excluded from income and
charged or credited directly to the unrealized appreciation or depreciation of
the investments component of shareholder's equity, net of applicable deferred
income tax.
INVESTED ASSETS
Short term investments, which have an original maturity of one year or less,
are carried at amortized cost.
Fixed maturities, which include bonds and redeemable preferred stocks, are
purchased to support the investment strategies of the Company. These strategies
are developed based on many factors including rate of return, maturity, credit
risk, tax considerations and regulatory requirements. Those fixed maturities
which the Company has the ability and intent to hold to maturity are considered
held-to-maturity (previously referred to as held-for-investment) and carried at
amortized cost. Fixed maturities which may be sold prior to maturity to support
the investment strategies of the Company are considered available-for-sale and
carried at market value as of the balance sheet date. Prior to 1994, fixed
maturities considered available-for-sale were carried at the lower of aggregate
amortized cost or market value as of the balance sheet date.
F-7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CHUBB LIFE INSURANCE COMPANY OF AMERICA AND SUBSIDIARIES
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
Equity securities, which include common stocks and non-redeemable preferred
stocks, are carried at market values as of the balance sheet date.
Policy loans are carried at the unpaid balances. Mortgage loans on real
estate are carried at the unpaid balances, adjusted for amortization of premium
or discount.
Realized gains and losses on the sale of investments are determined on the
basis of the cost of the specific investments sold and are credited or charged
to income. Unrealized appreciation or depreciation on those investments which
are carried at market value is excluded from income and credited or charged
directly to a separate component of shareholder's equity.
GOODWILL
Goodwill, which represents the excess of the purchase price over the fair
value of net assets of subsidiaries acquired, is amortized using the straight-
line method over 40 years.
PROPERTY AND EQUIPMENT
Property and equipment used in operations are carried at cost less
accumulated depreciation. Depreciation is calculated using the straight-line
method over the estimated useful lives of the assets.
FEDERAL INCOME TAXES
The Company files a consolidated federal income tax return with its parent.
Federal income tax is allocated as if the Company and its subsidiaries filed a
separate consolidated income tax return. Deferred income tax assets and
liabilities are recognized for the expected future tax effects attributable to
temporary differences between the financial reporting and tax bases of assets
and liabilities, based on enacted tax rates and other provisions of tax law.
Deferred income taxes related to unrealized appreciation or depreciation of
investments carried at market value are charged or credited directly to a
separate component of shareholder's equity.
FAIR VALUES OF FINANCIAL INSTRUMENTS
Fair values of financial instruments are based on quoted market prices where
available. Fair values of financial instruments for which quoted market prices
are not available are based on estimates using present value or other valuation
techniques. Those techniques are significantly affected by the assumptions
used, including the discount rates and the estimates of future cash flows.
Accordingly, the derived fair value estimates cannot be substantiated by
comparison to independent markets and are not necessarily indicative of the
amounts that could be realized in immediate settlement of the instrument.
Certain financial instruments, particularly insurance contracts, are excluded
from fair value disclosure requirements.
The methods and assumptions used to estimate the fair value of financial
instruments are as follows:
. Fair values of fixed maturities with active markets are based on quoted
market prices. For fixed maturities that trade in less active markets,
fair values are obtained from independent pricing services. Fair values
of fixed maturities are principally a function of current interest
rates. Care should be used in evaluating the significance of these
estimated market values.
. Fair values of equity securities are based on quoted market prices.
. The carrying value of short term investments approximates fair value due
to the short maturities of these investments.
. Fair values of policy loans and mortgage loans are estimated using
discounted cash flow analyses and approximate carrying values.
. The carrying value of short term debt approximates fair value due to the
short maturities of the debt.
F-8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CHUBB LIFE INSURANCE COMPANY OF AMERICA AND SUBSIDIARIES
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
The carrying value and fair value of financial instruments at December 31,
1994 are as follows:
<TABLE>
<CAPTION>
CARRYING FAIR
VALUE VALUE
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Assets
Invested assets
Fixed maturities
Held-to-maturity................................ $ 620,935 $ 605,962
Available-for-sale.............................. 1,537,409 1,537,409
Equity securities................................. 86,768 86,768
Short term investments............................ 112,393 112,393
Policy loans...................................... 190,694 190,694
Mortgage loans on real estate..................... 11,985 11,985
Liabilities
Short term debt..................................... 36,000 36,000
</TABLE>
CASH FLOW INFORMATION
In the statement of cash flows, short term investments are not considered to
be cash equivalents. Cash overdrafts are included in accrued expenses and other
liabilities. The overdrafts at December 31, 1994 were $29,574,000.
2. CHANGES IN ACCOUNTING PRINCIPLES
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 115, Accounting for Certain Investments in Debt
and Equity Securities. Similar to the Company's previous accounting policy for
investments in fixed maturities and equity securities, SFAS No. 115 provides
that the accounting for such securities depends on their classification as
either held-to-maturity (previously referred to as held-for-investment),
available-for-sale or trading. However, SFAS No. 115 establishes more stringent
criteria for classifying fixed maturities as held-to-maturity. Therefore, the
adoption of SFAS No. 115 resulted in an increase in the portion of the
Company's fixed maturities classified as available-for-sale and a similar
decrease in those classified as held-to-maturity. SFAS No. 115 also requires
that fixed maturities classified as available-for-sale be carried at market
value, with unrealized appreciation or depreciation excluded from income and
credited or charged directly to a separate component of shareholder's equity.
Prior to 1994, such fixed maturities were carried at the lower of the aggregate
amortized cost or market value. In conjunction with the Company's adoption of
SFAS No. 115, deferred policy acquisition costs and value assigned purchased
insurance in force related to universal life and investment contracts were
adjusted to reflect the effects that would have been recognized had the
unrealized gains relating to investments classified as available-for-sale
actually been realized, with a corresponding charge directly to the separate
component of shareholder's equity. SFAS No. 115 may not be retroactively
applied to prior years' financial statements. The cumulative effect, as of
January 1, 1994, of the change in accounting principle on shareholder's equity,
was as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Unrealized appreciation of fixed maturities considered
available-for-sale....................................... $ 99,395
Adjustment to deferred policy acquisition costs........... (54,838)
Adjustment to value assigned purchased insurance in force. (5,882)
--------
38,675
Deferred income tax....................................... 13,535
--------
Increase in shareholder's equity........................ $ 25,140
========
</TABLE>
Adoption of the SFAS No. 115 did not have an impact on net income in 1994 nor
is it expected to in future years.
F-9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CHUBB LIFE INSURANCE COMPANY OF AMERICA AND SUBSIDIARIES
3. INVESTED ASSETS
The sources of net investment income for the year ended December 31, 1994
were as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Fixed maturities............................................ $185,594
Equity securities........................................... 4,996
Short term investments...................................... 2,933
Policy loans................................................ 12,749
Mortgage loans.............................................. 1,259
Other....................................................... 1,214
--------
Gross investment income................................... 208,745
Investment expenses......................................... 2,430
--------
Net investment income..................................... $206,315
========
</TABLE>
Realized investment gains and losses for the year ended December 31, 1994
were as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Gross realized investment gains
Fixed maturities.......................................... $ 6,013
Equity securities......................................... 8,302
-------
$14,315
=======
Gross realized investment losses
Fixed maturities.......................................... $ 3,618
Equity securities......................................... 1,393
-------
$ 5,011
=======
Net realized investment gains
Fixed maturities.......................................... $ 2,395
Equity securities......................................... 6,909
-------
$ 9,304
=======
</TABLE>
Proceeds from the sales of fixed maturities considered available-for-sale
were $174,053,000. Gross gains of $5,918,000 and gross losses of $3,581,000
were realized on such sales in 1994.
F-10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CHUBB LIFE INSURANCE COMPANY OF AMERICA AND SUBSIDIARIES
3. INVESTED ASSETS--CONTINUED
The components of unrealized appreciation (depreciation) of investments
carried at market value at December 31, 1994 were as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Equity securities
Gross unrealized appreciation............................. $ 7,744
Gross unrealized depreciation............................. 2,778
--------
4,966
Fixed maturities
Gross unrealized appreciation............................. 16,434
Gross unrealized depreciation............................. 72,886
--------
(56,452)
--------
(51,486)
Deferred policy acquisition costs adjustment................ 23,545
Value assigned purchased insurance in force adjustment...... 3,438
--------
26,983
Minority interest in unrealized depreciation................ 39
Deferred tax asset, net..................................... (8,564)
Tax valuation allowance..................................... 18,007
--------
$(33,907)
========
</TABLE>
The changes in unrealized appreciation or depreciation of investments carried
at market value for the year ended December 31, 1994 were as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Change in unrealized appreciation of equity securities..... $ (9,257)
Change in unrealized appreciation of fixed maturities...... (155,808)
Change in deferred policy acquisition costs adjustment..... 78,383
Change in value assigned purchased insurance in force ad-
justment.................................................. 9,320
---------
(77,362)
Deferred income tax (credit)............................... (27,077)
Change in tax valuation allowance.......................... 18,007
---------
(68,292)
Cumulative effect, as of January 1, 1994, of change in ac-
counting principle, net................................... 25,140
---------
$ (43,152)
=========
</TABLE>
The cost of equity securities was $81,802,000 at December 31, 1994.
F-11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CHUBB LIFE INSURANCE COMPANY OF AMERICA AND SUBSIDIARIES
3. INVESTED ASSETS--CONTINUED
The amortized costs and estimated market value of fixed maturities were as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1994
-------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Held-to-maturity
Tax exempt bonds.............. $ 1,840 $ 80 $ 35 $ 1,885
---------- ------- ------- ----------
Taxable
U.S. Government and
government agency and
authority obligations...... 17,256 163 17,093
Corporate bonds............. 235,056 8,809 1,976 241,889
Foreign bonds............... 149 17 166
Mortgage-backed securities.. 366,634 2,316 24,021 344,929
---------- ------- ------- ----------
Total taxable................. 619,095 11,142 26,160 604,077
---------- ------- ------- ----------
Total held-to-maturity........ 620,935 11,222 26,195 605,962
---------- ------- ------- ----------
Available-for-sale
Taxable
U.S. Government and
government agency and
authority obligations...... 128,637 108 6,912 121,833
Corporate bonds............. 819,640 12,147 39,451 792,336
Foreign bonds............... 4,828 89 338 4,579
Mortgage-backed securities.. 637,729 3,822 26,127 615,424
Redeemable preferred stocks. 3,027 268 58 3,237
---------- ------- ------- ----------
Total available-for-sale........ 1,593,861 16,434 72,886 1,537,409
---------- ------- ------- ----------
Total fixed maturities.......... $2,214,796 $27,656 $99,081 $2,143,371
========== ======= ======= ==========
</TABLE>
The change in unrealized appreciation or depreciation of fixed maturities
carried at amortized cost is not reflected in the financial statements. The
change in unrealized appreciation or depreciation of such fixed maturities was
depreciation of $166,767,000 for the year ended December 31, 1994. The change
includes a reduction of $99,395,000 for the cumulative effect, as of January 1,
1994, resulting from the implementation of SFAS No. 115.
The amortized cost and estimated market value of fixed maturities at December
31, 1994 by contractual maturity were as follows:
<TABLE>
<CAPTION>
HELD-TO-MATURITY AVAILABLE-FOR-SALE
------------------- ---------------------
ESTIMATED ESTIMATED
AMORTIZED MARKET AMORTIZED MARKET
COST VALUE COST VALUE
--------- --------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Due in one year or less........... $ 8,289 $ 8,340
Due after one year through five
years............................ $ 43,976 $ 45,138 160,541 162,689
Due after five years through ten
years............................ 94,805 99,971 352,589 337,511
Due after ten years............... 115,520 115,924 434,713 413,445
-------- -------- ---------- ----------
Subtotal........................ 254,301 261,033 956,132 921,985
Mortgage-backed securities........ 366,634 344,929 637,729 615,424
-------- -------- ---------- ----------
$620,935 $605,962 $1,593,861 $1,537,409
======== ======== ========== ==========
</TABLE>
Actual maturities could differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call or
prepayment penalties.
F-12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CHUBB LIFE INSURANCE COMPANY OF AMERICA AND SUBSIDIARIES
4. DEFERRED POLICY ACQUISITION COSTS AND VALUE ASSIGNED PURCHASED INSURANCE IN
FORCE
Policy acquisition costs deferred and the related amortization charged to
income for the year ended December 31, 1994 were as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Balance, beginning of year................................. $474,105
Cumulative effect, as of January 1, 1994, of change in
accounting principle...................................... (54,838)
Costs deferred during year................................. 129,216
Amortization during year................................... (68,521)
Change in adjustment to reflect the effects of unrealized
depreciation of investments............................... 78,383
--------
Balance, end of year....................................... $558,345
========
</TABLE>
Changes in the value assigned purchased in force for the year ended December
31, 1994 were as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Balance, beginning of year................................. $48,439
Cumulative effect, as of January 1, 1994, of change in
accounting principle...................................... (5,882)
Accrued interest........................................... 4,040
Amortization............................................... (7,769)
Change in adjustment to reflect the effects of unrealized
depreciation of investments............................... 9,320
-------
Balance, end of year....................................... $48,148
=======
</TABLE>
The estimated net amortization of the value assigned purchased insurance in
force is as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Year Ending December 31:
1995...................................................... $ 3,780
1996...................................................... 3,623
1997...................................................... 3,350
1998...................................................... 3,057
1999...................................................... 2,641
Subsequent to 1999........................................ 31,697
-------
$48,148
=======
</TABLE>
5. FEDERAL INCOME TAXES
Federal income tax provisions for the year ended December 31, 1994 have been
computed using the tax rates and regulations in effect during the year. The
provision for federal income tax gives effect to permanent differences between
financial and taxable income. Accordingly, the effective tax rate is less than
the statutory federal corporate tax rate. The reasons for the lower effective
tax rate were as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Tax at statutory federal income tax rate (35%).............. $ 9,667
Dividends received deduction and tax exempt income.......... (1,925)
Amortization of goodwill.................................... 394
Foreign taxes............................................... (952)
Settlement of prior years' federal income tax expense....... 34
Other....................................................... 289
-------
Federal income tax expense................................ $ 7,507
=======
</TABLE>
F-13
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CHUBB LIFE INSURANCE COMPANY OF AMERICA AND SUBSIDIARIES
5. FEDERAL INCOME TAXES--CONTINUED
The tax effects of temporary differences that gave rise to deferred income
tax liabilities and assets at December 31, 1994 were as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Deferred income tax liabilities:
Deferred policy acquisition costs......................... $161,721
Value assigned purchased insurance in force............... 21,926
--------
Total................................................... 183,647
Deferred income tax assets:
Future policy benefits and policy fund balances........... 127,867
Valuation allowance for deferred tax assets............... (18,007)
Other..................................................... 7,605
--------
Total................................................... 117,465
--------
Net deferred income tax liabilities......................... $ 66,182
========
</TABLE>
The valuation allowance has been established primarily for the deferred
income tax asset related to the unrealized depreciation of investments at
December 31, 1994 due to the uncertainty as to when, if ever, such losses might
be realized.
Prior to 1984, life insurance companies were allowed certain special
deductions for federal income tax purposes which could become subject to tax at
normal rates under certain circumstances, including distribution to
shareholders. These special deductions were set aside in a Policyholders'
Surplus Account. Under the 1984 Act, no further additions to this account are
permitted. At December 31, 1994, approximately $13,464,000 of untaxed retained
earnings remained. No income taxes have been provided since management does not
anticipate any transaction that would cause this remaining amount to become
taxable. The unrecognized deferred tax related to the Policyholders' Surplus
Account is $4,712,000.
Federal income taxes paid in 1994 were $13,577,000.
6. PENSIONS AND OTHER POSTRETIREMENT BENEFITS
(A) The Company has several noncontributory defined benefit pension plans
covering substantially all employees. The benefits are generally based on an
employee's years of service and average compensation during the last five years
of employment. Pension costs are determined using the projected unit credit
method. The Company's policy is to make annual contributions that meet the
minimum funding requirements of the Employee Retirement Income Security Act of
1974. Contributions are intended to provide not only for benefits attributed to
service but also for those expected to be earned in the future.
The components of net pension cost for the year ended December 31, 1994 were
as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Service cost of current period.............................. $ 3,387
Interest cost on projected benefit obligation............... 5,098
Actual return on plan assets................................ (27)
Net amortization and deferral............................... (6,253)
-------
Net pension cost............................................ $ 2,205
=======
</TABLE>
F-14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CHUBB LIFE INSURANCE COMPANY OF AMERICA AND SUBSIDIARIES
6. PENSIONS AND OTHER POSTRETIREMENT BENEFITS--CONTINUED
The following table sets forth the plans' funded status and amounts
recognized in the balance sheet at December 31, 1994:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Actuarial present value of benefit obligations for service
rendered to date:
Accumulated benefit obligations, including vested benefits
of $53,769............................................... $55,388
Additional amount related to projected future salary
increases................................................ 15,892
-------
Projected benefit obligation for service rendered to date... 71,280
Plan assets at fair value, primarily listed stocks and
bonds...................................................... 66,833
-------
Plan assets less than projected benefit obligation.......... 4,447
Unrecognized net gain from past experience different from
that assumed and effects of changes in assumptions......... 2,818
Unrecognized prior service cost............................. (2,308)
Unrecognized net obligation at January 1, 1986 being
recognized over thirteen years............................. 1,335
-------
Pension liability included in other liabilities............. $ 6,292
=======
</TABLE>
The weighted average discount rates used in determining the actuarial present
value of the projected benefit obligations at December 31, 1994 was 7 3/4% and
the rate of increase in future compensation levels was 6%. The expected long-
term rate of return on assets was 9%.
(B) The Company provides certain other postretirement benefits, principally
health care and life insurance, to retired employees and their beneficiaries
and covered dependents. Substantially all employees may become eligible for
these benefits upon retirement if they meet minimum age and years of service
requirements.
The Company does not fund these benefits in advance. Benefits are paid as
covered expenses are incurred. Health care coverage is contributory. Retiree
contributions vary based upon a retiree's age, type of coverage and years of
service with the Company. Life insurance coverage is noncontributory.
The components of net postretirement benefit cost for the year ended December
31, 1994 were as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Service cost of current period.............................. $1,022
Interest cost on accumulated benefit obligation............. 1,505
------
Net postretirement benefit cost............................. $2,527
======
</TABLE>
Prior to the adoption of SFAS No. 106, the cost of other postretirement
benefits was recognized when the annual insurance premiums were paid.
The components of the accumulated postretirement benefit obligation at
December 31, 1994 were as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Retirees................................................... $ 8,899
Fully eligible active plan participants.................... 1,054
Other active plan participants............................. 11,274
-------
Accumulated postretirement benefit obligation.............. 21,227
Unrecognized net gain from past experience different from
that assumed.............................................. 986
-------
Postretirement benefit liability included in other liabili-
ties...................................................... $22,213
=======
</TABLE>
F-15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CHUBB LIFE INSURANCE COMPANY OF AMERICA AND SUBSIDIARIES
6. PENSIONS AND OTHER POSTRETIREMENT BENEFITS--CONTINUED
The weighted average discount rate used in determining the actuarial present
value of the accumulated postretirement benefit obligation at December 31, 1994
was 7 3/4%. The health care cost trend rate used to measure the accumulated
postretirement cost for medical benefits was 14 1/2% for 1994. The rate is
assumed to decrease gradually to 7 1/2% for the year 2005 and remain at that
level thereafter. The health care cost trend rate assumption has a significant
effect on the amount of the accumulated postretirement benefit obligation and
the net postretirement benefit cost reported. To illustrate, a one percent
increase in the trend rate for each year would increase the accumulated
postretirement benefit obligation at December 31, 1994 by $2,590,000 and the
aggregate of the service and interest cost components of net postretirement
benefit cost for the year ended December 31, 1994 by $349,000.
7. STOCK OWNERSHIP AND INCENTIVE PLANS
Substantially all of the Company's employees are eligible to participate in
the stock ownership and incentive plans of the Parent. The aggregate costs
associated with the plans were approximately $4,401,000 for the year ended
December 31, 1994.
8. RENT EXPENSE AND COMMITMENTS
The Company occupies office facilities under lease agreements which expire at
various dates through 2009; such leases generally are renewed or replaced by
other leases. In addition, the Company leases office and transportation
equipment. All leases are operating leases.
Total rent expense charged to operations amounted to approximately $5,099,000
for 1994. Leases generally provide that the Company pay for utilities,
insurance, taxes and maintenance and contain renewal options. At December 31,
1994, future minimum rental payments required under noncancellable operating
leases were as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Years Ending December 31:
1995..................................................... $ 4,161
1996..................................................... 3,372
1997..................................................... 2,573
1998..................................................... 2,042
1999..................................................... 1,634
Subsequent to 1999....................................... 8,749
-------
$22,531
=======
</TABLE>
9. REINSURANCE
The Company is involved in both the cession and assumption of reinsurance
with other insurance companies. Risks are reinsured with other companies to
permit the recovery of a portion of the direct losses. Sovereign had a
reinsurance recoverable resulting from a reinsurance agreement with a single
reinsurer of $102,761,000 at December 31, 1994. Sovereign coinsured fifty
percent of a block of single premium whole life policies under this agreement.
Sovereign and the reinsurer are joint and equal owners in securities and short-
term investments of $192,344,000 at December 31, 1994. The remaining
reinsurance recoverables were associated with numerous other reinsurers. The
maximum amount of individual life insurance retained on any one life, including
accidental death benefits, is $1,400,000.
F-16
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CHUBB LIFE INSURANCE COMPANY OF AMERICA AND SUBSIDIARIES
9. REINSURANCE--CONTINUED
Selected data regarding reinsurance amounts appearing in the consolidated
financial statements for 1994 are as follows:
<TABLE>
<CAPTION>
CEDED TO ASSUMED
OTHER FROM OTHER
DIRECT AMOUNT COMPANIES COMPANIES NET AMOUNT
------------- --------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Premiums Earned and Policy
Charges for the year:
Life Insurance............ $313,914 $19,068 $1,976 $296,822
Accident and Health Insur-
ance..................... 548,171 8,780 80 539,471
-------- ------- ------ --------
Total Premiums and Policy
Charges.................. $862,085 $27,848 $2,056 $836,293
======== ======= ====== ========
</TABLE>
Reinsurance recoveries of the Company which have been deducted from benefits,
claims and expenses were $53,141,000 in 1994.
10. ACCIDENT AND HEALTH UNPAID CLAIMS
The process of estimating loss reserves is an imprecise science and reflects
significant judgmental factors. Management considers facts currently known and
the present state of health care markets in which it operates when establishing
accident and health claim reserves. Management believes that the aggregate
claim liabilities at December 31, 1994 are adequate to cover claims for losses
which have occurred, including both those known and those yet to be reported.
However, changes in market conditions may require additional increases in claim
reserves which may adversely affect results in future periods. This emergence
cannot be precisely estimated.
A reconciliation of the beginning and ending liability for accident and
health unpaid claims, net of reinsurance recoverable, and a reconciliation of
the net liability to the corresponding liability on a gross basis at December
31, 1994 is as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Gross liability at beginning of year........................ $132,382
Less: reinsurance recoverable............................. 847
--------
Net liability at beginning of year.......................... 131,535
Incurred:
Current year.............................................. 469,102
Prior years............................................... (15,052)
--------
Total incurred.............................................. 454,050
Paid:
Current year.............................................. 365,573
Prior years............................................... 116,482
--------
Total paid.................................................. 482,055
--------
Net liability at end of year................................ 103,530
Plus: reinsurance recoverable............................. 1,545
--------
Gross liability at end of year.............................. $105,075
========
</TABLE>
During 1994, the accident and health business experienced overall favorable
development of $15,052,000 on claim reserves established as of the previous
year end. This difference has been reflected in operating results. Claims
settlement costs are not developed as part of the claim liability and are
reflected in operating results in the years the claims are paid.
F-17
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CHUBB LIFE INSURANCE COMPANY OF AMERICA AND SUBSIDIARIES
11. DIVIDEND RESTRICTIONS
The Company and its insurance subsidiaries are required to file annual
statements with state insurance regulatory authorities prepared on an
accounting basis prescribed or permitted by such authorities (statutory basis).
For such subsidiaries, GAAP differs in certain respects from statutory
accounting practices.
A comparison of shareholder's equity on a GAAP basis and policyholders'
surplus on a statutory basis at December 31, 1994 is as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
GAAP........................................................ $731,810
Statutory................................................... 301,084
</TABLE>
A comparison of GAAP and statutory net income (loss) for the year ended
December 31, 1994 is as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
GAAP........................................................ $20,551
Statutory................................................... (4,264)
</TABLE>
The amount of GAAP surplus in excess of statutory surplus is unavailable for
distribution. In addition, various state insurance laws restrict the Company
and its insurance subsidiaries as to the amount of dividends from statutory
surplus they may pay without the prior approval of regulatory authorities. The
restrictions generally are based on net gains from operations and on certain
levels of policyholders' surplus as determined in accordance with statutory
accounting practices. Dividends in excess of such thresholds are considered
"extraordinary" and require prior regulatory approval. The maximum ordinary
dividend distribution that may be made by the Company to the Parent during 1995
is approximately $30,100,000.
12. DEBT AND CREDIT ARRANGEMENTS
(a) Short term debt at December 31, 1994 consisted of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Commercial paper............................................ $26,000
Notes....................................................... 10,000
-------
$36,000
=======
</TABLE>
The short term commercial paper was issued by Chubb Capital Corporation, a
subsidiary of the Parent. The interest rate is variable and is based on Chubb
Capital Corporation's cost of funds. Interest paid on the borrowings in 1994
was $1,094,000. In addition, the Company has a loan agreement with a bank
providing for a line of credit of $36,000,000 at a variable interest rate.
There were $10,000,000 in borrowings against this line of credit at December
31, 1994. Interest paid on these borrowings was $382,000 in 1994.
(b) Long term debt consisted of the following:
A mortgage loan payable, which is secured by a portion of the Company's home
office property in Concord, New Hampshire, bears interest at 11 3/8% and is
payable monthly through December 2000.
F-18
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CHUBB LIFE INSURANCE COMPANY OF AMERICA AND SUBSIDIARIES
12. DEBT AND CREDIT ARRANGEMENTS--CONTINUED
Debt maturities of the mortgage loan payable are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Years ending December 31:
1995..................................................... $ 753
1996..................................................... 843
1997..................................................... 944
1998..................................................... 1,057
1999..................................................... 1,184
Subsequent to 1999....................................... 1,184
------
$5,965
======
</TABLE>
Interest paid on the mortgage loan in 1994 was $721,000.
13. BUSINESS SEGMENTS
The Company is principally engaged in the sale of individual and group life
and health insurance products. Insurance revenues, net investment income and
earnings before federal income taxes for the year ended December 31, 1994 for
each class of business were as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Revenues:
Individual insurance:
Premiums and policy charges........................... $271,947
Investment income..................................... 192,414
Group insurance:
Premiums.............................................. 564,346
Investment income..................................... 13,901
Earnings (loss) before federal income taxes and minority
interest:
Individual insurance.................................. 47,858
Group insurance....................................... (29,540)
Realized gains........................................ 9,304
--------
$ 27,622
========
</TABLE>
It is not practicable to determine identifiable assets and capital
expenditures applicable to the foregoing classes of business.
Earnings before federal income taxes by class of business reflect allocations
of investment income and significant expenses using allocation methods deemed
to be reasonable. Other acceptable allocation methods could produce different
results by groupings of classes of business.
14. ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED
In May 1993, the Financial Accounting Standards Board (FASB) issued SFAS
No.114, Accounting by Creditors for Impairment of a Loan. Under SFAS No. 114, a
loan is considered impaired and a valuation allowance is established when it is
probable that a creditor will be unable to collect all principal and interest
amounts due according to the contractual terms of the loan agreement. SFAS No.
114 requires creditors to measure impairment of a loan based on the present
value of expected future cash flows discounted at the loan's effective interest
rate or, as a practical expedient, based on the market price of the loan or the
fair value of the collateral if the loan is collateral dependent. Currently,
the Company measures impairment of a loan based on undiscounted expected future
cash flows. SFAS No. 114 is effective for fiscal years beginning after December
15, 1994. Restatement of prior years' financial statements is not permitted.
The Company will adopt SFAS No. 114 in the first quarter of 1995. The adoption
will not have a significant effect on net income in 1995.
F-19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CHUBB LIFE INSURANCE COMPANY OF AMERICA AND SUBSIDIARIES
15. LITIGATION
The Company is involved in pending or threatened lawsuits arising from the
normal conduct of its insurance business. Several suits have been brought
against the Company seeking both punitive and compensatory damages. Management
is of the opinion that these suits are substantially without merit, that valid
defenses exist, and that such litigation will not have a material effect on the
consolidated financial statements.
F-20
<PAGE>
APPENDIX A
ILLUSTRATIONS OF ACCUMULATION VALUES CASH VALUES AND DEATH BENEFITS
Following are a series of tables that illustrate how the accumulation values,
cash values and death benefits of a policy change with the investment
performance of the Trust. The tables show how the accumulation values, cash
values and death benefits of a Policy issued to an insured(s) of a given age(s)
and given premium would vary over time if the return on the assets held in each
Portfolio of the Trust were a constant gross annual rate of 0%, 6%, and 12%.
The tables on pages A-2 through A-7 illustrate a Chubb Heritage I Policy issued
to a male, age 35, under a standard rate non-smoker underwriting risk
classification. The tables on pages A-8 through A-13 illustrate a Chubb
Heritage II Policy issued to a male, age 40, under a standard rate non-smoker
underwriting risk classification and a female, age 35, under a standard rate
non-smoker underwriting risk classification. The accumulation values, cash
values and death benefits would be different from those shown if the returns
averaged 0%, 6%, and 12% over a period of years, but fluctuated above and below
those averages for individual policy years.
The amount of the accumulation value exceeds the cash value during the first
five policy years due to the surrender charge. For policy years six and after,
the accumulation value and cash value are equal, since the surrender charge has
been reduced to zero.
The second column shows the accumulation value of the premiums paid at the
stated interest rate. The third and sixth columns illustrate the accumulation
values and the fourth and seventh columns illustrate the cash values of the
Policy over the designated period. The accumulation values shown in the third
column and the cash values shown in the fourth column assume the monthly charge
for cost of insurance is based upon the current cost of insurance rates and
assume a cost of insurance discount which varies based on the Specified Amount
of the Policy. The current cost of insurance rates, which may be modified at
any time, are based on the sex, issue age, policy year, and rating class of the
Insured(s). The accumulation values shown in the sixth column and the cash
values shown in the seventh column assume the monthly charge for cost of
insurance is based upon the maximum cost of insurance rates allowable, which
are based on the Commissioner's 1980 Standard Ordinary Mortality Table. The
fifth and eighth columns illustrate the death benefit of a Policy over the
designated period. The illustrations of death benefits reflect the same
assumptions as the accumulation values and cash values. The death benefit
values also vary between tables, depending upon whether Option I or Option II
death benefits are illustrated.
The amounts shown for the death benefit, accumulation values, and cash values
reflect the fact that the net investment return of the Divisions of Separate
Account C is lower than the gross rates of return on the assets in the Trust,
as a result of expenses paid by the Trust and charges levied against the
Divisions of Separate Account C.
The policy values shown take into account a daily investment advisory fee
equivalent to the maximum annual rate of .62% of the aggregate average daily
net assets of the Portfolios of the Trust plus an assumed charge of .30% of the
aggregate average daily net assets to cover expenses incurred by the Trust. The
.62% investment advisory fee is an average of the individual investment
advisory fees of the five Portfolios. See the attached Prospectus for the Trust
for a description of the assumption of expenses of the Trust in excess of
specified annual rates averaging .92%. The policy values also take into account
a daily charge to each Division of Separate Account C for assuming mortality
and expense risks which is equivalent to a charge at an annual rate of .65% of
the average net assets of the Divisions of Separate Account C. After deduction
of these amounts, the illustrated gross investment rates of 0%, 6%, and 12%
correspond to approximate net annual rates of -1.57%, 4.43%, and 10.43%,
respectively.
The hypothetical values shown in the tables do not reflect any charges for
federal income taxes or other taxes other than the DAC tax. However, if, in the
future, any additional charges are made, the gross annual investment rate of
return would have to exceed the stated investment rates by a sufficient amount
to cover the tax charges in order to produce the accumulation values, cash
values and death benefits illustrated.
The tables illustrate the policy values that would result based on
hypothetical investment rates of return if premiums are paid in full at the
beginning of each year, if all net premiums are allocated to Separate Account
C, and if no policy loans have been made. The values would vary from those
shown if the assumed annual premium payments were paid in installments during a
year. The values would also vary if the Policyowner varied the amount or
frequency of premium payments. The tables also assume that the Policyowner has
not requested an increase or decrease in Specified Amount, that no withdrawals
have been made and no surrender charges imposed, and that no transfers have
been made and no transfer charges imposed.
Upon request, Chubb Life will provide, without charge, a comparable
illustration based upon the proposed insured's age, sex and rating class, the
Specified Amount requested, the proposed frequency and amount of premium
payments and any available riders requested. Existing policyowners may request
illustrations based on existing cash value at the time of request. Chubb Life
has reserved the right to charge an administrative fee of up to $25 for such
illustrations.
A-1
<PAGE>
CHUBB LIFE INSURANCE COMPANY OF AMERICA
CHUBB HERITAGE I FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
DEATH BENEFIT OPTION I ASSUMED HYPOTHETICAL GROSS
MALE NON-SMOKER ISSUE AGE 35 ANNUAL RATE OF RETURN: 0% (-1.57% NET)
$1,000,000 INITIAL SPECIFIED AMOUNT ASSUMED ANNUAL PREMIUM (1): $12,360
<TABLE>
<CAPTION>
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED --------------------------------- --------------------------------
OF AT 5% INTEREST ACCUMULATION CASH DEATH ACCUMULATION CASH DEATH
YEAR PER YEAR VALUE(2) VALUE(2) BENEFITS(2) VALUE(2) VALUE(2) BENEFIT(2)
---- -------------- ------------ -------- ----------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 12,978 10,905 10,287 1,000,000 9,693 9,075 1,000,000
2 26,605 21,566 21,072 1,000,000 19,172 18,677 1,000,000
3 40,913 31,932 31,561 1,000,000 28,413 28,042 1,000,000
4 55,937 42,047 41,800 1,000,000 37,412 37,164 1,000,000
5 71,712 51,936 51,813 1,000,000 46,155 46,032 1,000,000
6 88,275 61,604 61,604 1,000,000 54,640 54,640 1,000,000
7 105,667 71,047 71,047 1,000,000 62,844 62,844 1,000,000
8 123,928 80,260 80,260 1,000,000 70,775 70,775 1,000,000
9 143,103 89,248 89,248 1,000,000 78,410 78,410 1,000,000
10 163,236 98,000 98,000 1,000,000 85,758 85,758 1,000,000
11 184,376 106,529 106,529 1,000,000 92,789 92,789 1,000,000
12 206,572 114,796 114,796 1,000,000 99,492 99,492 1,000,000
13 229,879 122,799 122,799 1,000,000 105,859 105,859 1,000,000
14 254,351 130,520 130,520 1,000,000 111,878 111,878 1,000,000
15 280,047 137,947 137,947 1,000,000 117,523 117,523 1,000,000
16 307,027 145,091 145,091 1,000,000 122,784 122,784 1,000,000
17 335,356 151,917 151,917 1,000,000 127,610 127,610 1,000,000
18 365,102 158,390 158,390 1,000,000 131,950 131,950 1,000,000
19 396,335 164,511 164,511 1,000,000 135,761 135,761 1,000,000
20 429,130 170,238 170,238 1,000,000 138,976 138,976 1,000,000
25 619,402 191,810 191,810 1,000,000 144,326 144,326 1,000,000
30 862,243 195,980 195,980 1,000,000 123,969 123,969 1,000,000
35 1,172,177 171,403 171,403 1,000,000 56,792 56,792 1,000,000
40 1,567,739 95,672 95,672 1,000,000 0 0 0
45 0 0 0 0 0 0 0
50 0 0 0 0 0 0 0
55 0 0 0 0 0 0 0
60 0 0 0 0 0 0 0
65 0 0 0 0 0 0 0
</TABLE>
-------
(1) Assumes a $12,360 premium is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
(2) Assumes that no policy loans or withdrawals have been made. Zero values
indicate lapse in the absence of an additional premium payment.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN
MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS BY THE OWNER AND DIFFERENT INVESTMENT
RATES OF RETURN FOR CHUBB SERIES TRUST. THE ACCUMULATION VALUE, CASH VALUE AND
DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATES OF RETURN AVERAGED 0% OVER A PERIOD OF YEARS, BUT FLUCTUATED
ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION
CAN BE MADE BY CHUBB LIFE, SEPARATE ACCOUNT C, OR CHUBB SERIES TRUST THAT THIS
ASSUMED INVESTMENT RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-2
<PAGE>
CHUBB LIFE INSURANCE COMPANY OF AMERICA
CHUBB HERITAGE I FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
DEATH BENEFIT OPTION I ASSUMED HYPOTHETICAL GROSS
MALE NON-SMOKER ISSUE AGE 35 ANNUAL RATE OF RETURN: 6% (4.43% NET)
$1,000,000 INITIAL SPECIFIED AMOUNT ASSUMED ANNUAL PREMIUM (1): $12,360
<TABLE>
<CAPTION>
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED ---------------------------------- ---------------------------------
OF AT 5% INTEREST ACCUMULATION CASH DEATH ACCUMULATION CASH DEATH
YEAR PER YEAR VALUE(2) VALUE(2) BENEFITS(2) VALUE(2) VALUE(2) BENEFIT(2)
---- -------------- ------------ --------- ----------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 12,978 11,582 10,964 1,000,000 10,331 9,713 1,000,000
2 26,605 23,604 23,109 1,000,000 21,057 20,563 1,000,000
3 40,913 36,026 35,655 1,000,000 32,170 31,799 1,000,000
4 55,937 48,911 48,663 1,000,000 43,680 43,433 1,000,000
5 71,712 62,300 62,176 1,000,000 55,589 55,465 1,000,000
6 88,275 76,218 76,218 1,000,000 67,909 67,909 1,000,000
7 105,667 90,683 90,683 1,000,000 80,635 80,635 1,000,000
8 123,928 105,712 105,712 1,000,000 93,792 93,792 1,000,000
9 143,103 121,335 121,335 1,000,000 107,375 107,375 1,000,000
10 163,236 137,565 137,565 1,000,000 121,413 121,413 1,000,000
11 184,376 154,443 154,443 1,000,000 135,896 135,896 1,000,000
12 206,572 171,985 171,985 1,000,000 150,836 150,836 1,000,000
13 229,879 190,219 190,219 1,000,000 166,247 166,247 1,000,000
14 254,351 209,161 209,161 1,000,000 182,143 182,143 1,000,000
15 280,047 228,836 228,836 1,000,000 198,526 198,526 1,000,000
16 307,027 249,288 249,288 1,000,000 215,414 215,414 1,000,000
17 335,356 270,520 270,520 1,000,000 232,791 232,791 1,000,000
18 365,102 292,545 292,545 1,000,000 250,643 250,643 1,000,000
19 396,335 315,410 315,410 1,000,000 268,967 268,967 1,000,000
20 429,130 339,130 339,130 1,000,000 287,743 287,743 1,000,000
25 619,402 471,809 471,809 1,000,000 388,532 388,532 1,000,000
30 862,243 629,351 629,351 1,120,244(3) 501,106 501,106 1,000,000
35 1,172,177 808,971 808,971 1,278,174(3) 626,530 626,530 1,000,000
40 1,567,739 1,008,644 1,008,644 1,432,275(3) 764,394 764,394 1,085,439(3)
45 2,072,589 1,225,045 1,225,045 1,604,809(3) 899,823 899,823 1,178,768(3)
50 2,716,918 1,455,133 1,455,133 1,775,263(3) 1,031,384 1,031,384 1,258,288(3)
55 3,539,264 1,697,889 1,697,889 1,969,551(3) 1,155,490 1,155,490 1,340,368(3)
60 4,588,809 1,960,273 1,960,273 2,175,903(3) 1,283,184 1,283,184 1,424,334(3)
65 5,928,325 2,332,605 2,332,605 2,425,909(3) 1,416,722 1,416,722 1,473,391(3)
</TABLE>
-------
(1) Assumes a $12,360 premium is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
(2) Assumes that no policy loans or withdrawals have been made. Zero values
indicate lapse in the absence of an additional premium payment.
(3) Increase is due to adjustment by the corridor percentage. See "Death
Benefits".
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN
MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS BY THE OWNER AND DIFFERENT INVESTMENT
RATES OF RETURN FOR CHUBB SERIES TRUST. THE ACCUMULATION VALUE, CASH VALUE AND
DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATES OF RETURN AVERAGED 6% OVER A PERIOD OF YEARS, BUT FLUCTUATED
ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION
CAN BE MADE BY CHUBB LIFE, SEPARATE ACCOUNT C, OR CHUBB SERIES TRUST THAT THIS
ASSUMED INVESTMENT RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-3
<PAGE>
CHUBB LIFE INSURANCE COMPANY OF AMERICA
CHUBB HERITAGE I FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
DEATH BENEFIT OPTION I ASSUMED HYPOTHETICAL GROSS
MALE NON-SMOKER ISSUE AGE 35 ANNUAL RATE OF RETURN:12% (10.43% NET)
$1,000,000 INITIAL SPECIFIED AMOUNT ASSUMED ANNUAL PREMIUM (1): $12,360
<TABLE>
<CAPTION>
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED ----------------------------------- ----------------------------------
OF AT 5% INTEREST ACCUMULATION CASH DEATH ACCUMULATION CASH DEATH
YEAR PER YEAR VALUE(2) VALUE(2) BENEFITS(2) VALUE(2) VALUE(2) BENEFIT(2)
---- -------------- ------------ ---------- ----------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 12,978 12,260 11,642 1,000,000 10,970 10,352 1,000,000
2 26,605 25,723 25,228 1,000,000 23,022 22,527 1,000,000
3 40,913 40,456 40,085 1,000,000 36,243 35,872 1,000,000
4 55,937 56,637 56,390 1,000,000 50,750 50,503 1,000,000
5 71,712 74,441 74,318 1,000,000 66,664 66,541 1,000,000
6 88,275 94,043 94,043 1,000,000 84,131 84,131 1,000,000
7 105,667 115,624 115,624 1,000,000 103,293 103,293 1,000,000
8 123,928 139,390 139,390 1,000,000 124,339 124,339 1,000,000
9 143,103 165,581 165,581 1,000,000 147,452 147,452 1,000,000
10 163,236 194,477 194,477 1,000,000 172,864 172,864 1,000,000
11 184,376 226,386 226,386 1,000,000 200,800 200,800 1,000,000
12 206,572 261,597 261,597 1,000,000 231,530 231,530 1,000,000
13 229,879 300,472 300,472 1,000,000 265,360 265,360 1,000,000
14 254,351 343,397 343,397 1,000,000 302,631 302,631 1,000,000
15 280,047 390,755 390,755 1,078,484(3) 343,715 343,715 1,079,805(3)
16 307,027 442,859 442,859 1,182,433(3) 389,013 389,013 1,038,664(3)
17 335,356 500,124 500,124 1,295,320(3) 438,587 438,587 1,135,939(3)
18 365,102 563,024 563,024 1,413,191(3) 492,702 492,702 1,236,683(3)
19 396,335 632,117 632,117 1,536,043(3) 551,749 551,749 1,340,749(3)
20 429,130 707,943 707,943 1,670,745(3) 616,086 616,086 1,453,964(3)
25 619,402 1,211,638 1,211,638 2,471,742(3) 1,033,518 1,033,518 2,108,377(3)
30 862,243 1,998,391 1,998,391 3,557,135(3) 1,661,451 1,661,451 2,957,383(3)
35 1,172,177 3,207,526 3,207,526 5,067,892(3) 2,584,056 2,584,056 4,082,809(3)
40 1,567,739 5,035,290 5,035,290 7,150,112(3) 3,907,037 3,907,037 5,547,992(3)
45 2,072,589 7,751,710 7,751,710 10,154,740(3) 5,742,294 5,742,294 7,522,406(3)
50 2,716,918 11,734,160 11,734,160 14,315,675(3) 8,265,945 8,265,945 10,084,453(3)
55 3,539,264 17,525,844 17,525,844 20,329,979(3) 11,682,751 11,682,751 13,551,991(3)
60 4,588,809 25,995,452 25,995,452 28,854,952(3) 16,427,579 16,427,579 18,234,613(3)
65 5,928,325 39,877,775 39,877,775 41,472,886(3) 23,045,381 23,045,381 23,967,196(3)
</TABLE>
-------
(1) Assumes a $12,360 premium is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
(2) Assumes that no policy loans or withdrawals have been made. Zero values
indicate lapse in the absence of an additional premium payment.
(3) Increase is due to adjustment by the corridor percentage. See "Death
Benefits".
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN
MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS BY THE OWNER AND DIFFERENT INVESTMENT
RATES OF RETURN FOR CHUBB SERIES TRUST. THE ACCUMULATION VALUE, CASH VALUE AND
DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATES OF RETURN AVERAGED 12% OVER A PERIOD OF YEARS, BUT FLUCTUATED
ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION
CAN BE MADE BY CHUBB LIFE, SEPARATE ACCOUNT C, OR CHUBB SERIES TRUST THAT THIS
ASSUMED INVESTMENT RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-4
<PAGE>
CHUBB LIFE INSURANCE COMPANY OF AMERICA
CHUBB HERITAGE I FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
DEATH BENEFIT OPTION II ASSUMED HYPOTHETICAL GROSS
MALE NON-SMOKER ISSUE AGE 35 ANNUAL RATE OF RETURN: 0% (-1.57% NET)
$1,000,000 INITIAL SPECIFIED AMOUNT ASSUMED ANNUAL PREMIUM (1): $12,360
<TABLE>
<CAPTION>
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED --------------------------------- --------------------------------
OF AT 5% INTEREST ACCUMULATION CASH DEATH ACCUMULATION CASH DEATH
YEAR PER YEAR VALUE(2) VALUE(2) BENEFITS(2) VALUE(2) VALUE(2) BENEFIT(2)
---- -------------- ------------ -------- ----------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 12,978 10,900 10,282 1,010,900 9,675 9,057 1,009,675
2 26,605 21,550 21,056 1,021,550 19,119 18,624 1,019,119
3 40,913 31,894 31,524 1,031,894 28,305 27,935 1,028,305
4 55,937 41,977 41,730 1,041,977 37,229 36,982 1,037,229
5 71,712 51,823 51,700 1,051,823 45,875 45,752 1,045,875
6 88,275 61,436 61,436 1,061,436 54,237 54,237 1,054,237
7 105,667 70,808 70,808 1,070,808 62,290 62,290 1,062,290
8 123,928 79,935 79,935 1,079,935 70,039 70,039 1,070,039
9 143,103 88,819 88,819 1,088,819 77,458 77,458 1,077,458
10 163,236 97,445 97,445 1,097,445 84,554 84,554 1,084,554
11 184,376 105,828 105,828 1,105,828 91,291 91,291 1,091,291
12 206,572 113,921 113,921 1,113,921 97,656 97,656 1,097,656
13 229,879 121,719 121,719 1,121,719 103,634 103,634 1,103,634
14 254,351 129,196 129,196 1,129,196 109,213 109,213 1,109,213
15 280,047 136,340 136,340 1,136,340 114,358 114,358 1,114,358
16 307,027 143,154 143,154 1,143,154 119,057 119,057 1,119,057
17 335,356 149,596 149,596 1,149,596 123,248 123,248 1,123,248
18 365,102 155,619 155,619 1,155,619 126,869 126,869 1,126,869
19 396,335 161,222 161,222 1,161,222 129,870 129,870 1,129,870
20 429,130 166,350 166,350 1,166,350 132,173 132,173 1,132,173
25 619,402 183,327 183,327 1,183,327 131,165 131,165 1,131,165
30 862,243 178,771 178,771 1,178,771 101,122 101,122 1,101,122
35 1,172,177 139,883 139,883 1,139,883 23,281 23,281 1,023,281
40 1,567,739 46,888 46,888 1,046,888 0 0 0
45 0 0 0 0 0 0 0
50 0 0 0 0 0 0 0
55 0 0 0 0 0 0 0
60 0 0 0 0 0 0 0
65 0 0 0 0 0 0 0
</TABLE>
-------
(1) Assumes a $12,360 premium is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
(2) Assumes that no policy loans or withdrawals have been made. Zero values
indicate lapse in the absence of an additional premium payment.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN
MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS BY THE OWNER AND DIFFERENT INVESTMENT
RATES OF RETURN FOR CHUBB SERIES TRUST. THE ACCUMULATION VALUE, CASH VALUE AND
DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATES OF RETURN AVERAGED 0% OVER A PERIOD OF YEARS, BUT FLUCTUATED
ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION
CAN BE MADE BY CHUBB LIFE, SEPARATE ACCOUNT C, OR CHUBB SERIES TRUST THAT THIS
ASSUMED INVESTMENT RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-5
<PAGE>
CHUBB LIFE INSURANCE COMPANY OF AMERICA
CHUBB HERITAGE I FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
DEATH BENEFIT OPTION II ASSUMED HYPOTHETICAL GROSS
MALE NON-SMOKER ISSUE AGE 35 ANNUAL RATE OF RETURN: 6% (4.43% NET)
$1,000,000 INITIAL SPECIFIED AMOUNT ASSUMED ANNUAL PREMIUM(1): $12,360
<TABLE>
<CAPTION>
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED --------------------------------- --------------------------------
OF AT 5% INTEREST ACCUMULATION CASH DEATH ACCUMULATION CASH DEATH
YEAR PER YEAR VALUE(2) VALUE(2) BENEFITS(2) VALUE(2) VALUE(2) BENEFIT(2)
---- -------------- ------------ -------- ----------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 12,978 11,577 10,959 1,011,577 10,312 9,694 1,010,312
2 26,605 23,585 23,091 1,023,585 20,999 20,504 1,020,999
3 40,913 35,983 35,612 1,035,983 32,047 31,676 1,032,047
4 55,937 48,828 48,580 1,048,828 43,462 43,215 1,043,462
5 71,712 62,160 62,036 1,062,160 55,240 55,117 1,055,240
6 88,275 76,001 76,001 1,076,001 67,387 67,387 1,067,387
7 105,667 90,363 90,363 1,090,363 79,889 79,889 1,079,889
8 123,928 105,260 105,260 1,105,260 92,761 92,761 1,092,761
9 143,103 120,715 120,715 1,120,715 105,989 105,989 1,105,989
10 163,236 136,732 136,732 1,136,732 119,589 119,589 1,119,589
11 184,376 153,348 153,348 1,153,348 133,536 133,536 1,133,536
12 206,572 170,562 170,562 1,170,562 147,826 147,826 1,147,826
13 229,879 188,393 188,393 1,188,393 162,454 162,454 1,162,454
14 254,351 206,836 206,836 1,206,836 177,414 177,414 1,177,414
15 280,047 225,901 225,901 1,225,901 192,679 192,679 1,192,679
16 307,027 245,616 245,616 1,245,616 208,244 208,244 1,208,244
17 335,356 265,948 265,948 1,265,948 224,050 224,050 1,224,050
18 365,102 286,877 286,877 1,286,877 240,036 240,036 1,240,036
19 396,335 308,418 308,418 1,308,418 256,149 256,149 1,256,149
20 429,130 330,539 330,539 1,330,539 272,304 272,304 1,272,304
25 619,402 448,888 448,888 1,448,888 351,124 351,124 1,351,124
30 862,243 573,618 573,618 1,573,618 415,619 415,619 1,415,619
35 1,172,177 689,910 689,910 1,689,910 438,149 438,149 1,438,149
40 1,567,739 769,945 769,945 1,769,945 371,091 371,091 1,371,091
45 2,072,589 766,303 766,303 1,766,303 129,267 129,267 1,129,267
50 2,716,918 598,299 598,299 1,598,299 0 0 0
55 3,539,264 145,154 145,154 1,145,154 0 0 0
60 0 0 0 0 0 0 0
65 0 0 0 0 0 0 0
</TABLE>
-------
(1) Assumes a $12,360 premium is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
(2) Assumes that no policy loans or withdrawals have been made. Zero values
indicate lapse in the absence of an additional premium payment.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN
MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS BY THE OWNER AND DIFFERENT INVESTMENT
RATES OF RETURN FOR CHUBB SERIES TRUST. THE ACCUMULATION VALUE, CASH VALUE AND
DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATES OF RETURN AVERAGED 6% OVER A PERIOD OF YEARS, BUT FLUCTUATED
ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION
CAN BE MADE BY CHUBB LIFE, SEPARATE ACCOUNT C, OR CHUBB SERIES TRUST THAT THIS
ASSUMED INVESTMENT RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-6
<PAGE>
CHUBB LIFE INSURANCE COMPANY OF AMERICA
CHUBB HERITAGE I FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
DEATH BENEFIT OPTION II ASSUMED HYPOTHETICAL GROSS
MALE NON-SMOKER ISSUE AGE 35 ANNUAL RATE OF RETURN:12% (10.43% NET)
$1,000,000 INITIAL SPECIFIED AMOUNT ASSUMED ANNUAL PREMIUM (1): $12,360
<TABLE>
<CAPTION>
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED ----------------------------------- ----------------------------------
OF AT 5% INTEREST ACCUMULATION CASH DEATH ACCUMULATION CASH DEATH
YEAR PER YEAR VALUE(2) VALUE(2) BENEFITS(2) VALUE(2) VALUE(2) BENEFIT(2)
---- -------------- ------------ ---------- ----------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 12,978 12,254 11,636 1,012,254 10,950 10,332 1,010,950
2 26,605 25,703 25,208 1,025,703 22,957 22,463 1,022,957
3 40,913 40,406 40,036 1,040,406 36,102 35,731 1,036,102
4 55,937 56,539 56,291 1,056,539 50,491 50,244 1,050,491
5 71,712 74,269 74,146 1,074,269 66,234 66,110 1,066,234
6 88,275 93,765 93,765 1,093,765 83,461 83,461 1,083,461
7 105,667 115,200 115,200 1,115,200 102,296 102,296 1,102,296
8 123,928 138,765 138,765 1,138,765 122,906 122,906 1,122,906
9 143,103 164,688 164,688 1,164,688 145,445 145,445 1,145,445
10 163,236 193,229 193,229 1,193,229 170,114 170,114 1,170,114
11 184,376 224,677 224,677 1,224,677 197,093 197,093 1,197,093
12 206,572 259,287 259,287 1,259,287 226,603 226,603 1,226,603
13 229,879 297,383 297,383 1,297,383 258,887 258,887 1,258,887
14 254,351 339,302 339,302 1,339,302 294,212 294,212 1,294,212
15 280,047 385,430 385,430 1,385,430 332,854 332,854 1,332,854
16 307,027 436,210 436,210 1,436,210 375,138 375,138 1,375,138
17 335,356 492,074 492,074 1,492,074 421,371 421,371 1,421,371
18 365,102 553,507 553,507 1,553,507 471,891 471,891 1,471,891
19 396,335 621,088 621,088 1,621,088 527,083 527,083 1,527,083
20 429,130 695,405 695,405 1,695,405 587,339 587,339 1,587,339
25 619,402 1,191,149 1,191,149 2,429,945(3) 982,238 982,238 2,033,765(3)
30 862,243 1,965,870 1,965,870 3,499,248(3) 1,582,636 1,582,636 2,817,092(3)
35 1,172,177 3,156,543 3,156,543 4,987,337(3) 2,464,996 2,464,996 3,894,693(3)
40 1,567,739 4,956,430 4,956,430 7,038,130(3) 3,730,400 3,730,400 5,297,168(3)
45 2,072,589 7,631,454 7,631,454 9,997,205(3) 5,485,956 5,485,956 7,186,603(3)
50 2,716,918 11,553,250 11,553,250 14,094,965(3) 7,900,147 7,900,147 9,638,179(3)
55 3,539,264 17,256,755 17,256,755 20,017,835(3) 11,168,885 11,168,885 12,955,907(3)
60 4,588,809 25,597,427 25,597,427 28,413,144(3) 15,708,130 15,708,130 17,436,024(3)
65 5,928,325 39,268,325 39,268,325 40,839,058(3) 21,875,273 21,875,273 22,875,273(3)
</TABLE>
-------
(1) Assumes a $12,360 premium is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
(2) Assumes that no policy loans or withdrawals have been made. Zero values
indicate lapse in the absence of an additional premium payment.
(3) Death Benefits are greater than Specified Amount plus Accumulation Value
due to adjustment by the corridor percentage.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN
MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS BY THE OWNER AND DIFFERENT INVESTMENT
RATES OF RETURN FOR CHUBB SERIES TRUST. THE ACCUMULATION VALUE, CASH VALUE AND
DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATES OF RETURN AVERAGED 12% OVER A PERIOD OF YEARS, BUT FLUCTUATED
ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION
CAN BE MADE BY CHUBB LIFE, SEPARATE ACCOUNT C, OR CHUBB SERIES TRUST THAT THIS
ASSUMED INVESTMENT RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-7
<PAGE>
CHUBB LIFE INSURANCE COMPANY OF AMERICA
CHUBB HERITAGE II JOINT AND LAST SURVIVOR FLEXIBLE PREMIUM VARIABLE LIFE
INSURANCE POLICY
DEATH BENEFIT OPTION I ASSUMED HYPOTHETICAL GROSS
MALE NON-SMOKER ISSUE AGE 40 ANNUAL RATE OF RETURN: 0% (-1.57% NET)
FEMALE NON-SMOKER ISSUE AGE 35
$2,000,000 INIASSUMED ANNUAL PREMIUM (1): $19,620
<TABLE>
<CAPTION>
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED --------------------------------- --------------------------------
OF AT 5% INTEREST ACCUMULATION CASH DEATH ACCUMULATION CASH DEATH
YEAR PER YEAR VALUE(2) VALUE(2) BENEFITS(2) VALUE(2) VALUE(2) BENEFIT(2)
---- -------------- ------------ -------- ----------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 20,601 18,006 17,025 2,000,000 18,002 17,021 2,000,000
2 42,232 35,722 34,937 2,000,000 35,706 34,921 2,000,000
3 64,945 53,153 52,565 2,000,000 53,115 52,526 2,000,000
4 88,793 70,302 69,909 2,000,000 70,229 69,837 2,000,000
5 113,834 87,170 86,974 2,000,000 87,050 86,854 2,000,000
6 140,126 103,761 103,761 2,000,000 103,576 103,576 2,000,000
7 167,734 120,076 120,076 2,000,000 119,806 119,806 2,000,000
8 196,721 136,116 136,116 2,000,000 135,739 135,739 2,000,000
9 227,158 151,883 151,883 2,000,000 151,372 151,372 2,000,000
10 259,117 167,378 167,378 2,000,000 166,701 166,701 2,000,000
11 292,674 182,616 182,616 2,000,000 181,723 181,723 2,000,000
12 327,909 197,604 197,604 2,000,000 196,429 196,429 2,000,000
13 364,905 212,337 212,337 2,000,000 210,810 210,810 2,000,000
14 403,751 226,812 226,812 2,000,000 224,854 224,854 2,000,000
15 444,540 241,024 241,024 2,000,000 238,544 238,544 2,000,000
16 487,368 254,965 254,965 2,000,000 251,862 251,862 2,000,000
17 532,337 268,625 268,625 2,000,000 264,785 264,785 2,000,000
18 579,555 281,997 281,997 2,000,000 277,287 277,287 2,000,000
19 629,134 295,063 295,063 2,000,000 289,334 289,334 2,000,000
20 681,192 307,810 307,810 2,000,000 300,890 300,890 2,000,000
25 983,226 365,975 365,975 2,000,000 349,552 349,552 2,000,000
30 1,368,707 411,170 411,170 2,000,000 375,034 375,034 2,000,000
35 1,860,689 432,416 432,416 2,000,000 353,196 353,196 2,000,000
40 2,488,595 405,195 405,195 2,000,000 231,786 231,786 2,000,000
45 3,289,983 266,811 266,811 2,000,000 0 0 0
50 0 0 0 0 0 0 0
55 0 0 0 0 0 0 0
60 0 0 0 0 0 0 0
65 0 0 0 0 0 0 0
</TABLE>
-------
(1) Assumes a $10,620 premium is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
(2) Assumes that no policy loans or withdrawals have been made. Zero values
indicate lapse in the absence of an additional premium payment.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN
MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS BY THE OWNER AND DIFFERENT INVESTMENT
RATES OF RETURN FOR CHUBB SERIES TRUST. THE ACCUMULATION VALUE, CASH VALUE AND
DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATES OF RETURN AVERAGED 0% OVER A PERIOD OF YEARS, BUT FLUCTUATED
ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION
CAN BE MADE BY CHUBB LIFE, SEPARATE ACCOUNT C, OR CHUBB SERIES TRUST THAT THIS
ASSUMED INVESTMENT RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-8
<PAGE>
CHUBB LIFE INSURANCE COMPANY OF AMERICA
CHUBB HERITAGE II JOINT AND LAST SURVIVOR FLEXIBLE PREMIUM VARIABLE LIFE
INSURANCE POLICY
DEATH BENEFIT OPTION I ASSUMED HYPOTHETICAL GROSS
MALE NON-SMOKER ISSUE AGE 40 ANNUAL RATE OF RETURN: 6% (4.43% NET)
FEMALE NON-SMOKER ISSUE AGE 35
$2,000,000 INITIAL SPECIFIED AMOUNT
ASSUMED ANNUAL PREMIUM (1): $19,620
<TABLE>
<CAPTION>
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED ---------------------------------- ---------------------------------
OF AT 5% INTEREST ACCUMULATION CASH DEATH ACCUMULATION CASH DEATH
YEAR PER YEAR VALUE(2) VALUE(2) BENEFITS(2) VALUE(2) VALUE(2) BENEFIT(2)
---- -------------- ------------ --------- ----------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 20,601 19,103 18,122 2,000,000 19,099 18,118 2,000,000
2 42,232 39,046 38,261 2,000,000 39,030 38,245 2,000,000
3 64,945 59,865 59,278 2,000,000 59,824 59,236 2,000,000
4 88,793 81,597 81,205 2,000,000 81,519 81,127 2,000,000
5 113,834 104,281 104,085 2,000,000 104,149 103,953 2,000,000
6 140,126 127,957 127,957 2,000,000 127,751 127,751 2,000,000
7 167,734 152,666 152,666 2,000,000 152,362 152,362 2,000,000
8 196,721 178,451 178,451 2,000,000 178,021 178,021 2,000,000
9 227,158 205,391 205,391 2,000,000 204,767 204,767 2,000,000
10 259,117 233,542 233,542 2,000,000 232,642 232,642 2,000,000
11 292,674 262,955 262,955 2,000,000 261,688 261,688 2,000,000
12 327,909 293,684 293,684 2,000,000 291,946 291,946 2,000,000
13 364,905 325,784 325,784 2,000,000 323,456 323,456 2,000,000
14 403,751 359,311 359,311 2,000,000 356,261 356,261 2,000,000
15 444,540 394,323 394,323 2,000,000 390,402 390,402 2,000,000
16 487,368 430,880 430,880 2,000,000 425,917 425,917 2,000,000
17 532,337 469,043 469,043 2,000,000 462,848 462,848 2,000,000
18 579,655 508,877 508,877 2,000,000 501,236 501,236 2,000,000
19 629,134 550,446 550,446 2,000,000 541,118 541,118 2,000,000
20 681,192 593,818 593,818 2,000,000 582,533 582,533 2,000,000
25 983,226 840,238 840,238 2,050,181(3) 814,022 814,022 2,000,000
30 1,368,707 1,141,242 1,141,242 2,339,546(3) 1,087,293 1,087,293 2,228,950(3)
35 1,860,689 1,500,976 1,500,976 2,626,708(3) 1,394,453 1,394,453 2,440,292(3)
40 2,486,596 1,918,981 1,918,981 2,916,850(3) 1,721,619 1,721,619 2,616,861(3)
45 3,289,983 2,382,987 2,382,987 3,240,862(3) 2,042,192 2,042,192 2,777,381(3)
50 4,312,778 2,871,718 2,871,718 3,589,648(3) 2,335,903 2,335,903 2,919,879(3)
55 5,618,153 3,384,386 3,384,386 3,959,732(3) 2,599,683 2,599,683 3,041,629(3)
60 7,284,178 3,961,504 3,961,504 4,397,270(3) 2,851,516 2,851,516 3,165,183(3)
65 9,410,496 4,749,943 4,749,943 4,939,941(3) 3,102,330 3,102,330 3,226,423(3)
</TABLE>
-------
(1) Assumes a $19,620 premium is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
(2) Assumes that no policy loans or withdrawals have been made. Zero values
indicate lapse in the absence of an additional premium payment.
(3) Increase is due to adjustment by the corridor percentage. See "Death
Benefits".
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN
MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS BY THE OWNER AND DIFFERENT INVESTMENT
RATES OF RETURN FOR CHUBB SERIES TRUST. THE ACCUMULATION VALUE, CASH VALUE AND
DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATES OF RETURN AVERAGED 6% OVER A PERIOD OF YEARS, BUT FLUCTUATED
ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION
CAN BE MADE BY CHUBB LIFE, SEPARATE ACCOUNT C, OR CHUBB SERIES TRUST THAT THIS
ASSUMED INVESTMENT RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
A-9
<PAGE>
CHUBB LIFE INSURANCE COMPANY OF AMERICA
CHUBB HERITAGE II JOINT AND LAST SURVIVOR FLEXIBLE PREMIUM VARIABLE LIFE
INSURANCE POLICY
DEATH BENEFIT OPTION I ASSUMED HYPOTHETICAL GROSS
MALE NON-SMOKER ISSUE AGE 40 ANNUAL RATE OF RETURN: 12% (10.43% NET)
FEMALE NON-SMOKER ISSUE AGE 35
$2,000,000 INITIAL SPECIFIED AMOUNT
ASSUMED ANNUAL PREMIUM (1): $19,620
<TABLE>
<CAPTION>
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED ----------------------------------- ----------------------------------
OF AT 5% INTEREST ACCUMULATION CASH DEATH ACCUMULATION CASH DEATH
YEAR PER YEAR VALUE(2) VALUE(2) BENEFITS(2) VALUE(2) VALUE(2) BENEFIT(2)
---- -------------- ------------ ---------- ----------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 20,601 20,201 19,220 2,000,000 20,197 19,216 2,000,000
2 42,232 42,502 41,717 2,000,000 42,485 41,700 2,000,000
3 64,945 67,121 66,533 2,000,000 67,078 66,490 2,000,000
4 88,793 94,299 93,907 2,000,000 94,215 93,823 2,000,000
5 113,834 124,301 124,105 2,000,000 124,156 123,960 2,000,000
6 140,126 157,418 157,418 2,000,000 157,189 157,189 2,000,000
7 167,734 193,975 193,975 2,000,000 193,632 193,632 2,000,000
8 196,721 234,386 234,386 2,000,000 233,833 233,833 2,000,000
9 227,158 279,055 279,055 2,000,000 278,182 278,182 2,000,000
10 259,117 328,431 328,431 2,000,000 327,103 327,103 2,000,000
11 292,674 383,010 383,010 2,000,000 381,069 381,069 2,000,000
12 327,909 443,341 443,341 2,000,000 440,598 440,598 2,000,000
13 364,905 510,028 510,028 2,000,000 506,265 506,265 2,000,000
14 403,751 583,734 583,734 2,148,142(3) 578,687 578,687 2,129,570(3)
15 444,540 665,168 665,168 2,354,695(3) 658,493 658,493 2,331,066(3)
16 487,368 755,124 755,124 2,574,974(3) 746,395 746,395 2,545,208(3)
17 532,337 854,478 854,478 2,802,687(3) 843,182 843,182 2,765,637(3)
18 579,555 964,191 964,191 3,046,845(3) 949,707 949,707 3,001,073(3)
19 629,134 1,085,316 1,085,316 3,310,214(3) 1,066,887 1,066,887 3,254,006(3)
20 681,192 1,219,017 1,219,017 3,571,721(3) 1,195,745 1,195,745 3,503,533(3)
25 983,226 2,125,031 2,125,031 5,185,075(3) 2,056,334 2,056,334 5,017,454(3)
30 1,368,707 3,595,019 3,595,019 7,369,789(3) 3,411,390 3,411,390 6,993,349(3)
35 1,860,689 5,947,470 5,947,470 10,408,072(3) 5,484,821 5,484,821 9,598,436(3)
40 2,488,596 9,642,582 9,642,582 14,656,725(3) 8,552,536 8,552,536 12,999,854(3)
45 3,289,983 15,284,268 15,284,268 20,786,604(3) 12,885,823 12,885,823 17,524,719(3)
50 4,312,778 23,630,475 23,630,475 29,538,093(3) 18,798,346 18,798,346 23,497,932(3)
55 5,618,153 35,868,982 35,868,982 41,966,709(3) 26,762,101 26,762,101 31,311,658(3)
60 7,284,178 54,250,961 54,250,961 60,218,566(3) 37,636,622 37,636,622 41,776,651(3)
65 9,410,496 84,304,819 84,304,819 87,677,012(3) 52,609,065 52,609,065 54,713,428(3)
</TABLE>
-------
(1) Assumes a $19,620 premium is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
(2) Assumes that no policy loans or withdrawals have been made. Zero values
indicate lapse in the absence of an additional premium payment.
(3) Increase is due to adjustment by the corridor percentage. See "Death
Benefits".
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN
MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS BY THE OWNER AND DIFFERENT INVESTMENT
RATES OF RETURN FOR CHUBB SERIES TRUST. THE ACCUMULATION VALUE, CASH VALUE AND
DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATES OF RETURN AVERAGED 12% OVER A PERIOD OF YEARS, BUT FLUCTUATED
ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION
CAN BE MADE BY CHUBB LIFE, SEPARATE ACCOUNT C, OR CHUBB SERIES TRUST THAT THIS
ASSUMED INVESTMENT RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-10
<PAGE>
CHUBB LIFE INSURANCE COMPANY OF AMERICA
CHUBB HERITAGE II JOINT AND LAST SURVIVOR FLEXIBLE PREMIUM VARIABLE LIFE
INSURANCE POLICY
DEATH BENEFIT OPTION II ASSUMED HYPOTHETICAL GROSS
MALE NON-SMOKER ISSUE AGE 40 ANNUAL RATE OF RETURN: 0% (-1.57% NET)
FEMALE NON-SMOKER ISSUE AGE 35
$2,000,000 INITIAL SPECIFIED AMOUNT
ASSUMED ANNUAL PREMIUM (1): $19,620
<TABLE>
<CAPTION>
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED --------------------------------- --------------------------------
OF AT 5% INTEREST ACCUMULATION CASH DEATH ACCUMULATION CASH DEATH
YEAR PER YEAR VALUE(2) VALUE(2) BENEFITS(2) VALUE(2) VALUE(2) BENEFIT(2)
---- -------------- ------------ -------- ----------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 20,601 18,006 17,025 2,018,006 18,002 17,021 2,018,002
2 42,232 35,722 34,937 2,035,722 35,706 34,921 2,035,706
3 64,945 53,153 52,564 2,053,153 53,113 52,525 2,053,113
4 88,793 70,300 69,908 2,070,300 70,226 69,833 2,070,226
5 113,834 87,167 86,971 2,087,167 87,042 86,846 2,087,042
6 140,126 103,755 103,755 2,103,755 103,562 103,562 2,103,562
7 167,734 120,066 120,066 2,120,066 119,783 119,783 2,119,783
8 196,721 136,100 136,100 2,136,100 135,702 135,702 2,135,702
9 227,158 151,859 151,859 2,151,859 151,315 151,315 2,151,315
10 259,117 167,342 167,342 2,167,342 166,617 166,617 2,166,617
11 292,674 182,565 182,565 2,182,565 181,603 181,603 2,181,603
12 327,909 197,532 197,532 2,197,532 196,262 196,262 2,196,262
13 364,905 212,238 212,238 2,212,238 210,581 210,581 2,210,581
14 403,751 226,678 226,678 2,226,678 224,543 224,543 2,224,543
15 444,540 240,845 240,845 2,240,845 238,131 238,131 2,238,131
16 487,368 254,728 254,728 2,254,728 251,317 251,317 2,251,317
17 532,337 268,315 268,315 2,268,315 264,074 264,074 2,264,074
18 579,555 281,593 281,593 2,281,593 276,367 276,367 2,276,367
19 629,134 294,542 294,542 2,294,542 288,153 288,153 2,288,153
20 681,192 307,143 307,143 2,307,143 299,384 299,384 2,299,384
25 983,226 363,870 363,870 2,363,870 344,946 344,946 2,344,946
30 1,368,707 405,194 405,194 2,405,194 362,616 362,616 2,362,616
35 1,860,689 416,612 416,612 2,416,612 322,936 322,936 2,322,936
40 2,488,596 367,346 367,346 2,367,346 170,819 170,819 2,170,819
45 3,289,983 189,645 189,645 2,189,645 0 0 0
50 0 0 0 0 0 0 0
55 0 0 0 0 0 0 0
60 0 0 0 0 0 0 0
65 0 0 0 0 0 0 0
</TABLE>
-------
(1) Assumes a $19,620 premium is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
(2) Assumes that no policy loans or withdrawals have been made. Zero values
indicate lapse in the absence of an additional premium payment.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN
MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS BY THE OWNER AND DIFFERENT INVESTMENT
RATES OF RETURN FOR CHUBB SERIES TRUST. THE ACCUMULATION VALUE, CASH VALUE AND
DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATES OF RETURN AVERAGED 0% OVER A PERIOD OF YEARS, BUT FLUCTUATED
ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION
CAN BE MADE BY CHUBB LIFE, SEPARATE ACCOUNT C, OR CHUBB SERIES TRUST THAT THIS
ASSUMED INVESTMENT RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-11
<PAGE>
CHUBB LIFE INSURANCE COMPANY OF AMERICA
CHUBB HERITAGE II JOINT AND LAST SURVIVOR FLEXIBLE PREMIUM VARIABLE LIFE
INSURANCE POLICY
DEATH BENEFIT OPTION II ASSUMED HYPOTHETICAL GROSS
MALE NON-SMOKER ISSUE AGE 40 ANNUAL RATE OF RETURN: 6% (4.43% NET)
FEMALE NON-SMOKER ISSUE AGE 35
$2,000,000 INITIAL SPECIFIED AMOUNT
ASSUMED ANNUAL PREMIUM(1): $19,620
<TABLE>
<CAPTION>
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED ---------------------------------- ---------------------------------
OF AT 5% INTEREST ACCUMULATION CASH DEATH ACCUMULATION CASH DEATH
YEAR PER YEAR VALUE(2) VALUE(2) BENEFITS(2) VALUE(2) VALUE(2) BENEFIT(2)
---- -------------- ------------ --------- ----------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 20,601 19,103 18,122 2,019,103 19,099 18,118 2,019,099
2 42,232 39,046 38,261 2,039,046 39,029 38,244 2,039,029
3 64,945 59,864 59,276 2,059,864 59,823 59,234 2,059,823
4 88,793 81,595 81,203 2,081,595 81,515 81,122 2,081,515
5 113,834 104,277 104,081 2,104,277 104,140 103,944 2,104,140
6 140,126 127,949 127,949 2,127,949 127,733 127,733 2,127,733
7 167,734 152,653 152,653 2,152,653 152,331 152,331 2,152,331
8 196,721 178,429 178,429 2,178,429 177,970 177,970 2,177,970
9 227,158 205,357 205,357 2,205,357 204,687 204,687 2,204,687
10 259,117 233,489 233,489 2,233,489 232,519 232,519 2,232,519
11 292,674 262,877 262,877 2,262,877 261,506 261,506 2,261,506
12 327,909 293,571 293,571 2,293,571 291,682 291,682 2,291,682
13 364,905 325,622 325,622 2,325,622 323,082 323,082 2,323,082
14 403,751 359,084 359,084 2,359,084 355,737 355,737 2,355,737
15 444,540 394,008 394,008 2,394,008 389,678 389,678 2,389,678
16 487,368 430,450 430,450 2,430,450 424,928 424,928 2,424,928
17 532,337 468,459 468,459 2,468,459 461,510 461,510 2,461,510
18 579,555 508,090 508,090 2,508,090 499,441 499,441 2,499,441
19 629,134 549,395 549,395 2,549,395 538,728 538,728 2,538,728
20 681,192 592,421 592,421 2,592,421 579,374 579,374 2,579,374
25 983,226 834,973 834,973 2,834,973 802,382 802,382 2,802,382
30 1,368,707 1,125,361 1,125,361 3,125,361 1,051,505 1,051,505 3,051,505
35 1,860,689 1,457,844 1,457,844 3,457,844 1,296,991 1,296,991 3,296,991
40 2,488,596 1,805,559 1,805,559 3,805,559 1,470,058 1,470,058 3,470,058
45 3,289,983 2,090,330 2,090,330 4,090,330 1,418,120 1,418,120 3,418,120
50 4,312,778 2,149,368 2,149,368 4,149,368 890,607 890,607 2,890,607
55 5,618,153 1,761,867 1,761,867 3,761,867 0 0 0
60 7,284,178 701,954 701,954 2,701,954 0 0 0
65 0 0 0 0 0 0 0
</TABLE>
-------
(1) Assumes a $19,620 premium is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
(2) Assumes that no policy loans or withdrawals have been made. Zero values
indicate lapse in the absence of an additional premium payment.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN
MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS BY THE OWNER AND DIFFERENT INVESTMENT
RATES OF RETURN FOR CHUBB SERIES TRUST. THE ACCUMULATION VALUE, CASH VALUE AND
DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATES OF RETURN AVERAGED 6% OVER A PERIOD OF YEARS, BUT FLUCTUATED
ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION
CAN BE MADE BY CHUBB LIFE, SEPARATE ACCOUNT C, OR CHUBB SERIES TRUST THAT THIS
ASSUMED INVESTMENT RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-12
<PAGE>
CHUBB LIFE INSURANCE COMPANY OF AMERICA
CHUBB HERITAGE II JOINT AND LAST SURVIVOR FLEXIBLE PREMIUM VARIABLE LIFE
INSURANCE POLICY
DEATH BENEFIT OPTION II ASSUMED HYPOTHETICAL GROSS
MALE NON-SMOKER ISSUE AGE 40 ANNUAL RATE OF RETURN: 12% (10.43% NET)
FEMALE NON-SMOKER ISSUE AGE 35
$2,000,000 INITIAL SPECIFIED AMOUNT
ASSUMED ANNUAL PREMIUM(1): $19,620
<TABLE>
<CAPTION>
PREMIUMS ASSUMING CURRENT COSTS ASSUMING GUARANTEED COSTS
END ACCUMULATED ----------------------------------- ----------------------------------
OF AT 5% INTEREST ACCUMULATION CASH DEATH ACCUMULATION CASH DEATH
YEAR PER YEAR VALUE(2) VALUE(2) BENEFITS(2) VALUE(2) VALUE(2) BENEFIT(2)
---- -------------- ------------ ---------- ----------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 20,601 20,201 19,220 2,020,201 20,197 19,216 2,020,197
2 42,232 42,502 41,717 2,042,502 42,484 41,699 2,042,484
3 64,945 67,120 66,532 2,067,120 67,076 66,488 2,067,076
4 88,793 94,297 93,905 2,094,297 94,210 93,817 2,094,210
5 113,834 124,296 124,100 2,124,296 124,145 123,949 2,124,145
6 140,126 157,409 157,409 2,157,409 157,167 157,167 2,157,167
7 167,734 193,958 193,958 2,193,958 193,592 193,592 2,193,592
8 196,721 234,356 234,356 2,234,356 233,764 233,764 2,233,764
9 227,158 279,006 279,006 2,279,006 278,068 278,068 2,278,068
10 259,117 328,354 328,354 2,328,354 326,923 326,923 2,326,923
11 292,674 382,892 382,892 2,382,892 380,792 380,792 2,380,792
12 327,909 443,162 443,162 2,443,162 440,182 440,182 2,440,182
13 364,905 509,762 509,762 2,509,762 505,649 505,649 2,505,649
14 403,751 583,355 583,355 2,583,355 577,806 577,806 2,577,806
15 444,540 664,666 664,666 2,664,666 657,321 657,321 2,657,321
16 487,368 754,500 754,500 2,754,500 744,931 744,931 2,744,931
17 532,337 853,740 853,740 2,853,740 841,442 841,442 2,841,442
18 579,555 963,361 963,361 3,044,221(3) 947,736 947,736 2,994,846(3)
19 629,134 1,084,399 1,084,399 3,307,417(3) 1,064,714 1,064,714 3,247,376(3)
20 681,192 1,218,004 1,218,004 3,568,752(3) 1,193,350 1,193,350 3,496,515(3)
25 983,226 2,123,366 2,123,366 5,181,013(3) 2,052,461 2,052,461 5,008,005(3)
30 1,368,707 3,592,299 3,592,299 7,364,213(3) 3,405,195 3,405,195 6,980,650(3)
35 1,860,689 5,943,062 5,943,062 10,400,358(3) 5,475,081 5,475,081 9,581,391(3)
40 2,488,596 9,635,525 9,635,525 14,645,998(3) 8,537,560 8,537,560 12,977,091(3)
45 3,289,983 15,273,168 15,273,168 20,771,509(3) 12,863,464 12,863,464 17,494,311(3)
50 4,312,778 23,613,399 23,613,399 29,516,749(3) 18,765,926 18,765,926 23,457,408(3)
55 5,618,153 35,843,147 35,843,147 41,936,482(3) 26,716,142 26,716,142 31,257,886(3)
60 7,284,178 54,211,970 54,211,970 60,175,286(3) 37,572,182 37,572,182 41,705,122(3)
65 9,410,496 84,244,313 84,244,313 87,614,086(3) 52,514,843 52,514,843 54,615,436(3)
</TABLE>
-------
(1) Assumes a $19,620 premium is paid at the beginning of each policy year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
(2) Assumes that no policy loans or withdrawals have been made. Zero values
indicate lapse in the absence of an additional premium payment.
(3) Death Benefits are greater than Specified Amount plus Accumulation Value
due to adjustment by the corridor percentage.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN
MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS,
INCLUDING THE INVESTMENT ALLOCATIONS BY THE OWNER AND DIFFERENT INVESTMENT
RATES OF RETURN FOR CHUBB SERIES TRUST. THE ACCUMULATION VALUE, CASH VALUE AND
DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATES OF RETURN AVERAGED 12% OVER A PERIOD OF YEARS, BUT FLUCTUATED
ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION
CAN BE MADE BY CHUBB LIFE, SEPARATE ACCOUNT C, OR CHUBB SERIES TRUST THAT THIS
ASSUMED INVESTMENT RATE OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
A-13
