File Nos. 33-74174
811-8306
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 4 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 5 [X]
(Check appropriate box or boxes.)
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
_______________________________________
(Exact Name of Registrant)
FIRST COVA LIFE INSURANCE COMPANY
__________________________________
(Name of Depositor)
120 Broadway, New York, New York 10271
____________________________________________________ _________
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (800) 469-4545
Name and Address of Agent for Service
Lorry J. Stensrud, President
First Cova Life Insurance Company
120 Broadway
New York, NY 10271
(800) 469-4545
Copies to:
Judith A. Hasenauer and Bernard J. Spaulding
Blazzard, Grodd & Hasenauer, P.C. Senior Vice President,
P.O. Box 5108 General Counsel and Secretary
Westport, CT 06881 First Cova Life Insurance
Company
(203) 226-7866 120 Broadway
New York, NY 10271
It is proposed that this filing will become effective:
__X__ immediately upon filing pursuant to paragraph (b) of Rule 485
_____ on (date) pursuant to paragraph (b) of Rule 485
_____ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
_____ on (date) pursuant to paragraph (a)(1) of Rule 485
If appropriate, check the following:
_____ this post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
Title of Securities Registered:
Individual Variable Annuity Contracts
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CROSS REFERENCE SHEET
(required by Rule 495)
Item No. Location
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PART A
Item 1. Cover Page . . . . . . . . . . . . . . Cover Page
Item 2. Definitions . . . . . . . . . . . . . Index of Special Terms
Item 3. Synopsis . . . . . . . . . . . . . . . Summary
Item 4. Condensed Financial Information . . . Appendix A - Condensed Financial
Information
Item 5. General Description of Registrant,
Depositor, and Portfolio Companies . . Other Information - Cova; The
Separate Account; Cova
Series Trust; General American
Capital Company
Item 6. Deductions and Expenses. . . . . . . . Expenses
Item 7. General Description of Variable
Annuity Contracts. . . . . . . . . . . The Annuity Contract
Item 8. Annuity Period . . . . . . . . . . . . Annuity Payments
(The Income Phase)
Item 9. Death Benefit. . . . . . . . . . . . . Death Benefit
Item 10. Purchases and Contract Value . . . . . Purchase
Item 11. Redemptions. . . . . . . . . . . . . . Access to Your Money
Item 12. Taxes. . . . . . . . . . . . . . . . . Taxes
Item 13. Legal Proceedings. . . . . . . . . . . None
Item 14. Table of Contents of the Statement of
Additional Information . . . . . . . . Table of Contents of the
Statement of Additional
Information
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CROSS REFERENCE SHEET
(required by Rule 495)
Item No. Location
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PART B
Item 15. Cover Page . . . . . . . . . . . . . . Cover Page
Item 16. Table of Contents. . . . . . . . . . . Table of Contents
Item 17. General Information and History. . . . Company
Item 18. Services . . . . . . . . . . . . . . . Not Applicable
Item 19. Purchase of Securities Being Offered . Not Applicable
Item 20. Underwriters . . . . . . . . . . . . . Distribution
Item 21. Calculation of Performance Data. . . . Performance Information
Item 22. Annuity Payments . . . . . . . . . . . Annuity Provisions
Item 23. Financial Statements . . . . . . . . . Financial Statements
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PART C
Information required to be included in Part C is set forth under the appropriate
Item so numbered in Part C to this Registration Statement.
PART A
The Fixed
And Variable Annuity
issued by
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
and
FIRST COVA LIFE
INSURANCE COMPANY
This prospectus describes the Fixed and Variable Annuity Contract offered by
First Cova Life Insurance Company (First Cova).
The annuity contract has 12 investment choices - a fixed account which offers an
interest rate which is guaranteed by First Cova, and 11 investment portfolios
listed below. The 11 investment portfolios are part of Cova Series Trust or
General American Capital Company. You can put your money in the fixed account
and/or any of these investment portfolios.
Cova Series Trust:
Managed by J.P. Morgan
Investment Management Inc.:
Select Equity
Large Cap Stock
Small Cap Stock
International Equity
Quality Bond
Managed by Lord, Abbett & Co.:
Bond Debenture
Mid-Cap Value
Large Cap Research
Developing Growth
Lord Abbett Growth and Income
General American Capital Company:
Managed by Conning Asset
Management Company:
Money Market
Please read this prospectus before investing and keep it on file for future
reference. It contains important information about the First Cova Fixed and
Variable Annuity Contract.
To learn more about the First Cova Fixed and Variable Annuity Contract, you can
obtain a copy of the Statement of Additional Information (SAI) dated December
____, 1999. The SAI has been filed with the Securities and Exchange Commission
(SEC) and is legally a part of the prospectus. The SEC maintains a Web site
(http://www.sec.gov) that contains the SAI, material incorporated by reference,
and other information regarding companies that file electronically with the SEC.
The Table of Contents of the SAI is on Page __ of this prospectus. For a free
copy of the SAI, call us at (800) 523-1661 or write us at: One Tower Lane, Suite
3000, Oakbrook Terrace, Illinois 60181-4644.
The Contracts:
* are not bank deposits
* are not federally insured
* are not endorsed by any bank or government agency
* are not guaranteed and may be subject to loss of principal
The Securities and Exchange Commission has not approved or disapproved these
securities or determined if this prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
December ___, 1999
TABLE OF CONTENTS Page
INDEX OF SPECIAL TERMS
SUMMARY
Fee Table
Examples
THE ANNUITY CONTRACT
ANNUITY PAYMENTS (THE INCOME PHASE)
Annuity Date
Annuity Payments
Annuity Options
PURCHASE
Purchase Payments
Allocation of Purchase Payments
Accumulation Units
INVESTMENT OPTIONS
Cova Series Trust
General American Capital Company
Transfers
Dollar Cost Averaging Program
Automatic Rebalancing Program
Voting Rights
Substitution
EXPENSES
Insurance Charges
Contract Maintenance Charge
Withdrawal Charge
Reduction or Elimination of the
Withdrawal Charge
Transfer Fee
Income Taxes
Investment Portfolio Expenses
TAXES
Annuity Contracts in General
Qualified and Non-Qualified Contracts
Withdrawals - Non-Qualified Contracts
Withdrawals - Qualified Contracts
Diversification
ACCESS TO YOUR MONEY
Systematic Withdrawal Program
Suspension of Payments or Transfers
PERFORMANCE
DEATH BENEFIT
Upon Your Death
Death of Annuitant
OTHER INFORMATION
First Cova
Year 2000
The Separate Account
Distributor
Ownership
Beneficiary
Assignment
Financial Statements
TABLE OF CONTENTS OF THE STATEMENT OF
ADDITIONAL INFORMATION
APPENDIX A
Condensed Financial Information
APPENDIX B
Performance Information
INDEX OF SPECIAL TERMS
We have tried to make this prospectus as readable and understandable for you as
possible. By the very nature of the contract, however, certain technical words
or terms are unavoidable and need an explanation. We have identified the
following as some of these words or terms. They are identified in the text in
italic and the page that is indicated here is where we believe you will find the
best explanation for the word or term.
Page
Accumulation Phase
Accumulation Unit
Annuitant
Annuity Date
Annuity Options
Annuity Payments
Annuity Unit
Beneficiary
Fixed Account
Income Phase
Investment Portfolios
Joint Owner
Non-Qualified
Owner
Purchase Payment
Qualified
Tax Deferral
SUMMARY
The sections in this Summary correspond to sections in this prospectus which
discuss the topics in more detail.
THE ANNUITY CONTRACT:
The fixed and variable annuity contract offered by First Cova is a contract
between you, the owner, and First Cova, an insurance company. The contract
provides a means for investing on a tax-deferred basis. The contract is intended
for retirement savings or other long-term investment purposes and provides for a
death benefit and guaranteed income options.
This contract offers 11 investment portfolios. These portfolios are designed to
offer a better return than the fixed account. However, this is NOT guaranteed.
You can also lose your money.
The fixed account offers an interest rate that is guaranteed by the insurance
company, First Cova. This interest rate is set once each year. While your money
is in the fixed account, the interest your money will earn as well as your
principal is guaranteed by First Cova.
You can put money into any or all of the investment portfolios and the fixed
account. You can transfer between accounts up to 12 times a year without charge
or tax implications.
The contract, like all deferred annuity contracts, has two phases: the
accumulation phase and the income phase. During the accumulation phase, earnings
accumulate on a tax-deferred basis and are taxed as income when you make a
withdrawal. The income phase occurs when you begin receiving regular payments
from your contract.
The amount of money you are able to accumulate in your account during the
accumulation phase will determine, in part, the amount of income payments during
the income phase.
ANNUITY PAYMENTS (THE INCOME PHASE):
If you want to receive regular income from your annuity, you can choose an
annuity option. Once you begin receiving regular payments, you cannot change
your payment plan. During the income phase, you have the same investment choices
you had during the accumulation phase. You can choose to have payments come from
the fixed account, the investment portfolios or both. If you choose to have any
part of your payments come from the investment portfolios, the dollar amount of
your payments may go up or down.
HOW TO PURCHASE THE CONTRACT:
You can buy this contract with $5,000 or more under most circumstances. You can
add $500 or more any time you like during the accumulation phase. Your
registered representative can help you fill out the proper forms.
INVESTMENT OPTIONS:
You can put your money in any or all of the investment portfolios which are
described in the prospectuses for the funds. Depending upon market conditions
and the performance of the portfolio(s) you select, you can make or lose money
in any of these portfolios.
EXPENSES:
The contract has insurance features and investment features, and there are costs
related to each.
* Each year First Cova deducts a $30 contract maintenance charge from your
contract. During the accumulation phase, First Cova currently waives this charge
if the value of your contract is at least $50,000.
* First Cova also deducts for its insurance charges which total 1.40% of
the average daily value of your contract allocated to the investment portfolios.
* If you take your money out, First Cova may assess a withdrawal charge of
up to 7% of the purchase payment withdrawn. After First Cova has had a purchase
payment for seven years, there is no charge by First Cova for a withdrawal of
that purchase payment.
* The first 12 transfers in a year are free. After that, a transfer fee of
$25 or 2% of the amount transferred (whichever is less) is assessed.
* There are also investment charges which range from .205% to 1.30% of the
average daily value of the investment portfolio depending upon the investment
portfolio.
TAXES:
Your earnings are not taxed until you take them out. If you take money out,
earnings come out first and are taxed as income. If you are younger than 59 1/2
when you take money out, you may be charged a 10% federal tax penalty on the
earnings. Payments during the income phase are considered partly a return of
your original investment. That part of each payment is not taxable as income.
ACCESS TO YOUR MONEY:
You can take money out at any time during the accumulation phase. After the
first year, you can take up to 10% of your total purchase payments each year
without charge from First Cova. Withdrawals of purchase payments in excess of
that may be charged a withdrawal charge, depending on how long your money has
been in the contract. However, First Cova will never assess a withdrawal charge
on earnings you withdraw. Earnings are defined as the value in your contract
minus the remaining purchase payments in your contract. Of course, you may also
have to pay income tax and a tax penalty on any money you take out.
DEATH BENEFIT:
If you die before moving to the income phase, the person you have chosen as your
beneficiary will receive a death benefit.
OTHER INFORMATION:
Free Look. If you cancel the contract within 10 days after receiving it we will
send you whatever your contract is worth on the day we receive your request
(this may be more or less than your original payment) without assessing a
withdrawal charge. If you have purchased the contract as an Individual
Retirement Annuity (IRA), you will receive back your purchase payment.
(Currently, the contract is not available under an IRA until the IRA Endorsement
is approved by the State of New York Insurance Department.)
No Probate. In most cases, when you die, the person you choose as your
beneficiary will receive the death benefit without going through probate.
However, the avoidance of probate does not mean that the beneficiary will not
have tax liability as a result of receiving the death benefit.
Who should purchase the contract? This contract is designed for people seeking
long-term tax-deferred accumulation of assets, generally for retirement or other
long-term purposes. The tax-deferred feature is most attractive to people in
high federal and state income tax brackets. You should not buy this contract if
you are looking for a short-term investment or if you cannot take the risk of
getting back less money than you put in.
Additional Features. This contract has additional features you might be
interested in. These include:
* You can arrange to have money automatically sent to you each month while
your contract is still in the accumulation phase. Of course, you'll have to
pay taxes on money you receive. We call this feature the Systematic
Withdrawal Program.
* You can arrange to have a regular amount of money automatically invested in
investment portfolios each month, theoretically giving you a lower average
cost per unit over time than a single one time purchase. We call this
feature Dollar Cost Averaging.
* First Cova will automatically readjust the money between investment
portfolios periodically to keep the blend you select. We call this feature
Automatic Rebalancing.
These features may not be suitable for your particular situation.
INQUIRIES:
If you need more information about buying a contract, please contact us at:
Cova Life Sales Company
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181
800-523-1661
If you have any other questions, please contact us at our Home Office:
120 Broadway, 10th Floor
New York, NY 10271
(800) 469-4545
(212) 766-0012
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE FEE TABLE
The purpose of the Fee Table is to show you the various expenses you will incur
directly or indirectly with the contract. The Fee Table reflects expenses of the
Separate Account as well as of the investment portfolios.
OWNER TRANSACTION EXPENSES
Withdrawal Charge (as a percentage of Years Since
purchase payments) (see Note 1 below) Payment Charge
1 7%
2 6%
3 5%
4 4%
5 3%
6 2%
7 1%
8+ 0%
Transfer Fee (see Note 2 below)
No charge for first 12 transfers in a contract year; thereafter, the fee is
$25 per transfer or, if less, 2% of the amount transferred.
CONTRACT MAINTENANCE CHARGE (see Note 3 below) $30 per contract per year
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)
Mortality and Expense Risk Premium 1.25%
Administrative Expense Charge .15%
---
TOTAL SEPARATE ACCOUNT ANNUAL EXPENSES 1.40%
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Investment Portfolio Expenses
(as a percentage of the average daily net assets of an investment portfolio)
Other Expenses
(after expense
reimbursement for
Management certain Portfolios - Total Annual
Fees see Note 4 below) Portfolio Expenses
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Cova Series Trust
Managed by J.P. Morgan
Investment Management Inc.
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Select Equity .68% .18% .86%
Large Cap Stock .65% .10% .75%
Small Cap Stock .85% .27% 1.12%
International Equity .80% .28% 1.08%
Quality Bond .55% .10% .65%
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Managed by Lord, Abbett & Co.
Bond Debenture .75% .10% .85%
Mid-Cap Value 1.00% .30% 1.30%
Large Cap Research 1.00% .30% 1.30%
Developing Growth .90% .30% 1.20%
Lord Abbett Growth and Income* .65% .07% .72%
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General American Capital Company
Managed by Conning Asset
Management Company
Money Market .125% .08% .205%
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* Estimated. The Portfolio commenced investment operations on January 8,
1999.
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Examples
The examples should not be considered a representation of past or future expenses.
Actual expenses may be greater or less than those shown.
For purposes of the examples, the assumed average contract size is $30,000.
You would pay the following expenses on a $1,000 investment, assuming a 5% annual
return on assets:
(a) if you surrender the contract at the end of each time period;
(b) if you do not surrender the contract or if you apply the contract value
to an annuity option.
Time Periods
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1 year 3 years 5 years 10 years
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Cova Series Trust
Managed by J.P. Morgan
Investment Management Inc.
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Select Equity (a) $93.90 (a) $118.46 (a) $152.49 (a) $267.24
(b) $23.90 (b) $ 73.46 (b) $125.49 (b) $267.24
Large Cap Stock (a) $92.80 (a) $115.15 (a) $146.95 (a) $256.13
(b) $22.80 (b) $ 70.15 (b) $119.95 (b) $256.13
Small Cap Stock (a) $96.50 (a) $126.26 (a) $165.47 (a) $292.98
(b) $26.50 (b) $ 81.26 (b) $138.47 (b) $292.98
International Equity (a) $96.10 (a) $125.06 (a) $163.48 (a) $289.07
(b) $26.10 (b) $ 80.06 (b) $136.48 (b) $289.07
Quality Bond (a) $91.79 (a) $112.12 (a) $141.89 (a) $245.92
(b) $21.79 (b) $ 67.12 (b) $114.89 (b) $245.92
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Managed by Lord, Abbett & Co.
Bond Debenture (a) $93.80 (a) $118.16 (a) $151.99 (a) $266.24
(b) $23.80 (b) $ 73.16 (b) $124.99 (b) $266.24
Mid-Cap Value (a) $98.30 (a) $131.62 (a) $174.35 (a) $310.37
(b) $28.30 (b) $ 86.62 (b) $147.35 (b) $310.37
Large Cap Research (a) $98.30 (a) $131.62 (a) $174.35 (a) $310.37
(b) $28.30 (b) $ 86.62 (b) $147.35 (b) $310.37
Developing Growth (a) $97.30 (a) $128.65 (a) $169.42 (a) $300.75
(b) $27.30 (b) $ 83.65 (b) $142.42 (b) $300.75
Lord Abbett Growth and Income (a) $92.49 (a) $114.24 (a) $145.43 (a) $253.08
(b) $22.49 (b) $ 69.24 (b) $118.43 (b) $253.08
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General American Capital Company
Managed by Conning Asset
Management Company
Money Market (a) $87.31 (a) $98.54 (a) $119.02 (a) $199.08
(b) $17.31 (b) $53.54 (b) $ 92.02 (b) $199.08
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Explanation of Fee Table
1. After First Cova has had a purchase payment for 7 years, there is no charge
by First Cova for a withdrawal of that purchase payment. You may also have
to pay income tax and a tax penalty on any money you take out. After the
first year, you can take up to 10% of your total purchase payments each
year without a charge from First Cova.
2. First Cova will not charge you the transfer fee even if there are more than
12 transfers in a year if the transfer is for the Dollar Cost Averaging or
Automatic Rebalancing Programs.
3. During the accumulation phase, First Cova will not charge the contract
maintenance charge if the value of your contract is $50,000 or more,
although, if you make a complete withdrawal, First Cova will charge the
contract maintenance charge.
4. Since May 1, 1996, Cova Financial Services Life Insurance Company (Cova
Life), an affiliate of First Cova, has been reimbursing the investment
portfolios of Cova Series Trust for all operating expenses (exclusive of
the management fees) in excess of approximately .10%. Beginning May 1,
1999, Cova will discontinue this reimbursement arrangement for the Select
Equity, Small Cap Stock and International Equity Portfolios. Therefore, the
amounts shown above under "Other Expenses" have been restated to reflect
the actual expenses for these Portfolios for the year ended December 31,
1998. Also beginning May 1, 1999, Cova will reimburse the Mid-Cap Value,
Large Cap Research and Developing Growth Portfolios for all operating
expenses (exclusive of the management fees) in excess of approximately
.30%, instead of .10%. This change is reflected above under "Other
Expenses" for these three Portfolios. Absent the expense reimbursement, the
percentages shown for total annual portfolio expenses for the year ended
December 31, 1998 would have been .86% for the Quality Bond Portfolio, .94%
for the Large Cap Stock Portfolio, .93% for the Bond Debenture Portfolio,
1.68% for the Mid-Cap Value Portfolio, 1.95% for the Large Cap Research
Portfolio and 1.70% for the Developing Growth Portfolio.
5. Premium taxes are not reflected. New York does not assess premium taxes.
THERE IS AN ACCUMULATION UNIT VALUE HISTORY (CONDENSED FINANCIAL INFORMATION)
CONTAINED IN APPENDIX A.
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THE ANNUITY CONTRACT
This Prospectus describes the Fixed and Variable Annuity Contract offered by
First Cova.
An annuity is a contract between you, the owner, and an insurance company (in
this case First Cova), where the insurance company promises to pay an income to
you, in the form of annuity payments, beginning on a designated date that is at
least one year after we issue your contract. Until you decide to begin receiving
annuity payments, your annuity is in the accumulation phase. Once you begin
receiving annuity payments, your contract switches to the income phase.
The contract benefits from tax deferral. Tax deferral means that you are not
taxed on earnings or appreciation on the assets in your contract until you take
money out of your contract.
The contract is called a variable annuity because you can choose among 11
investment portfolios and, depending upon market conditions, you can make or
lose money in any of these portfolios. If you select the variable annuity
portion of the contract, the amount of money you are able to accumulate in your
contract during the accumulation phase depends upon the investment performance
of the investment portfolio(s) you select. The amount of the annuity payments
you receive during the income phase from the variable annuity portion of the
contract also depends, in part, upon the investment performance of the
investment portfolios you select for the income phase.
The contract also contains a fixed account. The fixed account offers an interest
rate that is guaranteed by First Cova. If you select the fixed account, your
money will be placed with the other general assets of First Cova. If you select
the fixed account, the amount of money you are able to accumulate in your
contract during the accumulation phase depends upon the total interest credited
to your contract. The amount of the annuity payments you receive during the
income phase from the fixed account portion of the contract will remain level
for the entire income phase.
As owner of the contract, you exercise all interest and rights under the
contract. You can change the owner at any time by notifying First Cova in
writing. You and another person can be named joint owners. We have described
more information on this under "Other Information."
ANNUITY PAYMENTS (THE INCOME PHASE)
Annuity Date
Under the contract you can receive regular income payments. You can choose the
month and year in which those payments begin. We call that date the annuity
date. Your annuity date must be the first day of a calendar month.
We ask you to choose your annuity date when you purchase the contract. You can
change it at any time before the annuity date with 30 days notice to us. Your
annuity date cannot be any earlier than one year after we issue the contract.
Annuity Payments
You will receive annuity payments during the income phase. In general, annuity
payments must begin by the annuitant's 90th birthday. The annuitant is the
person whose life we look to when we make annuity payments.
During the income phase, you have the same investment choices you had just
before the start of the income phase. At the annuity date, you can choose
whether payments will come from:
* the fixed account,
* the investment portfolio(s), or
* a combination of both.
If you don't tell us otherwise, your annuity payments will be based on the
investment allocations that were in place on the annuity date.
If you choose to have any portion of your annuity payments come from the
investment portfolio(s), the dollar amount of your payment will depend upon 3
things:
1) the value of your contract in the investment portfolio(s) on the annuity
date,
2) the 3% assumed investment rate used in the annuity table for the
contract, and
3) the performance of the investment portfolios you selected.
If the actual performance exceeds the 3% assumed investment rate, your annuity
payments will increase. Similarly, if the actual investment rate is less than
3%, your annuity payments will decrease.
Annuity payments are made monthly unless you have less than $2,000 to apply
toward a payment and you have not made a purchase payment in 3 years. In that
case, First Cova may provide your annuity payment in a single lump sum.
Likewise, if your annuity payments would be less than $20 a month, First Cova
has the right to change the frequency of payments so that your annuity payments
are at least $20.
Annuity Options
You can choose among income plans. We call them annuity options. We ask you to
choose an annuity option when you purchase the contract. You can change it at
any time before the annuity date with 30 days notice to us. If you do not choose
an annuity option at the time you purchase the contract, we will assume that you
selected Option 2 which provides a life annuity with 10 years of guaranteed
payments.
You can choose one of the following annuity options or any other annuity option
acceptable to First Cova. After annuity payments begin, you cannot change the
annuity option.
Option 1. Life Annuity. Under this option, we will make an annuity payment each
month so long as the annuitant is alive. After the annuitant dies, we stop
making annuity payments.
Option 2. Life Annuity with 5, 10 or 20 Years Guaranteed. Under this option, we
will make an annuity payment each month so long as the annuitant is alive.
However, if, when the annuitant dies, we have made annuity payments for less
than the selected guaranteed period, we will then continue to make annuity
payments for the rest of the guaranteed period to the beneficiary. If the
beneficiary does not want to receive annuity payments, he or she can ask us for
a single lump sum.
Option 3. Joint and Last Survivor Annuity. Under this option, we will make
annuity payments each month so long as the annuitant and a second person are
both alive. When either of these people dies, we will continue to make annuity
payments, so long as the survivor continues to live. The amount of the annuity
payments we will make to the survivor can be equal to 100%, 66 2/3% or 50% of
the amount that we would have paid if both were alive.
PURCHASE
Purchase Payments
A purchase payment is the money you give us to invest in the contract. The
minimum we will accept is $5,000 when the contract is purchased as a non-
qualified contract. If you are purchasing the contract as part of an IRA
(Individual Retirement Annuity) the minimum we will accept is $2,000.
(Currently, the contract is not available under an IRA until the IRA Endorsement
is approved by the State of New York Insurance Department.) The maximum purchase
payment we accept is $1 million without our prior approval. You can make
additional purchase payments of $500 or more to either type of contract.
Allocation of Purchase Payments
When you purchase a contract, we will allocate your purchase payment to the
fixed account and/or one or more of the investment portfolios you have selected.
If you make additional purchase payments, we will allocate them in the same way
as your first purchase payment unless you tell us otherwise. There is a $500
minimum allocation requirement for the fixed account and for each investment
portfolio.
Once we receive your purchase payment and the necessary information, we will
issue your contract and allocate your first purchase payment within 2 business
days. If you do not give us all of the information we need, we will contact you
to get it. If for some reason we are unable to complete this process within 5
business days, we will either send back your money or get your permission to
keep it until we get all of the necessary information. If you add more money to
your contract by making additional purchase payments, we will credit these
amounts to your contract within one business day. Our business day closes when
the New York Stock Exchange closes, usually 4:00 P.M. Eastern time.
Free Look
If you change your mind about owning this contract, you can cancel it within 10
days after receiving it. When you cancel the contract within this time period,
First Cova will not assess a withdrawal charge. You will receive back whatever
your contract is worth on the day we receive your request. If you have purchased
the contract as an IRA, we are required to give you back your purchase payment
if you decide to cancel your contract within 10 days after receiving it.
Accumulation Units
The value of the variable annuity portion of your contract will go up or down
depending upon the investment performance of the investment portfolio(s) you
choose. In order to keep track of the value of your contract, we use a unit of
measure we call an accumulation unit. (An accumulation unit works like a share
of a mutual fund.) During the income phase of the contract we call the unit an
annuity unit.
Every day we determine the value of an accumulation unit for each of the
investment portfolios. We do this by:
1. determining the total amount of money invested in the particular investment
portfolio;
2. subtracting from that amount any insurance charges and any other charges
such as taxes we have deducted; and
3. dividing this amount by the number of outstanding accumulation units.
The value of an accumulation unit may go up or down from day to day.
When you make a purchase payment, we credit your contract with accumulation
units. The number of accumulation units credited is determined by dividing the
amount of the purchase payment allocated to an investment portfolio by the value
of the accumulation unit for that investment portfolio.
We calculate the value of an accumulation unit for each investment portfolio
after the New York Stock Exchange closes each day and then credit your contract.
Example:
On Monday we receive an additional purchase payment of $5,000 from you. You
have told us you want this to go to the Quality Bond Portfolio. When the
New York Stock Exchange closes on that Monday, we determine that the value
of an accumulation unit for the Quality Bond Portfolio is $13.90. We then
divide $5,000 by $13.90 and credit your contract on Monday night with
359.71 accumulation units for the Quality Bond Portfolio.
INVESTMENT OPTIONS
The contract offers 11 investment portfolios which are listed below. Additional
investment portfolios may be available in the future.
YOU SHOULD READ THE PROSPECTUSES FOR THESE FUNDS CAREFULLY BEFORE INVESTING.
COPIES OF THESE PROSPECTUSES ARE ATTACHED TO THIS PROSPECTUS.
Cova Series Trust
Cova Series Trust is managed by Cova Investment Advisory Corporation (Cova
Advisory) which is an affiliate of First Cova. Cova Series Trust is a mutual
fund with multiple portfolios. Each investment portfolio has a different
investment objective. Cova Advisory has engaged sub-advisers to provide
investment advice for the individual investment portfolios. The following
investment portfolios are available under the contract:
J.P. Morgan Investment Management Inc. is the sub-adviser to the following
portfolios:
Select Equity Portfolio
Large Cap Stock Portfolio
Small Cap Stock Portfolio
International Equity Portfolio
Quality Bond Portfolio
Lord, Abbett & Co. is the sub-adviser to the following portfolios:
Bond Debenture Portfolio
Mid-Cap Value Portfolio
Large Cap Research Portfolio
Developing Growth Portfolio
Lord Abbett Growth and Income Portfolio
General American Capital Company
General American Capital Company is a mutual fund with multiple portfolios. Each
portfolio is managed by Conning Asset Management Company. The following
portfolio is available under the contract:
Money Market Fund
Transfers
You can transfer money among the fixed account and the investment portfolios.
Telephone Transfers. You can make transfers by telephone. If you own the
contract with a joint owner, unless First Cova is instructed otherwise, First
Cova will accept instructions from either you or the other owner. First Cova
will use reasonable procedures to confirm that instructions given us by
telephone are genuine. If First Cova fails to use such procedures, we may be
liable for any losses due to unauthorized or fraudulent instructions. First Cova
tape records all telephone instructions.
Transfers During the Accumulation Phase.
You can make 12 transfers every year during the accumulation phase without
charge. We measure a year from the anniversary of the day we issued your
contract. You can make a transfer to or from the fixed account and to or from
any investment portfolio. If you make more than 12 transfers in a year, there is
a transfer fee deducted. The following apply to any transfer during the
accumulation phase:
1. The minimum amount which you can transfer is $500 or your entire value in
the investment portfolio or fixed account.
2. Your request for transfer must clearly state which investment portfolio(s)
or the fixed account are involved in the transfer.
3. Your request for transfer must clearly state how much the transfer is for.
4. You cannot make any transfers within 7 calendar days of the annuity date.
Transfers During the Income Phase.
You can only make transfers between the investment portfolios once each year. We
measure a year from the anniversary of the day we issued your contract. You
cannot transfer from the fixed account to an investment portfolio, but you can
transfer from one or more investment portfolios to the fixed account at any
time.
Dollar Cost Averaging Program
The Dollar Cost Averaging Program allows you to systematically transfer a set
amount each month from the Money Market Fund or the fixed account to any of the
other investment portfolio(s). By allocating amounts on a regular schedule as
opposed to allocating the total amount at one particular time, you may be less
susceptible to the impact of market fluctuations. The Dollar Cost Averaging
Program is available only during the accumulation phase.
The minimum amount which can be transferred each month is $500. You must have at
least $6,000 in the Money Market Fund or the fixed account, (or the amount
required to complete your program, if less) in order to participate in the
Dollar Cost Averaging Program. Currently, First Cova does not charge for
participating in the Dollar Cost Averaging Program.
If you participate in the Dollar Cost Averaging Program, the transfers made
under the program are not taken into account in determining any transfer fee.
First Cova may, from time to time, offer other dollar cost averaging programs
which may have terms different from those described above.
Automatic Rebalancing Program
Once your money has been allocated to the investment portfolios, the performance
of each portfolio may cause your allocation to shift. You can direct us to
automatically rebalance your contract to return to your original percentage
allocations by selecting our Automatic Rebalancing Program. You can tell us
whether to rebalance quarterly, semi-annually or annually. We will measure these
periods from the anniversary of the date we issued your contract. The transfer
date will be the 1st day after the end of the period you selected.
The Automatic Rebalancing Program is available only during the accumulation
phase. Currently, First Cova does not charge for participating in the Automatic
Rebalancing Program. If you participate in the Automatic Rebalancing Program,
the transfers made under the program are not taken into account in determining
any transfer fee.
Example:
Assume that you want your initial purchase payment split between 2
investment portfolios. You want 40% to be in the Quality Bond Portfolio and
60% to be in the Select Equity Portfolio. Over the next 2 1/2 months the
bond market does very well while the stock market performs poorly. At the
end of the first quarter, the Quality Bond Portfolio now represents 50% of
your holdings because of its increase in value. If you have chosen to have
your holdings rebalanced quarterly, on the first day of the next quarter,
First Cova will sell some of your units in the Quality Bond Portfolio to
bring its value back to 40% and use the money to buy more units in the
Select Equity Portfolio to increase those holdings to 60%.
Voting Rights
First Cova is the legal owner of the investment portfolio shares. However, First
Cova believes that when an investment portfolio solicits proxies in conjunction
with a vote of shareholders, it is required to obtain from you and other
affected owners instructions as to how to vote those shares. When we receive
those instructions, we will vote all of the shares we own in proportion to those
instructions. This will also include any shares that First Cova owns on its own
behalf. Should First Cova determine that it is no longer required to comply with
the above, we will vote the shares in our own right.
Substitution
First Cova may be required to substitute one of the investment portfolios you
have selected with another portfolio. We would not do this without the prior
approval of the Securities and Exchange Commission. We will give you notice of
our intent to do this.
EXPENSES
There are charges and other expenses associated with the contracts that reduce
the return on your investment in the contract. These charges and expenses are:
Insurance Charges
Each day, First Cova makes a deduction for its insurance charges. First Cova
does this as part of its calculation of the value of the accumulation units and
the annuity units. The insurance charge has two parts:
1) the mortality and expense risk premium, and
2) the administrative expense charge.
Mortality and Expense Risk Premium. This charge is equal, on an annual basis, to
1.25% of the daily value of the contracts invested in an investment portfolio,
after fund expenses have been deducted. This charge is for the insurance
benefits e.g., guarantee of annuity rates, the death benefits, for certain
expenses of the contract, and for assuming the risk (expense risk) that the
current charges will be sufficient in the future to cover the cost of
administering the contract. If the charges under the contract are not
sufficient, then First Cova will bear the loss. First Cova does, however, expect
to profit from this charge. The mortality and expense risk premium cannot be
increased. First Cova may use any profits we make from this charge to pay for
the costs of distributing the contract.
Administrative Expense Charge. This charge is equal, on an annual basis, to .15%
of the daily value of the contracts invested in an investment portfolio, after
fund expenses have been deducted. This charge, together with the contract
maintenance charge (see below) is for the expenses associated with the
administration of the contract. Some of these expenses are: preparation of the
contract, confirmations, annual reports and statements, maintenance of contract
records, personnel costs, legal and accounting fees, filing fees, and computer
and systems costs. Because this charge is taken out of every unit value, you may
pay more in administrative costs than those that are associated solely with your
contract. First Cova does not intend to profit from this charge. However, if
this charge and the contract maintenance charge are not enough to cover the
costs of the contracts in the future, First Cova will bear the loss.
Contract Maintenance Charge
During the accumulation phase, every year on the anniversary of the date when
your contract was issued, First Cova deducts $30 from your contract as a
contract maintenance charge. This charge is for administrative expenses (see
above). This charge cannot be increased.
First Cova will not deduct this charge during the accumulation phase if when the
deduction is to be made, the value of your contract is $50,000 or more. First
Cova may some time in the future discontinue this practice and deduct the
charge.
If you make a complete withdrawal from your contract, the contract maintenance
charge will also be deducted. A prorata portion of the charge will be deducted
if the annuity date is other than an anniversary. After the annuity date, the
charge will be collected monthly out of the annuity payment.
Withdrawal Charge
During the accumulation phase, you can make withdrawals from your contract.
First Cova keeps track of each purchase payment. Once a year after the first
year, you can withdraw up to 10% of your total purchase payments and no
withdrawal charge will be assessed on the 10%, if on the day you make your
withdrawal the value of your contract is $5,000 or more. Otherwise, unless the
purchase payment was made more than 7 years ago, the charge is:
<TABLE>
<CAPTION>
Years Since
Payment Charge
<S> <C>
1 7%
2 6%
3 5%
4 4%
5 3%
6 2%
7 1%
8+ 0%
</TABLE>
After First Cova has had a purchase payment for 7 years, there is no charge when
you withdraw that purchase payment. First Cova does not assess a withdrawal
charge on earnings withdrawn from the contract. Earnings are defined as the
value in your contract minus the remaining purchase payments in your contract.
The withdrawal order for calculating the withdrawal charge is shown below.
* 10% of purchase payments free.
* Remaining purchase payments that are over 7 years old and not subject
to a withdrawal charge.
* Earnings in the contract free.
* Remaining purchase payments that are less than 7 years old and are
subject to a withdrawal charge.
For purposes of calculating the withdrawal charge, slightly different rules may
apply to Section 1035 exchanges.
When the withdrawal is for only part of the value of your contract, the
withdrawal charge is deducted from the remaining value in your contract if
sufficient, or from the amount withdrawn.
First Cova does not assess the withdrawal charge on any payments paid out as
annuity payments or as death benefits.
NOTE: For tax purposes, earnings are considered to come out first.
Transfer Fee
You can make 12 free transfers every year. We measure a year from the day we
issue your contract. If you make more than 12 transfers a year, we will deduct a
transfer fee of $25 or 2% of the amount that is transferred whichever is less.
If the transfer is part of the Dollar Cost Averaging Program or the Automatic
Rebalancing Program it will not count in determining the transfer fee.
Income Taxes
First Cova will deduct from the contract for any income taxes which it incurs
because of the contract. At the present time, we are not making any such
deductions.
Investment Portfolio Expenses
There are deductions from and expenses paid out of the assets of the various
investment portfolios, which are described in the attached fund prospectuses.
TAXES
NOTE: First Cova has prepared the following information on taxes as a general
discussion of the subject. It is not intended as tax advice to any individual.
You should consult your own tax adviser about your own circumstances. First Cova
has included an additional discussion regarding taxes in the Statement of
Additional Information.
Annuity Contracts in General
Annuity contracts are a means of setting aside money for future needs - usually
retirement. Congress recognized how important saving for retirement was and
provided special rules in the Internal Revenue Code (Code) for annuities.
Simply stated these rules provide that you will not be taxed on the earnings on
the money held in your annuity contract until you take the money out. This is
referred to as tax deferral. There are different rules as to how you will be
taxed depending on how you take the money out and the type of contract -
qualified or non-qualified (see following sections).
You, as the owner, will not be taxed on increases in the value of your contract
until a distribution occurs - either as a withdrawal or as annuity payments.
When you make a withdrawal you are taxed on the amount of the withdrawal that is
earnings. For annuity payments, different rules apply. A portion of each annuity
payment is treated as a partial return of your purchase payments and will not be
taxed. The remaining portion of the annuity payment will be treated as ordinary
income. How the annuity payment is divided between taxable and non-taxable
portions depends upon the period over which the annuity payments are expected to
be made. Annuity payments received after you have received all of your purchase
payments are fully includible in income.
When a non-qualified contract is owned by a non-natural person (e.g.,
corporation or certain other entities other than a trust holding the contract as
an agent for a natural person), the contract will generally not be treated as an
annuity for tax purposes.
Qualified and Non-Qualified Contracts
If you purchase the contract as an individual and not under an Individual
Retirement Annuity (IRA), your contract is referred to as a non-qualified
contract.
If you purchase the contract under an IRA, your contract is referred to as a
qualified contract. Currently, the contract is not available under an IRA until
the IRA Endorsement is approved by the State of New York Insurance Department.
Withdrawals - Non-Qualified Contracts
If you make a withdrawal from your contract, the Code treats such a withdrawal
as first coming from earnings and then from your purchase payments. Such
withdrawn earnings are includible in income.
The Code also provides that any amount received under an annuity contract which
is included in income may be subject to a penalty. The amount of the penalty is
equal to 10% of the amount that is includible in income. Some withdrawals will
be exempt from the penalty. They include any amounts:
(1) paid on or after the taxpayer reaches age 59 1/2;
(2) paid after you die;
(3) paid if the taxpayer becomes totally disabled (as that term is defined
in the Code);
(4) paid in a series of substantially equal payments made annually (or more
frequently) for life or a period not exceeding life expectancy;
(5) paid under an immediate annuity; or
(6) which come from purchase payments made prior to August 14, 1982.
Withdrawals - Qualified Contracts
The above information describing the taxation of non-qualified contracts does
not apply to qualified contracts. There are special rules that govern with
respect to qualified contracts. We have provided a more complete discussion in
the Statement of Additional Information.
Diversification
The Code provides that the underlying investments for a variable annuity must
satisfy certain diversification requirements in order to be treated as an
annuity contract. First Cova believes that the investment portfolios are being
managed so as to comply with the requirements.
Neither the Code nor the Internal Revenue Service Regulations issued to date
provide guidance as to the circumstances under which you, because of the degree
of control you exercise over the underlying investments, and not First Cova
would be considered the owner of the shares of the investment portfolios. If you
are considered the owner of the shares, it will result in the loss of the
favorable tax treatment for the contract. It is unknown to what extent under
federal tax law owners are permitted to select investment portfolios, to make
transfers among the investment portfolios or the number and type of investment
portfolios owners may select from without being considered the owner of the
shares. If any guidance is provided which is considered a new position, then the
guidance would generally be applied prospectively. However, if such guidance is
considered not to be a new position, it may be applied retroactively. This would
mean that you, as the owner of the contract, could be treated as the owner of
the shares of the investment portfolios.
Due to the uncertainty in this area, First Cova reserves the right to modify the
contract in an attempt to maintain favorable tax treatment.
ACCESS TO YOUR MONEY
You can have access to the money in your contract:
(1) by making a withdrawal (either a partial or a complete withdrawal);
(2) by electing to receive annuity payments; or
(3) when a death benefit is paid to your beneficiary.
You can only make withdrawals during the accumulation phase.
When you make a complete withdrawal you will receive the withdrawal value. The
withdrawal value is the value of the contract on the day you made the
withdrawal:
* less any applicable withdrawal charge,
* less any premium tax, and
* less any contract maintenance charge.
(See "Expenses" for a discussion of the charges.)
Unless you instruct First Cova otherwise, any partial withdrawal will be made
pro-rata from all the investment portfolios and the fixed account you selected.
Under most circumstances the amount of any partial withdrawal must be for at
least $500 or if smaller, the remaining withdrawal value. First Cova requires
that after a partial withdrawal is made you keep at least $500 in your contract.
When you make a withdrawal, the amount of the death benefit may be reduced. See
"Death Benefits."
INCOME TAXES AND TAX PENALTIES MAY APPLY TO ANY WITHDRAWAL YOU MAKE.
Systematic Withdrawal Program
The Systematic Withdrawal Program provides an automatic monthly payment to you
of up to 10% of your total purchase payments each year. No withdrawal charge
will be deducted for these payments. First Cova does not have any charge for
this program. If you use this program, you may not also make a single 10% free
withdrawal. For a discussion of the withdrawal charge and the 10% free
withdrawal, see Section 5. Expenses.
Income taxes and tax penalties may apply to Systematic Withdrawals.
Suspension of Payments or Transfers
First Cova may be required to suspend or postpone payments for withdrawals or
transfers for any period when:
1. the New York Stock Exchange is closed (other than customary weekend and
holiday closings);
2. trading on the New York Stock Exchange is restricted;
3. an emergency exists as a result of which disposal of shares of the
investment portfolios is not reasonably practicable or First Cova cannot
reasonably value the shares of the investment portfolios;
4. during any other period when the Securities and Exchange Commission, by
order, so permits for the protection of owners.
First Cova has reserved the right to defer payment for a withdrawal or transfer
from the fixed account for the period permitted by law but not for more than six
months.
PERFORMANCE
First Cova periodically advertises performance of the various investment
portfolios. First Cova will calculate performance by determining the percentage
change in the value of an accumulation unit by dividing the increase (decrease)
for that unit by the value of the accumulation unit at the beginning of the
period. This performance number reflects the deduction of the insurance charges.
It does not reflect the deduction of any applicable contract maintenance charge
and withdrawal charge. The deduction of any applicable contract maintenance
charge and withdrawal charges would reduce the percentage increase or make
greater any percentage decrease. Any advertisement will also include total
return figures which reflect the deduction of the insurance charges, contract
maintenance charges, and withdrawal charges.
For periods starting prior to the date the contracts were first offered, the
performance will be based on the historical performance of the corresponding
investment portfolios for the periods commencing from the date on which the
particular investment portfolio was made available through the Separate Account.
In addition, for certain investment portfolios, performance may be shown for the
period commencing from the inception date of the investment portfolio. These
figures should not be interpreted to reflect actual historical performance of
the Separate Account.
First Cova may, from time to time, include in its advertising and sales
materials, tax deferred compounding charts and other hypothetical illustrations,
which may include comparisons of currently taxable and tax deferred investment
programs, based on selected tax brackets.
Appendix B contains performance information that you may find informative. It is
divided into various parts, depending upon the type of performance information
shown. Future performance will vary and the results shown are not necessarily
representative of future results.
DEATH BENEFIT
Upon Your Death
If you die before annuity payments begin, First Cova will pay a death benefit to
your beneficiary (see below). If you have a joint owner, the death benefit will
be paid when the first of you dies. The surviving joint owner will be treated as
the beneficiary.
For contracts purchased on or after December 30, 1999, your death benefit is the
Annual Step-Up Option. If you bought your contract before December 30, 1999, you
received the Seven Year Step-Up Option. On your next contract anniversary after
December 30, 1999, you can elect the Annual Step-Up Option for contracts issued
prior to December 30, 1999. If you do not make an election on such contract
anniversary, your death benefit will remain the Seven Year Step-Up Option.
The death benefits are described below. If you have a joint owner, the death
benefit is determined based on the age of the oldest joint owner and the death
benefit is payable on the death of the first joint owner.
ANNUAL STEP-UP OPTION FOR CONTRACTS ISSUED ON OR AFTER DECEMBER 30, 1999
Prior to you, or your joint owner, reaching age 80, the death benefit will be
the greatest of:
1. Total purchase payments, less any withdrawals (and any withdrawal charges
paid on the withdrawals); or
2. The value of your contract at the time the death benefit is to be paid; or
3. The greatest adjusted contract value (GACV) (as explained below).
The GACV is evaluated at each contract anniversary prior to the date of you or
your joint owner's death, and on each day a purchase payment or withdrawal is
made. On the contract anniversary, if the current contract value is greater that
the GACV, the GACV will be increased to the current value of your contract. If a
purchase payment is made, the amount of the purchase payment will increase the
GACV. If a withdrawal is made, the GACV will be reduced by the amount withdrawn
(and any associated withdrawal charges) divided by the value of your contract
immediately before the withdrawal multiplied by the GACV immediately prior to
the withdrawal. The following example describes the effect of a withdrawal on
the GACV:
Example:
Assumed facts for example:
$10,000 current GACV
$8,000 contract value
$5,000 total purchase payments, less any prior withdrawals and associated
withdrawal charges
$2,100 partial withdrawal ($2,000 withdrawal + $100 withdrawal charge)
New GACV = $10,000 - [($2,100 $8,000) X $10,000]
which results in the current GACV of $10,000 being reduced by $2,625
The new GACV is $7,375.
The contract value immediately after the withdrawal is $5,900, which is $8,000
less the $2,000 withdrawal and the $100 withdrawal charge.
The death benefit immediately after the withdrawal is the greatest of purchase
payments less withdrawals and withdrawal charges ($5,000 minus $2,100) or the
contract value ($5,900) or the GACV ($7,375).
The death benefit is therefore $7,375.
After you, or your joint owner, reaches age 80, the death benefit will be the
greatest of:
1. Total purchase payments made, less any withdrawals (and any withdrawal
charges paid on the withdrawals); or
2. The value of your contract at the time the death beneift is to be paid; or
3. The greatest adjusted contract value (GACV) (as explained below).
The GACV is evaluated at each contract anniversary on or before your, or your
joint owner's, 80th birthday, and on each day a purchase payment or withdrawal
is made. On the contract anniversary on or before your, or your joint owner's,
80th birthday, if the current contract value is greater than the GACV, the GACV
will be increased to the current value of your contract. If a purchase payment
is made, the amount of the purchase payment will increase the GACV. If a
withdrawal is made, the example above explains the effect of a withdrawal on the
GACV.
ANNUAL STEP-UP OPTION FOR CONTRACTS ISSUED PRIOR TO DECEMBER 30, 1999
Prior to you or your joint owner, reaching age 80, the death benefit will be the
greatest of:
1. Total purchase payments, less any withdrawals (and any withdrawal charges
paid on the withdrawals); or
2. The value of your contract at the time the death benefit is to be paid; or
3. The greatest adjusted contract value (GACV) (as explained below).
The GACV is initially the death benefit determined as of the day First Cova
receives notice that you have elected this death benefit option. This figure is
based on your existing death benefit as defined in your contract, Option C (not
as defined in the endorsement for this option). The GACV is then evaluated at
each subsequent contract anniversary prior to your or your joint owner's death
and on each subsequent day a purchase payment or withdrawal is made. On the
contract anniversary, if the current contract value is greater than the GACV,
the GACV will be increased to the current value of your contract. If a purchase
payment is made, the amount of the purchase payment will increase the GACV. If a
withdrawal is made, the GACV will be reduced by the amount withdrawn (and any
associated withdrawal charges) divided by the value of your contract immediately
before the withdrawal multiplied by the GACV immediately prior to the
withdrawal. The example above under Death Benefit Option A explains the effect
of a withdrawal on the GACV under this death benefit option.
After you, or your joint owner, reaches age 80, the death benefit will be the
greatest of:
1. Total purchase payments made, less any withdrawals (and any withdrawal
charges paid on the withdrawals); or
2. The value of your contract at the time the death benefit is to be paid; or
3. The greatest adjusted contract value (GACV) (as explained below).
The GACV is initially the death benefit determined as of the day First Cova
receives notice that you have elected this death benefit option. This figure is
based on your existing death benefit as defined in your contract, Option C (not
as defined in the endorsement for this option). The GACV is then evaluated at
each subsequent contract anniversary on or before your or your joint owner's,
80th birthday, and on each subsequent day a purchase payment or withdrawal is
made. On the contract anniversary on or before your or your joint owner's, 80th
birthday, if the current contract value is greater than the GACV, the GACV will
be increased to the current value of your contract. If a purchase payment is
made, the amount of the purchase payment will increase the GACV. If a withdrawal
is made, the GACV will be reduced by the amount withdrawn (and any associated
withdrawal charges) divided by the value of your contract immediately before the
withdrawal, multiplied by the GACV immediately prior to the withdrawal. The
example above under Death Benefit Option A explains the effect of a withdrawal
on the GACV under this death benefit option.
SEVEN YEAR STEP-UP OPTION FOR CONTRACTS ISSUED PRIOR TO DECEMBER 30, 1999
The amount of the death benefit depends on how old you or your joint owner is.
Prior to you, or your joint owner, reaching age 80, the death benefit will be
the greatest of:
1. Total purchase payments, less withdrawals (and any withdrawal charges paid
on the withdrawals);
2. The value of your contract at the time the death benefit is to be paid; or
3. The value of your contract on the most recent seven year anniversary before
the date of death, plus any subsequent purchase payments, less any
withdrawals (and any withdrawal charges paid on the withdrawals.)
After you, or your joint owner, reaches age 80, the death benefit will be the
greater of:
1. Total purchase payments, less any withdrawals (and any withdrawal charges
paid on the withdrawals);
2. The value of your contract at the time the death benefit is to be paid; or
3. The value of your contract on the most recent seven year anniversary on or
before you or your joint owner reaches age 80, plus any subsequent purchase
payments, less any withdrawals (and any withdrawal charges paid on the
withdrawals).
The entire death benefit must be paid within 5 years of the date of death unless
the beneficiary elects to have the death benefit payable under an annuity
option. The death benefit payable under an annuity option must be paid over the
beneficiary's lifetime or for a period not extending beyond the beneficiary's
life expectancy. Payment must begin within one year of the date of death. If the
beneficiary is the spouse of the owner, he/she can continue the contract in
his/her own name at the then current value. If a lump sum payment is elected and
all the necessary requirements are met, the payment will be made within 7 days.
Payment under an annuity option may only be elected during the 60 day period
beginning with the date First Cova receives proof of death. If First Cova does
not receive an election during such time, it will make a single sum payment to
the beneficiary at the end of the 60 day period.
Death of Annuitant
If the annuitant, not an owner or joint owner, dies before annuity payments
begin, you can name a new annuitant. If no annuitant is named within 30 days of
the death of the annuitant, you will become the annuitant. However, if the owner
is a non-natural person (for example, a corporation), then the death or change
of annuitant will be treated as the death of the owner, and a new annuitant may
not be named.
Upon the death of the annuitant after annuity payments begin, the death benefit,
if any, will be as provided for in the annuity option selected.
OTHER INFORMATION
First Cova Life Insurance Company (First Cova) was organized under the laws of
the State of New York on December 31, 1992. First Cova is a wholly-owned
subsidiary of Cova Financial Services Life Insurance Company (Cova Life), a
Missouri insurance company. On June 1, 1995, a wholly-owned subsidiary of
General American Life Insurance Company purchased First Cova which on that date
changed its name to First Cova Life Insurance Company.
On August 26, 1999, it was announced that The Metropolitan Life Insurance
Company would purchase the ultimate parent of General American Life Insurance
Company, the parent company of Cova Life. Metropolitan Life is one of the
country's oldest and most financially sound life insurance organizations.
First Cova is licensed to do business only in the state of New York.
YEAR 2000
First Cova has developed and initiated plans to assure that its computer systems
will function properly in the year 2000 and later years. These efforts have
included receiving assurances from outside service providers that their computer
systems will also function properly in this context. Included within these plans
are the computer systems of the advisers and sub-advisers of the various
investment portfolios underlying the Separate Account.
The total cost of implementing these plans is not expected to have a material
effect on First Cova's financial position or results of operations. First Cova
believes that it has taken all reasonable steps to address these potential
problems. There can be no guarantee, however, that the steps taken will be
adequate to avoid any adverse impact.
The Separate Account
First Cova has established a separate account, First Cova Variable Annuity
Account One (Separate Account), to hold the assets that underlie the contracts.
The Board of Directors of First Cova adopted a resolution to establish the
Separate Account under New York insurance law on December 31, 1992. We have
registered the Separate Account with the Securities and Exchange Commission as a
unit investment trust under the Investment Company Act of 1940. The Separate
Account is divided into sub-accounts.
The assets of the Separate Account are held in First Cova's name on behalf of
the Separate Account and legally belong to First Cova. However, those assets
that underlie the contracts, are not chargeable with liabilities arising out of
any other business First Cova may conduct. All the income, gains and losses
(realized or unrealized) resulting from these assets are credited to or charged
against the contracts and not against any other contracts First Cova may issue.
Distributor
Cova Life Sales Company (Life Sales), One Tower Lane, Suite 3000, Oakbrook
Terrace, Illinois 60181-4644, acts as the distributor of the contracts. Life
Sales is an affiliate of First Cova.
Commissions will be paid to broker-dealers who sell the contracts.
Broker-dealers will be paid commissions of up to 3.5% of purchase payments. In
addition, under certain circumstances, an expense allowance of up to 2.75% of
purchase payments may be payable. The New York Insurance Department has ruled
that asset based compensation is permissible under certain circumstances. First
Cova may, in the future, adopt an asset based compensation program in addition
to, or in lieu of, the present compensation program.
Ownership
Owner. You, as the owner of the contract, have all the interest and rights under
the contract. Prior to the annuity date, the owner is as designated at the time
the contract is issued, unless changed. On and after the annuity date, the
annuitant is the owner (this may be a taxable event). The beneficiary becomes
the owner when a death benefit is payable. When this occurs, some ownership
rights may be limited.
Joint Owner. The contract can be owned by joint owners. Upon the death of either
joint owner, the surviving owner will be the designated beneficiary. Any other
beneficiary designation at the time the contract was issued or as may have been
later changed will be treated as a contingent beneficiary unless otherwise
indicated.
Beneficiary
The beneficiary is the person(s) or entity you name to receive any death
benefit. The beneficiary is named at the time the contract is issued unless
changed at a later date. Unless an irrevocable beneficiary has been named, you
can change the beneficiary at any time before you die.
Assignment
You can assign the contract at any time during your lifetime. First Cova will
not be bound by the assignment until it receives the written notice of the
assignment. First Cova will not be liable for any payment or other action we
take in accordance with the contract before we receive notice of the assignment.
AN ASSIGNMENT MAY BE A TAXABLE EVENT.
If the contract is issued pursuant to a qualified plan, there may be limitations
on your ability to assign the contract.
Financial Statements
The financial statements of First Cova and the Separate Account have been
included in the Statement of Additional Information.
Table of Contents of the Statement of Additional Information
Company
Experts
Legal Opinions
Distribution
Calculation of Performance Information
Federal Tax Status
Annuity Provisions
Financial Statements
<TABLE>
<CAPTION>
APPENDIX A
Condensed Financial Information
Accumulation Unit Value History
The following schedule includes accumulation unit values for the period
indicated. This data has been extracted from the Separate Account's Financial
Statements. This information should be read in conjunction with the Separate
Account's Financial Statements and related notes which are included in the
Statement of Additional Information.
Period Period Period
Ended 9/30/99 Ended 12/31/98 Ended 12/31/97
(unaudited)
- ----------------------------------------------------------------------------------------------------
Cova Series Trust
Managed by J.P. Morgan
Investment Management Inc.
Select Equity Sub-Account
<S> <C> <C> <C>
Beginning of Period $16.99 $14.05 $11.76
End of Period 16.30 16.99 14.05
Number of Accum. Units Outstanding 138,623 5,207 1,321
Small Cap Stock Sub-Account
Beginning of Period $12.58 $13.49 $10.92
End of Period 13.32 12.58 13.49
Number of Accum. Units Outstanding 62,947 2,679 530
International Equity Sub-Account
Beginning of Period $12.89 $11.46 $11.14
End of Period 13.85 12.89 11.46
Number of Accum. Units Outstanding 157,491 6,954 3,836
Quality Bond Sub-Account
Beginning of Period $11.91 $11.16 $10.45
End of Period 11.61 11.91 11.16
Number of Accum. Units Outstanding 66,046 5,759 2,068
Large Cap Stock Sub-Account
Beginning of Period $19.43 $14.89 $12.40
End of Period 20.19 19.43 14.89
Number of Accum. Units Outstanding 261,332 6,695 2,807
- -------------------------------------------------------------------------------------------------------------------
Managed by Lord, Abbett & Co.
Bond Debenture Sub-Account
Beginning of Period $13.50 $12.88 $11.74
End of Period 13.30 13.50 12.88
Number of Accum. Units Outstanding 225,659 11,913 8,928
- -------------------------------------------------------------------------------------------------------------------
Mid-Cap Value Sub-Account
Beginning of Period $10.44 $11.05 N/A
End of Period 10.65 10.44
Number of Accum. Units Outstanding 47,389 1,487
- -------------------------------------------------------------------------------------------------------------------
Large Cap Research Sub-Account
Beginning of Period $11.83 $10.95 N/A
End of Period 12.79 11.83
Number of Accum. Units Outstanding 89,834 2,713
- -------------------------------------------------------------------------------------------------------------------
Developing Growth Sub-Account
Beginning of Period $11.07 $10.19 N/A
End of Period 11.96 11.07
Number of Accum. Units Outstanding 35,864 167
- -------------------------------------------------------------------------------------------------------------------
General American Capital Company
Money Market Sub-Account
Beginning of Period $11.11 $11.11 N/A
End of Period 11.41 11.11
Number of Accum. Units Outstanding 100 2,161
<FN>
* The accumulation unit values shown above for the beginning of the period
reflect the date these accumulation units first invested in the Cova Series
Trust investment portfolios as follows: Select Equity (3/11/97), Small Cap
Stock (3/17/97), International Equity (3/11/97), Quality Bond (5/15/97),
Large Cap Stock (3/11/97), Bond Debenture (5/15/97), Mid-Cap Value
(3/4/98), Large Cap Research (3/3/98) and Developing Growth (11/23/98). The
General American Capital Company Money Market Sub-Account commenced
investment operations on December 28, 1998.
</FN>
</TABLE>
<TABLE>
<CAPTION>
APPENDIX B
PERFORMANCE INFORMATION
FUTURE PERFORMANCE WILL VARY AND THE RESULTS SHOWN ARE NOT NECESSARILY
REPRESENTATIVE OF FUTURE RESULTS.
Note: The figures below present investment performance information for the
periods ended September 30, 1999. While these numbers represent the returns as
of that date, they do not represent performance information of the portfolios
since that date. Performance information for the periods after September 30,
1999 may be different than the numbers shown below.
PART 1 - SEPARATE ACCOUNT PERFORMANCE
J.P. Morgan Investment Management Inc. is the sub-adviser for the following
portfolios of Cova Series Trust: Select Equity, Small Cap Stock, International
Equity, Quality Bond and Large Cap Stock. Lord, Abbett & Co. is the sub-adviser
for the following Portfolios of Cova Series Trust: Bond Debenture, Mid-Cap
Value, Large Cap Research and Developing Growth. All of these portfolios began
operations before December 31, 1998. As a result, performance information is
available for the accumulation unit values investing in these portfolios.
* Column A presents performance figures for the accumulation units which
reflect the insurance charges, the contract maintenance charge, the fees
and expenses of the investment portfolio, and assumes that you make a
withdrawal at the end of the period and therefore the withdrawal charge is
reflected.
* Column B presents performance figures for the accumulation units which
reflect the insurance charges as well as the fees and expenses of the
investment portfolio.
The inception dates shown below reflect the dates the Separate Account first
invested in the Portfolio. The total return figures are not annualized if the
sub-account was in existence for less than one year.
Part 1 Cova Series Trust
Average Annual Total Return for the period ended 9/30/99
- -------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Performance
Column A Column B
(reflects all charges (reflects insurance
and portfolio charges and
expenses) portfolio expenses)
Separate Account
Inception Date since since
Portfolio in Portfolio 1 yr inception 1 yr inception
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Select Equity 3/11/97 9.86% 12.02% 16.27% 13.61%
Small Cap Stock 3/17/97 15.06% 6.41% 21.48% 8.13%
International Equity 3/11/97 21.07% 7.19% 27.49% 8.88%
Quality Bond 5/15/97 -9.43% 2.60% -3.03% 4.54%
Large Cap Stock 3/11/97 20.82% 19.57% 27.25% 21.03%
Bond Debenture 5/15/97 -3.26% 3.51% 3.15% 5.38%
Mid-Cap Value 3/04/98 8.57% -6.52% 14.99% -2.29%
Large Cap Research 3/03/98 22.63% 6.37% 29.06% 10.33%
Developing Growth 11/23/98 -- 10.22% -- 17.33%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PART 1 General American Capital Company Money Market Fund
Average Annual Total Return for the period ended 9/30/99:
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Performance
Column A Column B
(reflects all charges (reflects insurance
and portfolio charges and
expenses) portfolio expenses)
- ------------------------------------------------------------------------------------------------------------------------------------
Separate Account
Inception Date 1 yr since 1 yr since
Portfolio in Portfolio inception inception
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Money Market 12/28/98 -- -4.35% -- 2.75%
</TABLE>
<TABLE>
<CAPTION>
PART 2 - HISTORICAL FUND PERFORMANCE
Shares of the General American Capital Company Money Market Fund were offered
under the contract on May 1, 1997. Shares of the Select Equity, Small Cap Stock,
International Equity, Quality Bond, Large Cap Stock and Bond Debenture
Portfolios of Cova Series Trust were offered under the contracts on February 3,
1997 and shares of the Mid-Cap Value, Large Cap Research and Developing Growth
Portfolios of Cova Series Trust were offered under the contracts on November 15,
1997. However, the Portfolios have been in existence for a longer time and
therefore have an investment performance history. In order to show how the
historical performance of the Portfolios affects accumulation unit values, we
have developed performance information.
The chart below shows the investment performance of the Portfolios and the
accumulation unit performance calculated by assuming that accumulation units
were invested in the Portfolios for the same periods.
* The performance figures in Column A reflect the fees and expenses paid by
the Portfolio.
* Column B presents performance figures for the accumulation units which
reflect the insurance charges, the contract maintenance charge, the fees
and expenses of the investment portfolio, and assumes that you make a
withdrawal at the end of the period and therefore the withdrawal charge is
reflected.
* Column C presents performance figures for the accumulation units which
reflect the insurance charges as well as the fees and expenses of the
Portfolio.
Part 2 Cova Series Trust
Average Annual Total Return for the period ended 9/30/99:
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Performance
Column B Column C
(reflects all charges (reflects insurance
Fund Performance and portfolio charges and
Column A expenses) portfolio expenses)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio
Inception since since since
Portfolio Date 1 yr inception 1 yr inception 1 yr inception
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Select Equity 5/1/96 17.87% 16.70% 9.86% 14.03% 16.27% 15.08%
Small Cap Stock 5/1/96 23.11% 8.68% 15.06% 5.95% 21.48% 7.17%
International Equity 5/1/96 29.28% 10.87% 21.07% 8.14% 27.49% 9.31%
Quality Bond 5/1/96 -1.63% 6.23% -9.43% 3.49% -3.03% 4.78%
Large Cap Stock 5/1/96 29.08% 24.53% 20.82% 21.89% 27.25% 22.81%
Bond Debenture 5/1/96 4.66% 9.91% -3.26% 7.19% 3.15% 8.38%
Mid-Cap Value 8/20/97 16.60% 4.34% 8.57% 0.86% 14.99% 3.04%
Large Cap Research 8/20/97 30.85% 13.74% 22.63% 10.33% 29.06% 12.32%
Developing Growth 8/20/97 37.67% 10.24% 29.34% 6.78% 35.74% 8.84%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Part 2 General American Capital Company Money Market Fund
Average Annual Total Return for the period ended 9/30/99
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Performance
Column B Column C
(reflects all charges (reflects insurance
Fund Performance and portfolio charges and
Column A expenses) portfolio expenses)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio
Inception
Portfolio Date 1 yr 5 yrs 10 yrs 1 yr 5 yrs 10 yrs 1 yr 5 yrs 10 yrs
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Money Market 10/1/87 5.12% 5.57% 5.44% -2.75% -0.43% 3.94% 3.65% 4.17% 4.04%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ------------------------
- ------------------------
- ------------------------
First Cova Life
Insurance Company
Attn: Variable Products
120 Broadway, 10th Floor
New York, New York 10271
Please send me, at no charge, the Statement of Additional Information dated
December 30, 1999, for The Annuity Contract issued by First Cova.
(Please print or type and fill in all information)
- ------------------------------------------------------------------------
Name
- ------------------------------------------------------------------------
Address
- ------------------------------------------------------------------------
City State Zip Code
CNY-1090 (__/99) FIRST COVA VA
[Back Cover]
COVA
First Cova Life Insurance Company
Home Office
120 Broadway, 10th Floor
New York, NY 10271
800-469-4545
Annuity Service Office
P.O. Box 10366
Des Moines, IA 50306
800-343-8496
CNY-1023(5/99) Policy Form Series CNY-672 21-VARI-NY (5/99)
PART B
STATEMENT OF ADDITIONAL INFORMATION
INDIVIDUAL FIXED AND VARIABLE DEFERRED ANNUITY CONTRACT
ISSUED BY
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
AND
FIRST COVA LIFE INSURANCE COMPANY
THIS IS NOT A PROSPECTUS. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE
READ IN CONJUNCTION WITH THE PROSPECTUS DATED DECEMBER 30, 1999 FOR THE
INDIVIDUAL FIXED AND VARIABLE DEFERRED ANNUITY CONTRACT WHICH IS DESCRIBED
HEREIN.
THE PROSPECTUS CONCISELY SETS FORTH INFORMATION THAT A PROSPECTIVE INVESTOR
OUGHT TO KNOW BEFORE INVESTING. FOR A COPY OF THE PROSPECTUS CALL OR WRITE THE
COMPANY AT: One Tower Lane, Suite 3000, Oakbrook Terrace, Illinois 60181-4644,
(800) 831-LIFE.
THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED DECEMBER 30, 1999.
TABLE OF CONTENTS
Page
COMPANY
EXPERTS
LEGAL OPINIONS
DISTRIBUTION
CALCULATION OF PERFORMANCE INFORMATION
Total Return
Historical Unit Values
Reporting Agencies
Performance Information
FEDERAL TAX STATUS
General
Diversification
Multiple Contracts
Contracts Owned by Other than Natural Persons
Tax Treatment of Assignments
Income Tax Withholding
Death Benefits
Tax Treatment of Withdrawals - Non-Qualified Contracts
Qualified Plans
Tax Treatment of Withdrawals - Qualified Contracts
ANNUITY PROVISIONS
Variable Annuity
Fixed Annuity
Annuity Unit
Net Investment Factor
Mortality and Expense Guarantee
FINANCIAL STATEMENTS
COMPANY
First Cova Life Insurance Company (the "Company") was organized under the laws
of the state of New York on December 31, 1992. The Company is presently licensed
to do business only in the state of New York. The Company is a wholly-owned
subsidiary of Cova Financial Services Life Insurance Company ("Cova Life"), a
Missouri insurance company. On December 31, 1992, Cova Life acquired Wausau
Underwriters Life Insurance Company ("Wausau"), a stock life insurance company
organized under the laws of the state of Wisconsin. On April 16, 1993, Wausau
was merged into the Company, with the Company as the surviving corporation.
On June 1, 1995, a wholly-owned subsidiary of General American Life Insurance
Company ("General American") purchased Cova Life from Xerox Financial Services,
Inc. The acquisition of Cova Life included related companies, including the
Company. On June 1, 1995, the Company changed its name to First Cova Life
Insurance Company.
General American is a St. Louis-based mutual company with more than $300 billion
of life insurance in force and approximately $24 billion in assets. It provides
life and health insurance, retirement plans, and related financial services to
individuals and groups.
On August 26, 1999, it was announced that The Metropolitan Life Insurance
Company would purchase the ultimate parent of General American Life Insurance
Company, the parent company of Cova Life. Metropolitan Life is one of the
country's oldest and most financially sound life insurance organizations.
EXPERTS
The statutory statements of admitted assets, liabilities, and capital stock and
surplus of the Company as of December 31, 1998 and 1997, and the related
statutory statements of operations, capital stock and surplus, and cash flow for
each of the years in the three-year period ended December 31, 1998, and the
statement of assets and liabilities of the Separate Account as of December 31,
1998, and the related statement of operations for the year then ended, and the
statements of changes in net assets for the year then ended and the statement of
changes in net assets for the period from commencement of operations through
December 31, 1997, have been included herein in reliance upon the reports of
KPMG LLP, independent certified public accountants, appearing elsewhere herein,
and upon the authority of said firm as experts in accounting and auditing.
LEGAL OPINIONS
Blazzard, Grodd & Hasenauer, P.C., Westport, Connecticut has provided advice on
certain matters relating to the federal securities and income tax laws in
connection with the Contracts.
DISTRIBUTION
Cova Life Sales Company ("Life Sales") acts as the distributor. Prior to June 1,
1995, Cova Life Sales Company was known as Xerox Life Sales Company. Life Sales
is an affiliate of the Company. The offering is on a continuous basis.
PERFORMANCE INFORMATION
TOTAL RETURN
From time to time, the Company may advertise performance data. Such data will
show the percentage change in the value of an Accumulation Unit based on the
performance of an investment portfolio over a period of time, usually a calendar
year, determined by dividing the increase (decrease) in value for that unit by
the Accumulation Unit value at the beginning of the period.
Any such advertisement will include total return figures for the time periods
indicated in the advertisement. Such total return figures will reflect the
deduction of a 1.25% Mortality and Expense Risk Premium, a .15% Administrative
Expense Charge, the expenses for the underlying investment portfolio being
advertised and any applicable Contract Maintenance Charges and Withdrawal
Charges.
The hypothetical value of a Contract purchased for the time periods described in
the advertisement will be determined by using the actual Accumulation Unit
values for an initial $1,000 purchase payment, and deducting any applicable
Contract Maintenance Charges and any applicable Withdrawal Charges to arrive at
the ending hypothetical value. The average annual total return is then
determined by computing the fixed interest rate that a $1,000 purchase payment
would have to earn annually, compounded annually, to grow to the hypothetical
value at the end of the time periods described. The formula used in these
calculations is:
n
P ( 1 + T) = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the time periods used (or
fractional portion thereof) of a hypothetical $1,000 payment made
at the beginning of the time periods used.
The Company may also advertise performance data which will be calculated in the
same manner as described above but which will not reflect the deduction of any
Withdrawal Charge. The deduction of any Withdrawal Charge would reduce any
percentage increase or make greater any percentage decrease.
You should note that the investment results of each investment portfolio will
fluctuate over time, and any presentation of the investment portfolio's total
return for any period should not be considered as a representation of what an
investment may earn or what your total return may be in any future period.
HISTORICAL UNIT VALUES
The Company may also show historical Accumulation Unit values in certain
advertisements containing illustrations. These illustrations will be based on
actual Accumulation Unit values.
In addition, the Company may distribute sales literature which compares the
percentage change in Accumulation Unit values for any of the investment
portfolios against established market indices such as the Standard & Poor's 500
Composite Stock Price Index, the Dow Jones Industrial Average or other
management investment companies which have investment objectives similar to the
investment portfolio being compared. The Standard & Poor's 500 Composite Stock
Price Index is an unmanaged, unweighted average of 500 stocks, the majority of
which are listed on the New York Stock Exchange. The Dow Jones Industrial
Average is an unmanaged, weighted average of thirty blue chip industrial
corporations listed on the New York Stock Exchange. Both the Standard & Poor's
500 Composite Stock Price Index and the Dow Jones Industrial Average assume
quarterly reinvestment of dividends.
REPORTING AGENCIES
The Company may also distribute sales literature which compares the performance
of the Accumulation Unit values of the Contracts with the unit values of
variable annuities issued by other insurance companies. Such information will be
derived from the Lipper Variable Insurance Products Performance Analysis
Service, the VARDS Report or from Morningstar.
The Lipper Variable Insurance Products Performance Analysis Service is published
by Lipper Analytical Services, Inc., a publisher of statistical data which
currently tracks the performance of almost 4,000 investment companies. The
rankings compiled by Lipper may or may not reflect the deduction of asset-based
insurance charges. The Company's sales literature utilizing these rankings will
indicate whether or not such charges have been deducted. Where the charges have
not been deducted, the sales literature will indicate that if the charges had
been deducted, the ranking might have been lower.
The VARDS Report is a monthly variable annuity industry analysis compiled by
Variable Annuity Research & Data Service of Roswell, Georgia and published by
Financial Planning Resources, Inc. The VARDS rankings may or may not reflect the
deduction of asset-based insurance charges. In addition, VARDS prepares risk
adjusted rankings, which consider the effects of market risk on total return
performance. This type of ranking may address the question as to which funds
provide the highest total return with the least amount of risk. Other ranking
services may be used as sources of performance comparison, such as
CDA/Weisenberger.
Morningstar rates a variable annuity against its peers with similar investment
objectives. Morningstar does not rate any variable annuity that has less than
three years of performance data.
PERFORMANCE INFORMATION
The Select Equity, Small Cap Stock, Large Cap Stock, International Equity,
Quality Bond and Bond Debenture Portfolios of Cova Series Trust were available
under the contract starting February 3, 1997 and the Mid-Cap Value, Large Cap
Research and Developing Growth Portfolios of Cova Series Trust were available
under the contract on November 15, 1997. The Money Market Fund of General
American Capital Company became available under the Contract on May 1, 1997.
However, these funds have been in existence for some time and consequently have
an investment performance history. In order to demonstrate how investment
experience of these Portfolios affects Accumulation Unit values, performance
information was developed. The information is based upon the historical
experience of the Portfolios and is for the periods shown. The prospectus
contains a chart of performance information.
Future performance of the Portfolios will vary and the results shown are not
necessarily representative of future results. Performance for periods ending
after those shown may vary substantially from the examples shown. The
performance of the Portfolios is calculated for a specified period of time by
assuming an initial Purchase Payment of $1,000 allocated to the Portfolio. There
are performance figures for the Accumulation Units which reflect the insurance
charges as well as the portfolio expenses. There are also performance figures
for the Accumulation Units which reflect the insurance charges, the contract
maintenance charge, the portfolio expenses, and assume that you make a
withdrawal at the end of the period and therefore the withdrawal charge is
reflected. The percentage increases (decreases) are determined by subtracting
the initial Purchase Payment from the ending value and dividing the remainder by
the beginning value. The performance may also show figures when no withdrawal is
assumed.
FEDERAL TAX STATUS
GENERAL
NOTE: THE FOLLOWING DESCRIPTION IS BASED UPON THE COMPANY'S UNDERSTANDING OF
CURRENT FEDERAL INCOME TAX LAW APPLICABLE TO ANNUITIES IN GENERAL. THE COMPANY
CANNOT PREDICT THE PROBABILITY THAT ANY CHANGES IN SUCH LAWS WILL BE MADE.
PURCHASERS ARE CAUTIONED TO SEEK COMPETENT TAX ADVICE REGARDING THE POSSIBILITY
OF SUCH CHANGES. THE COMPANY DOES NOT GUARANTEE THE TAX STATUS OF THE CONTRACTS.
PURCHASERS BEAR THE COMPLETE RISK THAT THE CONTRACTS MAY NOT BE TREATED AS
"ANNUITY CONTRACTS" UNDER FEDERAL INCOME TAX LAWS. IT SHOULD BE FURTHER
UNDERSTOOD THAT THE FOLLOWING DISCUSSION IS NOT EXHAUSTIVE AND THAT SPECIAL
RULES NOT DESCRIBED HEREIN MAY BE APPLICABLE IN CERTAIN SITUATIONS. MOREOVER, NO
ATTEMPT HAS BEEN MADE TO CONSIDER ANY APPLICABLE STATE OR OTHER TAX LAWS.
Section 72 of the Code governs taxation of annuities in general. An Owner is not
taxed on increases in the value of a Contract until distribution occurs, either
in the form of a lump sum payment or as annuity payments under the Annuity
Option selected. For a lump sum payment received as a total withdrawal (total
surrender), the recipient is taxed on the portion of the payment that exceeds
the cost basis of the Contract. For Non-Qualified Contracts, this cost basis is
generally the purchase payments, while for Qualified Contracts there may be no
cost basis. The taxable portion of the lump sum payment is taxed at ordinary
income tax rates.
For annuity payments, a portion of each payment in excess of an exclusion amount
is includible in taxable income. The exclusion amount for payments based on a
fixed annuity option is determined by multiplying the payment by the ratio that
the cost basis of the Contract (adjusted for any period or refund feature) bears
to the expected return under the Contract. The exclusion amount for payments
based on a variable annuity option is determined by dividing the cost basis of
the Contract (adjusted for any period certain or refund guarantee) by the number
of years over which the annuity is expected to be paid. Payments received after
the investment in the Contract has been recovered (i.e. when the total of the
excludable amount equals the investment in the Contract) are fully taxable. The
taxable portion is taxed at ordinary income tax rates. For certain types of
Qualified Plans there may be no cost basis in the Contract within the meaning of
Section 72 of the Code. Owners, Annuitants and Beneficiaries under the Contracts
should seek competent financial advice about the tax consequences of any
distributions. The Company is taxed as a life insurance company under the Code.
For federal income tax purposes, the Separate Account is not a separate entity
from the Company, and its operations form a part of the Company.
DIVERSIFICATION
Section 817(h) of the Code imposes certain diversification standards on the
underlying assets of variable annuity contracts. The Code provides that a
variable annuity contract will not be treated as an annuity contract for any
period (and any subsequent period) for which the investments are not, in
accordance with regulations prescribed by the United States Treasury Department
("Treasury Department"), adequately diversified. Disqualification of the
Contract as an annuity contract would result in the imposition of federal income
tax to the Owner with respect to earnings allocable to the Contract prior to the
receipt of payments under the Contract. The Code contains a safe harbor
provision which provides that annuity contracts such as the Contract meet the
diversification requirements if, as of the end of each quarter, the underlying
assets meet the diversification standards for a regulated investment company and
no more than fifty-five percent (55%) of the total assets consist of cash, cash
items, U.S. Government securities and securities of other regulated investment
companies.
On March 2, 1989, the Treasury Department issued Regulations (Treas.
Reg.1.817-5), which established diversification requirements for the investment
portfolios underlying variable contracts such as the Contract. The Regulations
amplify the diversification requirements for variable contracts set forth in the
Code and provide an alternative to the safe harbor provision described above.
Under the Regulations, an investment portfolio will be deemed adequately
diversified if: (1) no more than 55% of the value of the total assets of the
portfolio is represented by any one investment; (2) no more than 70% of the
value of the total assets of the portfolio is represented by any two
investments; (3) no more than 80% of the value of the total assets of the
portfolio is represented by any three investments; and (4) no more than 90% of
the value of the total assets of the portfolio is represented by any four
investments.
The Code provides that, for purposes of determining whether or not the
diversification standards imposed on the underlying assets of variable contracts
by Section 817(h) of the Code have been met, "each United States government
agency or instrumentality shall be treated as a separate issuer."
The Company intends that all investment portfolios underlying the Contracts will
be managed in such a manner as to comply with these diversification
requirements.
The Treasury Department has indicated that the diversification Regulations do
not provide guidance regarding the circumstances in which Owner control of the
investments of the Separate Account will cause the Owner to be treated as the
owner of the assets of the Separate Account, thereby resulting in the loss of
favorable tax treatment for the Contract. At this time it cannot be determined
whether additional guidance will be provided and what standards may be contained
in such guidance.
The amount of Owner control which may be exercised under the Contract is
different in some respects from the situations addressed in published rulings
issued by the Internal Revenue Service in which it was held that the policy
owner was not the owner of the assets of the separate account. It is unknown
whether these differences, such as the Owner's ability to transfer among
investment choices or the number and type of investment choices available, would
cause the Owner to be considered as the owner of the assets of the Separate
Account resulting in the imposition of federal income tax to the Owner with
respect to earnings allocable to the Contract prior to receipt of payments under
the Contract.
In the event any forthcoming guidance or ruling is considered to set forth a new
position, such guidance or ruling will generally be applied only prospectively.
However, if such ruling or guidance was not considered to set forth a new
position, it may be applied retroactively resulting in the Owners being
retroactively determined to be the owners of the assets of the Separate Account.
Due to the uncertainty in this area, the Company reserves the right to modify
the Contract in an attempt to maintain favorable tax treatment.
MULTIPLE CONTRACTS
The Code provides that multiple non-qualified annuity contracts which are issued
within a calendar year to the same contract owner by one company or its
affiliates are treated as one annuity contract for purposes of determining the
tax consequences of any distribution. Such treatment may result in adverse tax
consequences including more rapid taxation of the distributed amounts from such
combination of contracts. For purposes of this rule, contracts received in a
Section 1035 exchange will be considered issued in the year of the exchange.
Owners should consult a tax adviser prior to purchasing more than one
non-qualified annuity contract in any calendar year.
CONTRACTS OWNED BY OTHER THAN NATURAL PERSONS
Under Section 72(u) of the Code, the investment earnings on premiums for the
Contracts will be taxed currently to the Owner if the Owner is a non-natural
person, e.g., a corporation or certain other entities. Such Contracts generally
will not be treated as annuities for federal income tax purposes. However, this
treatment is not applied to a Contract held by a trust or other entity as an
agent for a natural person nor to Contracts held by Qualified Plans. Purchasers
should consult their own tax counsel or other tax adviser before purchasing a
Contract to be owned by a non-natural person.
TAX TREATMENT OF ASSIGNMENTS AND TRANSFER OF OWNERSHIP
An assignment, pledge or transfer of ownership of a Contract may be a taxable
event. Owners should therefore consult competent tax advisers should they wish
to assign, pledge or transfer ownership of their Contracts.
DEATH BENEFITS
Any death benefits paid under the Contract are taxable to the beneficiary. The
rules governing the taxation of payments from an annuity contract, as discussed
above, generally apply to the payment of death benefits and depend on whether
the death benefits are paid as a lump sum or as annuity payments. Estate taxes
may also apply.
INCOME TAX WITHHOLDING
All distributions or the portion thereof which is includible in the gross income
of the Owner are subject to federal income tax withholding. Generally, amounts
are withheld from periodic payments at the same rate as wages and at the rate of
10% from non-periodic payments. However, the Owner, in most cases, may elect not
to have taxes withheld or to have withholding done at a different rate.
Effective January 1, 1993, certain distributions from retirement plans qualified
under Section 401 or Section 403(b) of the Code, which are not directly rolled
over to another eligible retirement plan or individual retirement account or
individual retirement annuity, are subject to a mandatory 20% withholding for
federal income tax. The 20% withholding requirement generally does not apply to:
a) a series of substantially equal payments made at least annually for the life
or life expectancy of the participant or joint and last survivor expectancy of
the participant and a designated beneficiary, or for a specified period of 10
years or more; b) distributions which are required minimum distributions; or c)
the portion of the distributions not includible in gross income (i.e. returns of
after-tax contributions); or d) hardship withdrawals. Participants should
consult their own tax counsel or other tax adviser regarding withholding
requirements.
TAX TREATMENT OF WITHDRAWALS - NON-QUALIFIED CONTRACTS
Section 72 of the Code governs treatment of distributions from annuity
contracts. It provides that if the Contract Value exceeds the aggregate purchase
payments made, any amount withdrawn will be treated as coming first from the
earnings and then, only after the income portion is exhausted, as coming from
the principal. Withdrawn earnings are includible in gross income. It further
provides that a ten percent (10%) penalty will apply to the income portion of
any premature distribution. However, the penalty is not imposed on amounts
received: (a) after the taxpayer reaches age 59 1/2; (b) after the death of the
Owner; (c) if the taxpayer is totally disabled (for this purpose disability is
as defined in Section 72(m)(7) of the Code); (d) in a series of substantially
equal periodic payments made not less frequently than annually for the life (or
life expectancy) of the taxpayer or for the joint lives (or joint life
expectancies) of the taxpayer and his or her Beneficiary; (e) under an immediate
annuity; or (f) which are allocable to purchase payments made prior to August
14, 1982.
With respect to (d) above, if the series of substantially equal periodic
payments is modified before the later of your attaining age 59 1/2 or 5 years
from the date of the first periodic payment, then the tax for the year of the
modification is increased by an amount equal to the tax which would have been
imposed (the 10% penalty tax) but for the exception, plus interest for the tax
years in which the exception was used.
The above information does not apply to Qualified Contracts. However, separate
tax withdrawal penalties and restrictions may apply to such Qualified Contracts.
(See "Tax Treatment of Withdrawals - Qualified Contracts" below.)
QUALIFIED PLANS
The Contracts offered herein may also be used as Qualified Contracts. Owners,
Annuitants and Beneficiaries are cautioned that benefits under a Qualified
Contract may be subject to the terms and conditions of the plan regardless of
the terms and conditions of the Contracts issued pursuant to the plan. The
following discussion of Qualified Contracts is not exhaustive and is for general
informational purposes only. The tax rules regarding Qualified Contracts are
very complex and will have differing applications depending on individual facts
and circumstances. Each purchaser should obtain competent tax advice prior to
purchasing Qualified Contracts.
Qualified Contracts include special provisions restricting Contract provisions
that may otherwise be available as described herein. Generally, Qualified
Contracts are not transferable except upon surrender or annuitization.
On July 6, 1983, the Supreme Court decided in ARIZONA GOVERNING COMMITTEE V.
NORRIS that optional annuity benefits provided under an employer's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women. Qualified Contracts will utilize annuity tables
which do not differentiate on the basis of sex. Such annuity tables will also be
available for use in connection with certain non-qualified deferred compensation
plans.
Section 408(b) of the Code permits eligible individuals to contribute to an
individual retirement program known as an Individual Retirement Annuity (IRA).
THE CONTRACTS ARE NOT AVAILABLE AS QUALIFIED CONTRACTS UNTIL AN IRA ENDORSEMENT
IS APPROVED BY THE STATE OF NEW YORK INSURANCE DEPARTMENT. Under applicable
limitations, certain amounts may be contributed to an IRA which will be
deductible from the individual's taxable income. These IRAs are subject to
limitations on eligibility, contributions, transferability and distributions.
(See "Tax Treatment of Withdrawals - Qualified Contracts" below.) Under certain
conditions, distributions from other IRAs and other Qualified Plans may be
rolled over or transferred on a tax-deferred basis into an IRA. Sales of
Contracts for use with IRAs are subject to special requirements imposed by the
Code, including the requirement that certain informational disclosure be given
to persons desiring to establish an IRA. Purchasers of Contracts to be qualified
as Individual Retirement Annuities should obtain competent tax advice as to the
tax treatment and suitability of such an investment.
TAX TREATMENT OF WITHDRAWALS - QUALIFIED CONTRACTS
Section 72(t) of the Code imposes a 10% penalty tax on the taxable portion of
any distribution from qualified retirement plans, including Contracts issued and
qualified under Code Section 408(b) (Individual Retirement Annuities). To the
extent amounts are not includible in gross income because they have been rolled
over to an IRA or to another eligible Qualified Plan, no tax penalty will be
imposed. The tax penalty will not apply to the following distributions: (a) if
distribution is made on or after the date on which the Annuitant reaches age 59
1/2; (b) distributions following the death or disability of the Annuitant (for
this purpose disability is as defined in Section 72(m)(7) of the Code); (c)
distributions that are part of substantially equal periodic payments made not
less frequently than annually for the life (or life expectancy) of the Annuitant
or the joint lives (or joint life expectancies) of the Annuitant and his or her
designated Beneficiary; (d) distributions made to the Owner or Annuitant (as
applicable) to the extent such distributions do not exceed the amount allowable
as a deduction under Code Section 213 to the Owner or Annuitant (as applicable)
for amounts paid during the taxable year for medical care; (e) distributions
from an Individual Retirement Annuity for the purchase of medical insurance (as
described in Section 213(d)(1)(D) of the Code) for the Owner or Annuitant (as
applicable) and his or her spouse and dependents if the Owner or Annuitant (as
applicable) has received unemployment compensation for at least 12 weeks (this
exception will no longer apply after the Owner or Annuitant (as applicable) has
been re-employed for at least 60 days); (f) distributions from an Individual
Retirement Annuity made to the Owner or Annuitant (as applicable) to the extent
such distributions do not exceed the qualified higher education expenses (as
defined in Section 72(t)(7) of the Code) of the Owner or Annuitant (as
applicable) for the taxable year; and (g) distributions from an Individual
Retirement Annuity made to the Owner or Annuitant (as applicable) which are
qualified first-time home buyer distributions (as defined in Section 72(t)(8) of
the Code).
With respect to (c) above, if the series of substantially equal periodic
payments is modified before the later of your attaining age 59 1/2 or 5 years
from the date of the first periodic payment, then the tax for the year of the
modification is increased by an amount equal to the tax which would have been
imposed (the 10% penalty tax) but for the exception, plus interest for the tax
years in which the exception was used.
Generally, distributions from a qualified plan must commence no later than April
1 of the calendar year following the year in which the employee attains age 70
1/2. Required distributions must be over a period not exceeding the life
expectancy of the individual or the joint lives or life expectancies of the
individual and his or her designated beneficiary. If the required minimum
distributions are not made, a 50% penalty tax is imposed as to the amount not
distributed.
ANNUITY PROVISIONS
VARIABLE ANNUITY
A variable annuity is an annuity with payments which: (1) are not predetermined
as to dollar amount; and (2) will vary in amount with the net investment results
of the applicable investment portfolio(s) of the Separate Account. At the
Annuity Date, the Contract Value in each investment portfolio will be applied to
the applicable Annuity Tables. The Annuity Table used will depend upon the
Annuity Option chosen. If, as of the Annuity Date, the then current Annuity
Option rates applicable to this class of Contracts provide a first Annuity
Payment greater than guaranteed under the same Annuity Option under this
Contract, the greater payment will be made. The dollar amount of Annuity
Payments after the first is determined as follows:
(1) the dollar amount of the first Annuity Payment is divided by the value
of an Annuity Unit as of the Annuity Date. This establishes the number of
Annuity Units for each monthly payment. The number of Annuity Units remains
fixed during the Annuity Payment period.
(2) the fixed number of Annuity Units is multiplied by the Annuity Unit
value for the last Valuation Period of the month preceding the month for which
the payment is due. This result is the dollar amount of the payment.
The total dollar amount of each Variable Annuity Payment is the sum of all
investment portfolios' Variable Annuity Payments reduced by the applicable
Contract Maintenance Charge.
FIXED ANNUITY
A fixed annuity is a series of payments made during the Annuity Period which are
guaranteed as to dollar amount by the Company and do not vary with the
investment experience of the Separate Account. The General Account Value on the
day immediately preceding the Annuity Date will be used to determine the Fixed
Annuity monthly payment. The first monthly Annuity Payment will be based upon
the Annuity Option elected and the appropriate Annuity Option Table.
ANNUITY UNIT
The value of an Annuity Unit for each investment portfolio was arbitrarily set
initially at $10. This was done when the first investment portfolio shares were
purchased. The investment portfolio Annuity Unit value at the end of any
subsequent Valuation Period is determined by multiplying the investment
portfolio Annuity Unit value for the immediately preceding Valuation Period by
the product of (a) the Net Investment Factor for the day for which the Annuity
Unit value is being calculated, and (b) 0.999919.
NET INVESTMENT FACTOR
The Net Investment Factor for any investment portfolio for any Valuation Period
is determined by dividing:
(a) the Accumulation Unit value as of the close of the current Valuation
Period, by
(b) the Accumulation Unit value as of the close of the immediately
preceding Valuation Period.
The Net Investment Factor may be greater or less than one, as the Annuity Unit
value may increase or decrease.
MORTALITY AND EXPENSE GUARANTEE
The Company guarantees that the dollar amount of each Annuity Payment after the
first Annuity Payment will not be affected by variations in mortality or expense
experience.
FINANCIAL STATEMENTS
The financial statements of the Company included herein should be considered
only as bearing upon the ability of the Company to meet its obligations under
the Contracts.
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Assets and Liabilities
June 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Assets:
Investments:
Cova Series Trust (Trust):
<S> <C> <C> <C>
Lord Abbett Growth and Income Portfolio 22,720 shares at a net asset value of $21.791180 per share $ 495,097
Bond Debenture Portfolio 18,794 shares at a net asset value of $12.007691 per share 225,668
Developing Growth Portfolio 2,922 shares at a net asset value of $12.276121 per share 35,865
Large Cap Research Portfolio 6,884 shares at a net asset value of $13.050142 per share 89,837
Mid-Cap Value Portfolio 4,347 shares at a net asset value of $10.901244 per share 47,391
Quality Bond Portfolio 6,190 shares at a net asset value of $10.670452 per share 66,049
Small Cap Stock Portfolio 4,924 shares at a net asset value of $12.783032 per share 62,949
Large Cap Stock Portfolio 14,165 shares at a net asset value of $18.449313 per share 261,342
Select Equity Portfolio 9,740 shares at a net asset value of $14.233562 per share 138,628
International Equity Portfolio 11,488 shares at a net asset value of $13.710082 per share 157,497
General American Capital Company (GACC):
Money Market Fund 5 shares at a net asset value of $19.971255 per share 106
------------
Total assets $ 1,580,429
============
</TABLE>
<TABLE>
<CAPTION>
Liabilities:
<S> <C>
Trust Lord Abbett Growth and Income $ 19
Trust Bond Debenture 9
Trust Developing Growth 1
Trust Large Cap Research 3
Trust Mid-Cap Value 2
Trust Quality Bond 3
Trust Small Cap Stock 2
Trust Large Cap Stock 10
Trust Select Equity 5
Trust International Equity 6
GACC Money Market 6
------------
Total liabilities $ 66
============
</TABLE>
<TABLE>
<CAPTION>
Net Assets:
Accumulation units:
<S> <C> <C> <C>
Trust Lord Abbett Growth and Income 13,811 accumulation units at $35.846306 per unit $ 495,078
Trust Bond Debenture 16,970 accumulation units at $13.297243 per unit 225,659
Trust Developing Growth 2,998 accumulation units at $11.961510 per unit 35,864
Trust Large Cap Research 7,026 accumulation units at $12.785300 per unit 89,834
Trust Mid-Cap Value 4,448 accumulation units at $10.653132 per unit 47,389
Trust Quality Bond 5,689 accumulation units at $11.609210 per unit 66,046
Trust Small Cap Stock 4,725 accumulation units at $13.321805 per unit 62,947
Trust Large Cap Stock 12,942 accumulation units at $20.192583 per unit 261,332
Trust Select Equity 8,506 accumulation units at $16.297840 per unit 138,623
Trust International Equity 11,369 accumulation units at $13.853303 per unit 157,491
GACC Money Market 9 accumulation units at $11.411979 per unit 100
------------
Net assets $ 1,580,363
============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Operations
Nine months ended September 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Trust
------------------------------------------------------------------------------------------
Lord Abbett Large Small
Growth and Bond Developing Cap Mid-Cap Quality Cap
Income (1) Debenture Growth Research Value Bond Stock
------------- ----------- ----------- ----------- ----------- --------- ----------
Income:
<S> <C> <C> <C> <C> <C> <C> <C>
Dividends $ - 3,910 - 103 53 722 169
------------- ----------- ----------- ----------- ----------- --------- ----------
Expenses:
Mortality and expense risk 4,040 1,819 182 528 316 620 474
Administrative fee 485 218 22 63 38 75 57
------------- ----------- ----------- ----------- ----------- --------- ----------
Total expenses 4,525 2,037 204 591 354 695 531
------------- ----------- ----------- ----------- ----------- --------- ----------
Net investment income (loss) (4,525) 1,873 (204) (488) (301) 27 (362)
------------- ----------- ----------- ----------- ----------- --------- ----------
Net realized gain (loss) on investments:
Realized gain (loss) on sale of fund
shares 1,574 34 28 78 18 103 18
Realized gain distributions - 1,267 - - - 361 -
------------- ----------- ----------- ----------- ----------- --------- ----------
Net realized gain (loss) 1,574 1,301 28 78 18 464 18
------------- ----------- ----------- ----------- ----------- --------- ----------
Change in unrealized appreciation 1,734 (6,609) 1,300 4,327 1,139 (2,221) 4,376
------------- ----------- ----------- ----------- ----------- --------- ----------
Net increase (decrease) in net
assets from operations $ (1,217) (3,435) 1,124 3,917 856 (1,730) 4,032
============= =========== =========== =========== =========== ========= ==========
</TABLE>
(1) Sub account commenced operations January 8, 1999
<PAGE>
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Operations
Nine months ended September 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Trust GACC Lord Abbett
-------------------------------------------- ------------ ----------------
Large Growth
Cap Select International Money and
Stock Equity Equity Market Income (2) Total
-------------- ------------ ------------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Income:
Dividends $ 311 369 724 - - 6,361
-------------- ------------ ------------- ------------ ------------- -------------
Expenses:
Mortality and expense risk 1,958 1,232 1,187 214 87 12,657
Administrative fee 235 148 142 26 10 1,519
-------------- ------------ ------------- ------------ ------------- -------------
Total expenses 2,193 1,380 1,329 240 97 14,176
-------------- ------------ ------------- ------------ ------------- -------------
Net investment income (loss) (1,882) (1,011) (605) (240) (97) (7,815)
-------------- ------------ ------------- ------------ ------------- -------------
Net realized gain (loss) on investments:
Realized gain (loss) on sale of fund
shares 635 163 134 845 16,931 20,561
Realized gain distributions 6,787 12,513 1,936 - - 22,864
-------------- ------------ ------------- ------------ ------------- -------------
Net realized gain (loss) 7,422 12,676 2,070 845 16,931 43,425
-------------- ------------ ------------- ------------ ------------- -------------
Change in unrealized appreciation (1,706) (19,118) 8,026 (6) (2,381) (11,139)
-------------- ------------ ------------- ------------ ------------- -------------
Net increase (decrease) in net
assets from operations $ 3,834 (7,453) 9,491 599 14,453 24,471
============== ============ ============= ============ ============= =============
</TABLE>
(2) Sub account ceased operations on January 8, 1999
See accompanying notes to financial statements.
<PAGE>
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Nine months ended September 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Trust
--------------------------------------------------------------------------------------
Lord Abbett Large Small
Growth and Bond Developing Cap Mid-Cap Quality Cap
Income (1) Debenture Growth Research Value Bond Stock
-------------- ------------------------ --------------------- --------- ---------
Increase (decrease) in net assets
from operations:
<S> <C> <C> <C> <C> <C> <C> <C>
Net investment income (loss) $ (4,525) 1,873 (204) (488) (301) 27 (362)
Net realized gain (loss) 1,574 1,301 28 78 18 464 18
Change in unrealized appreciation 1,734 (6,609) 1,300 4,327 1,139 (2,221) 4,376
Net increase (decrease) from
-------------- ----------- ----------- --------- ---------- --------- ---------
operations (1,217) (3,435) 1,124 3,917 856 (1,730) 4,032
-------------- ----------- ----------- --------- ---------- --------- ---------
Contract transactions:
Cova payments - - - - - - -
Cova redemptions - - - - - - -
Payments received from contract
owners 90,778 41,228 12,849 42,395 9,150 - 3,822
Transfers between sub-accounts
(including fixed account), net 408,464 29,470 20,041 11,465 21,874 2,316 21,414
Transfers for contract benefits and
terminations (2,947) (2,387) 6 (21) (12) (3,152) (30)
Net increase (decrease) in net
assets from contract
-------------- ----------- ----------- --------- ---------- --------- ---------
transactions 496,295 68,311 32,896 53,839 31,012 (836) 25,206
-------------- ----------- ----------- --------- ---------- --------- ---------
Net increase (decrease) in net
assets 495,078 64,876 34,020 57,756 31,868 (2,566) 29,238
Net assets at beginning of period - 160,783 1,844 32,078 15,521 68,612 33,709
-------------- ----------- ----------- --------- ---------- --------- ---------
Net assets as end of period $ 495,078 225,659 35,864 89,834 47,389 66,046 62,947
============== =========== =========== ========= ========== ========= =========
</TABLE>
(1) Sub-account commenced operations on January 8, 1999.
<PAGE>
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Nine months ended September 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Trust GACC Lord Abbett
----------------------------------------- -------------- ----------------
Large Growth
Cap Select International Money and
Stock Equity Equity Market Income (2) Total
------------ ----------- ------------- -------------- ------------- -------------
Increase (decrease) in net assets
from operations:
<S> <C> <C> <C> <C> <C> <C>
Net investment income (loss) $ (1,882) (1,011) (605) (240) (97) (7,815)
Net realized gain (loss) 7,422 12,676 2,070 845 16,931 43,425
Change in unrealized appreciation (1,706) (19,118) 8,026 (6) (2,381) (11,139)
Net increase (decrease) from
------------ ----------- ------------- -------------- ------------- -------------
operations 3,834 (7,453) 9,491 599 14,453 24,471
------------ ----------- ------------- -------------- ------------- -------------
Contract transactions:
Cova payments - - - 100 - 100
Cova redemptions - - - - - -
Payments received from contract
owners 77,295 20,000 13,209 - 1,382 312,108
Transfers between sub-accounts
(including fixed account), net 53,200 37,802 45,649 (24,607) (328,602) 298,486
Transfers for contract benefits and
terminations (3,079) (176) (509) - 9 (12,298)
Net increase (decrease) in net
assets from contract ------------ ----------- ------------- -------------- ------------- -------------
transactions 127,416 57,626 58,349 (24,507) (327,211) 598,396
------------ ----------- ------------- -------------- ------------- -------------
Net increase (decrease) in net
assets 131,250 50,173 67,840 (23,908) (312,758) 622,867
Net assets at beginning of period 130,082 88,450 89,651 24,008 312,758 957,496
------------ ----------- ------------- -------------- ------------- -------------
Net assets as end of period $ 261,332 138,623 157,491 100 - 1,580,363
============ =========== ============= ============== ============= =============
</TABLE>
(2) Sub-account ceased operations on January 8, 1999.
See accompanying notes to financial statements.
<PAGE>
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year Ended December 31, 1998
<TABLE>
<CAPTION>
Trust
------------------------------------------------------------------------------------------
Large Small Large
Bond Developing Cap Mid-Cap Quality Cap Cap
Debenture Growth Research Value Bond Stock Stock
-------------------------- ----------- ---------- ---------- ---------- ----------
Increase (decrease) in net assets
from operations:
<S> <C> <C> <C> <C> <C> <C> <C>
Net investment income (loss) $ 2,046 (1) (171) (96) 671 (203) (887)
Net realized gain (loss) 1,566 - 3 (4) 64 432 907
Change in unrealized appreciation 2,573 121 2,958 87 2,940 91 22,305
Net increase (decrease) from
------------ ------------ ----------- ---------- ---------- ---------- ----------
operations 6,185 120 2,790 (13) 3,675 320 22,325
------------ ------------ ----------- ---------- ---------- ---------- ----------
Contract transactions:
Cova payments - - - - - - -
Cova redemptions - - - - - - -
Payments received from contract
owners 25,475 - 28,039 14,334 34,865 9,652 35,989
Transfers between sub-accounts
(including fixed account), net 16,036 1,724 1,249 1,200 8,993 16,587 31,944
Transfers for contract benefits and
terminations (1,924) - - - (1,989) 4 (1,975)
Net increase (decrease) in net
assets from contract ------------ ------------ ----------- ---------- ---------- ---------- ----------
transactions 39,587 1,724 29,288 15,534 41,869 26,243 65,958
------------ ------------ ----------- ---------- ---------- ---------- ----------
Net increase (decrease) in net
assets 45,772 1,844 32,078 15,521 45,544 26,563 88,283
Net assets at beginning of period 115,011 - - - 23,068 7,146 41,799
------------ ------------ ----------- ---------- ---------- ---------- ----------
Net assets as end of period $ 160,783 1,844 32,078 15,521 68,612 33,709 130,082
============ ============ =========== ========== ========== ========== ==========
</TABLE>
<PAGE>
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year Ended December 31, 1998
<TABLE>
<CAPTION>
Trust GACC Lord Abbett
----------------------------- ------------- ----------------
Growth
Select International Money and
Equity Equity Market Income Total
-------------- ------------- ------------- -------------- -------------
Increase (decrease) in net assets
from operations:
<S> <C> <C> <C> <C> <C>
Net investment income (loss) $ (527) 205 (3) 1,159 2,193
Net realized gain (loss) 2,516 42 - 14,754 20,280
Change in unrealized appreciation 9,506 7,092 11 10,125 57,809
Net increase (decrease) from
-------------- ------------- ------------- -------------- -------------
operations 11,495 7,339 8 26,038 80,282
-------------- ------------- ------------- -------------- -------------
Contract transactions:
Cova payments - - - - -
Cova redemptions - - - - -
Payments received from contract
owners 39,613 16,232 24,000 66,977 295,176
Transfers between sub-accounts
(including fixed account), net 18,967 22,607 - 50,718 170,025
Transfers for contract benefits and
terminations (191) (501) - (2,035) (8,611)
Net increase (decrease) in net
assets from contract
-------------- ------------- ------------- -------------- -------------
transactions 58,389 38,338 24,000 115,660 456,590
-------------- ------------- ------------- -------------- -------------
Net increase (decrease) in net
assets 69,884 45,677 24,008 141,698 536,872
Net assets at beginning of period 18,566 43,974 - 171,060 420,624
-------------- ------------- ------------- -------------- -------------
Net assets as end of period $ 88,450 89,651 24,008 312,758 957,496
============== ============= ============= ============== =============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
September 30, 1999
(Unaudited)
(1) ORGANIZATION
First Cova Variable Annuity Account One (the Separate Account), a unit
investment trust registered under the Investment Company Act of 1940 as
amended, was established by First Cova Life Insurance Company (Cova) and
exists in accordance with the regulations of the New York Department of
Insurance. The Separate Account is a funding vehicle for variable annuity
contracts issued by Cova.
The Separate Account is divided into sub-accounts with the assets of each
sub-account invested in corresponding portfolios of the following
investment companies. Each investment company is a diversified, open-end,
management investment company registered under the Investment Company Act
of 1940 as amended. The sub-accounts available for investment may vary
between variable annuity contracts offered for sale by Cova.
Cova Series Trust (Trust) 10 portfolios
General American Capital Company (GACC) 1 portfolio
On January 8, 1999, the Lord Abbett Series Fund, Inc. Lord Abbett Growth
and Income sub-account ceased operations and its assets were transferred
to the Cova Series Trust Lord Abbett Growth and Income sub-account which
commenced operations on January 8, 1999. The asset transfer was made in
accordance with a substitution order issued by the Securities and
Exchange Commission.
(2) SIGNIFICANT ACCOUNTING POLICIES
(A) INVESTMENT VALUATION
Investments made in the portfolios of the investment companies
are valued at the reported net asset value of such portfolios,
which value their investment securities at fair value. The
average cost method is used to compute the realized gains and
losses on the sale of portfolio shares owned by the sub-accounts.
Income from dividends and gains from realized capital gain
distributions are recorded on the ex-distribution date.
(B) REINVESTMENT OF DISTRIBUTIONS
With the exception of the GACC Money Market Fund, dividends and
gains from realized gain distributions are reinvested in
additional shares of the portfolio.
GACC follows the Federal income tax practice known as consent
dividending, whereby substantially all of its net investment
income and realized capital gains are deemed to pass through to
the Separate Account. As a result, GACC does not distribute
dividends and realized capital gains. During December of each
year, the accumulated net investment income and realized capital
gains of the GACC Money Market Fund are allocated to the Separate
Account by increasing the cost basis and recognizing a gain in
the Separate Account.
(C) FEDERAL INCOME TAXES
The operations of the Separate Account are included in the
federal income tax return of Cova which is taxed as a Life
Insurance Company under the provisions of the Internal Revenue
Code (IRC). Under current IRC provisions, Cova believes it will
be treated as the owner of the Separate Account assets for
federal income tax purposes and does not expect to incur federal
income taxes on the earnings of the Separate Account to the
extent the earnings are credited to the variable annuity
contracts. Based on this, no charge has been made to the Separate
Account for federal income taxes. A charge may be made in future
years for any federal income taxes that would be attributable to
the variable annuity contracts.
<PAGE>
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements (Continued)
September 30, 1999
(Unaudited)
(3) SEPARATE ACCOUNT EXPENSES
Cova deducts a daily charge from the net assets of each Separate Account
sub-account equivalent to an annual rate of 1.25% for the assumption of
mortality and expense risks and 0.15% for administrative expenses. The
mortality risks assumed by Cova arise from its contractual obligation to
make annuity payments after the annuity date for the life of the
annuitant and to waive the withdrawal fee in the event of the death of
the contract owner. The administrative fees cover the cost of
establishing and maintaining the variable annuity contracts and the
Separate Account.
(4) CONTRACT FEES
There are no deductions made from purchase payments for sales fees at the
time a variable annuity contract is purchased. However, if all or a
portion of the contract value is withdrawn, a withdrawal fee may be
assessed and deducted from the contract value or payment to the contract
owner. The withdrawal fee is imposed on withdrawals of contract values
attributable to purchase payments within seven years after receipt and is
equal to 7% of the purchase payment withdrawn in the first and second
years, 5% of the purchase payments withdrawn in the third, fourth and
fifth years and 3% of the purchase payments withdrawn in the sixth and
seventh years. After the first contract anniversary, provided the
contract value exceeds $5,000, the contract owner may make one withdrawal
each contract year of up to 10% of the aggregate purchase payments (on
deposit for more than one year) without incurring a surrender fee. There
were no surrender fees deducted during the nine months ending September
30, 1999.
An annual contract maintenance fee of $30 is imposed on all variable
annuity contracts with contract values less than $50,000 on their
anniversary. This fee covers the cost of contract administration for the
previous year and is prorated between the Separate Account sub-accounts
and the fixed rate account to which the contract value is allocated.
Subject to certain restrictions, the contract owner may transfer all or a
part of the accumulated value of the contract among the available
sub-accounts and the fixed rate account. If more than 12 transfers have
been made in the contract year, a transfer fee of $25 per transfer or, if
less, 2% of the amount transferred, may be deducted from the contract
value. Transfers made in a dollar cost averaging program are not subject
to the transfer fee.
During the nine months ending September 30, 1999, contract maintenance
and transfer fees of $340 were deducted.
Currently, Cova advances any premium taxes due at the time purchase
payments are made and then deducts premium taxes at the time annuity
payments begin. Cova reserves the right to deduct premium taxes when
incurred.
<PAGE>
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
September 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
(5) COST BASIS OF INVESTMENTS
The cost basis of each sub-account's investment follows:
<S> <C>
Trust Lord Abbett Growth and Income $ 493,363
Trust Bond Debenture 229,658
Trust Developing Growth 34,444
Trust Large Cap Research 82,552
Trust Mid-Cap Value 46,165
Trust Quality Bond 65,229
Trust Small Cap Stock 58,179
Trust Large Cap Stock 240,341
Trust Select Equity 147,138
Trust International Equity 144,344
GACC Money Market 101
----------------
$ 1,541,514
================
</TABLE>
<PAGE>
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
September 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
(6) UNIT FAIR VALUE
A summary of accumulation unit values, net assets, total return and
expense ratios for each sub-account follows:
Commenced Accumulation Unit Value Net Assets (in thousands)
--------------------------------------- -------------------------------------
Operations 9/30/99 12/31/98 12/31/97 9/30/99 12/31/98 12/31/97
----------- ------------ ----------- ----------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Trust Lord Abbett Growth and Income 1/8/99 $ 35.846306 $ 495
Trust Bond Debenture 5/15/97 13.297243 13.496763 12.882042 226 161 115
Trust Developing Growth 11/23/98 11.961510 11.068002 36 2
Trust Large Cap Research 3/3/98 12.785300 11.825475 90 32
Trust Mid-Cap Value 3/4/98 10.653132 10.437999 47 16
Trust Quality Bond 5/15/97 11.609210 11.914486 11.155130 66 69 23
Trust Small Cap Stock 3/17/97 13.321805 12.583415 13.492111 63 34 7
Trust Large Cap Stock 3/11/97 20.192583 19.428714 14.889594 261 130 42
Trust Select Equity 3/11/97 16.297840 16.987197 14.053502 139 88 19
Trust International Equity 3/11/97 13.853303 12.891430 11.462941 157 90 44
GACC Money Market 12/28/98 11.411979 11.109941 - 24
</TABLE>
<TABLE>
<CAPTION>
Commenced Total Return* As a % of Average Net Assets**
--------------------------------------- -------------------------------------
Operations 1999 1998 1997 1999 1998 1997
----------- ------------ ----------- ----------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Trust Lord Abbett Growth and Income 1/8/99 -0.16% 1.40%
Trust Bond Debenture 5/15/97 -1.48% 4.77% 9.71% 1.40% 1.40% 1.40%
Trust Developing Growth 11/23/98 8.07% 8.57% 1.40% 1.40%
Trust Large Cap Research 3/3/98 8.12% 8.01% 1.40% 1.40%
Trust Mid-Cap Value 3/4/98 2.06% -5.54% 1.40% 1.40%
Trust Quality Bond 5/15/97 -2.56% 6.81% 6.79% 1.40% 1.40% 1.40%
Trust Small Cap Stock 3/17/97 5.87% -6.74% 23.53% 1.40% 1.40% 1.40%
Trust Large Cap Stock 3/11/97 3.93% 30.49% 20.08% 1.40% 1.40% 1.40%
Trust Select Equity 3/11/97 -4.06% 20.88% 19.47% 1.40% 1.40% 1.40%
Trust International Equity 3/11/97 7.46% 12.46% 2.87% 1.40% 1.40% 1.40%
GACC Money Market 12/28/98 2.72% 1.40%
* The total return for sub-accounts that commenced operations during the period is not annualized.
** The expense ratio for sub-accounts that commenced operations during the period is annualized.
</TABLE>
<PAGE>
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
September 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
(7) REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED APPRECIATION
The realized gain (loss) on the sale of fund shares and the change in
unrealized appreciation for each sub-account during the nine months
ending September 30, 1999 and the year ending December 31, 1998 follows:
Realized Gain (Loss)
------------------------------------------------------------
Aggregate Aggregate Cost
Year or Proceeds from Sales of Fund Shares Realized
Period of Fund Shares Redeemed Gain (Loss)
---------- ------------------- ------------------ ---------------
<S> <C> <C> <C> <C>
Trust Lord Abbett Growth and Income 1999 $ 42,765 $ 41,191 $ 1,574
1998 - - -
Trust Bond Debenture 1999 3,271 3,237 34
1998 3,263 3,243 20
Trust Developing Growth 1999 3,471 3,443 28
1998 1 1 -
Trust Large Cap Research 1999 813 735 78
1998 206 203 3
Trust Mid-Cap Value 1999 295 277 18
1998 105 109 (4)
Trust Quality Bond 1999 3,847 3,744 103
1998 2,573 2,509 64
Trust Small Cap Stock 1999 616 598 18
1998 205 216 (11)
Trust Large Cap Stock 1999 4,335 3,700 635
1998 2,908 2,698 210
Trust Select Equity 1999 1,889 1,726 163
1998 759 722 37
Trust International Equity 1999 1,720 1,586 134
1998 1,440 1,412 28
GACC Money Market 1999 24,743 23,898 845
1998 - - -
Lord Abbett Growth and Income 1999 330,371 313,440 16,931
1998 3,648 3,636 12
</TABLE>
<PAGE>
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
September 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
(7) REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED APPRECIATION, CONTINUED:
Unrealized Appreciation (Depreciation)
------------------------------------------------------------
Appreciation Appreciation
Year or (Depreciation) (Depreciation)
Period End of Period Beginning of Period Change
---------- ------------------- --------------------- -------------
<S> <C> <C> <C> <C>
Trust Lord Abbett Growth and Income 1999 $ 1,734 $ - $ 1,734
1998
Trust Bond Debenture 1999 (3,990) 2,619 (6,609)
1998 2,619 46 2,573
Trust Developing Growth 1999 1,421 121 1,300
1998 121 - 121
Trust Large Cap Research 1999 7,285 2,958 4,327
1998 2,958 - 2,958
Trust Mid-Cap Value 1999 1,226 87 1,139
1998 87 - 87
Trust Quality Bond 1999 820 3,041 (2,221)
1998 3,041 101 2,940
Trust Small Cap Stock 1999 4,770 394 4,376
1998 394 303 91
Trust Large Cap Stock 1999 20,001 21,707 (1,706)
1998 21,707 (598) 22,305
Trust Select Equity 1999 (8,510) 10,608 (19,118)
1998 10,608 1,102 9,506
Trust International Equity 1999 13,153 5,127 8,026
1998 5,127 (1,965) 7,092
GACC Money Market 1999 5 11 (6)
1998 11 - 11
Lord Abbett Growth and Income 1999 - 2,381 (2,381)
1998 2,381 (7,744) 10,125
</TABLE>
<PAGE>
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
September 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
(8) UNIT TRANSACTIONS
The change in the number of units for each sub-account follows:
Trust
-----------------------------------------------------------------------------------------
Lord Abbett Large Small
Growth and Bond Developing Cap Mid-Cap Quality Cap
Income (1) Debenture Growth Research Value Bond Stock
------------- ------------ ------------ ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation units:
Unit balance at 12/31/97 - 8,928 - - - 2,068 530
Cova contributions - - - - - - -
Cova redemptions - - - - - - -
Contract units sold - 1,929 - 2,602 1,370 3,068 711
Contract units transferred, net - 1,205 167 111 117 794 1,439
Contract units redeemed - (149) - - - (171) (1)
------------- ------------ ------------ ----------- ---------- --------- ----------
Unit balance at 12/31/98 - 11,913 167 2,713 1,487 5,759 2,679
Cova contributions - - - - - - -
Cova redemptions - - - - - - -
Contract units purchased 2,548 3,066 1,154 3,404 935 - 322
Contract units transferred, net 11,321 2,167 1,677 911 2,027 200 1,727
Contract units redeemed (58) (176) - (2) (1) (270) (3)
------------- ------------ ------------ ----------- ---------- --------- ----------
Unit balance at 9/30/99 13,811 16,970 2,998 7,026 4,448 5,689 4,725
============= ============ ============ =========== ========== ========= ==========
(1) Sub-account commenced operations on January 8, 1999.
</TABLE>
<PAGE>
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
September 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
(8) UNIT TRANSACTIONS, CONTINUED:
Trust GACC Lord Abbett
-------------------------------------------- -------------- -------------
Large Growth
Cap Select International Money and
Stock Equity Equity Market Income (2)
------------- -------------- ------------- -------------- -------------
Accumulation units:
<S> <C> <C> <C> <C> <C>
Unit balance at 12/31/97 2,807 1,321 3,836 - 5,547
Cova contributions - - - - -
Cova redemptions - - - - -
Contract units sold 2,093 2,639 1,307 2,161 2,036
Contract units transferred, net 1,930 1,260 1,863 - 1,600
Contract units redeemed (135) (13) (52) - (71)
------------- -------------- ------------- -------------- -------------
Unit balance at 12/31/98 6,695 5,207 6,954 2,161 9,112
Cova contributions - - - 9 -
Cova redemptions - - - - -
Contract units purchased 3,821 1,160 1,031 - 63
Contract units transferred, net 2,577 2,149 3,422 - (9,152)
Contract units redeemed (151) (10) (38) (2,161) (23)
------------- -------------- ------------- -------------- -------------
Unit balance at 9/30/99 12,942 8,506 11,369 9 -
============= ============== ============= ============== =============
(2) Sub-account ceased operations on January 8, 1999.
</TABLE>
FIRST COVA VARIABLE
ANNUITY ACCOUNT ONE
Financial Statements
December 31, 1998 and 1997
(With Independent Auditors' Report Thereon)
INDEPENDENT AUDITORS' REPORT
The Contract Owners of Cova Variable Annuity Account One, Board of
Directors and Shareholder of First Cova Life Insurance Company:
We have audited the accompanying statement of assets and liabilities of the
Bond Debenture, Developing Growth, Large Cap Research, Mid-Cap Value,
Quality Bond, Small Cap Stock, Large Cap Stock, Select Equity, and
International Equity sub-accounts (investment options within the Cova
Series Trust), the Growth and Income sub-account (investment option within
the Lord Abbett Series Fund, Inc.), and the Money Market sub-account
(investment option within the General American Capital Company) of First
Cova Variable Annuity Account One of First Cova Life Insurance Company (the
Separate Account), as of December 31, 1998, and the related statement of
operations for the year then ended, and statement of changes in net assets
for the year then ended, and the period from commencement of operations
through December 31, 1997. These financial statements are the
responsibility of the Separate Account's management. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1998, by correspondence with transfer agents. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the sub-accounts of
First Cova Variable Annuity Account One of First Cova Life Insurance
Company as of December 31, 1998, and the results of their operations, and
the changes in their net assets for each of the periods presented, in
conformity with generally accepted accounting principles.
Chicago, Illinois
March 1, 1999
<TABLE>
<CAPTION>
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Assets and Liabilities
December 31, 1998
<S> <C>
Assets:
Investments:
Cova Series Trust (Trust):
Bond Debenture Portfolio - 12,987 shares at a net asset value of $12.38 per share (cost: $158,170) $ 160,789
Developing Growth Portfolio - 164 shares at a net asset value of $11.24 per share (cost: $1,723) 1,844
Large Cap Research Portfolio - 2,681 shares at a net asset value of $11.96 per share (cost: $29,121) 32,079
Mid-Cap Value Portfolio - 1,467 shares at a net asset value of $10.58 per share (cost: $15,435) 15,522
Quality Bond Portfolio - 6,227 shares at a net asset value of $11.02 per share (cost: $65,574) 68,615
Small Cap Stock Portfolio - 2,813 shares at a net asset value of $11.98 per share (cost: $33,316) 33,710
Large Cap Stock Portfolio - 7,181 shares at a net asset value of $18.12 per share (cost: $108,380) 130,087
Select Equity Portfolio - 5,502 shares at a net asset value of $16.08 per share (cost: $77,845) 88,453
International Equity Portfolio - 6,973 shares at a net asset value of $12.86 per share (cost: $84,527) 89,654
Lord Abbett Series Fund, Inc. (Lord Abbett) Growth and Income Portfolio -
15,147 shares at a net asset value of $20.65 per share (cost: $310,389) 312,770
General American Capital Company (GACC) Money Market Portfolio -
1,247 shares at a net asset value of $19.25 per share (cost: $24,000) 24,011
-----------
Total assets $ 957,534
===========
Liabilities:
Trust Bond Debenture $ 6
Trust Large Cap Research 1
Trust Mid-Cap Value 1
Trust Quality Bond 3
Trust Small Cap Stock 1
Trust Large Cap Stock 5
Trust Select Equity 3
Trust International Equity 3
Lord Abbett Growth and Income 12
GACC Money Market 3
-----------
Total liabilities $ 38
===========
Net assets:
Trust Bond Debenture - 11,913 accumulation units at $13.496763 per unit $ 160,783
Trust Developing Growth - 167 accumulation units at $11.068002 per unit 1,844
Trust Large Cap Research - 2,713 accumulation units at $11.825475 per unit 32,078
Trust Mid-Cap Value - 1,487 accumulation units at $10.437999 per unit 15,521
Trust Quality Bond - 5,759 accumulation units at $11.914486 per unit 68,612
Trust Small Cap Stock - 2,679 accumulation units at $12.583415 per unit 33,709
Trust Large Cap Stock - 6,695 accumulation units at $19.428714 per unit 130,082
Trust Select Equity - 5,207 accumulation units at $16.987197 per unit 88,450
Trust International Equity - 6,954 accumulation units at $12.891430 per unit 89,651
Lord Abbett Growth and Income - 9,112 accumulation units at $34.325420 per unit 312,758
GACC Money Market - 2,161 accumulation units at $11.109941 per unit 24,008
-----------
Total net assets $ 957,496
===========
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Operations
Year ended December 31, 1998
TRUST
----------------------------------------------------------------------------
Bond Developing Large Cap Mid-Cap Quality
Debenture Growth Research Value Bond
-------------- --------------- --------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Income -
dividends $ 3,976 -- 48 13 1,502
-------------- --------------- --------------- ----------- ---------
Expenses:
Mortality and expense risk fee 1,723 1 196 97 742
Administrative fee 207 -- 23 12 89
-------------- --------------- --------------- ----------- ---------
Total expenses 1,930 1 219 109 831
-------------- --------------- --------------- ----------- ---------
Net investment income (loss) 2,046 (1) (171) (96) 671
-------------- --------------- --------------- ----------- ---------
Realized gain (loss) on investments:
Realized gain (loss) on sale of
fund shares 20 -- 3 (4) 64
Realized gain distributions 1,546 -- -- -- --
-------------- --------------- --------------- ----------- ---------
Net realized gain (loss) 1,566 -- 3 (4) 64
-------------- --------------- --------------- ----------- ---------
Change in unrealized appreciation
during the year 2,573 121 2,958 87 2,940
-------------- --------------- --------------- ----------- ---------
Net increase (decrease) in net assets
from operations $ 6,185 120 2,790 (13) 3,675
============== =============== =============== =========== =========
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Operations
Year ended December 31, 1998
Trust
-------------------------------------------------------------
Small Cap Large Cap Select International
Stock Stock Equity Equity
------------ -------------- ---------- ----------------
<S> <C> <C> <C> <C>
Income -
dividends $ 17 212 124 1,119
------------ -------------- ---------- ----------------
Expenses:
Mortality and expense risk fee 196 981 581 816
Administrative fee 24 118 70 98
------------ -------------- ---------- ----------------
Total expenses 220 1,099 651 914
------------ -------------- ---------- ----------------
Net investment income (loss) (203) (887) (527) 205
------------ -------------- ---------- ----------------
Realized gain (loss) on investments:
Realized gain (loss) on sale of
fund shares (11) 210 37 28
Realized gain distributions 443 697 2,479 14
------------ -------------- ---------- ----------------
Net realized gain (loss) 432 907 2,516 42
------------ -------------- ---------- ----------------
Change in unrealized appreciation
during the year 91 22,305 9,506 7,092
------------ -------------- ---------- ----------------
Net increase (decrease) in net assets
from operations $ 320 22,325 11,495 7,339
============ ============== ========== ================
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Operations
Year ended December 31, 1998
LORD ABBETT GACC
---------------------------
Growth and Money
Income Market Total
--------------- ------------------------
<S> <C> <C> <C>
Income -
dividends $ 4,585 -- 11,596
--------------- ---------- -----------
Expenses:
Mortality and expense risk fee 3,059 3 8,395
Administrative fee 367 -- 1,008
--------------- ---------- -----------
Total expenses 3,426 3 9,403
--------------- ---------- -----------
Net investment income (loss) 1,159 (3) 2,193
--------------- ---------- -----------
Realized gain (loss) on investments:
Realized gain (loss) on sale of
fund shares 12 -- 359
Realized gain distributions 14,742 -- 19,921
--------------- ---------- -----------
Net realized gain (loss) 14,754 -- 20,280
--------------- ---------- -----------
Change in unrealized appreciation
during the year 10,125 11 57,809
--------------- ---------- -----------
Net increase (decrease) in net assets
from operations $ 26,038 8 80,282
=============== ========== ===========
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1998
TRUST
-----------------------------------------------------------------------------
Bond Developing Large Cap Mid-Cap Quality
Debenture Growth Research Value Bond
--------------- --------------- -------------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ 2,046 (1) (171) (96) 671
Net realized gain (loss) 1,566 -- 3 (4) 64
Unrealized appreciation
during the year 2,573 121 2,958 87 2,940
--------------- --------------- -------------- ------------- ----------
Net increase (decrease)
from operations 6,185 120 2,790 (13) 3,675
--------------- --------------- -------------- ------------- ----------
Contract transactions:
Payments received from contract
owners 25,475 -- 28,039 14,334 34,865
Transfers between sub-accounts
(including fixed account), net 16,036 1,724 1,249 1,200 8,993
Transfers for contract benefits
and terminations (1,924) -- -- -- (1,989)
--------------- --------------- -------------- ------------- ----------
Net increase in
net assets from
contract transactions 39,587 1,724 29,288 15,534 41,869
--------------- --------------- -------------- ------------- ----------
Net increase
in net assets 45,772 1,844 32,078 15,521 45,544
Net assets at beginning of period 115,011 -- -- -- 23,068
--------------- --------------- -------------- ------------- ----------
Net assets at end of period $ 160,783 1,844 32,078 15,521 68,612
=============== =============== ============== ============= ==========
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1998
---------------------------------------------------------------
Small Cap Large Cap Select International
Stock Stock Equity Equity
--------------- -------------- ---------- -----------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ (203) (887) (527) 205
Net realized gain (loss) 432 907 2,516 42
Unrealized appreciation
during the year 91 22,305 9,506 7,092
--------------- -------------- ---------- -----------------
Net increase (decrease)
from operations 320 22,325 11,495 7,339
--------------- -------------- ---------- -----------------
Contract transactions:
Payments received from contract
owners 9,652 35,989 39,613 16,232
Transfers between sub-accounts
(including fixed account), net 16,587 31,944 18,967 22,607
Transfers for contract benefits
and terminations 4 (1,975) (191) (501)
--------------- -------------- ---------- -----------------
Net increase in
net assets from
contract transactions 26,243 65,958 58,389 38,338
--------------- -------------- ---------- -----------------
Net increase
in net assets 26,563 88,283 69,884 45,677
Net assets at beginning of period 7,146 41,799 18,566 43,974
--------------- -------------- ---------- -----------------
Net assets at end of period $ 33,709 130,082 88,450 89,651
=============== ============== ========== =================
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Year ended December 31, 1998
LORD ABBETT GACC
---------------- ----------
Growth and Money
Income Market Total
---------------- ---------- ------------
<S> <C> <C> <C>
Increase (decrease) in net assets from
operations:
Net investment income (loss) $ 1,159 (3) 2,193
Net realized gain (loss) 14,754 -- 20,280
Unrealized appreciation
during the year 10,125 11 57,809
---------------- ---------- ------------
Net increase (decrease)
from operations 26,038 8 80,282
---------------- ---------- ------------
Contract transactions:
Payments received from contract
owners 66,977 24,000 295,176
Transfers between sub-accounts
(including fixed account), net 50,718 -- 170,025
Transfers for contract benefits
and terminations (2,035) -- (8,611)
---------------- ---------- ------------
Net increase in
net assets from
contract transactions 115,660 24,000 456,590
---------------- ---------- ------------
Net increase
in net assets 141,698 24,008 536,872
Net assets at beginning of period 171,060 -- 420,624
---------------- ---------- ------------
Net assets at end of period $ 312,758 24,008 957,496
================ ========== ============
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Period ended December 31, 1997
TRUST
--------------------------------------------------------
BOND QUALITY SMALL CAP LARGE CAP
Debenture BOND STOCK STOCK
-------------- --------- ----------- --------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income (loss) $ 3,013 552 (2) 30
Net realized gain (loss) 91 98 3 2,190
Unrealized appreciation
during the year 46 101 303 (598)
-------------- --------- ----------- --------------
Net increase (decrease)
from operations 3,150 751 304 1,622
-------------- --------- ----------- --------------
Contract transactions:
Payments received from contract
owners 89,575 -- 5,151 14,027
Transfers between sub-accounts
(including fixed account), net (381) (350) (9) (341)
Transfers for contract benefits
and terminations 22,667 22,667 1,700 26,491
-------------- --------- ----------- --------------
Net increase in net assets
from contract transactions 111,861 22,317 6,842 40,177
-------------- --------- ----------- --------------
Net increase in net assets 115,011 23,068 7,146 41,799
Net assets at beginning of period -- -- -- --
-------------- --------- ----------- --------------
Net assets at end of period $ 115,011 23,068 7,146 41,799
============== ========= =========== ==============
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
Statement of Changes in Net Assets
Period ended December 31, 1997
TRUST LORD ABBETT
------------------------------ ---------------
SELECT INTERNATIONAL GROWTH AND
EQUITY EQUITY INCOME TOTAL
--------- ---------------- --------------- -----------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income (loss) $ 4 126 1,914 5,637
Net realized gain (loss) 31 214 12,091 14,718
Unrealized appreciation
during the year 1,102 (1,965) (7,744) (8,755)
--------- ---------------- --------------- -----------
Net increase (decrease)
from operations 1,137 (1,625) 6,261 11,600
--------- ---------------- --------------- -----------
Contract transactions:
Payments received from contract
owners 14,032 31,664 134,766 289,215
Transfers between sub-accounts
(including fixed account), net (145) 52 (851) (2,025)
Transfers for contract benefits
and terminations 3,542 13,883 30,884 121,834
--------- ---------------- --------------- -----------
Net increase in net assets
from contract transactions 17,429 45,599 164,799 409,024
--------- ---------------- --------------- -----------
Net increase in net assets 18,566 43,974 171,060 420,624
Net assets at beginning of period -- -- -- --
--------- ---------------- --------------- -----------
Net assets at end of period $ 18,566 43,974 171,060 420,624
========= ================ =============== ===========
</TABLE>
See accompanying notes to financial statements.
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
(1) ORGANIZATION
First Cova Variable Annuity Account One (the Separate Account), a unit
investment trust registered under the Investment Company Act of 1940 as
amended, was established by First Cova Life Insurance Company (Cova) and
exists in accordance with the regulations of the New York Department of
Insurance. The Separate Account is a funding vehicle for variable
annuity contracts issued by Cova.
The Separate Account is divided into sub-accounts with the assets of
each sub-account invested in the corresponding portfolios of the
following investment companies:
Cova Series Trust (Trust) 9 portfolios
Lord Abbett Series Fund, Inc. (Lord Abbett) 1 portfolio
General American Capital Company (GACC) 1 portfolio
Each investment company is a diversified, open-end, management
investment company registered under the Investment Company Act of 1940
as amended. Not all sub-accounts are available for investment depending
upon the terms of the variable annuity contracts offered for sale by
Cova.
(2) SIGNIFICANT ACCOUNTING POLICIES
(A) INVESTMENT VALUATION
Investments made in the portfolios of the investment companies are
valued at the reported net asset value of such portfolios, which
value their investment securities at fair value. The average cost
method is used to compute the realized gains and losses on the
sale of portfolio shares owned by the sub-accounts. Income from
dividends and gains from realized gain distributions are recorded
on the ex-distribution date.
(B) REINVESTMENT OF DISTRIBUTIONS
With the exception of the GACC Money Market Fund, dividends and
gains from realized gain distributions are reinvested in
additional shares of the portfolio.
GACC follows the federal income tax practice known as consent
dividending, whereby substantially all of its net investment
income and realized capital gains are deemed to pass through to
the Separate Account. As a result, GACC does not distribute
dividends and realized gains. During December of each year, the
accumulated net investment income and realized capital gains of
the GACC Money Market Fund are allocated to the Separate Account
by increasing the cost basis and recognizing a capital gain in the
Separate Account.
(C) FEDERAL INCOME TAXES
The operations of the Separate Account are included in the federal
income tax return of Cova, which is taxed as a Life Insurance
Company under the provisions of the Internal Revenue Code (IRC).
Under current IRC provisions, Cova believes it will be treated as
the owner of the Separate Account assets for federal income tax
purposes and does not expect to incur federal income taxes on the
earnings of the Separate Account to the extent the earnings are
credited to the variable annuity contracts. Based on this, no
charge is being made currently to the Separate Account for federal
income taxes. A charge may be made in future years for any federal
income taxes that would be attributable to the contracts.
(3) SEPARATE ACCOUNT EXPENSES
Cova deducts a daily charge from the net assets of the Separate Account
equivalent to an annual rate of 1.25% for the assumption of mortality
and expense risks and 0.15% for administrative expenses. The mortality
risks assumed by Cova arise from its contractual obligation to make
annuity payments after the annuity date for the life of the annuitant
and to waive the withdrawal fee in the event of the death of the
contract owner. The administrative fees cover the cost of establishing
and maintaining the variable annuity contracts and the Separate Account.
(4) CONTRACT FEES
There are no deductions made from purchase payments for sales fees at
the time a variable annuity contract is purchased. However, if all or a
portion of the contract value is withdrawn, a withdrawal fee may be
assessed and deducted from the contract value or payment to the contract
owner. The withdrawal fee is imposed on withdrawals of contract values
attributable to purchase payments within seven years after receipt and
is equal to 7% of the purchase payments withdrawn in the first and
second years, 5% of the purchase payments withdrawn in the third,
fourth, and fifth years, and 3% of the purchase payments withdrawn in
the six and seventh years. After the first contract anniversary,
provided the contract value exceeds $5000, the contract owner may make
one withdrawal each contract year of up to 10% of the aggregate purchase
payments (on deposit for more than one year) without incurring a
surrender fee. There were no surrender fees deducted from the contract
values in the Separate Account in 1998.
An annual contract maintenance fee of $30 is imposed on all variable
annuity contracts with contract values less than $50,000 on their policy
anniversary. This fee covers the cost of contract administration for the
previous year and is prorated between the sub-accounts and the fixed
rate account to which the contract value is allocated. In 1998, contract
maintenance fees of $117 were deducted from the contract values in the
Separate Account.
Subject to certain restrictions, the contract owner may transfer all or
a part of the accumulated value of the contract among the available
sub-accounts of the Separate Account and the fixed rate account offered
by Cova. If more than 12 transfers have been made in the contract year,
a transfer fee of $25 per transfer or, if less, 2% of amount
transferred, will be deducted from the contract account value. Transfers
made in the Dollar Cost Averaging program are not subject to the
transfer fee. There were no transfer fees deducted from the contract
values in the Separate Account in 1998.
Cova currently advances any premium taxes due at the time purchase
payments are made and then deducts premium taxes from the contract value
at the time annuity payments begin. Cova reserves the right to deduct
premium taxes when incurred.
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
(5) SUBSEQUENT EVENT
On January 8, 1999, the Lord Abbett Growth and Income sub-account ceased
operations and its assets were transferred to the Trust Lord Abbett
Growth and Income sub-account which commenced operations on January 8,
1999. The Trust Lord Abbett Growth and Income sub-account invests in the
Trust Lord Abbett Growth and Income Portfolio which commenced operations
on January 8, 1999. The Trust Lord Abbett Growth and Income Portfolio is
managed by Lord Abbett who also manages the Lord Abbett Growth and
Income Portfolio.
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
(6) UNIT FAIR VALUES
<TABLE>
<CAPTION>
A summary of accumulation unit values, net assets, performance returns,
and expense ratios for each sub-account follows:
Commenced Accumulation Unit Value Net Assets
------------------------------- ----------------------------
Operations 1998 1997 1998 1997
---------------- --------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Trust Bond Debenture 5/15/97 $ 13.496763 12.882042 160,783 115,001
Trust Developing Growth 11/23/98 11.068002 -- 1,844 --
Trust Large Cap Research 3/3/98 11.825475 -- 32,078 --
Trust Mid-Cap Value 3/4/98 10.437999 -- 15,521 --
Trust Quality Bond 5/15/97 11.914486 11.155130 68,612 23,068
Trust Small Cap Stock 3/17/97 12.583415 13.492111 33,709 7,146
Trust Large Cap Stock 3/11/97 19.428714 14.889594 130,082 41,799
Trust Select Equity 3/11/97 16.987197 14.053502 88,450 18,566
Trust International Equity 3/11/97 12.891430 11.462941 89,651 43,974
Lord Abbett Growth and Income* 3/11/97 34.325420 30.837096 312,758 171,060
GACC Money Market 12/28/98 11.109941 -- 24,008 --
================ =============== ============== ============= =============
</TABLE>
* Sub-account ceased operations on January 8, 1999.
** Performance returns for sub-accounts that commenced operations during the
year are not annualized. Expense ratios for sub-accounts that commenced
operations during the year are annualized.
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
(6) UNIT FAIR VALUES
<TABLE>
<CAPTION>
A summary of accumulation unit values, net assets, performance returns,
and expense ratios for each sub-account follows:
SEPARATE
ACCOUNT
Expenses to
Total to Average
Commenced Return** Net Assets**
---------------------- ----------------------
---------------------- ---------- ----------
Operations 1998 1997 1998 1997
---------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Trust Bond Debenture 5/15/97 4.77 % 9.71 1.40 1.40
Trust Developing Growth 11/23/98 8.57 -- 1.40 --
Trust Large Cap Research 3/3/98 8.01 -- 1.40 --
Trust Mid-Cap Value 3/4/98 (5.54) -- 1.40 --
Trust Quality Bond 5/15/97 6.81 6.79 1.40 1.40
Trust Small Cap Stock 3/17/97 (6.74) 23.53 1.40 1.40
Trust Large Cap Stock 3/11/97 30.49 20.08 1.40 1.40
Trust Select Equity 3/11/97 20.88 19.47 1.40 1.40
Trust International Equity 3/11/97 12.46 2.87 1.40 1.40
Lord Abbett Growth and Income* 3/11/97 11.31 14.18 1.40 1.40
GACC Money Market 12/28/98 -- -- -- --
================ ========= ========== ========== ==========
</TABLE>
* Sub-account ceased operations on January 8, 1999.
** Performance returns for sub-accounts that commenced operations during the
year are not annualized. Expense ratios for sub-accounts that commenced
operations during the year are annualized.
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
(7) REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED APPRECIATION
<TABLE>
<CAPTION>
The table below summarizes the realized gain (loss)
on the sale of fund shares and the change in unrealized
appreciation for each sub-account during the year.
1998 1997
----------- ----------
<S> <C> <C>
Realized gain (loss) on sale of fund shares:
Trust Bond Debenture:
Aggregate proceeds from sales of fund shares $ 3,263 24,281
Aggregate cost of fund shares redeemed 3,243 24,204
----------- ----------
Realized gain (loss) $ 20 77
=========== ==========
Trust Developing Growth:
Aggregate proceeds from sales of fund shares $ 1 --
Aggregate cost of fund shares redeemed 1 --
----------- ----------
Realized gain (loss) $ -- --
=========== ==========
Trust Large Cap Research:
Aggregate proceeds from sales of fund shares $ 206 --
Aggregate cost of fund shares redeemed 203 --
----------- ----------
Realized gain (loss) $ 3 --
=========== ==========
Trust Mid-Cap Value:
Aggregate proceeds from sales of fund shares $ 105 --
Aggregate cost of fund shares redeemed 109 --
----------- ----------
Realized gain (loss) $ (4) --
=========== ==========
Trust Quality Bond:
Aggregate proceeds from sales of fund shares $ 2,573 172
Aggregate cost of fund shares redeemed 2,509 169
----------- ----------
Realized gain (loss) $ 64 3
=========== ==========
Trust Small Cap Stock:
Aggregate proceeds from sales of fund shares $ 205 17
Aggregate cost of fund shares redeemed 216 16
----------- ----------
Realized gain (loss) $ (11) 1
=========== ==========
</TABLE>
<TABLE>
<CAPTION>
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
----------- ----------
<S> <C> <C>
Realized gain (loss) on sale of fund shares, continued:
Trust Large Cap Stock:
Aggregate proceeds from sales of fund shares $ 2,908 1,700
Aggregate cost of fund shares redeemed 2,698 1,704
----------- ----------
Realized gain (loss) $ 210 (4)
=========== ==========
Trust Select Equity:
Aggregate proceeds from sales of fund shares $ 759 1,651
Aggregate cost of fund shares redeemed 722 1,650
----------- ----------
Realized gain (loss) $ 37 1
=========== ==========
Trust International Equity:
Aggregate proceeds from sales of fund shares $ 1,440 25,579
Aggregate cost of fund shares redeemed 1,412 25,395
----------- ----------
Realized gain (loss) $ 28 184
=========== ==========
Lord Abbett Growth and Income:
Aggregate proceeds from sales of fund shares $ 3,648 74,949
Aggregate cost of fund shares redeemed 3,636 73,502
----------- ----------
Realized gain (loss) $ 12 1,447
=========== ==========
GACC Money Market:
Aggregate proceeds from sales of fund shares $ -- --
Aggregate cost of fund shares redeemed -- --
----------- ----------
Realized gain (loss) $ -- --
=========== ==========
Unrealized appreciation (depreciation):
Trust Bond Debenture:
Appreciation (depreciation), end of period $ 2,619 46
Appreciation (depreciation), beginning of period 46 --
----------- ----------
Unrealized appreciation (depreciation) $ 2,573 46
=========== ==========
Trust Developing Growth:
Appreciation (depreciation), end of period $ 121 --
Appreciation (depreciation), beginning of period -- --
----------- ----------
Unrealized appreciation (depreciation) $ 121 --
=========== ==========
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
----------- ----------
Unrealized appreciation (depreciation), continued:
Trust Large Cap Research:
Appreciation (depreciation), end of period $ 2,958 --
Appreciation (depreciation), beginning of period -- --
----------- ----------
Unrealized appreciation (depreciation) $ 2,958 --
=========== ==========
Trust Mid-Cap Value:
Appreciation (depreciation), end of period $ 87 --
Appreciation (depreciation), beginning of period -- --
----------- ----------
Unrealized appreciation (depreciation) $ 87 --
=========== ==========
Trust Quality Bond:
Appreciation (depreciation), end of period $ 3,041 101
Appreciation (depreciation), beginning of period 101 --
----------- ----------
Unrealized appreciation (depreciation) $ 2,940 101
=========== ==========
Trust Small Cap Stock:
Appreciation (depreciation), end of period $ 394 303
Appreciation (depreciation), beginning of period 303 --
----------- ----------
Unrealized appreciation (depreciation) $ 91 303
=========== ==========
Trust Large Cap Stock:
Appreciation (depreciation), end of period $ 21,707 (598)
Appreciation (depreciation), beginning of period (598) --
----------- ----------
Unrealized appreciation (depreciation) $ 22,305 (598)
=========== ==========
Trust Select Equity:
Appreciation (depreciation), end of period $ 10,608 1,102
Appreciation (depreciation), beginning of period 1,102 --
----------- ----------
Unrealized appreciation (depreciation) $ 9,506 1,102
=========== ==========
Trust International Equity:
Appreciation (depreciation), end of period $ 5,127 (1,965)
Appreciation (depreciation), beginning of period (1,965) --
----------- ----------
Unrealized appreciation (depreciation) $ 7,092 (1,965)
=========== ==========
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
1998 1997
----------- ----------
Unrealized appreciation (depreciation), continued:
Lord Abbett Growth and Income:
Appreciation (depreciation), end of period $ 2,381 (7,744)
Appreciation (depreciation), beginning of period (7,744) --
----------- ----------
Unrealized appreciation (depreciation) $ 10,125 (7,744)
=========== ==========
GACC Money Market:
Appreciation (depreciation), end of period $ 11 --
Appreciation (depreciation), beginning of period -- --
----------- ----------
Unrealized appreciation (depreciation) $ 11 --
=========== ==========
</TABLE>
<TABLE>
<CAPTION>
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
(8) UNIT TRANSACTIONS
The change in the number of accumulation units is as follows:
TRUST
--------------------------------------------------------------------------
Bond Developing Large Cap Mid-Cap Quality
Debenture Growth Research Value Bond
------------------------------- --------------------------- -----------
<S> <C> <C> <C> <C> <C>
Unit balance at 12/31/96
Contract units purchased 7,125 -- -- -- --
Contract units transferred, net 1,831 -- -- -- 2,100
Contract units redeemed (28) -- -- -- (32)
-------------- --------------- ------------- ------------ -----------
Unit balance at 12/31/97 8,928 -- -- -- 2,068
Contract units purchased 1,929 -- 2,602 1,370 3,068
Contract units transferred, net 1,205 167 111 117 794
Contract units redeemed (149) -- -- -- (171)
-------------- --------------- ------------- ------------ -----------
Unit balance at 12/31/98 11,913 167 2,713 1,487 5,759
============== =============== ============= ============ ===========
</TABLE>
<TABLE>
<CAPTION>
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
Notes to Financial Statements
December 31, 1998 and 1997
(8) UNIT TRANSACTIONS
The change in the number of accumulation units is as follows:
LORD ABBETT GACC
------------------------------------------------------ ----------------------------
Small Cap Large Cap Select International Growth and Money
Stock Stock Equity Equity Income Market
-------------- ----------- ---------- ------------ -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Unit balance at 12/31/96
Contract units purchased 390 978 1,037 2,663 4,526 --
Contract units transferred, net 140 1,852 292 1,188 1,036 --
Contract units redeemed -- (23) (8) (15) (15) --
-------------- ----------- ---------- ------------ -------------- -----------
Unit balance at 12/31/97 530 2,807 1,321 3,836 5,547 --
Contract units purchased 711 2,093 2,639 1,307 2,036 2,161
Contract units transferred, net 1,439 1,930 1,260 1,863 1,600 --
Contract units redeemed (1) (135) (13) (52) (71) --
-------------- ----------- ---------- ------------ -------------- -----------
Unit balance at 12/31/98 2,679 6,695 5,207 6,954 9,112 2,161
============== =========== ========== ============ ============== ===========
</TABLE>
FIRST COVA LIFE INSURANCE COMPANY
Statutory Financial Statements and Schedule
December 31, 1998, 1997, and 1996
(With Independent Auditors' Report Thereon)
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholder
First Cova Life Insurance Company:
We have audited the accompanying statutory statements of admitted assets,
liabilities, and capital stock and surplus of First Cova Life Insurance
Company (the Company) as of December 31, 1998 and 1997, and the related
statutory statements of operations, capital stock and surplus, and cash
flow for each of the years in the three-year period ended December 31,
1998. These statutory financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
statutory financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
As described more fully in note 2 to the financial statements, the Company
prepared these financial statements using accounting practices prescribed
or permitted by the New York State Insurance Department, which practices
differ from generally accepted accounting principles. The effects on the
financial statements of the variances between the statutory basis of
accounting and generally accepted accounting principles are also described
in note 2.
In our opinion, because of the effects of the matter discussed in the
preceding paragraph, the financial statements referred to above do not
present fairly, in conformity with generally accepted accounting
principles, the financial position of First Cova Life Insurance Company as
of December 31, 1998 and 1997, or the results of its operations or its cash
flows for each of the years in the three-year period ended December 31,
1998.
Also, in our opinion, the financial statements referred to above present
fairly, in all material respects, the admitted assets, liabilities, and
capital stock and surplus of First Cova Life Insurance Company as of
December 31, 1998 and 1997, and the results of its operations and its cash
flow for each of the years in the three-year period ended December 31,
1998, on the basis of accounting described in note 2.
Our audits were made for the purpose of forming an opinion on the basic
statutory financial statements taken as a whole. The supplementary
information included in the accompanying schedule is presented for purposes
of additional analysis and is not a required part of the basic statutory
financial statements. Such information has been subjected to the auditing
procedures applied in the audits of the basic statutory financial
statements and, in our opinion, is fairly stated in all material respects
in relation to the basic statutory financial statements taken as a whole.
Chicago, Illinois
April 23, 1999
<TABLE>
<CAPTION>
FIRST COVA LIFE INSURANCE COMPANY
Statutory Statements of Admitted Assets, Liabilities,
and Capital Stock and Surplus
December 31, 1998 and 1997
(In thousands, except share data)
ADMITTED ASSETS 1998 1997
----------- -----------
<S> <C> <C>
Bonds $ 58,302 159,738
Mortgage loans on real estate -- 8,866
Policy loans -- 20,544
Cash and short-term investments 5,894 3,026
----------- -----------
Total cash and investments 64,196 192,174
----------- -----------
Investment income due and accrued 829 3,017
Federal income taxes recoverable -- 66
Other assets 8 9
----------- -----------
Total admitted assets excluding separate account assets 65,033 195,266
Separate Account assets 958 421
----------- -----------
Total admitted assets $ 65,991 195,687
=========== ===========
LIABILITIES AND CAPITAL STOCK AND SURPLUS
Aggregate reserve for life policies and annuity contracts $ 30,366 164,208
Supplementary contracts without life contingencies 288 120
Life policy and annuity contract claims (1) 726
Interest maintenance reserve 3,192 1,583
General expenses due or accrued 64 95
Transfers to Separate Accounts due or accrued (31) (21)
Taxes, licenses, and fees due or accrued
excluding Federal income taxes 216 220
Federal income taxes 1,393 --
Remittances and items not allocated 22 (14)
Unearned investment income -- 3
Asset valuation reserve 523 1,529
Payable to parent, subsidiaries, and affiliates 20 35
Reinsurance payable to parent 1,369 2,372
Checks outstanding 291 46
Accounts payable - security purchases 480 --
----------- -----------
Total liabilities excluding separate account liabilities 38,192 170,902
Separate Account liabilities 958 421
----------- -----------
Total liabilities 39,150 171,323
----------- -----------
Common capital stock, $10 par value. Authorized,
issued, and outstanding 200,000 shares 2,000 2,000
Gross paid-in and contributed surplus 11,501 11,501
Unassigned surplus 13,340 10,863
----------- -----------
Total capital stock and surplus 26,841 24,364
----------- -----------
Total liabilities and capital stock and surplus $ 65,991 195,687
=========== ===========
</TABLE>
See accompanying notes to statutory financial statements.
<TABLE>
<CAPTION>
FIRST COVA LIFE INSURANCE COMPANY
Statutory Statements of Operations
Years ended December 31, 1998, 1997, and 1996
(In thousands)
1998 1997 1996
------------ ------------ ----------
<S> <C> <C> <C>
Income:
Premiums and annuity considerations $ (128,883) -- --
Deposit-type funds 948 6,851 569
Considerations for supplementary contracts
without life contingencies 219 54 81
Net investment income 13,813 13,771 13,507
Amortization of interest maintenance reserve (347) (244) (206)
Separate Account net gain from operations
excluding unrealized gains or losses 11 -- --
Separate Account administration fee income 9 2 --
------------ ------------ ----------
Total income (114,230) 20,434 13,951
------------ ------------ ----------
Benefits and expenses:
Death benefits 2,471 3,294 2,691
Annuity benefits 383 365 --
Surrender benefits and other fund withdrawals 12,758 7,222 8,719
Interest on policy or contract funds 47 11 10
Payment on supplementary contracts without
life contingencies 62 24 12
Increase (decrease) in aggregate reserves
for life policies and annuity contracts (134,624) 5,904 (928)
Increase in reserve for supplementary
contracts without life contingencies 168 30 66
Commissions on premiums, annuity
considerations and deposit-type funds 44 239 20
Commissions and expense allowances on
reinsurance assumed 405 423 400
General insurance expenses 679 966 663
Insurance taxes, licenses, and fees,
excluding Federal income taxes (170) 142 25
Net transfers to Separate Accounts 446 388 --
Other expenses -- 1 1
------------ ------------ ----------
Total benefits and expenses (117,331) 19,009 11,679
------------ ------------ ----------
Income from operations before Federal income taxes
and realized capital gains 3,101 1,425 2,272
Federal income tax expense, excluding
tax on capital gains 837 145 445
------------ ------------ ----------
Net gain from operations before realized capital gains 2,264 1,280 1,827
Realized capital gains (net of tax expense of $992 in 1998 and tax benefit of
$89 and $111 in 1997 and 1996, respectively, and net of amounts transferred
to the IMR of $1,263, $(122),
and $(153) in 1998, 1997, and 1996, respectively) -- -- --
------------ ------------ ----------
Net income $ 2,264 1,280 1,827
============ ============ ==========
</TABLE>
See accompanying notes to statutory financial statements.
<TABLE>
<CAPTION>
FIRST COVA LIFE INSURANCE COMPANY
Statutory Statements of Capital Stock and Surplus
Years ended December 31, 1998, 1997, and 1996
(In thousands)
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Capital stock - balance at beginning and end of year $ 2,000 2,000 2,000
--------- --------- ---------
Gross paid-in and contributed surplus - balance at
beginning and end of year 11,501 11,501 11,501
--------- --------- ---------
Unassigned surplus:
Balance at beginning of year 10,863 9,642 8,028
Net income (loss) 2,264 1,280 1,827
Change in reserve on account of change in valuation basis (781) -- --
Change in asset valuation reserve 1,005 (59) (285)
Other changes in surplus in Separate Accounts Statement (11) -- --
Prior period Federal Income Tax adjustment -- -- 72
--------- --------- ---------
Balance at end of year 13,340 10,863 9,642
--------- --------- ---------
Total capital stock and surplus $ 26,841 24,364 23,143
========= ========= =========
</TABLE>
See accompanying notes to statutory financial statements.
<TABLE>
<CAPTION>
FIRST COVA LIFE INSURANCE COMPANY
Statutory Statements of Cash Flow
Years ended December 31, 1998, 1997, and 1996
(In thousands)
1998 1997 1996
----------- ------------ ---------
<S> <C> <C> <C>
Cash from operations:
Premiums and annuity considerations $ (128,883) -- --
Deposit-type funds 948 6,852 569
Considerations for supplementary contracts without
life contingencies 219 54 81
Net investment income 15,912 13,310 13,499
Separate Account administration fee income 9 2
Miscellaneous income -- -- 72
----------- ------------ ---------
(111,795) 20,218 14,221
----------- ------------ ---------
Death benefits 3,196 2,842 2,716
Surrender benefits and other fund withdrawals 12,758 7,222 8,719
Other benefits to policyholders, primarily annuity benefits 495 399 23
Commissions, other expenses, and taxes paid,
excluding Federal income tax 1,262 1,709 1,089
Net transfers to Separate Accounts 456 409 --
Federal income taxes paid (recovered), excluding
tax on capital gains (622) 544 156
----------- ------------ ---------
17,545 13,125 12,703
----------- ------------ ---------
Net cash (used in) from operations (129,340) 7,093 1,518
----------- ------------ ---------
Cash from investments:
Proceeds from investments sold, matured, or repaid:
Bonds 118,066 40,473 40,506
Mortgage loans 11,057 364 1,316
----------- ------------ ---------
Total investment proceeds 129,123 40,837 41,822
----------- ------------ ---------
Taxes (paid) recovered on capital losses (721) 67 84
----------- ------------ ---------
Cost of investments acquired:
Bonds 14,981 44,688 41,686
Mortgage loans 1,500 479 --
----------- ------------ ---------
Total investments acquired 16,481 45,167 41,686
----------- ------------ ---------
Net increase (decrease) in policy loans (20,544) 1,651 1,970
----------- ------------ ---------
Net cash from (used for) investments 132,465 (5,914) (1,750)
----------- ------------ ---------
Cash from (used in) financing and miscellaneous sources:
Cash provided - other 761 13 2,015
Cash applied - other (1,018) (2,155) (935)
----------- ------------ ---------
Net cash from financing and miscellaneous sources (257) (2,142) 1,080
----------- ------------ ---------
Net change in cash and short-term investments 2,868 (963) 848
Cash and short-term investments at beginning of year 3,026 3,989 3,141
----------- ------------ ---------
Cash and short-term investments at end of year $ 5,894 3,026 3,989
=========== ============ =========
</TABLE>
See accompanying notes to statutory financial statements.
FIRST COVA LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
December 31, 1998, 1997, and 1996
(1) COMPANY OWNERSHIP AND NATURE OF BUSINESS
COMPANY OWNERSHIP
First Cova Life Insurance Company (the Company) is a wholly owned
subsidiary of Cova Financial Services Life Insurance Company
(CFSLIC), which is a downstream subsidiary of General American
Life Insurance Company (GALIC), a Missouri domiciled life
insurance company.
NATURE OF BUSINESS
The Company is licensed to do business in the state of New York.
The Company markets and services single premium deferred annuities
and variable annuities. Most of the policies issued present no
significant mortality nor longevity risk to the Company, but
rather represent investment deposits by the policyholders. Life
insurance policies provide policy beneficiaries with mortality
benefits amounting to a multiple, which declines with age, of the
original premium.
Under the deferred annuity contracts, interest rates credited to
policyholder deposits are guaranteed by the Company for periods
from one to seven years, but in no case may renewal rates be less
than 3%. The Company may assess surrender fees against amounts
withdrawn prior to scheduled rate reset and adjust account values
based on current crediting rates. Policyholders may also incur
certain Federal income tax penalties on withdrawals.
Under the variable annuity contracts, policyholder deposits are
allocated to various separate account sub-accounts or the general
accounts. A sub-account is valued at the sum of market values of
the securities in its underlying investment portfolio. The
contract value allocated to a sub-account will fluctuate based on
the performance of the sub-accounts. The contract value allocated
to the general accounts is credited with a fixed interest rate for
a specified period. The Company may assess surrender fees against
amounts withdrawn prior to the end of the withdrawal charge
period. Policyholders also may incur certain federal income tax
penalties on withdrawals.
Although the Company markets its products through numerous
distributors, including regional brokerage firms, national
brokerage firms, and banks, approximately 54% of the Company's
sales were through Edward Jones and Company in 1998. Approximately
58% of the Company's sales were through Dreyfus Service
Organization in 1997 and 91% of the Company's sales were through
one specific brokerage firm, Advest, in 1996.
(2) BASIS OF PRESENTATION
The accompanying statutory financial statements have been prepared in
conformity with accounting practices prescribed or permitted by the New
York State Insurance Department, which is a comprehensive basis of
accounting other than generally accepted accounting principles.
Prescribed statutory accounting practices include state laws,
regulations, and general administrative rules, as well as a variety of
publications of the National Association of Insurance Commissioners
(NAIC). Permitted statutory accounting practices encompass all
accounting practices that are not prescribed; such practices differ from
state to state, may differ from company to company within a state, and
may change in the future. All material transactions recorded by the
Company during 1998, 1997, and 1996 are in conformity with prescribed
practices.
Generally accepted accounting principles (GAAP) differ in certain
respects from the accounting practices prescribed or permitted by
insurance regulatory authorities (statutory accounting principles).
The major differences arise principally from the immediate expense
recognition of policy acquisition costs and intangible assets for
statutory reporting, determination of policy reserves based on different
discount rates and methods, the non-recognition of financial reinsurance
for GAAP reporting, the establishment of an Asset Valuation Reserve as a
contingent liability based on the credit quality of the Company's
investment securities on a statutory basis, and the establishment of an
Interest Maintenance Reserve on a statutory basis as an unearned
liability to defer the realized gains and losses of fixed income
investments presumably resulting from changes to interest rates and
amortize them into income over the remaining life of the investment
sold. In addition, adjustments to record the carrying values of debt
securities and certain equity securities at market are applied only
under GAAP reporting.
Another difference arises from Federal income taxes being charged to
operations based on income that is currently taxable. Deferred income
taxes are not provided for the tax effect of temporary differences
between book and tax basis of assets and liabilities on a statutory
basis.
Purchase accounting creates another difference as it requires the
restatement of GAAP assets and liabilities to their estimated fair
values and shareholder's equity to the net purchase price. Statutory
accounting does not recognize the purchase method of accounting.
<TABLE>
<CAPTION>
The following schedules set forth the adjustments to statutory net
income and capital stock and surplus necessary to present them in
accordance with generally accepted accounting principles (in thousands):
1998 1997 1996
------------ ------------ -----------
<S> <C> <C> <C>
Net income (loss):
As reported under statutory accounting practices $ 2,264 1,280 1,827
Deferred acquisition costs 51 477 48
Change in reserve for policies and contracts (4,872) 344 409
Interest maintenance reserve (1,609) 122 53
Deferred income taxes 3,003 (827) (642)
Amortization of intangible assets and liabilities (4,370) (216) (189)
Gain on securities due to reinsurance recapture 1,986 -- --
Other, net 766 421 163
------------ ------------ -----------
As reported under generally accepted accounting
principles $ (2,781) 1,601 1,669
============ ============ ===========
1998 1997 1996
------------ ------------ -----------
Capital stock and surplus:
As reported under statutory accounting practices $ 26,841 24,364 23,143
Deferred acquisition costs 576 525 48
Reserves for policies and contracts 301 5,173 4,829
Asset valuation reserve 523 1,528 1,470
Interest maintenance reserve 3,192 1,583 1,461
Unrealized appreciation (depreciation) of investments 897 2,964 (1,470)
Deferred income taxes 2,191 (1,163) 325
Present value of future profits 491 3,350 5,572
Goodwill 2,009 2,131 2,254
Other, net -- -- (5)
------------ ------------ -----------
As reported under generally accepted accounting
principles $ 37,021 40,455 37,627
============ ============ ===========
</TABLE>
In March 1998, the NAIC adopted the Codification of Statutory Accounting
Principles (the Codification). The Codification will constitute the only
source of "prescribed" statutory accounting practices. Accordingly, once
implemented, the definitions of what comprises prescribed versus
permitted statutory accounting practices may result in changes to the
accounting policies that insurance enterprises use to prepare their
statutory financial statements. The implementation date is ultimately
dependent on an insurer's state of domicile. The Company is currently
evaluating the impact of the Codification on its statutory financial
statements.
In preparing the statutory financial statements, management is required
to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosures of contingent assets and
liabilities as of the date of the balance sheet and revenues and
expenses for the period. Actual results could differ significantly from
those estimates. Investment valuation is most affected by the use of
estimates and assumptions.
The fair value of the Company's investments is subject to the risk that
interest rates will change and cause a temporary increase or decrease in
the liquidation value of debt securities. To the extent that
fluctuations in interest rates cause the cash flow of assets and
liabilities to change, the Company might have to liquidate assets prior
to their maturity and recognize a gain or a loss. Interest rate exposure
for the investment portfolio is managed through asset/liability
management techniques which attempt to control the risks presented by
differences in the probable cash flows and reinvestment of assets with
the timing of crediting rate changes in the Company's policies and
contracts. Changes in the estimated prepayments of mortgage-backed
securities also may cause retrospective changes in the amortization
period of such securities and the related recognition of income.
(3) BASIS OF VALUATION AND INCOME RECOGNITION OF INVESTED ASSETS
Asset values are generally stated as follows:
- Investments are valued as prescribed by the NAIC.
- Bonds not backed by other loans are valued at amortized cost using
the interest method.
- Mortgage-backed bonds, included in bonds, are valued at amortized
cost. Amortization of the discount or premium from the purchase of
these securities is recognized using a level-yield method which
considers the estimated timing and amount of prepayments of the
underlying mortgage loans. Actual prepayment experience is
periodically reviewed and effective yields are recalculated when
differences arise between the prepayments originally anticipated
and the actual prepayments received and currently anticipated. When
such differences occur, the net investment in the mortgage-backed
bond is adjusted to the amount that would have existed had the new
effective yield been applied since the acquisition of the bond with
a corresponding charge or credit to interest income (the
retrospective method).
Mortgage loans and policy loans are stated at the aggregate unpaid
principal value. Short-term investments are carried at amortized cost
which approximates fair value.
Investment income is recorded when earned. Realized capital gains and
losses on the sales of investments are determined on the basis of
specific costs of investments and are credited or charged to income net
of federal income taxes.
(4) REVENUE AND EXPENSE RECOGNITION
Premiums, annuity considerations and deposit-type funds are credited to
revenue when collected. Expenses, including acquisition costs related to
acquiring new business, are charged to operations as incurred.
(5) ASSET VALUATION RESERVE AND INTEREST MAINTENANCE RESERVE
Life insurance companies are required to establish an Asset Valuation
Reserve (AVR) and an Interest Maintenance Reserve (IMR). The AVR
provides for a standardized statutory investment valuation reserve for
bonds, preferred stocks, short-term investments, mortgage loans, common
stocks, real estate, and other invested assets. The IMR is designed to
defer net realized capital gains and losses presumably resulting from
changes in the level of interest rates in the market and to amortize
them into income over the remaining life of the bond or mortgage loan
sold. The IMR represents the unamortized portion not yet taken into
income.
(6) FEDERAL INCOME TAXES
Federal income taxes are charged to operations based on income that is
currently taxable. No charge to operations is made nor liability
established for the tax effect of timing differences between financial
reporting and taxable income.
For 1998, the Company will file a consolidated Federal income tax return
with its parent company, CFSLIC. The method of allocation between the
companies is both subject to written agreement and approval by the Board
of Directors. Allocation is to be based upon separate return
calculations, adjusted for any tax deferred intercompany transactions,
with current credit for net losses to the extent recoverable in the
consolidated return. Intercompany tax balances are to be settled no
later than 30 days after related returns are filed.
Amounts payable or recoverable related to periods before June 1, 1995
are subject to an indemnification agreement with Xerox Corporation which
has the effect that the Company is not at risk for any income taxes or
entitled to recoveries related to those periods.
<TABLE>
<CAPTION>
The actual Federal income tax expense differed from the expected tax
expense computed by applying the U.S. Federal statutory rate to the
1998, 1997, and 1996 net gain from operations before Federal income
taxes as follows:
1998 1997 1996
------------------------- ------------------------- -------------------------
(IN THOUSANDS)
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Computed expected tax expense $
1,085 35.0% 499 35.0% 795 35.0%
Tax basis reserve adjustment
41 1.3 13 .9 (30) (1.3)
IMR amortization 121 3.9 85 6.0 72 3.2
Proxy tax on insurance
acquisition costs 3 0.1 33 2.3 4 .2
Adjustment for prior years 48 1.5 (127) (8.9) -- --
Intangible amortization (376) (12.1) (376) (26.4) (376) (16.6)
Other (85) (2.7) 18 1.3 (20) (.9)
------------ ----------- ------------ ----------- -------------------------
$ 837 27.0% 145 10.2% 445 19.6%
============ =========== ============ =========== =========================
</TABLE>
The Budget Reconciliation Act of 1990 requires life insurers to
capitalize and amortize a "proxy" amount of policy acquisition costs
beginning in 1990. This proxy amount is based on a percentage of the
life insurance company's premium income and not on actual policy
acquisition costs.
(7) TRANSACTIONS WITH AFFILIATES
The Company has entered into a service agreement and an investment
accounting service agreement with its parent, CFSLIC. The Company has
also entered into an investment services agreement with Conning Asset
Management Company, a Missouri corporation and an affiliate of the
Company, pursuant to which the Company receives investment advice. Under
the terms of the agreements, the companies (Service Providers) perform
various services for the Company which include investment, underwriting,
claims, and certain administrative functions. The Service Providers are
reimbursed for their services. Expenses and fees paid to affiliated
companies during 1998, 1997, and 1996 were $386,821, $339,670, and
$337,994, respectively.
(8) CAPITAL STOCK AND SURPLUS RESTRICTIONS
The amount of dividends which can be paid by State of New York insurance
companies to shareholders is subject to prior approval of the Insurance
Commissioner. There have been no other restrictions placed on the
unassigned surplus funds.
(9) FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, Disclosures About
Fair Value of Financial Instruments (SFAS 107), extends fair value
disclosure practices with regard to financial instruments, both assets
and liabilities, for which it is practical to estimate fair value. In
cases where quoted market prices are not readily available, fair values
are based on estimates that use present value or other valuation
techniques.
These techniques are significantly affected by the assumptions used,
including the discount rate and estimates of future cash flows. Although
fair value estimates are calculated using assumptions that management
believes are appropriate, changes in assumptions or market conditions
could cause these estimates to vary materially. In that regard, the
derived fair value estimates cannot be substantiated by comparison to
independent markets and, in many cases, could not be realized in the
immediate settlement of the instruments. SFAS 107 excludes certain
financial instruments and all nonfinancial instruments from its
disclosure requirements. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Company.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
CASH AND CASH EQUIVALENTS, SHORT-TERM INVESTMENTS
AND ACCRUED INVESTMENT INCOME
The carrying value amounts reported in the balance sheets for
these instruments approximate their fair values.
INVESTMENT SECURITIES AND MORTGAGE LOANS
(INCLUDING MORTGAGE-BACKED SECURITIES)
Fair value for bonds are based on quoted market prices, where
available. For bonds not actively traded, fair values are
estimated using values obtained from independent pricing services.
In some cases, such as private placements, certain mortgage-backed
securities, and mortgage loans, fair values are estimated by
discounting expected future cash flows using a current market rate
applicable to the yield, credit quality, and maturity of the
investments. (See note 11 for fair value disclosures). As of
December 31, 1997, the fair value of the Company's mortgage loans
are equivalent to the carrying value.
POLICY LOANS
Fair values of policy loans approximate carrying value as the
interest rates on the majority of policy loans are reset
periodically and, therefore, approximate current interest rates.
INVESTMENT CONTRACTS
The Company's policy contracts require beneficiaries commence
receipt of payments by the later of age 85 or 10 years after
purchase, and may permit earlier surrenders, generally subject to
fees and adjustments. Fair values for the Company's liabilities
under investment type contracts are estimated as the amount
payable on demand. As of December 31, 1998 and 1997, the cash
surrender value of policyholder deposits was approximately
$1,118,000 and $4,050,000 less than their stated carrying value.
Of the contracts permitting surrender, substantially all provide
the option to surrender without fee or adjustment during the 30
days following reset of guaranteed crediting rates. The Company
has not determined a practical method to determine the present
value of this option.
(10) LIFE AND ANNUITY ACTUARIAL RESERVES
There are no deferred fractional premiums on any policies sold or
currently in force. There are no premiums beyond the date of death.
There are no required reserves for the waiver of deferred fractionals or
refund of premiums beyond the date of death.
Substandard policies are valued using a modification of the standard
valuation tables based on the substandard rating. The modification is a
25% additional mortality increase of the standard table for each table
rating.
As of December 31, 1998, the Company had no insurance in force for which
the gross premiums were less than the net premiums according to the
standard valuation set by the State of New York.
The tabular interest has been determined from the basic data for the
calculation of policy reserves.
Tabular interest for funds not involving life contingencies for each
valuation rate and contractual guaranteed rate was determined as the
statutory amount required to support the required statutory reserve
based on the Commissioner's annuity reserve valuation method. Generally
it is 1/100 of the product of such valuation rate of interest times the
mean funds at the beginning and end of the valuation period or issue
date of the policy, if less.
<TABLE>
<CAPTION>
The life and annuity actuarial reserves as provided in the accompanying
statutory financial statements segregated by type and valuation
characteristics for 1998 and 1997 are given below.
1998 1997 VALUATION WITHDRAWAL
--------- ----------
TYPE RESERVE RESERVE BASIC/RATE CHARACTERISTIC
--------- ---------- --------------------------- ----------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Structured settlements $ 1,090 1,058 1983 IAM 8.25% No withdrawal permitted
SPDA - 1 year 11,585 11,732 CARVM 5.75% - 7.00% Fixed surrender charge
SPDA - 5 year 11,867 15,030 CARVM 7.00% - 8.00% Withdrawal limited to
10% per year
SPDA - 6 year 42 37 CARVM 5.75% Market value adjustment
SPDA - 5 year 314 285 CARVM 7.25% Market value adjustment
SPDA - 7 year 6,249 6,027 CARVM 7.25% Market value adjustment
Variable 310 75 CARVM 5.50% Fixed surrender charge
Ordinary life 123 116 1958 CSO 3.5% NL Fixed surrender charge
Ordinary life 39 39 1980 CSO CRVM Fixed surrender charge
Ordinary life 249 243 1980 CSO 4.5% NO Fixed surrender charge
Ordinary life 2 2 Group conversion Fixed surrender charge
excess mortality
Ordinary life 3 3 Guaranteed insurability Fixed surrender charge
Ordinary life - 18,747 1958 CSO ALB 5.5% NL Fixed surrender charge
Group life - 31,291 1958 CSO ALB 5.5% NL Fixed surrender charge
Ordinary life - 20,849 1980 CSO ANB Male Fixed surrender charge
5.5% NL
Group life - 21,581 1980 CSO ANB Male Fixed surrender charge
5.5% NL
Ordinary life - 18,564 1980 CSO ANB Female Fixed surrender charge
5.5% NL
Group life - 19,990 1980 CSO ANB Female Fixed surrender charge
5.5% NL
Miscellaneous 16 16 -- --
Reinsurance ceded (1,523) (1,477) -- --
--------- ----------
$ 30,366 164,208
========= ==========
</TABLE>
<TABLE>
<CAPTION>
(11) INVESTMENTS
The cost or amortized cost and estimated fair value of bonds at December
31, 1998 and 1997 is as follows:
1998
-----------------------------------------------------------------------------------
COST OR GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR CARRYING
COST GAINS LOSSES VALUE VALUE
--------------- --------------- --------------- --------------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Bonds:
Governments $ 1,288 45 -- 1,333 1,288
Public utilities 1,800 45 -- 1,845 1,800
Industrial and
miscellaneous 55,214 1,039 114 56,139 55,214
--------------- --------------- --------------- --------------- ---------------
Total bonds $ 58,302 1,129 114 59,317 58,302
=============== =============== =============== =============== ===============
1997
-----------------------------------------------------------------------------------
COST OR GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR CARRYING
COST GAINS LOSSES VALUE VALUE
--------------- --------------- --------------- --------------- ---------------
(IN THOUSANDS)
Bonds:
Governments $ 1,267 2 -- 1,269 1,267
Public utilities 7,134 13 -- 7,148 7,134
Industrial and
miscellaneous 151,337 3,261 299 154,299 151,337
--------------- --------------- --------------- --------------- ---------------
Total bonds $ 159,738 3,276 299 162,716 159,738
=============== =============== =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
The amortized cost and estimated fair value of bonds at December 31,
1998, by contractual maturity, are shown in the following table.
Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties. Maturities of mortgage-backed
securities will be substantially shorter than their contractual maturity
because they may require monthly principal installments and mortgagees
may prepay principal.
ESTIMATED
CARRYING FAIR
VALUE VALUE
--------------- ---------------
(IN THOUSANDS)
<S> <C> <C>
Due in one year or less $ 400 404
Due after one year through five years 22,175 22,859
Due after five years through ten years 12,924 13,054
Due after ten years 4,470 4,667
Mortgage-backed securities 18,333 18,333
--------------- ---------------
Total $ 58,302 59,317
=============== ===============
</TABLE>
<TABLE>
<CAPTION>
Approximately 48.1% of the Company's bonds are of highest quality, 44.9%
are of high quality, and 7.0% are of medium quality based on NAIC rating
methodology. No provision was made for possible decline in the fair
value of individual bonds, other than the establishment of AVR, as of
December 31, 1998 or 1997, as the Company intends to hold the
investments until such time as no significant loss would result.
The components of net investment income were as follows:
1998 1997 1996
------------- -------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
Income on bonds $ 11,211 11,354 11,274
Income on mortgage loans 855 786 940
Income on short-term investments 242 197 106
Income on cash on deposit 6 7 4
Income on policy loans 1,588 1,531 1,281
Miscellaneous interest -- -- 4
------------- -------------- --------------
Total investment income 13,902 13,875 13,609
Investment expenses (89) (104) (102)
------------- -------------- --------------
Net investment income 13,813 13,771 13,507
============= ============== ==============
Realized capital gains/(losses):
Mortgages 661 -- --
Bonds 1,594 (211) (264)
Short-term investments -- -- --
------------- -------------- --------------
Net realized gains/(losses) on investments $ 2,255 (211) (264)
============= ============== ==============
</TABLE>
Proceeds from sales, redemptions, and paydowns of investments in bonds during
1998 were $118,066,396. Gross gains of $2,641,028 and gross losses of $1,046,860
were realized on those sales.
Proceeds from sales, redemptions, and paydowns of investments in bonds during
1997 were $40,473,142. Gross gains of $213,835 and gross losses of $424,506 were
realized on those sales.
Proceeds from sales, redemptions, and paydowns of investments in bonds during
1996 were $40,506,099. Gross gains of $51,375 and gross losses of $315,006 were
realized on those sales.
Bonds with a carrying value of approximately $837,431 at December 31, 1998 were
deposited with governmental authorities as required by law.
<TABLE>
<CAPTION>
The Company held the following individual securities which exceeded 10% of
capital stock and surplus as of December 31, 1998 and 1997:
1998
- -------------------------------------------------------------------
AMORTIZED
LONG-TERM DEBT SECURITIES COST
------------------
(IN THOUSANDS)
<S> <C>
Community First Bankshares $ 4,000
FNMA Remic Tr 1992 Ser 124-PH 3,433
Countryside Mtg. 1993-12 A4 3,211
Time Warner 3,200
Develop Div Rlty 3,019
ERAC USA Finance 2,998
RJR Nabisco Inc. 2,947
Salomon Inc. 2,934
</TABLE>
<TABLE>
<CAPTION>
1997
- --------------------------------------------------------------------------------------------------------------------
AMORTIZED AMORTIZED
LONG-TERM DEBT SECURITIES COST LONG-TERM DEBT SECURITIES COST
------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
FNMA Remic Tr 1992-159 Pk $ 9,858 Salomon Inc. $ 4,870
Countryside Mtg. 1993-12 A4 8,957 American Trans Air 1996-1 4,850
FNMA Remic Tr 1993 Ser 54-J 6,663 Newmont Mining Corp. 4,084
Community First Bankshares 6,000 Res Funding Mtg. Svcs 1993-S26 A8 4,009
Time Warner 5,419 Union Acceptance Corp. Senior Notes 4,000
Develop Div Rlty 5,053 Independent Natl Mtg. 1995-M A2 3,998
Swire Pacific Finance Ltd. 5,003 Pru Home Mtg. Sec 1993-31 A10 3,771
CS First Bost. Fin. Co. Sr Sears Mtg. Securities 1993-7 T5 3,751
Sec 1995-A 144AAA 5,000
American Airlines 4,984 Countrywide Mtg. Sec 1994-7 A5 3,518
FNMA Remic Tr 1992 Ser 124 PH Cox Communications Inc 3,352
4,965
FHLMC Mc Mtg. Prt Crt Ser 1406-G Pru Home Mtg. Sec 1994-20 A6 3,066
4,954
RJR Nabisco Inc. 4,898 Ensearch Exploration 3,000
Alcoa Aluminum 4,894 Enron Corp. 3,000
Telecommunications Inc. 2,851
</TABLE>
(12) NON-ADMITTED ASSETS
Assets must be included in the statements of assets and liabilities at
admitted asset value, and non-admitted assets, principally agents'
balances greater than 90 days past due, must be excluded through a
charge against unassigned surplus.
FIRST COVA LIFE INSURANCE COMPANY
Notes to Statutory Financial Statements
December 31, 1998, 1997, and 1996
(13) REINSURANCE
In 1993, the Company entered into a reinsurance treaty with its parent,
CFSLIC. The underlying block of business assumed was single premium
whole life policies. On December 31, 1998, the reinsurance contract was
terminated and CFSLIC recaptured all of the single premium whole life
policies previously assumed by the Company. Reserves assumed at December
31, 1997 approximated $131.0 million.
Reserves ceded at December 31, 1998 and 1997, were $1,634,569 and
$1,584,622, respectively. Reinsurance does not discharge the Company
from its primarily liability to policyholders.
(14) RISK-BASED CAPITAL
The NAIC has developed certain risk-based capital (RBC) requirements for
life insurers. If prescribed levels of RBC are not maintained, certain
actions may be required on the part of the Company or its regulators. At
December 31, 1998, the Company's total adjusted capital and authorized
control level - RBC were $27,364,306 and $959,369, respectively. At this
level of adjusted capital, no action is required.
(15) GUARANTY FUND ASSESSMENTS
The Company participates, along with all life insurance companies
licensed in New York, in an association formed to guarantee benefits to
policyholders of insolvent life insurance companies. Under the state
law, the Company is contingently liable for its share of claims covered
by the guaranty association for insolvencies incurred through 1998 but
for which assessments have not yet been determined.
The Company has not established an estimated liability for unassessed
guarantee fund claims incurred prior to December 31, 1998 as management
believes that such assessments are not material to the financial
statements.
(16) COMMITMENTS AND CONTINGENCIES
In the ordinary course of business the Company is involved in various
legal actions for which it establishes reserves where appropriate. In
the opinion of the Company's management, based upon the advice of legal
counsel, the resolution of such litigation is not expected to have a
material adverse effect on the statutory financial statements.
(17) OTHER
Certain 1997 and 1996 amounts have been reclassified to conform to the
1998 presentation.
SCHEDULE 1
<TABLE>
<CAPTION>
FIRST COVA LIFE INSURANCE COMPANY
Schedule of Selected Financial Data from Annual Statement
Year ended December 31, 1998
(In thousands of dollars)
<S> <C>
Investment income earned:
Government bonds $ 74
Other bonds (unaffiliated) 11,137
Bonds of affiliates --
Preferred stocks (unaffiliated) --
Preferred stocks of affiliates --
Common stocks (unaffiliated) --
Common stocks of affiliates --
Mortgage loans 855
Real estate --
Premium notes, policy loans, and liens 1,588
Collateral loans --
Cash on hand and on deposit 6
Short-term investments 242
Other invested assets --
Derivative instruments --
Aggregate write-in for investment income --
----------
Gross investment income 13,902
----------
Real estate owned - book value less encumbrances
Mortgage loans - book value:
Farm mortgages --
Residential mortgages --
Commercial mortgages --
----------
Total mortgage loans --
----------
Mortgage loans by standing - book value:
Good standing --
Good standing with restructured terms --
Interest overdue --
Foreclosure in process --
Other long-term assets - statement value --
Collateral loans --
Bonds and stocks of parents, subsidiaries, and affiliates - book value:
Bonds --
Preferred stocks --
Common stocks --
</TABLE>
SCHEDULE 1, CONT.
<TABLE>
<CAPTION>
FIRST COVA LIFE INSURANCE COMPANY
Schedule of Selected Financial Data from Annual Statement
Year ended December 31, 1998
(In thousands of dollars)
<S> <C>
Bonds and short-term investments by class and maturity: Bonds by maturity -
statement value:
Due within 1 year or less $ 14,593
Over 1 year through 5 years 28,981
Over 5 years through 10 years 17,886
Over 10 years through 20 years 2,660
Over 20 years --
----------
Total by maturity 64,120
----------
Bonds by class - statement value:
Class 1 33,873
Class 2 26,159
Class 3 4,088
Class 4 --
Class 5 --
Class 6 --
----------
Total by class 64,120
----------
Total bonds publicly traded 40,981
Total bonds privately placed 17,321
Preferred stocks - statement value --
Common stocks - market value --
Short-term investments - book value 5,818
Financial options owned - statement value --
Financial options written and in force - statement value --
Financial futures contracts open - current price --
Cash on deposit 76
Life insurance in force (000's omitted):
Industrial --
Ordinary 3
Credit life --
Group life --
----------
Amount of accidental death insurance in
force under ordinary policies --
----------
</TABLE>
SCHEDULE 1, CONT.
<TABLE>
<CAPTION>
FIRST COVA LIFE INSURANCE COMPANY
Schedule of Selected Financial Data from Annual Statement
Year ended December 31, 1998
(In thousands of dollars)
<S> <C>
Life insurance policies with disability provisions in force:
Industrial $ --
Ordinary --
Credit life --
Group life --
Supplementary contracts in force:
Ordinary - not involving life contingencies 7
Amount on deposit --
Income payable 64
Ordinary - involving life contingencies --
Income payable --
Group - not involving life contingencies --
Amount on deposit --
Income payable --
Group - involving life contingencies --
Income payable --
Annuities:
Ordinary:
Immediate - amount of income payable --
Deferred - fully paid account balance 30,994
Deferred - not fully paid - account balance --
Group:
Immediate - amount of income payable --
Fully paid account balance --
Not fully paid - account balance --
Accident and health insurance - premiums in force:
Ordinary --
Group --
Credit --
Deposit funds and dividend accumulations:
Deposit funds - account balance --
Dividend accumulations - account balance --
Claim payments 1997:
Group accident and health year ended December 31, 1998:
1998 --
1997 --
1996 --
</TABLE>
SCHEDULE 1, CONT.
<TABLE>
<CAPTION>
FIRST COVA LIFE INSURANCE COMPANY
Schedule of Selected Financial Data from Annual Statement
Year ended December 31, 1998
(In thousands of dollars)
<S> <C>
Other accident and health:
1998 $ --
1997 --
1996 --
Other coverages that use developmental methods to calculate claims reserves:
1998 --
1997 --
1996 --
==========
</TABLE>
See accompanying independent auditors' report.
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
<TABLE>
<CAPTION>
<S> <C> <C>
a. Financial Statements
---------------------------------------------------------------
The following financial statements of the Separate Account
are included in Part B hereof:
1. Statement of Assets and Liabilities - September 30, 1999 (unaudited).
2. Statement of Operations for the Nine Months Ended September 30, 1999
(unaudited).
3. Statement of Changes in Net Assets for the Nine Months Ended September
30, 1999 (unaudited).
4. Notes to Financial Statements - September 30, 1999 (unaudited).
5. Independent Auditors' Report.
6. Statement of Assets and Liabilities as of December 31, 1998.
7. Statement of Operations for the year ended December 31, 1998.
8. Statement of Changes in Net Assets for the year ended December
31, 1998 and the period from commencement of operations through
December 31, 1997
9. Notes to Financial Statements - December 31, 1998 and 1997.
The following financial statements of the Company are included in
Part B hereof:
1. Independent Auditors' Report.
2. Statutory Statements of Admitted Assets, Liabilities, and
Capital Stock and Surplus as of December 31, 1998 and 1997.
3. Statutory Statements of Operations for the Years ended
December 31, 1998, 1997, and 1996.
4. Statutory Statements of Capital Stock and Surplus for
the Years ended December 31, 1998, 1997, and 1996.
5. Statutory Statements of Cash Flow for the Years ended
December 31, 1998, 1997, and 1996.
6. Notes to Statutory Financial Statements - December 31, 1998,
1997, and 1996.
b. Exhibits
---------------------------------------------------------------
1. Resolution of Board of Directors of the Company authorizing the
establishment of the Variable Account.
2. Not Applicable.
3. Principal Underwriter's Agreement.
4. Individual Flexible Purchase Payment Deferred Variable Annuity
Contract.
(i) Rebalancing Transfers Endorsement.**
(ii) Automatic Withdrawals Endorsement.
(iii)Dollar Cost Averaging Endorsement.**
(iv) Endorsement (Death Benefit)
5. Application for Variable Annuity.**
6.(i) Copy of Articles of Incorporation of the Company.
(ii) Copy of the Bylaws of the Company.
7. Not Applicable.
8. Not Applicable.
9. Opinion and Consent of Counsel.
10. Consent of Independent Auditors.
11. Not Applicable.
12. Not Applicable.
13. Calculation of Performance Information.
14. Company Organizational Chart.**
27. Not Applicable
<FN>
** incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 to Form N-4 (File No. 33-74174) as electronically
filed on May 14, 1996.
</FN>
</TABLE>
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
The following are the Officers and Directors of the Company:
<TABLE>
<CAPTION>
<S> <C>
Name and Principal Positions and Offices
Business Address with Depositor
Richard A. Liddy Chairman of the Board and Director
700 Market Street
St. Louis, MO 63101
Lorry J. Stensrud President and Director
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
John W. Barber Director
13045 Tesson Ferry Road
St. Louis, MO 63128
Norse N. Blazzard Director
4401 West Tradewinds Avenue
Suite 207
Lauderdale by the Sea, FL 33308
William P. Boscow Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Connie A. Doern Vice President
4700 Westown Parkway
West Des Moines, IA 50266
Francis A. Goodhue III Director
Morgan Guaranty
9 West 57th Street
New York, NY 10019
Patricia E. Gubbe Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Philip A. Haley Executive Vice President
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Richard A. Hemmings Director
Lord, Bissell & Brook
115 S. LaSalle Street
Chicago, IL 60603
J. Robert Hopson Vice President,
One Tower Lane, Suite 3000 Chief Actuary and Director
Oakbrook Terrace, IL 60181-4644
E. Thomas Hughes, Jr. Treasurer
700 Market St.
St. Louis, MO 63101
James W. Koeger Assistant Treasurer
700 Market Street
St. Louis, MO 63101
Lisa O. Kirchner Vice President
1776 West Lakes Parkway
West Des Moines, IA 50266
Sum Leong Vice President, Chief
120 Broadway Administrative Officer
New York, NY 10271 and Assistant Secretary
William C. Mair Vice President and Director
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Matthew P. McCauley Assistant Secretary and Director
700 Market St.
St. Louis, MO 63101
Thomas A. Price Director
Bank of New York
1 Wall Street
New York, NY 10286
Mark E. Reynolds Executive Vice President, Chief Financial
One Tower Lane, Suite 3000 Officer and Director
Oakbrook Terrace, IL 60181-4644
Br. Thomas J. Scanlan, F.S.C. Director
Manhattan College
Riverdale, NY 10471
Bernard J. Spaulding Senior Vice President, General Counsel and
One Tower Lane, Suite 3000 Secretary
Oakbrook Terrace, IL 60181-4644
Joann T. Tanaka Director
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
Patricia M. Wersching Assistant Treasurer
700 Market Street
St. Louis, MO 63101
Peter L. Witkewiz Vice President and Controller
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
</TABLE>
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
A company organizational chart was filed as Exhibit 14 in Registrant's
Pre-Effective Amendment No. 1 and is incorporated herein by reference.
ITEM 27. NUMBER OF CONTRACT OWNERS
As of December 10, 1999, there were 43 Non-Qualified Contract Owners and 6
Qualified Contract Owners.
ITEM 28. INDEMNIFICATION
The Bylaws of the Company (Article II, Section 13) provide that:
Each person who is or was a director, officer or employee of the Corporation or
is or was serving at the request of the Corporation as a director, officer or
employee of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise (including the heirs, executors, administrators
or estate of such person) shall be indemnified by the Corporation as of right to
the full extent that officers and directors are permitted to be indemnified by
the laws of the State of New York, as now in effect and as hereafter amended,
against any liability, judgment, fine, amount paid in settlement, cost or
expense including attorneys' fees) asserted or threatened against or incurred by
such person in his capacity as or arising out of his status as a director,
officer or employee of the Corporation or if serving at the request of the
Corporation, as a director, officer or employee of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise.
The indemnification provided by this By-Law provision shall not be exclusive of
any other rights to which those indemnified may be entitled under any other
By-Law or under any agreement, resolution of shareholders or directors or
otherwise, which forms of indemnification are hereby expressly authorized, and
shall not limit in any way any right which the Corporation may have to make
different or further indemnification with respect to the same or different
persons or classes of persons. Notwithstanding the foregoing, a director shall
not be entitled to indemnification for liability to the Corporation or any of
its shareholders under the By-Laws or under any agreement or resolution of
shareholders or directors, if such liability is of the type described in
subsections (i) or (ii) of Section 10 of the Corporation's Certificate of
Incorporation and Charter.
The Corporation shall have the power, in furtherance of the provisions of this
Section 13, to apply for, purchase and maintain insurance of the type and in
such amounts as is or may hereafter be permitted by Section 726 of the Business
Corporation Law.
No payment of indemnification, advancement or allowance under Sections 721 to
726, inclusive, of the Business Corporation Law shall be made unless a notice
has been filed with the Superintendent of Insurance of the State of New York,
not less than thirty days prior to such payment, specifying the payees, the
amounts, the manner in which such payment is authorized and the nature and
status, at the time of such notice, of the litigation or threatened litigation.
If any action with respect to indemnification of directors and officers of the
Corporation shall be taken by resolution of directors, or by agreement or
otherwise, a notice shall be filed with the Superintended of Insurance of the
State of New York not less than thirty days thereafter specifying the action
taken.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted directors and officers or controlling persons of the
Company pursuant to the foregoing, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Cova Life Sales Company is the principal underwriter for the following
investment companies (other than Registrant):
Cova Variable Annuity Account One
Cova Variable Annuity Account Five
Cova Variable Life Account One
Cova Variable Life Account Five
Cova Variable Annuity Account Four
General American Separate Account Twenty-Eight
General American Separate Account Twenty-Nine
Security Equity Separate Account 26
Security Equity Separate Account 27
(b) Cova Life Sales Company is the principal underwriter for the Contracts.
The following persons are the officers and directors of Cova Life Sales Company.
The principal business address for each officer and director of Cova Life Sales
Company is One Tower Lane, Suite 3000, Oakbrook Terrace, Illinois 60181-4644.
<TABLE>
<CAPTION>
<S> <C>
Name and Principal Positions and Offices
Business Address with Underwriter
Lorry J. Stensrud Director
Patricia E. Gubbe President, Chief Compliance Officer and Director
William C. Mair Director
Philip A. Haley Vice President
Shari Ruecker Vice President
Mark E. Reynolds Treasurer
James W. Koeger Assistant Treasurer
Bernard J. Spaulding Secretary
</TABLE>
(c) Not Applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
William Flory, whose address is One Tower Lane, Suite 3000, Oakbrook Terrace,
Illinois 60181-4644 maintains physical possession of the accounts, books or
documents of the Variable Account required to be maintained by Section 31(a) of
the Investment Company Act of 1940 and the rules promulgated thereunder.
ITEM 31. MANAGEMENT SERVICES
Not Applicable.
ITEM 32. UNDERTAKINGS
a. Registrant hereby undertakes to file a post-effective amendment to this
registration statement as frequently as is necessary to ensure that the audited
financial statements in the registration statement are never more than sixteen
(16) months old for so long as payment under the variable annuity contracts may
be accepted.
b. Registrant hereby undertakes to include either (1) as part of any
application to purchase a contract offered by the Prospectus, a space that an
applicant can check to request a Statement of Additional Information, or (2) a
postcard or similar written communication affixed to or included in the
Prospectus that the applicant can remove to send for a Statement of Additional
Information.
c. Registrant hereby undertakes to deliver any Statement of Additional
Information and any financial statement required to be made available under this
Form promptly upon written or oral request.
d. First Cova Life Insurance Company ("Company") hereby represents that the
fees and charges deducted under the Contracts described in the Prospectus, in
the aggregate, are reasonable in relation to the services rendered, the expenses
to be incurred and the risks assumed by the Company.
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it meets the requirements of Securities Act
Rule 485(b) for effectiveness of this Registration Statement and has caused this
Registration Statement to be signed on its behalf, in the City of Oakbrook
Terrace, and State of Illinois on this 15th day of December, 1999.
<TABLE>
<CAPTION>
<S> <C>
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
(Registrant)
By: FIRST COVA LIFE INSURANCE COMPANY
By: /S/ LORRY J. STENSRUD
____________________________________
Lorry J. Stensrud, President
FIRST COVA LIFE INSURANCE COMPANY
Depositor
By: /S/ LORRY J. STENSRUD
____________________________________
Lorry J. Stensrud, President
</TABLE>
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
- ---------------------- Chairman of the Board and ------
Richard A. Liddy Director Date
/S/ LORRY J. STENSRUD President and Director 12/15/99
- ---------------------- -------
Lorry J. Stensrud Date
/s/ J. Robert Hopson* Director 12/15/99
- ---------------------- -------
J. Robert Hopson Date
/s/ William C. Mair* Director 12/15/99
- ---------------------- -------
William C. Mair Date
/s/ Matthew P. McCauley* Director 12/15/99
- ------------------------ -------
Matthew P. McCauley Date
Director
- ---------------------- -------
John W. Barber Date
/s/ Norse N. Blazzard* 12/15/99
- ---------------------- Director -------
Norse N. Blazzard Date
/s/ Francis A. Goodhue III* 12/15/99
- --------------------------- Director -------
Francis A. Goodhue III Date
/s/ Richard A. Hemmings* 12/15/99
- ---------------------- Director -------
Richard A. Hemmings Date
/s/ Thomas A. Price* 12/15/99
- ---------------------- Director -------
Thomas A. Price Date
/s/ Thomas J. Scanlan, FSC* 12/15/99
- ---------------------- Director -------
Thomas J. Scanlan, FSC Date
/S/ MARK E. REYNOLDS 12/15/99
- ---------------------- Director -------
Mark E. Reynolds Date
/S/ J. TERRI TANAKA 12/15/99
- ---------------------- Director -------
J. Terri Tanaka Date
/S/ PETER L. WITKEWIZ 12/15/99
- --------------------- Controller --------
Peter L. Witkewiz Date
</TABLE>
*By: /S/ LORRY J. STENSRUD
____________________________________
Lorry J. Stensrud, Attorney-in-Fact
INDEX TO EXHIBITS
EXHIBIT NO.
EX-99.B1 Resolution of the Board of Directors
EX-99.B3 Principal Underwriter's Agreement
EX-99.B4 Annuity Contract
EX-99.B4(ii) Automatic Withdrawals Endorsement
EX-99.B4(iv) Endorsement (Death Benefit)
EX-99.B6(i) Copy of Articles of Incorporation
EX-99.B6(ii) Copy of Bylaws
EX-99.B9 Opinion and Consent of Counsel
EX-99.B10 Consent of Independent Auditors
EX-99.B13 Calculation of Performance Information
EXHIBITS
TO
POST-EFFECTIVE AMENDMENT NO. 4
TO
FORM N-4
FOR
FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
WHEREAS, the Corporation is desirous of developing and marketing certain types
of variable and fixed annuity contracts, including modified guaranteed annuity
contracts, and variable life insurance contracts, which may be required to be
registered with the Securities and Exchange Commission pursuant to the various
securities laws (collectively, the "Contracts"); and
WHEREAS, it will be necessary to take certain actions in connection with the
Contracts including, but not limited to, establishing separate accounts for
segregation of assets and seeking approval of regulatory authorities;
NOW, THEREFORE, BE IT
RESOLVED, that the Corporation is hereby authorized to develop the necessary
program in order to effectuate the issuance and sale of the Contracts; and
further
RESOLVED, that the Corporation is hereby authorized to establish and to
designate one or more separate accounts of the Corporation in accordance with
the provisions of state insurance law; and that the purpose of any such separate
account shall be to provide an investment medium for such Contracts issued by
the Corporation as may be designated as participating therein; and that any such
separate account shall receive, hold, invest and reinvest only the monies
arising from (i) premiums, contributions or payments made pursuant to the
Contracts participating therein; (ii) such assets of the Corporation as shall be
deemed appropriate to be invested in the same manner as the assets applicable to
the Corporation's reserve liability under the Contracts participating in such
separate accounts or as may be necessary for the establishment of such separate
accounts; and (iii) the dividends, interest and gains produced by the foregoing;
and further
RESOLVED, that the proper officers of the Corporation are hereby authorized:
(i) to register the Contracts participating in any such separate accounts under
the provisions of the Securities Act of 1933, as amended, to the extent that it
shall be determined that such registration is necessary;
(ii) to register any such separate accounts with the Securities and Exchange
Commission under the provisions of the Investment Company Act of 1940, as
amended, to the extent that it shall be determined that such registration is
necessary;
(iii) to prepare, execute and file such amendments to any registration
statements filed under the aforementioned Acts (including post-effective
amendments), supplements and exhibits thereto as they may be deemed necessary or
desirable;
(iv) to apply for exemption from those provisions of the aforementioned Acts as
shall be deemed necessary and to take any and all other actions which shall be
deemed necessary, desirable, or appropriate in connection with such Acts;
(v) to file the Contracts participating in any such separate accounts with the
appropriate state insurance departments and to prepare and execute all necessary
documents to obtain approval of the insurance departments;
(vi) to prepare or have prepared and execute all necessary documents to obtain
approval of, or clearance with, or other appropriate actions required, of any
other regulatory authority that may be necessary;
and further
RESOLVED, that for the purposes of facilitating the execution and filing of any
registration statement and of remedying any deficiencies therein by appropriate
amendments (including post-effective amendments) or supplements thereto, the
President of the Corporation and the Secretary of the Corporation, and each of
them, are hereby designated as attorneys and agents of the Corporation; and the
appropriate officers of the Corporation be, and they hereby are, authorized and
directed to grant the power of attorney of the Corporation to the President of
the Corporation and to the Secretary of the Corporation by executing and
delivering to such individuals, on behalf of the Corporation, a power of
attorney; and further
RESOLVED, that in connection with the offering and sale of the Contracts in the
various States of the United States, as and to the extent necessary, the
appropriate officers of the Corporation be, and they hereby are, authorized to
take any and all such action, including but not limited to the preparation,
execution and filing with proper state authorities, on behalf of and in the name
of the Corporation, of such applications, notices, certificates, affidavits,
powers of attorney, consents to service of process, issuer's covenants,
certified copies of minutes of shareholders' and directors' meetings, bonds,
escrow and impounding agreements and other writings and instruments, as may be
required in order to render permissible the offering and sale of the Contracts
in such jurisdictions; and further
RESOLVED, that the forms of any resolutions required by any state authority to
be filed in connection with any of the documents or instruments referred to in
any of the preceding resolutions be, and the same hereby are, adopted as if
fully set forth herein if (1) in the opinion of the appropriate officers of the
Corporation, the adoption of the resolutions is advisable and (2) the Secretary
of the Corporation evidences such adoption by inserting into these minutes
copies of such resolutions; and further
RESOLVED, that the officers of the Corporation, and each of them, are hereby
authorized to prepare and to execute the necessary documents and to take such
further actions as may be deemed necessary or appropriate, in their discretion,
to implement the purpose of these resolutions.
PRINCIPAL UNDERWRITER'S AGREEMENT
IT IS HEREBY AGREED by and between FIRST XEROX LIFE INSURANCE COMPANY
("INSURANCE COMPANY") on behalf of FIRST XEROX VARIABLE ANNUITY ACCOUNT ONE (the
"Variable Account") and XEROX LIFE SALES COMPANY ("PRINCIPAL UNDERWRITER") as
follows: I INSURANCE COMPANY proposes to issue and sell Individual Flexible
Purchase Payment Deferred Variable and Fixed Annuity Contracts (collectively the
"Contracts") of the Variable Account to the public through PRINCIPAL
UNDERWRITER. The PRINCIPAL UNDERWRITER agrees to provide sales service subject
to the terms and conditions hereof. The Contracts to be sold are more fully
described in the registration statements and prospectuses hereinafter mentioned.
Such Contracts will be issued by INSURANCE COMPANY through the Variable Account.
II
INSURANCE COMPANY grants PRINCIPAL UNDERWRITER the exclusive right, during the
term of this Agreement, subject to registration requirements of the Securities
Act of 1933 and the Investment Company Act of 1940 and the provisions of the
Securities Exchange Act of 1934, to be the distributor of the Contracts issued
through the Variable Account. PRINCIPAL UNDERWRITER will sell the Contracts
under such terms as set by INSURANCE COMPANY and will make such sales to
purchasers permitted to buy such Contracts as specified in the prospectus.
III
PRINCIPAL UNDERWRITER shall be compensated for its distribution service in such
amount as to meet all of its obligations to selling broker-dealers with respect
to all Purchase Payments accepted by INSURANCE COMPANY on the Contracts covered
hereby.
IV
On behalf of the Variable Account, INSURANCE COMPANY shall furnish PRINCIPAL
UNDERWRITER with copies of all prospectuses, financial statements and other
documents which PRINCIPAL UNDERWRITER reasonably requests for use in connection
with the distribution of the Contracts. INSURANCE COMPANY shall provide to
PRINCIPAL UNDERWRITER such number of copies of the current effective
prospectuses as PRINCIPAL UNDERWRITER shall request.
V
PRINCIPAL UNDERWRITER is not authorized to give any information, or to make any
representations concerning the Contracts or the Variable Account of INSURANCE
COMPANY other than those contained in the current registration statements or
prospectuses relating to the Variable Account filed with the Securities and
Exchange Commission or such sales literature as may be authorized by INSURANCE
COMPANY.
VI
Both parties to this Agreement agree to keep the necessary records as indicated
by applicable state and federal law and to render the necessary assistance to
one another for the accurate and timely preparation of such records.
VII
This Agreement shall be effective upon the execution hereof and will remain in
effect unless terminated as hereinafter provided. This Agreement shall
automatically be terminated in the event of its assignment by PRINCIPAL
UNDERWRITER.
This Agreement may at any time be terminated by either party hereto upon 60
days' written notice to the other party.
VIII
All notices, requests, demands and other communications under this Agreement
shall be in writing and shall be deemed to have been given on the date of
service if served personally on the party to whom notice is to be given, or
on the date of mailing if sent by First Class Mail, Registered or Certified,
postage prepaid and properly addressed.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be signed
on their behalf by their respective officers thereunto duly authorized.
EXECUTED this ____ day of ___________, 1994.
INSURANCE COMPANY
FIRST XEROX LIFE
INSURANCE COMPANY
BY:___________________________
ATTEST:____________________
Secretary
PRINCIPAL UNDERWRITER
XEROX LIFE SALES COMPANY
BY:___________________________
ATTEST:____________________
Secretary
CNY-672 (11/99)
First Cova Life Insurance Company
A New York stock insurance company
120 Broadway
New York, New York 10271
FIRST COVA LIFE INSURANCE COMPANY (the "Company") will make Annuity Payments to
the Annuitant starting on the Annuity Date subject to the terms of this
Contract.
This Contract is issued in return for the Application and payment of the initial
Purchase Payment. A copy of the Application is attached to and made a part of
the Contract.
This is a legal contract between the Owner and the Company.
TEN DAY FREE LOOK
Within 10 days of the date of receipt of this Contract by the Owner, it may be
returned by delivering or mailing it to the Company or to the agent through whom
it was purchased. When this Contract is received by the Company, it will be
voided as if it had never been in force. The Company will refund the Contract
Value computed at the end of the Valuation Period during which this Contract is
mailed to or delivered to the Company at its Home Office or the agent through
whom it was purchased.
Signed for the Company.
INDIVIDUAL FLEXIBLE PURCHASE PAYMENT
DEFERRED VARIABLE AND FIXED ANNUITY CONTRACT
NONPARTICIPATING
NO DIVIDENDS
READ YOUR CONTRACT CAREFULLY
ANNUITY PAYMENTS AND VALUES PROVIDED BY THIS CONTRACT, WHEN BASED ON THE
INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT
GUARANTEED AS TO DOLLAR AMOUNT. VARIABLE ACCOUNT EXPENSES CONSIST OF A MORTALITY
AND EXPENSE RISK PREMIUM, AN ADMINISTRATIVE EXPENSE CHARGE, A CONTRACT
MAINTENANCE CHARGE AND A TRANSFER FEE. THESE CHARGES ARE SHOWN ON THE CONTRACT
DATA PAGE. VARIABLE ANNUITY PAYMENTS WILL NOT DECREASE AS LONG AS THE NET
INVESTMENT EXPERIENCE OF THE VARIABLE ACCOUNT, AFTER DEDUCTION OF THE MORTALITY
AND EXPENSE RISK PREMIUM AND THE ADMINISTRATIVE EXPENSE CHARGE, EQUALS OR
EXCEEDS 3% PER YEAR.
THE VARIABLE PROVISIONS OF THIS CONTRACT CAN BE FOUND ON PAGES 9 AND 12.
CNY-672 (11/99) 2
Page
Definitions ....................................................................
General Provisions .............................................................
The Contract ...................................................................
Incontestability ...............................................................
Non-Participating ..............................................................
Misstatement of Age or Sex......................................................
Contract Settlement ............................................................
Reports ........................................................................
Taxes ..........................................................................
Evidence of Survival ...........................................................
Modification of Contract .......................................................
Annuitant, Ownership, Assignment Provisions.....................................
Annuitant ......................................................................
Ownership.......................................................................
Assignment .....................................................................
Beneficiary Provisions .........................................................
Beneficiary ....................................................................
Change of Beneficiary ..........................................................
Purchase Payment Provisions ....................................................
Purchase Payments ..............................................................
Change in Purchase Payments ....................................................
Allocation of Purchase Payments ................................................
No Default .....................................................................
General Account Provisions .....................................................
General Account Value...........................................................
Interest To Be Credited.........................................................
Contract Value Provision .......................................................
Contract Value .................................................................
Variable Account Provisions ....................................................
The Variable Account............................................................
Investments of the Variable Account ............................................
Valuation of Assets ............................................................
Accumulation Unit ..............................................................
Mortality and Expense Risk Premium .............................................
Administrative Expense Charge...................................................
Mortality and Expense Guarantee ................................................
Contract Maintenance Charge ....................................................
Deduction for Contract Maintenance Charge ......................................
Transfer Provision .............................................................
Transfers ......................................................................
Death Benefit ..................................................................
Death of Annuitant .............................................................
Death of Owner .................................................................
Payment of Death Benefit .......................................................
Annuity Provisions .............................................................
Annuity Date....................................................................
Election of Annuity Option .....................................................
Frequency and Amount of Annuity Payments........................................
Basis of Payments...............................................................
Annuity Options ................................................................
Annuity ........................................................................
Fixed Annuity ..................................................................
Variable Annuity................................................................
Annuity Unit ...................................................................
Net Investment Factor ..........................................................
Transfers During the Annuity Period.............................................
Protection of Proceeds .........................................................
Withdrawal Provisions ..........................................................
Withdrawals ....................................................................
Withdrawal Charge...............................................................
Waiver of Withdrawal Charge ....................................................
Suspension or Deferral of Payments or Transfers from the Variable Account ......
Deferral of Payments or Transfers from the General Account .....................
Reserves, Values and Benefits ..................................................
Tables .........................................................................
CNY-672 (11/99)
CONTRACT DATA PAGE
ANNUITANT: [John Doe] AGE AT ISSUE: [35]
OWNER: [John Doe] AGE AT ISSUE: [35]
CONTRACT NUMBER: [123] ISSUE DATE: [6/1/1995]
INITIAL PURCHASE PAYMENT: [$25,000] ANNUITY DATE: [6/1/2025]
MINIMUM SUBSEQUENT PURCHASE
PAYMENT: [$500]
BENEFICIARY:
AS STATED IN THE APPLICATION FOR THIS CONTRACT UNLESS CHANGED IN ACCORDANCE
WITH THE CONTRACT PROVISIONS.
INITIAL INTEREST RATE APPLICABLE TO THE GENERAL ACCOUNT:
7% GUARANTEED THROUGH THE END OF THE CURRENT CALENDAR YEAR
MINIMUM GUARANTEED INTEREST RATE FOR THE FIXED ANNUITY OPTION: 3%
ASSUMED INVESTMENT RATE FOR THE VARIABLE ANNUITY OPTION: 3%
CONTRACT MAINTENANCE CHARGE: $30.00 EACH CONTRACT YEAR. THIS CHARGE IS NOT
DEDUCTED, IF WHEN THE DEDUCTION IS TO BE MADE, THE CONTRACT VALUE IS $50,000 OR
MORE. THE COMPANY RESERVES THE RIGHT TO DISCONTINUE THIS PRACTICE AND DEDUCT
THIS CHARGE.
AFTER THE ANNUITY DATE, THE CONTRACT MAINTENANCE CHARGE WILL BE COLLECTED ON A
MONTHLY BASIS.
MORTALITY AND EXPENSE RISK PREMIUM:
EQUAL ON AN ANNUAL BASIS TO 1.25% OF THE AVERAGE DAILY NET ASSET VALUE OF THE
VARIABLE ACCOUNT.
ADMINISTRATIVE EXPENSE CHARGE:
EQUAL ON AN ANNUAL BASIS TO .15% OF THE AVERAGE DAILY NET ASSET VALUE OF THE
VARIABLE ACCOUNT.
TRANSFER FEE:
$25 OR, IF SMALLER, 2% OF THE AMOUNT TRANSFERRED PER TRANSACTION IF THERE ARE
MORE THAN 12 TRANSFERS IN A CONTRACT YEAR. ELIGIBLE INVESTMENTS:
[COVA SERIES TRUST]
[J.P. MORGAN INVESTMENT MANAGEMENT]
[SELECT EQUITY PORTFOLIO]
[LARGE CAPITAL STOCK PORTFOLIO]
[SMALL CAPITAL STOCK PORTFOLIO]
[INTERNATIONAL EQUITY PORTFOLIO]
[QUALITY BOND PORTFOLIO]
[LORD ABBETT & CO.]
[LORD ABBETT BOND DEBENTURE PORTFOLIO]
[LORD ABBETT MID-CAP VALUE PORTFOLIO]
[LORD ABBETT LARGE CAP RESEARCH PORTFOLIO]
[LORD ABBETT DEVELOPING GROWTH PORTFOLIO]
[LORD ABBETT GROWTH AND INCOME PORTFOLIO]
[GENERAL AMERICAN CAPITAL COMPANY]
[CONNING ASSET MANAGEMENT COMPANY]
[CONNING MONEY MARKET FUND]
VARIABLE ACCOUNT: FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
HOME OFFICE:
First Cova Life Insurance Company
120 Broadway
New York, New York 10271
(800) 469-4545
(212) 766-0012
FOR USE WITH FIRST COVA VARIABLE ANNUITY ACCOUNT ONE
A SEPARATE INVESTMENT ACCOUNT OF
FIRST COVA LIFE INSURANCE COMPANY
CNY-672 (11/99)
DEFINITIONS
ACCOUNT - General Account and/or one or more of the Subaccount(s) of the
Variable Account.
ACCUMULATION UNIT - An accounting unit of measure used to calculate the Contract
Value in a Subaccount of the Variable Account.
ADJUSTED ATTAINED AGE - Attained Age of the Annuitant less one year for every
eight years elapsed between January 1, 2000 and the Annuity Date.
ANNUITANT - The natural person on whose life Annuity Payments are based.
ANNUITY OR ANNUITY PAYMENTS - The series of payments made to the Annuitant after
the Annuity Date under the Annuity Option elected.
ANNUITY DATE - The date on which Annuity Payments begin. The Annuity Date is
shown on the Contract Data Page.
ANNUITY PERIOD - The period starting on the Annuity Date.
ANNUITY UNIT - An accounting unit of measure used to calculate Variable Annuity
Payments after the Annuity Date.
ATTAINED AGE - The age on the birthday prior to any date for which age is to be
determined.
BENEFICIARY - The person(s) who will receive the Death Benefit.
COMPANY - First Cova Life Insurance Company at its Home Office shown on the
Contract Data Page.
CONTRACT ANNIVERSARY - An anniversary of the Issue Date.
CONTRACT VALUE - The sum of the Owner's interest in the General Account and the
Subaccounts of the Variable Account.
CONTRACT YEAR - One year from the Issue Date and from each Contract Anniversary.
ELIGIBLE INVESTMENT(S) - An investment entity shown on the Contract Data Page.
FIXED ANNUITY - A series of payments made during the Annuity Period which are
guaranteed as to dollar amount by the Company and do not vary with the
investment experience of the Variable Account.
GENERAL ACCOUNT - The Company's general investment account which contains all
the assets of the Company with the exception of Cova Variable Annuity Account
One (the "Variable Account") and other segregated asset accounts.
GENERAL ACCOUNT VALUE - The Owner's interest in the General Account.
ISSUE DATE - The date this Contract is issued. The Issue Date is shown on the
Contract Data Page.
OWNER - The person or entity named in the Application who/which has all rights
under this Contract.
PORTFOLIO - A segment of an Eligible Investment which constitutes a separate and
distinct class of shares.
SUBACCOUNT - A segment of the Variable Account.
SUBACCOUNT VALUE - The Owner's interest in a Subaccount.
VALUATION DATE - The Variable Account will be valued each day that the New York
Stock Exchange is open for trading.
VALUATION PERIOD - The period beginning at the close of business of the New York
Stock Exchange on each Valuation Date and ending at the close of business for
the next succeeding Valuation Date.
VARIABLE ACCOUNT - A separate investment account of the Company designated on
the Contract Data Page.
VARIABLE ACCOUNT VALUE - The sum of the Owner's interest in each of the
Subaccounts of the Variable Account.
VARIABLE ANNUITY - A series of payments made during the Annuity Period which
vary in amount with the investment experience of each applicable Subaccount.
WITHDRAWAL VALUE - The Withdrawal Value is:
1) the Contract Value for the Valuation Period next following the Valuation
Period during which a written request for a withdrawal is received at the
Company; less
2) any applicable taxes not previously deducted; less
3) the Withdrawal Charge, if any; less
4) the Contract Maintenance Charge, if any.
GENERAL PROVISIONS
THE CONTRACT - The entire contract consists of:
1) this Contract;
2) the Application which is attached to this Contract; and
3) any riders or endorsements attached to this Contract.
This Contract may be changed or altered only by the President or Secretary of
the Company. A change or alteration must be made in writing.
INCONTESTABILITY - The Company will not contest this Contract from the Issue
Date.
NON-PARTICIPATING - This Contract will not share in any distribution of
dividends.
MISSTATEMENT OF AGE OR SEX - The Company may require proof of age or sex of the
Annuitant before making any life Annuity Payments under this Contract. If the
age or sex of the Annuitant has been misstated, the amount payable will be the
amount that the Contract Value would have provided at the correct age or sex.
After the Annuity Date, any under payments will be made up in one sum, including
interest at 6% per year, with the next Annuity Payment. Any overpayments,
including
7
CNY-672 (11/99)
interest at 6% per year, will be deducted from future Annuity Payments until the
total is repaid.
CONTRACT SETTLEMENT - This Contract must be returned to the Company prior to any
settlement. Prior to any payment as a death claim, due proof of death must be
submitted to the Company.
REPORTS - At least once each calendar year, the Company will furnish the Owner
with a report showing the Contract Value and any other information as may be
required by law. The Company will also furnish an annual report of the Variable
Account. Reports will be sent to the last known address of the Owner.
TAXES - Any taxes paid to any governmental entity relating to this Contract will
be deducted from the Purchase Payments or Contract Value when incurred. The
Company will, in its sole discretion, determine when taxes have resulted from:
the investment experience of the Variable Account; receipt by the Company of the
Purchase Payments; or commencement of Annuity Payments. The Company may, at its
sole discretion, pay taxes when due and deduct that amount from the Contract
Value at a later date. Payment at an earlier date does not waive any right the
Company may have to deduct amounts at a later date. The Company will deduct any
withholding taxes required by applicable law.
EVIDENCE OF SURVIVAL - The Company may require satisfactory evidence of the
continued survival of any person(s) on whose life Annuity Payments are based.
MODIFICATION OF CONTRACT - This Contract may not be modified by the Company
without the consent of the Owner except as may be required by applicable law.
ANNUITANT, OWNERSHIP, ASSIGNMENT
PROVISIONS
ANNUITANT - The Annuitant is the person on whose life Annuity Payments are
based. The Annuitant is the person designated in the Application, unless
changed.
OWNERSHIP - The Owner has all ri ghts and may receive all benefits under this
Contract. Prior to the Annuity Date, the Owner is the person designated in the
Application, unless changed. On and after the Annuity Date:
1) the Annuitant is the Owner; and
2) upon the death of the Annuitant, the Beneficiary is the Owner.
The Owner may change the Owner at any time. A change of Owner will automatically
revoke any prior designation of Owner. A request for change must be:
1) made in writing; and
2) received at the Company.
The change will become effective as of the date the written request is signed. A
new designation of Owner will not apply to any payment made or action taken by
the Company prior to the time it was received.
ASSIGNMENT - The Owner may, at any time during his or her lifetime, assign his
or her rights under this Contract. The Company will not be bound by any
assignment until written notice is received by the Company. The Company is not
responsible for the validity of any assignment. The Company will not be liable
as to any payment or other settlement made by the Company before receipt of the
assignment.
BENEFICIARY PROVISIONS
BENEFICIARY - The Beneficiary is named in the Application, unless changed. The
Beneficiary is entitled to receive the benefits to be paid at the death of the
Owner. Unless the Owner provides otherwise, the Death Benefit will be paid in
equal shares or all to the survivor as follows:
1) to the Primary Beneficiaries who survive the Owner's death; or if there are
none,
2) to the Contingent Beneficiaries who survive the Owner's death; or if there
are none,
3) to the estate of the Owner.
CHANGE OF BENEFICIARY - Subject to the rights of any irrevocable Beneficiary,
the Owner may change the Primary Beneficiary or Contingent Beneficiary. A change
may be made by filing a written request with the Company. The change will take
effect as of the date the notice is signed. The Company will not be liable for
any payment made or action taken before it records the change.
PURCHASE PAYMENT PROVISIONS
PURCHASE PAYMENTS - The Initial Purchase Payment is due on the Issue Date.
Thereafter, a Purchase Payment may be made at any time in any amount, subject to
the Minimum Subsequent Purchase Payment shown on the Contract Data Page. The
Company reserves the right to reject any Application or Purchase Payment.
CHANGE IN PURCHASE PAYMENTS - Subject to the minimum shown on the Contract Data
Page, the Owner may increase or decrease or change the frequency of subsequent
Purchase Payments.
ALLOCATION OF PURCHASE PAYMENTS - The allocation of the initial Purchase Payment
is elected by the Owner on the Application. Unless elected otherwise by the
Owner, subsequent Purchase Payments are allocated in the same manner as the
initial Purchase Payment. Allocation of the Purchase Payments is subject to the
terms and conditions imposed by the Company.
NO DEFAULT - Unless the Owner makes a total withdrawal, this Contract will
remain in force until the Annuity Date. This Contract will not be in default if
subsequent Purchase Payments are not made.
GENERAL ACCOUNT PROVISIONS
GENERAL ACCOUNT VALUE - The General Account Value at any time is equal to:
8
CNY-672 (11/99)
1) the Purchase Payments allocated to the General Account; plus
2) amounts transferred to the General Account; plus
3) interest credited to the General Account; less
4) any prior partial withdrawals and Withdrawal Charges deducted from the
General Account; less
5) amounts transferred from the General Account; less
6) any applicable premium taxes, Contract Maintenance Charge or Transfer Fee.
INTEREST TO BE CREDITED - The Company guarantees that the interest rate credited
to the General Account will not be less than the Minimum Guaranteed Interest
Rate. The Minimum Guaranteed Interest Rate is 3% per year. The Company may
credit additional interest at its sole discretion.
CONTRACT VALUE PROVISION
CONTRACT VALUE - Each Purchase Payment is allocated to a Subaccount of the
Variable Account and/or the General Account. A Purchase Payment allocated to a
Subaccount of the Variable Account is converted into Accumulation Units. The
number of Accumulation Units in a Subaccount credited to this Contract is
determined by dividing the Purchase Payment allocated to that Subaccount by the
Accumulation Unit Value for that Subaccount. The Contract Value on any Valuation
Date is the sum of the Owner's interest in the General Account and the
Subaccounts of the Variable Account. The value of the Owner's interest in a
Subaccount is determined by multiplying the number of Accumulation Units
attrib-utable to that Subaccount by the Accumulation Unit Value for that
Subaccount.
Withdrawals will result in the cancellation of Accumu-lation Units in a
Subaccount or a reduction of the General Account Value.
VARIABLE ACCOUNT PROVISIONS
THE VARIABLE ACCOUNT - The Variable Account is a separate investment account of
the Company. It is shown on the Contract Data Page. The Company has allocated a
part of its assets for this and certain other contracts to the Variable Account.
The assets of the Variable Account are the property of the Company. However,
they are not chargeable with the liabilities arising out of any other business
the Company may conduct. The Variable Account is subject to the laws of the
State of New York.
INVESTMENTS OF THE VARIABLE ACCOUNT - Purchase Payments applied to the Variable
Account are allocated to a Subaccount of the Variable Account. The assets of the
Subaccount are allocated to the Eligible Investment(s) and the Portfolio(s), if
any, within an Eligible Investment shown on the Contract Data Page. The Company
may, from time to time, and with the prior approval of the Superintendent of
Insurance of the state of New York, add additional Eligible Investments or
Port-folios to those shown on the Contract Data Page. The Owner may be permitted
to transfer Contract Values to the additional Eligible Investments or
Portfolios. However, the right to make any transfer will be limited by the terms
and conditions imposed by the Company.
If the shares of any of the Eligible Investment(s) or any Portfolio(s) within
the Eligible Investments become unavailable for investment by the Variable
Account, or the Company's Board of Directors deems further investment in these
shares inappropriate, the Company may substitute shares of another Eligible
Investment for shares already purchased under this Contract.
VALUATION OF ASSETS - Assets of the Variable Account are valued at their fair
market value in accordance with procedures of the Company.
ACCUMULATION UNIT - A Purchase Payment allocated to the Variable Account is
converted into Accumulation Units for each elected Subaccount. The number of
Accumulation Units in a Subaccount credited to this Contract is determined by
dividing the Purchase Payment allocated to that Subaccount by the Accumu-lation
Unit Value for that Subaccount as of the Valuation Period during which the
Purchase Payment is allocated to the Subaccount. The Accumulation Unit Value for
each Subaccount was arbitrarily set initially at $10. The Accu-mulation Unit
Value for any later Valuation Period is determined by subtracting (b) from (a)
and dividing the result by (c) where:
(a) is the net result of
1) the assets of the Subaccount; i.e., the aggregate value of the
underlying Eligible Investment shares held at the end of such
Valuation Period; plus or minus
2) the cumulative charge or credit for taxes reserved which is determined
by the Company to have resulted from the operation of the Subaccount
of the Variable Account;
(b) is the cumulative unpaid charge for the Mortality and Expense Risk Premium
and for the Administrative Expense Charge which are shown on the Contract
Data Page; and
(c) is the number of Accumulation Units in a Subaccount of the Variable Account
outstanding at the end of the Valuation Period.
Withdrawals from a Subaccount will result in the cancellation of Accumulation
Units in each Subaccount of the Variable Account. The Contract Value
attributable to a Subaccount of the Variable Account is determined by
multiplying the number of Accumulation Units attrib-utable to the Subaccount by
the Accumulation Unit Value for that Subaccount. An Accumulation Unit Value may
increase or decrease from Valuation Period to Valuation Period.
MORTALITY AND EXPENSE RISK PREMIUM - The Company deducts a Mortality and Expense
Risk Premium from the Variable Account which is equal, on an annual basis, to
the amount shown on the Contract Data Page. The Mortality and Expense Risk
Premium compensates the Company for assuming the mortality and expense risks
under this Contract.
9
CNY-672 (11/99) 10
ADMINISTRATIVE EXPENSE CHARGE - The Company deducts an Administrative Expense
Charge from the Variable Account which is equal, on an annual basis, to the
amount shown on the Contract Data Page. The Administrative Expense Charge
compensates the Company for the costs associated with the administration of this
Contract and the Variable Account.
MORTALITY AND EXPENSE GUARANTEE - The Company guarantees that the dollar amount
of each Annuity Payment after the first Annuity Payment will not be affected by
variations in mortality or expense experience.
CONTRACT MAINTENANCE CHARGE
DEDUCTION FOR CONTRACT MAINTENANCE
CHARGE - The Company deducts an annual Contract Maintenance Charge from the
Contract Value by cancelling Accumulation Units from each applicable Subaccount
or reducing the General Account Value to reimburse it for expenses relating to
maintenance of this Contract. The Contract Maintenance Charge is shown on the
Contract Data Page. The Contract Maintenance Charge will be deducted from the
Contract Value on each Contract Anniversary while this Contract is in force.
If a total withdrawal is made on other than a Contract Anniversary, the Contract
Maintenance Charge will be deducted at the time of withdrawal. If the Annuity
Date is not a Contract Anniversary, a prorata portion of the annual Contract
Maintenance Charge will be deducted on the Annuity Date. After the Annuity Date,
the Contract Maintenance Charge will be collected on a monthly basis and will
result in a reduction of each Annuity Payment.
TRANSFER PROVISION
TRANSFERS - Prior to the Annuity Date, the Owner may transfer all or part of an
Account without the imposition of any fee or charge if there have been no more
than 12 transfers made in the Contract Year. All transfers are subject to the
following:
1) if more than 12 transfers have been made in the Contract Year, the Company
will deduct a Transfer Fee. The Transfer Fee is shown on the Contract Data
Page. The Transfer Fee will be deducted from the Account from which the
transfer is made. However, if the entire interest in an Account is being
transferred, the Transfer Fee will be deducted from the amount which is
transferred.
2) the minimum amount which may be transferred is the lesser of: (A)
$500; or (B) the Owner's entire interest in the Account.
3) transfers will be effected during the Valuation Period next following
receipt by the Company of a written transfer request containing all
required information. However, no transfer may be made effective
within seven calendar days of the Annuity Date.
4) any transfer direction must clearly specify: (A) the amount which is
to be transferred; and (B) the Accounts which are to be affected.
If the Owner elects to use the transfer privilege, neither the Company nor its
Home Office will be liable for transfers made in accordance with the Owner's
instructions.
DEATH BENEFIT
DEATH OF ANNUITANT - Upon death of the Annuitant prior to the Annuity Date, the
Owner must designate a new Annuitant. If no designation is made within 30 days
of the death of the Annuitant, the Owner will become the Annuitant.
Upon death of the Annuitant on or after the Annuity Date, the Death Benefit, if
any, will be as specified in the Annuity Option elected and the remaining
Annuity Payments will be distributed at least as rapidly as prior to the
Annuitant's death.
DEATH OF OWNER - Upon death of the Owner prior to the Annuity Date, the Death
Benefit will be paid to the Beneficiary designated by the Owner.
Before the Owner, or a Joint Owner, attains age 80, the Death Benefit will be
the greatest of:
1. the Purchase Payments less any Withdrawals and any applicable Withdrawal
Charge; or
2. the Contract Value determined on the Valuation Period next following the
date of receipt by the Company of both due proof of death and an election
for payment; or
3. the greatest adjusted Contract Value.
The greatest adjusted Contract Value is evaluated at each Contract Anniversary
prior to the death of the Owner or Joint Owner and on each day a Purchase
Payment or Withdrawal is made. On the Contract Anniversary, if the current
Contract Value exceeds the greatest adjusted Contract Value, the greatest
adjusted Contract Value will be increased to the current Contract Value. If a
Purchase Payment is made, the amount of the Purchase Payment will increase the
greatest adjusted Contract Value. If a Withdrawal is made, the greatest adjusted
Contract Value will be reduced by the sum of the Withdrawal Amount and any
associated Withdrawal Charges divided by the Contract Value immediately prior to
the Withdrawal, multiplied by the greatest adjusted Contract Value immediately
prior to the Withdrawal.
The following example describes the effect of a
Withdrawal on the greatest adjusted Contract Value:
Assumed facts for example:
$10,000 current greatest adjusted Contract Value
$8,000 Contract Value
$5,000 total Purchase Payments, less any prior
Withdrawals and associated Withdrawal Charges
$2,100 partial withdrawal ($2,000 Withdrawal + $100
Withdrawal Charge)
New greatest adjusted Contract Value = $10,000 -[($
2,100 / $8,000) x $10,000)] which results in the
current greatest adjusted Contract Value of $10,000 being
reduced by $2,625.
CNY-672 (11/99) 11
The new greatest adjusted Contract Value is $7,375.
The Contract Value immediately after the Withdrawal is $5,900, which is $8,000
less the $2,000 Withdrawal and the $100 Withdrawal Charge.
The Death Benefit immediately after the Withdrawal is the greatest of Purchase
Payments less Withdrawals and Withdrawal Charges ($5,000 minus $2,100) or the
Contract Value ($5,900) or the greatest adjusted Contract Value ($7,375).
The Death Benefit is therefore $7,375.
After the Owner, or a Joint Owner, attains age 80, the Death Benefit will be the
greatest of:
1. the Purchase Payments less any Withdrawals and any applicable Withdrawal
Charge; or
2. the Contract Value determined on the Valuation Period next following the
date of receipt by the Company of both due proof of death and an election
for payment; or
3. the greatest adjusted Contract Value.
The greatest adjusted Contract Value is evaluated at each Contract Anniversary
on or before the Owner's, or a Joint Owner's, 80th birthday and on each day a
Purchase Payment or Withdrawal is made. On the Contract Anniversary on or before
the Owner's, or a Joint Owner's 80th birthday, if the current Contract Value
exceeds the greatest adjusted Contract Value, the greatest adjusted Contract
Value will be increased to the current Contract Value. If a Purchase Payment is
made, the amount of the Purchase Payment will increase the greatest adjusted
Contract Value. If a Withdrawal is made, the greatest adjusted Contract Value
will be reduced by the Withdrawal Amount and any associated Withdrawal Charges
divided by the Contract Value immediately prior to the Withdrawal, multiplied by
the greatest adjusted Contract Value immediately prior to the Withdrawal.
If Joint Owners are named:
1) The Death Benefit is determined based on the age of the oldest Joint Owner;
and
2) The Death Benefit is payable upon the first death of a Joint Owner.
3) Upon the death of either Joint Owner, the surviving Joint Owner will be the
Primary Beneficiary. Any other Beneficiary designated will be a Contingent
Beneficiary unless otherwise indicated in writing.
The Death Benefit will be paid following receipt by the Company of both due
proof of death and an election for a single sum payment or election under an
Annuity Option.
If a single sum payment is requested, the proceeds will be paid within seven (7)
days of receipt of proof of death and the election. Payment under an Annuity
Option may only be elected during the sixty-day period beginning with the date
of receipt of proof of death or a single sum payment will be made to the
Beneficiary at the end of the sixty-day period.
The entire Death Benefit must be paid within five (5) years of the date of death
unless the Beneficiary elects to have the Death Benefit payable under an Annuity
option over the Beneficiary's lifetime or for a period not extending beyond the
Beneficiary's life expectancy, beginning within one (1) year of the date of
death.
If the Beneficiary is the spouse of the Owner, the spouse may elect to become
the Owner and continue this Contract in effect at the then current Contract
Value.
PAYMENT OF DEATH BENEFIT - The Company will require due proof of death before
any Death Benefit is paid. Due proof of death will be:
1) a certified death certificate;
2) a certified decree of a court of competent jurisdiction as to the finding
of death;
3) a written statement by a medical doctor who attended the deceased; or
4) any other proof satisfactory to the Company.
Any Death Benefit will be paid in accordance with applicable law or regulations
governing death benefit payments.
ANNUITY PROVISIONS
ANNUITY DATE - The Annuity Date is elected by the Owner on the Application. The
Annuity Date is shown on the Contract Data Page. The Annuity Date must be the
first day of a calendar month and must be at least one year after the Issue
Date. The Annuity Date may not be later than the fi rst day of the calendar
month following the Annuitant's 90th birthday.
Prior to the Annuity Date, the Owner may, subject to the above, change the
Annuity Date upon 30 days prior written notice to the Company.
ELECTION OF ANNUITY OPTION - The Annuity Option is elected by the Owner on the
Application. If no Annuity Option is elected, Option 2 with 10 years guaranteed
will automatically be applied. Prior to the Annuity Date, the Owner may, upon 30
days prior written notice to the Company, change the Annuity Option.
FREQUENCY AND AMOUNT OF ANNUITY PAYMENTS - Annuity Payments will be paid as
monthly installments. The Contract Value on the Annuity Date is applied to the
Annuity Table for the Annuity Option elected. If a Purchase Payment has not been
made for a period of 3 years and the Contract Value on the Annuity Date is less
than $2,000, the Company reserves the right to make one lump sum payment in lieu
of Annuity Payments. If the amount of any Annuity Payment would be or become
less than $20, the Company will reduce the frequency of payments to an interval
which will result in each payment being at least $20.
BASIS OF PAYMENTS - The Annuity Tables are based on the Annuity 2000 mortality
table with interest at the Minimum Guaranteed Interest Rate for the Fixed
Annuity
CNY-672 (11/99)
Option and interest at the Assumed Investment Rate for the Variable Annuity
Option shown on the Contract Data Page. The Adjusted Attained Age of the
Annuitant on the Annuity Date is used to determine the Annuity Payments.
ANNUITY OPTIONS - The following Annuity Options or any other Annuity Option
acceptable to the Company may be elected.
Option 1 - Life Annuity - The Company will make monthly payments during the life
of the Annuitant.
Option 2 - Life Annuity with 5, 10 or 20 Years Guaranteed - The Company will
make monthly Annuity Payments during the life of the Annuitant. If payments have
been made for less than the guaranteed period at the death of the Annuitant,
payments will continue to the Beneficiary for the remainder of the guaranteed
period. However, the Beneficiary may elect to receive a single sum payment. A
single sum payment will be equal to the present value of remaining payments as
of the date of receipt of due proof of death commuted at the assumed investment
rate of 3%. If any life income optional settlement with a period certain
provides for installment payments of the same amount at some ages for different
periods certain, the contract must provide that the insurer will deem an
election to have been made for the longest period certain which could have been
elected for such age and amount.
Option 3 - Joint and Last Survivor Annuity - The Company will make monthly
Annuity Payments for the joint lifetime of the Annuitant and another person. At
the death of either Payee, Annuity Payments will continue to be made to the
survivor Payee. The survivor's Annuity Payments will be equal to 100%, 66 2/3%
or 50% of the amount payable during the joint lifetime, as chosen.
ANNUITY - If all of the Contract Value on the seventh calendar day before the
Annuity Date is allocated to the General Account, the Annuity will be paid as a
Fixed Annuity. If all of the Contract Value on the Annuity Date is allocated to
the Variable Account, the Annuity will be paid as a Variable Annuity. If the
Contract Value on the Annuity Date is allocated to both the General Account and
the Variable Account, the Annuity will be paid as a combination of a Fixed
Annuity and a Variable Annuity to reflect the allocation between the Accounts.
Variable Annuity Payments will reflect the investment performance of the
Variable Account in accordance with the allocation of the Contract Value to the
Subaccounts on the Annuity Date.
The Contract Value will be applied to the applicable Annuity Tables. The Annuity
Table used will depend upon the Annuity Option elected. The amount of the first
payment for each $1,000 of Contract Value is shown in the Annuity Tables. If, as
of the Annuity Date, the then current Single Premium Immediate Annuity rates
applicable to this class of contracts provide a first Annuity Payment greater
than guaranteed under the same Annuity Option under this Contract, the greater
payment will be made.
FIXED ANNUITY - The General Account Value on the day immediately preceding the
Annuity Date will be used to determine the Fixed Annuity monthly payment. The
first monthly Annuity Payment will be based upon the Annuity Option elected and
the appropriate Annuity Option Table.
VARIABLE ANNUITY - Variable Annuity Payments:
1) are not predetermined as to dollar amount; and
2) will vary in amount with the net investment results of the applicable
Subaccount(s) of the Variable Account at the Annuity Date.
The dollar amount of Variable Annuity Payments for each applicable Subaccount
after the first is determined as follows:
1) the dollar amount of the fi rst Variable Annuity Payment is divided by the
value of an Annuity Unit for each applicable Subaccount as of the Annuity
Date. This establishes the number of Annuity Units for each monthly
payment. The number of Annuity Units for each applicable Subaccount remains
fixed during the Annuity Period;
2) the fixed number of Annuity Units per payment in each Subaccount is
multiplied by the Annuity Unit Value for that Subaccount for the last
Valuation Period of the month preceding the month for which the payment is
due. This result is the dollar amount of the payment for each applicable
Subaccount.
The total dollar amount of each Variable Annuity Payment is the sum of all
Subaccount Variable Annuity Payments reduced by the applicable Contract
Maintenance Charge.
ANNUITY UNIT - The value of an Annuity Unit for each Subaccount of the Variable
Account was initially set on an arbitrary basis. This was done when the first
Eligible Investment shares were purchased.
The Subaccount Annuity Unit Value at the end of any subsequent Valuation Period
is determined by multiplying the Subaccount Annuity Unit Value for the
immediately preceding Valuation Period by the net investment factor for the day
for which the Annuity Unit Value is being calculated; and multiplying the result
by 0.999919 for each day within the Valuation Period.
NET INVESTMENT FACTOR - The Net Investment Factor for any Subaccount of the
Variable Account for any Valuation Period is determined by dividing:
1) the Accumulation Unit Value as of the close of the current Valuation
Period; by
2) the Accumulation Unit Value as of the close of the immediately preceding
Valuation Period.
The Net Investment Factor may be greater or less than one, as the Annuity Unit
Value may increase or decrease.
12
CNY-672 (11/99)
TRANSFERS DURING THE ANNUITY PERIOD - During the Annuity Period, the Owner may
make transfers, by written request, as follows:
1) the Owner may make a transfer once each Contract Year between Subaccounts
of the Variable Account.
2) the Owner may at any time, make a transfer from one or more Subaccounts to
the General Account. The Owner may not make a transfer from the General
Account to the Variable Account.
The amount transferred to the General Account from a Subaccount of the Variable
Account will be equal to the annuity reserve for the payee's interest in that
Subaccount. The annuity reserve is the product of "(a)" multiplied by "(b)"
multiplied by "(c)", where (a) is the number of Annuity Units representing the
Owner's interest in the Subaccount per Annuity Payment; (b) is the Annuity Unit
Value for the Subaccount; and (c) is the present value of $1.00 per payment
period based on the Adjusted Attained Age of the Annuitant at time of transfer
for the Annuity Option, determined using the Annuity 2000 mortality table,
Male/Female, with interest at the applicable Assumed Investment Rate for the
Variable Annuity Option. Amounts transferred to the General Account will be
applied under the Annuity Option elected at the Adjusted Attained Age of the
Annuitant at the time of the transfer and will be treated in the same manner as
regular purchases of fixed payout annuities from Contract Values in the General
Account. All amounts and Annuity Unit Values will be determined as of the end of
the Valuation Period preceding the effective date of the transfer.
PROTECTION OF PROCEEDS - No Payee may commute, encumber, alienate or assign any
payments under this Contract. To the extent permitted by law, no payments will
be subject to the debts, contracts or engagements of any Payee or to any
judicial process to levy upon or attach the same for payment thereof.
WITHDRAWAL PROVISIONS
WITHDRAWALS - Prior to the Annuity Date, the Owner may, upon written request
received by the Company, make a total or partial withdrawal of the Withdrawal
Value. A withdrawal will result in the cancellation of Accumulation Units from
each applicable Subaccount of the Variable Account or a reduction in the General
Account Value in the ratio that the Subaccount Value and/or the General Account
Value bears to the total Contract Value. The Owner must specify in writing in
advance which units are to be cancelled or values are to be reduced if other
than the above method is desired. The Company will pay the amount of any
withdrawal within seven (7) days of receipt of a request in good order unless
the Suspension Or Deferral Of Payments Or Transfers From The Variable Account
provision or the Deferral Of Payments Or Transfers From The General Account
provision is in effect.
Each partial withdrawal must be for an amount which is not less than $500 or, if
smaller, the remaining Withdrawal Value. The remaining Withdrawal Value must be
at least $500 after a partial withdrawal is completed.
The Death Benefit is reduced when withdrawals are made. The amount of the
reduction is described in the DEATH OF OWNER section.
WITHDRAWAL CHARGE - A Withdrawal Charge may be deducted in the event of a
withdrawal of all or a portion of the Contract Value. The Withdrawal Charge is
imposed on a withdrawal of Contract Value attributable to a Purchase Payment
within seven (7) years of receipt of the Purchase Payment. The Withdrawal
Charge, if any, is equal to 7% of the Purchase Payment withdrawn within the
first year following receipt, 6% of the Purchase Payment withdrawn within the
second year following receipt, 5% of the Purchase Payment withdrawn within the
third year following receipt, 4% of the Purchase Payment withdrawn within the
fourth year following receipt, 3% of the Purchase Payment withdrawn within the
fifth year of receipt, 2% of the Purchase Payment withdrawn within the sixth
year of receipt, 1% of the Purchase Payment withdrawn within the seventh year of
receipt and 0% thereafter.
For a partial withdrawal, the Withdrawal Charge will be deducted from the
remaining Withdrawal Value, if sufficient, or from the amount withdrawn. The
Withdrawal Charge will be deducted by cancelling Accumulation Units from each
applicable Subaccount or reducing the General Account Value in the ratio that
the Subaccount Value and/ or General Account bears to the total Contract Value.
The Owner must specify in writing in advance if other than the above method of
cancellation is desired.
WAIVER OF WITHDRAWAL CHARGE - A withdrawal of 10% of the aggregate Purchase
Payments may be made without the Withdrawal Charge on a non-cumulative basis as
follows:
1) Once each Contract Year after the first Contract Year, as a single sum
payment if the Contract Value prior to the withdrawal exceeds $5,000; or
2) At any time, subject to any conditions the Company may impose, as equal
periodic installments. However, total monthly withdrawals cannot exceed 10%
of Purchase Payments in any 12 month period.
SUSPENSION OR DEFERRAL OF
PAYMENTS OR TRANSFERS FROM
THE VARIABLE ACCOUNT
The Company reserves the right to suspend or postpone payments for a withdrawal
or transfer for any period when:
1) the New York Stock Exchange is closed (other than customary weekend and
holiday closings);
2) trading on the New York Stock Exchange is restricted;
3) an emergency exists as a result of which disposal of securities held in the
Variable Account is not reasonably practicable or it is not reasonably
practicable to determine the value of the Variable Account's net assets; or
13
4) during any other period when the Securities and Exchange Commission, by
order, so permits for the protection of Owners; provided that applicable
rules and regulations of the Securities and Exchange Commission will govern
as to whether the conditions described in (2) and (3) exist.
DEFERRAL OF PAYMENTS OR TRANSFERS
FROM THE GENERAL ACCOUNT
The Company reserves the right to defer payment for a withdrawal or transfer
from the General Account for the period permitted by law but not for more than
six months after written election is received by the Company.
RESERVES, VALUES AND BENEFITS
All reserves are greater to or equal to those required by statute. Any values
and death benefits that may be available under this Contract are not less than
the minimum benefits required by any statute of the state in which this Contract
is delivered.
CNY-672 (11/99) 15
<TABLE>
<CAPTION>
ANNUITY TABLE OPTION 1
Monthly Annuity Payments for Life Annuity
For Each $1,000 Of Contract Value Applied
Male Female Male Female Male Female
Adjusted Monthly Monthly Adjusted Monthly Monthly Adjusted Monthly Monthly
Age Payment Payment Age Payment Payment Age Payment Payment
<S> <C> <C> <C> <C> <C> <C> <C> <C>
5 2.79 2.74 35 3.36 3.23 65 5.77 5.24
6 2.80 2.74 36 3.40 3.26 66 5.94 5.39
7 2.81 2.75 37 3.43 3.29 67 6.13 5.55
8 2.82 2.76 38 3.47 3.32 68 6.34 5.72
9 2.83 2.77 39 3.51 3.35 69 6.55 5.91
10 2.84 2.78 40 3.55 3.39 70 6.78 6.10
11 2.85 2.80 41 3.60 3.43 71 7.02 6.32
12 2.87 2.81 42 3.65 3.46 72 7.28 6.55
13 2.88 2.82 43 3.69 3.50 73 7.56 6.80
14 2.90 2.83 44 3.75 3.55 74 7.86 7.07
15 2.91 2.84 45 3.80 3.59 75 8.18 7.37
16 2.92 2.86 46 3.86 3.64 76 8.52 7.68
17 2.94 2.87 47 3.91 3.69 77 8.88 8.02
18 2.96 2.88 48 3.98 3.74 78 9.27 8.40
19 2.97 2.90 49 4.04 3.79 79 9.69 8.80
20 2.99 2.91 50 4.11 3.85 80 10.13 9.23
21 3.01 2.93 51 4.18 3.91 81 10.60 9.71
22 3.03 2.94 52 4.25 3.97 82 11.11 10.22
23 3.05 2.96 53 4.33 4.04 83 11.65 10.77
24 3.07 2.98 54 4.42 4.11 84 12.23 11.37
25 3.09 3.00 55 4.50 4.19 85 12.84 12.01
26 3.11 3.02 56 4.60 4.27 86 13.49 12.70
27 3.13 3.04 57 4.70 4.35 87 14.18 13.44
28 3.16 3.06 58 4.80 4.44 88 14.92 14.22
29 3.18 3.08 59 4.91 4.53 89 15.70 15.05
30 3.21 3.10 60 5.03 4.63 90 16.52 15.91
31 3.24 3.12 61 5.16 4.74
32 3.27 3.15 62 5.30 4.86
33 3.30 3.17 63 5.44 4.98
34 3.33 3.20 64 5.60 5.11
</TABLE>
CNY-672 (11/99) 16
<TABLE>
<CAPTION>
ANNUITY TABLE OPTION 2
Monthly Annuity Payments for Life Annuity with 5, 10 or 20 Years Guaranteed
For Each $1,000 Of Contract Value Applied
Female's Female's
Adjusted 5 Years 10 Years 20 Years Adjusted 5 Years 10 Years 20 Years
Age Guaranteed Guaranteed Guaranteed Age Guaranteed Guaranteed Guaranteed
<S> <C> <C> <C> <C> <C> <C> <C>
5 2.74 2.74 2.73 50 3.85 3.84 3.78
6 2.74 2.74 2.74 51 3.91 3.89 3.83
7 2.75 2.75 2.75 52 3.97 3.96 3.88
8 2.76 2.76 2.76 53 4.04 4.02 3.94
9 2.77 2.77 2.77 54 4.11 4.09 4.00
10 2.78 2.78 2.78 55 4.18 4.16 4.06
11 2.80 2.79 2.79 56 4.26 4.23 4.12
12 2.81 2.81 2.80 57 4.34 4.31 4.18
13 2.82 2.82 2.82 58 4.43 4.40 4.25
14 2.83 2.83 2.83 59 4.52 4.49 4.31
15 2.84 2.84 2.84 60 4.62 4.58 4.38
16 2.86 2.85 2.85 61 4.73 4.68 4.45
17 2.87 2.87 2.87 62 4.84 4.78 4.52
18 2.88 2.88 2.88 63 4.96 4.89 4.60
19 2.90 2.90 2.89 64 5.08 5.01 4.67
20 2.91 2.91 2.91 65 5.22 5.13 4.74
21 2.93 2.93 2.92 66 5.36 5.26 4.81
22 2.94 2.94 2.94 67 5.51 5.40 4.88
23 2.96 2.96 2.96 68 5.68 5.54 4.95
24 2.98 2.98 2.97 69 5.86 5.69 5.02
25 3.00 3.00 2.99 70 6.05 5.85 5.08
26 3.02 3.01 3.01 71 6.25 6.02 5.14
27 3.04 3.03 3.03 72 6.47 6.20 5.19
28 3.06 3.05 3.05 73 6.70 6.38 5.24
29 3.08 3.08 3.07 74 6.95 6.56 5.28
30 3.10 3.10 3.09 75 7.21 6.76 5.32
31 3.12 3.12 3.11 76 7.50 6.96 5.36
32 3.15 3.15 3.14 77 7.80 7.16 5.39
33 3.17 3.17 3.16 78 8.12 7.36 5.41
34 3.20 3.20 3.19 79 8.46 7.56 5.43
35 3.23 3.23 3.21 80 8.82 7.75 5.45
36 3.26 3.25 3.24 81 9.20 7.95 5.46
37 3.29 3.28 3.27 82 9.60 8.13 5.48
38 3.32 3.32 3.30 83 10.01 8.30 5.48
39 3.35 3.35 3.33 84 10.44 8.47 5.49
40 3.39 3.38 3.37 85 10.88 8.62 5.50
41 3.42 3.42 3.40 86 11.32 8.76 5.50
42 3.46 3.46 3.44 87 11.76 8.88 5.50
43 3.50 3.50 3.47 88 12.20 8.99 5.50
44 3.55 3.54 3.51 89 12.63 9.09 5.51
45 3.59 3.58 3.55 90 13.04 9.18 5.51
46 3.64 3.63 3.59
47 3.69 3.68 3.64
48 3.74 3.73 3.68
49 3.79 3.78 3.73
</TABLE>
CNY-672 (11/99) 17
<TABLE>
<CAPTION>
ANNUITY TABLE OPTION 2
Monthly Annuity Payments for Life Annuity with 5, 10 or 20 Years Guaranteed
For Each $1,000 Of Contract Value Applied
Male's Male's
Adjusted 5 Years 10 Years 20 Years Adjusted 5 Years 10 Years 20 Years
Age Guaranteed Guaranteed Guaranteed Age Guaranteed Guaranteed Guaranteed
<S> <C> <C> <C> <C> <C> <C> <C>
5 2.79 2.78 2.78 50 4.10 4.08 3.97
6 2.80 2.80 2.79 51 4.17 4.14 4.03
7 2.81 2.81 2.80 52 4.24 4.21 4.08
8 2.82 2.82 2.81 53 4.32 4.29 4.14
9 2.83 2.83 2.82 54 4.40 4.37 4.20
10 2.84 2.84 2.84 55 4.49 4.45 4.26
11 2.85 2.85 2.85 56 4.58 4.53 4.32
12 2.87 2.87 2.86 57 4.68 4.63 4.39
13 2.88 2.88 2.87 58 4.78 4.72 4.45
14 2.89 2.89 2.89 59 4.89 4.82 4.52
15 2.91 2.91 2.90 60 5.01 4.93 4.58
16 2.92 2.92 2.92 61 5.13 5.04 4.65
17 2.94 2.94 2.93 62 5.27 5.16 4.72
18 2.96 2.95 2.95 63 5.41 5.28 4.78
19 2.97 2.97 2.96 64 5.56 5.41 4.85
20 2.99 2.99 2.98 65 5.71 5.55 4.91
21 3.01 3.01 3.00 66 5.88 5.69 4.97
22 3.03 3.02 3.02 67 6.06 5.84 5.03
23 3.05 3.04 3.04 68 6.25 5.99 5.08
24 3.07 3.06 3.06 69 6.45 6.14 5.13
25 3.09 3.09 3.08 70 6.66 6.30 5.18
26 3.11 3.11 3.10 71 6.88 6.47 5.23
27 3.13 3.13 3.12 72 7.12 6.64 5.27
28 3.16 3.15 3.14 73 7.36 6.81 5.31
29 3.18 3.18 3.17 74 7.62 6.98 5.34
30 3.21 3.21 3.19 75 7.90 7.16 5.37
31 3.24 3.23 3.22 76 8.19 7.34 5.39
32 3.26 3.26 3.25 77 8.49 7.51 5.42
33 3.29 3.29 3.28 78 8.81 7.69 5.43
34 3.33 3.32 3.31 79 9.13 7.86 5.45
35 3.36 3.36 3.34 80 9.48 8.02 5.46
36 3.39 3.39 3.37 81 9.83 8.18 5.47
37 3.43 3.43 3.40 82 10.20 8.33 5.48
38 3.47 3.46 3.44 83 10.57 8.48 5.49
39 3.51 3.50 3.47 84 10.95 8.62 5.50
40 3.55 3.55 3.51 85 11.34 8.74 5.50
41 3.60 3.59 3.55 86 11.74 8.86 5.50
42 3.64 3.63 3.59 87 12.13 8.97 5.50
43 3.69 3.68 3.63 88 12.52 9.06 5.51
44 3.74 3.73 3.68 89 12.91 9.15 5.51
45 3.80 3.78 3.72 90 13.30 9.23 5.51
46 3.85 3.84 3.77
47 3.91 3.89 3.82
48 3.97 3.95 3.87
49 4.03 4.01 3.92
</TABLE>
<TABLE>
<CAPTION>
ANNUITY TABLE OPTION 3
Monthly Payments for Joint & Last Survivor Annuity
For Each $1,000 Of Contract Value Applied
JOINT AND 50% SURVIVOR ANNUITY
Male's Adjusted Age
Female's Adjusted Age 50 55 60 65 70 75
<S> <C> <C> <C> <C> <C> <C> <C>
50 3.98 4.15 4.36 4.62 4.91 5.24
55 4.15 4.34 4.57 4.85 5.18 5.54
60 4.36 4.57 4.83 5.14 5.51 5.92
65 4.61 4.85 5.14 5.49 5.91 6.39
70 4.91 5.18 5.52 5.93 6.42 6.99
75 5.27 5.59 5.98 6.47 7.06 7.75
JOINT AND 66 2 /3% SURVIVOR ANNUITY
Male's Adjusted Age
Female's Adjusted Age 50 55 60 65 70 75
50 3.82 3.96 4.12 4.29 4.47 4.66
55 3.98 4.14 4.33 4.53 4.75 4.97
60 4.15 4.35 4.57 4.82 5.08 5.35
65 4.34 4.58 4.85 5.16 5.49 5.83
70 4.55 4.83 5.16 5.54 5.97 6.41
75 4.77 5.10 5.49 5.97 6.52 7.12
JOINT AND 100% SURVIVOR ANNUITY
Male's Adjusted Age
Female's Adjusted Age 50 55 60 65 70 75
50 3.54 3.63 3.70 3.75 3.79 3.81
55 3.67 3.80 3.91 4.00 4.07 4.11
60 3.79 3.97 4.14 4.29 4.40 4.49
65 3.88 4.12 4.36 4.59 4.80 4.95
70 3.96 4.24 4.56 4.90 5.22 5.51
75 4.01 4.34 4.73 5.17 5.65 6.12
</TABLE>
Information about different age combinations will be furnished upon request.
SAMPLE
INDIVIDUAL FLEXIBLE PURCHASE PAYMENT
DEFERRED VARIABLE AND FIXED ANNUITY CONTRACT
NONPARTICIPATING
NO DIVIDENDS
First Cova Life Insurance Company
120 Broadway
New York, New York 10271
First Cova Life Insurance Company
120 Broadway
New York, New York 10271
ENDORSEMENT
This Endorsement forms a part of the Contract to which it is attached. The
effective date of this Endorsement is the Issue Date shown on the Contract Data
Page.
AUTOMATIC WITHDRAWALS - Automatic Withdrawals may be made by the Owner subject
to the following conditions:
1) Automatic Withdrawals of up to 10% of aggregate purchase payments may
be made. The Automatic Withdrawal made each month will equal
one-twelfth (1/12) of the annual Automatic Withdrawal amount.
2) The Company has received written notice of an election to initiate
Automatic Withdrawals from the Owner.
All other terms and conditions of the Contract remain unchanged.
First Cova Life Insurance Company has caused this Endorsement to be signed by
its President and Secretary.
_______________________Secretary _______________________President
CNY-4053 (11/99)
First Cova Life Insurance Company
120 Broadway
New York, New York 10271
ENDORSEMENT
This Endorsement forms a part of the Contract to which it is attached. The
effective date of this Endorsement is the day the Company receives notice that
the Owner has elected to accept this Endorsement. The Contract is amended in the
following manner:
1) The DEATH OF OWNER section of the DEATH BENEFIT provision is deleted in its
entirety and replaced with the following:
"DEATH OF OWNER - Upon death of the Owner prior to the Annuity Date, the
Death Benefit will be paid to the Beneficiary designated by the Owner.
Before the Owner, or a Joint Owner, attains age 80, the Death Benefit will
be the greatest of:
1. the Purchase Payments less any Withdrawals and any applicable
Withdrawal Charge; or
2. the Contract Value determined on the Valuation Period next following
the date of receipt by the Company of both due proof of death and an
election for payment; or
3. the greatest adjusted Contract Value.
The greatest adjusted Contract Value as of the day Cova receives notice
that the Owner has elected to accept this Endorsement is the Death Benefit
as stated in the Contract. The greatest adjusted Contract Value is then
evaluated at each subsequent Contract Anniversary prior to the death of the
Owner or Joint Owner and on each subsequent day a Purchase Payment or
Withdrawal is made. On the Contract Anniversary, if the current Contract
Value exceeds the greatest adjusted Contract Value, the greatest adjusted
Contract Value will be increased to the current Contract Value. If a
Purchase Payment is made, the amount of the Purchase Payment will increase
the greatest adjusted Contract Value. If a Withdrawal is made, the greatest
adjusted Contract Value will be reduced by the sum of the Withdrawal Amount
and any associated Withdrawal Charges divided by the Contract Value
immediately prior to the Withdrawal, multiplied by the greatest adjusted
Contract Value immediately prior to the Withdrawal.
The following example describes the effect of a Withdrawal on the greatest
adjusted Contract Value: Assumed facts for example:
$10,000 current greatest adjusted Contract Value
$8,000 Contract Value
$5,000 total Purchase Payments, less any prior Withdrawals and associated
Withdrawal Charges
$2,100 partial withdrawal ($2,000 Withdrawal + $100 Withdrawal Charge)
New greatest adjusted Contract Value = $10,000 - [($2,100 / $8,000) x
$10,000)] which results in the current greatest adjusted Contract Value of
$10,000 being reduced by $2,625.
The new greatest adjusted Contract Value is $7,375.
The Contract Value immediately after the Withdrawal is $5,900, which is
$8,000 less the $2,000 Withdrawal and the $100 Withdrawal Charge.
The Death Benefit immediately after the Withdrawal is the greatest of
Purchase Payments less Withdrawals and Withdrawal Charges ($5,000 minus
$2,100) or the Contract Value ($5,900) or the greatest adjusted Contract
Value ($7,375).
The Death Benefit is therefore $7,375.
After the Owner, or a Joint Owner, attains age 80, the Death Benefit will
be the greatest of:
1. the Purchase Payments less any Withdrawals and any applicable
Withdrawal Charge; or
2. the Contract Value determined on the Valuation Period next following
the date of receipt by the Company of both due proof of death and an
election for payment; or
3. the greatest adjusted Contract Value.
The greatest adjusted Contract Value as of the day Cova receives notice
that the Owner has elected to accept this Endorsement is the Death Benefit
as stated in the Contract. The greatest adjusted Contract Value is then
evaluated at each subsequent Contract Anniversary on or before the Owner's,
or a Joint Owner's, 80th birthday and on each subsequent day a Purchase
Payment or Withdrawal is made. On the Contract Anniversary, on or before
the Owner's, or a Joint Owner's 80th birthday, if the current Contract
Value exceeds the greatest adjusted Contract Value, the greatest adjusted
Contract Value will be increased to the current Contract Value. If a
Purchase Payment is made, the amount of the Purchase Payment will increase
the greatest adjusted Contract Value. If a Withdrawal is made, the greatest
adjusted Contract Value will be reduced by the Withdrawal Amount and any
associated Withdrawal Charges divided by the Contract Value immediately
prior to the Withdrawal, multiplied by the greatest adjusted Contract Value
immediately prior to the Withdrawal.
If Joint Owners are named:
1) The Death Benefit is determined based on the age of the oldest Joint
Owner; and
2) The Death Benefit is payable upon the first death of a Joint Owner.
3) Upon the death of either Joint Owner, the surviving Joint Owner will
be the Primary Beneficiary. Any other Beneficiary designated will be a
Contingent Beneficiary unless otherwise identified in writing.
The Death Benefit will be paid following receipt by the Company of both due
proof of death and an election for a single sum payment or election under
an Annuity Option.
If a single sum payment is requested, the proceeds will be paid within
seven (7) days of receipt of proof of death and the election. Payment under
an Annuity Option may only be elected during the sixty-day period beginning
with the date of receipt of proof of death or a single sum payment will be
made to the Beneficiary at the end of the sixty-day period.
The entire Death Benefit must be paid within five (5) years of the date of
death unless the Beneficiary elects to have the Death Benefit payable under
an Annuity option over the Beneficiary's lifetime or for a period not
extending beyond the Beneficiary's life expectancy, beginning within one
(1) year of the date of death.
If the Beneficiary is the spouse of the Owner, the spouse may elect to
become the Owner and continue this Contract in effect at the then current
Contract Value."
2) The WITHDRAWALS section of the WITHDRAWAL provision is amended to include
the following paragraph:
"The Death Benefit is reduced when withdrawals are made. The amount of the
reduction is described in the DEATH OF OWNER section."
All other terms and conditions of the Contract remain unchanged.
First Cova Life Insurance Company has caused this Endorsement to be signed by
its President and Secretary.
CNY-4053 (11/99)
______________________Secretary ________________President
DECLARATION AND CERTIFICATE OF INCORPORATION
AND CHARTER OF
FIRST XEROX LIFE INSURANCE COMPANY
Under Section 1201 of the Insurance Law
of the State of New York
We, the undersigned, being natural persons each of whom is at least eighteen
years of age and citizens of the United States and at least three of which are
residents of the State of New York, hereby declare our intention to form a
corporation for the purposes of transacting the kinds of insurance specified in
paragraphs "1", "2", and "3" of Section 1113(a) of the Insurance Law of the
State of New York and the kinds of reinsurance authorized under Section 1114 of
the Insurance Law of the State of New York and we do hereby certify that the
following is the proposed Charter of the Corporation:
CHARTER
Section 1. The name of this Corporation is: FIRST XEROX LIFE INSURANCE COMPANY.
Section 2. The principal office of the Corporation shall be located in the City,
County and State of New York. Section 3. The kinds of insurance business to be
transacted by the Corporation shall be as follows:
(a) "Life Insurance," meaning every insurance upon the lives of human
beings, and every insurance appertaining thereto, including the granting of
endowment benefits, additional benefits in the event of death by accident,
additional benefits to safeguard the contract from lapse, accelerated payments
of part of all of the death benefit or a special surrender value upon diagnosis
(A) of terminal illness defined as a life expectancy of twelve months or less,
or (B) of a medical condition requiring extraordinary medical care or treatment
regardless of life expectancy, or provide a special surrender value, upon total
and permanent disability of the insured, and optional modes of settlement of
proceeds. Amounts paid the Corporation for life insurance and proceeds applied
under optional modes of settlement or under dividend options may be allocated by
the Corporation to one or more separate accounts pursuant to Section 4240 of the
Insurance Law of the State of New York.
(b) "Annuities," meaning all agreements to make periodical payments for
a period certain or where the making or continuance of all or some of a series
of such payments, or the amount of any such payment, depends upon the
continuance of human life, except payments made under the authority of paragraph
one hereof. Amounts paid the Corporation to provide annuities and proceeds
applied under optional modes of settlement or under dividend options may be
allocated by the Corporation to one or more separate accounts pursuant to
Section 4240 of the Insurance Law of the State of New York.
(c) "Accident and Health Insurance," meaning (i) insurance against
death or personal injury by accident or by any specific kind or kinds of
accident and insurance against sickness, ailment or bodily injury, including
insurances providing disability benefits pursuant to Article IX of the Workers'
Compensation law of the State of New York, except as specified in item (ii)
hereof; and (ii) non-cancelable disability insurance, meaning insurance against
disability resulting from sickness, ailment or bodily injury (but excluding
insurance solely against accidental injury) under any contract which does not
give the insurer the option to cancel or otherwise terminate the contract at or
after one year from its effective date or renewal date.
(d) "Reinsurance," meaning all kinds of reinsurance of the kinds of
insurance permitted in paragraphs 1, 2, and 3 of Section 1113(a) of the
Insurance Law of the State of New York as authorized by Section 1114 of the
Insurance law of the State of New York.
and such other insurance or other business as a stock life insurance company now
is or hereinafter may be permitted to transact under Section 1714 of the
Insurance Law of the State of New York and under any other section of the
Insurance Law of the State of New York and under any other applicable law and
for which the Corporation shall have the required capital and surplus.
Section 4. The corporate powers of this Corporation shall be exercised through a
Board of Directors and through such officers and agents as such Board shall
empower.
Section 5. The Board of Directors shall consist of not less than 13 nor more
than 21 members. Each director shall be at least eighteen years of age and at
all times a majority shall be citizens and residents of the United States and
not less than three shall be residents of this State. The directors shall not be
required to hold any shares of stock in the Corporation.
Section 6. The following named persons shall be the first directors of the
Corporation who shall serve until the first Annual Meeting of the Corporation:
Board of Directors
Name Post Office Residence Addresses
- ---- -------------------------------
Donald R. Altieri 10 Stallion Trails
Greenwich, Connecticut 06831
Norse N. Blazzard 441 S. Surf Road
Hollywood, Florida 33019
Susan M. Boyle 440 Riversville Road
Greenwich, Connecticut 06831
Stephen P. Clark 23 S. Park
Hinsdale, Illinois 60521
Francis A. Goodhue III Fox Lane RFD #2
Mt. Kisco, New York 10549
Dean H. Goossen 1941 Sunset Ridge Road
Glenview, Illinois 60025
Richard A. Hemmings 1214 Scott Avenue
Winnetka, Illinois 60093
Robert Hopson 2 Elmcreek Drive #415
Elmhurst, Illinois 60126
William C. Mair 7N349 Westview Court
St. Charles, Illinois 60175
Thomas A. Price 60 Wagstaff Lane
West Islip, New York 11795
Brother Thomas J. Scanlan, F.S.C. Christian Brothers Center
4415 Post Road
Bronx, New York 10471
Robert B. Stack 2644 Roslyn Circle
Highland Park, Illinois 60035
Lorry J. Stensrud 1305 Elm Tree Road
Lake Forest, Illinois 60045
Section 7. The Annual meeting of the stockholders of the Corporation shall be
held on the Tuesday following the first Monday in the month of May in each year
at such place and time as the Board of Directors shall by resolution prescribe
in accordance with the Corporation's By-Laws for the purpose of electing
directors and for the transaction of such other business as may properly be
brought before the meeting. At such Annual Meeting the directors shall be
elected for the ensuing year, the directors to take office immediately upon
election and to hold office until the next Annual Meeting, and until their
successors are elected and qualify. Whenever any vacancy shall occur in the
Board of Directors, by death, resignation or otherwise, the remaining members of
the Board may elect a director or directors to fill the vacancy or vacancies
then existing and each director so elected shall hold office for the unexpired
term of the director whose place he has taken.
Section 8. The duration of corporate existence of the Corporation shall be
perpetual.
Section 9. The amount of the authorized capital of the Corporation shall be
$2,000,000 and shall consist of 200,000 shares of common stock having a par
value of $10.00 per share.
Section 10. No director shall be personally liable to the Corporation or any of
its shareholders for damages for any breach of duty as a director; provided,
however, that the foregoing provision shall not eliminate or limit (i) the
liability of a director if a judgment or other final adjudication adverse to him
or her establishes that his or her acts or omissions were in bad faith or
involved intentional misconduct or were acts or omissions (a) which he or she
knew or reasonably should have known violated the New York Insurance Law or (b)
which violated a specific standard of care imposed on directors directly, and
not by reference, by a provision of the New York Insurance Law (or any
regulations promulgated thereunder) or (c) which constituted a knowing violation
of any other law, or establishes that he or she personally gained in fact a
financial profit or other advantage to which he or she was not legally entitled;
or (ii) the liability of a director for any act or omission prior to the
adoption of this provision by the shareholders of the Corporation.
IN WITNESS WHEREOF, we the undersigned Incorporators, have made and subscribed
this Certificate on the date and at the place hereinafter attested.
State of Connecticut
Donald R. Altieri County of Fairfield ss.
On the 17th day of December, 1992 before me personally came
Norse N. Blazzard Donald R. Altieri to me known and known to me to be the
individual incorporator specified in and who executed the foregoing instrument
and acknowledged to me that (s)he executed the same.
Susan M. Boyle
Stephen P. Clark Notary Public
Francis A. Goodhue III
Dean H. Goossen
Richard A. Hemmings
Robert Hopson
William C. Mair
Thomas A. Price
Br. Thomas J. Scanlan, F.S.C.
Robert B. Stack
Lorry J. Stensrud
IN WITNESS WHEREOF, we the undersigned Incorporators, have made and subscribed
this Certificate on the date and at the place hereinafter attested.
State of Connecticut
Donald R. Altieri County of Fairfield: ss.
On the 15 day of December, 1992 before me personally came
Norse N. Blazzard to me Norse N. Blazzard known and known to me to be the
individual incorporator specified in and who executed the foregoing instrument
and acknowledged to me that (s)he executed the same.
Susan M. Boyle
Stephen P. Clark Notary Public
Francis A. Goodhue III
Dean H. Goossen
Richard A. Hemmings
Robert Hopson
William C. Mair
Thomas A. Price
Br. Thomas J. Scanlan, F.S.C.
Robert B. Stack
Lorry J. Stensrud
IN WITNESS WHEREOF, we the undersigned Incorporators, have made and subscribed
this Certificate on the date and at the place hereinafter attested.
State of Connecticut
Donald R. Altieri County of Fairfield: ss. Stanford
On the 18th day of December, 1992 before me personally came Susan Boyle to
me
Norse N. Blazzard known and known to me to be the individual incorporator
specified in and who executed the foregoing instrument and acknowledged to me
that (s)he executed the same.
Susan M. Boyle
Stephen P. Clark Notary Public
Francis A. Goodhue III
Dean H. Goossen
Richard A. Hemmings
Robert Hopson
William C. Mair
Thomas A. Price
Br. Thomas J. Scanlan, F.S.C.
Robert B. Stack
Lorry J. Stensrud
IN WITNESS WHEREOF, we the undersigned Incorporators, have made and subscribed
this Certificate on the date and at the place hereinafter attested.
State of Illinois
Donald R. Altieri County of DuPage: ss.
On the 15th day of December, 1992 before me personally came
______________ to me Norse N. Blazzard known and known to me to be the
individual incorporator specified in and who executed the foregoing instrument
and acknowledged to me that (s)he executed the same.
Susan M. Boyle
Stephen P. Clark Notary Public
Francis A. Goodhue III
Dean H. Goossen
Richard A. Hemmings
Robert Hopson
William C. Mair
Thomas A. Price
Br. Thomas J. Scanlan, F.S.C.
Robert B. Stack
Lorry J. Stensrud
IN WITNESS WHEREOF, we the undersigned Incorporators, have made and subscribed
this Certificate on the date and at the place hereinafter attested.
State of New York
Donald R. Altieri County of New York: ss.
On the 17th day of December, 1992 before me personally came
Francis A. Goodhue III to me Norse N. Blazzard known and known to me to be the
individual incorporator specified in and who executed the foregoing instrument
and acknowledged to me that (s)he executed the same.
Susan M. Boyle
Stephen P. Clark Notary Public
Francis A. Goodhue III
Dean H. Goossen
Richard A. Hemmings
Robert Hopson
William C. Mair
Thomas A. Price
Br. Thomas J. Scanlan, F.S.C.
Robert B. Stack
Lorry J. Stensrud
IN WITNESS WHEREOF, we the undersigned Incorporators, have made and subscribed
this Certificate on the date and at the place hereinafter attested.
State of Illinois
Donald R. Altieri County of DuPage: ss.
On the 17th day of December, 1992 before me personally came
Dean H. Goossen to me Norse N. Blazzard known and known to me to be the
individual incorporator specified in and who executed the foregoing instrument
and acknowledged to me that (s)he executed the same.
Susan M. Boyle
Stephen P. Clark Notary Public
Francis A. Goodhue III
Dean H. Goossen
Richard A. Hemmings
Robert Hopson
William C. Mair
Thomas A. Price
Br. Thomas J. Scanlan, F.S.C.
Robert B. Stack
Lorry J. Stensrud
IN WITNESS WHEREOF, we the undersigned Incorporators, have made and subscribed
this Certificate on the date and at the place hereinafter attested.
State of Illinois
Donald R. Altieri County of Cook: ss.
On the 14th day of December, 1992 before me personally came
Richard A. Hemmings to me Norse N. Blazzard known and known to me to be the
individual incorporator specified in and who executed the foregoing instrument
and acknowledged to me that (s)he executed the same.
Susan M. Boyle
Stephen P. Clark Notary Public
Francis A. Goodhue III
Dean H. Goossen
Richard A. Hemmings
Robert Hopson
William C. Mair
Thomas A. Price
Br. Thomas J. Scanlan, F.S.C.
Robert B. Stack
Lorry J. Stensrud
IN WITNESS WHEREOF, we the undersigned Incorporators, have made and subscribed
this Certificate on the date and at the place hereinafter attested.
State of New York
Donald R. Altieri County of New York: ss.
On the 15th day of December, 1992 before me personally came
Thomas A. Price to me Norse N. Blazzard known and known to me to be the
individual incorporator specified in and who executed the foregoing instrument
and acknowledged to me that (s)he executed the same.
Susan M. Boyle
Stephen P. Clark Notary Public
Francis A. Goodhue III
Dean H. Goossen
Richard A. Hemmings
Robert Hopson
William C. Mair
Thomas A. Price
Br. Thomas J. Scanlan, F.S.C.
Robert B. Stack
Lorry J. Stensrud
IN WITNESS WHEREOF, we the undersigned Incorporators, have made and subscribed
this Certificate on the date and at the place hereinafter attested.
State of New York
Donald R. Altieri County of Bronx: ss.
On the 14th day of December, 1992 before me personally came
Br. Thomas J. Scanlan, F.S.C. to me Norse N. Blazzard known and known to me to
be the individual incorporator specified in and who executed the foregoing
instrument and acknowledged to me that (s)he executed the same.
Susan M. Boyle
Stephen P. Clark Notary Public
Francis A. Goodhue III
Dean H. Goossen
Richard A. Hemmings
Robert Hopson
William C. Mair
Thomas A. Price
Br. Thomas J. Scanlan, F.S.C.
Robert B. Stack
Lorry J. Stensrud
IN WITNESS WHEREOF, we the undersigned Incorporators, have made and subscribed
this Certificate on the date and at the place hereinafter attested.
State of Illinois
Donald R. Altieri County of DuPage: ss.
On the 15th day of December, 1992 before me personally came
Lorry J. Stensrud to me Norse N. Blazzard known and known to me to be the
individual incorporator specified in and who executed the foregoing instrument
and acknowledged to me that (s)he executed the same.
Susan M. Boyle
Stephen P. Clark Notary Public
Francis A. Goodhue III
Dean H. Goossen
Richard A. Hemmings
Robert Hopson
William C. Mair
Thomas A. Price
Br. Thomas J. Scanlan, F.S.C.
Robert B. Stack
Lorry J. Stensrud
AMENDED AND RESTATED BY-LAWS OF FIRST COVA LIFE INSURANCE COMPANY
ARTICLE I
CHARTER
Section I.1. Charter. The name and purpose of the Corporation shall be as set
forth in the Charter. These By-Laws, the powers of the Corporation and of its
directors and shareholders, and all matters concerning the conduct and
regulation of the business and affairs of the Corporation shall be subject to
such provisions in regard thereto, if any, as are set forth in the Charter. All
references in these By-Laws to the Charter shall mean the Charter as from time
to time amended and restated.
ARTICLE II
OFFICES
Section II.1. Offices. The principal office of the Corporation shall be located
in the County of Manhattan, State of New York. The Corporation, in addition to
its principal office, may also establish and maintain such other offices and
places of business, within or without the State of New York, as the Board of
Directors may from time to time determine.
ARTICLE III
SHAREHOLDERS
Section III.1. Annual Meeting. The annual meeting of the shareholders of the
Corporation for the election of directors and for the transaction of such other
business as may properly come before the meeting shall be held on the fourth
Tuesday in January of each year, at nine o'clock in the forenoon, or on such
other date or at such other time as may be fixed by the Board of Directors and
stated in the notice of the meeting. The place of the meeting shall be the
principal office of the Corporation, or such other place, within or without the
State of New York, as may be fixed by the Board of Directors and stated in the
notice of the meeting.
Section III.2. Special Meetings. A special meeting of the shareholders may be
called at any time by the President or the Board of Directors, and shall be
called by the President upon the written request of one-third of the
shareholders of record entitled to vote, such written request to state the
purpose or purposes of the meeting and to be delivered to the President. All
special meetings shall be held at the principal office of the Corporation, or at
such other place, within or without the State of New York, as may be designated
by the President, at a date and time to be fixed by the President, which date
shall not be later than thirty days from the date of the receipt of such written
request.
Section III.3. Notice of Meetings and Waiver. Except as otherwise required by
law, a written notice of each meeting of shareholders, whether annual or
special, stating the place, date and hour of the meeting, shall be given not
less than ten nor more than fifty days before the meeting to each shareholder of
record entitled to vote at such meeting. No notice of any meeting of
shareholders need be given to a shareholder if a written waiver of notice,
executed before, during or after the meeting by such shareholder or his attorney
thereunto duly authorized, is filed with the records of the meeting, or to any
shareholder who shall attend such meeting in person or by proxy otherwise than
for the express purpose of objecting, prior to the conclusion of the meeting, to
the transaction of any business because the meeting is not lawfully called or
convened, or to any shareholder with whom communication is at the time unlawful.
Section III.4. Quorum and Adjournment. Except as otherwise required by law, the
Charter or these By-Laws, at all meetings of shareholders, the holders of a
majority of the shares entitled to vote at such meeting, present in person or
represented by proxy, shall constitute a quorum for the transaction of business.
In the absence of a quorum, any officer entitled to preside over or act as
secretary of such meeting may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum be present. At any
such adjourned meeting at which a quorum may be present, any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days or a new record date
is fixed, notice of adjournment of a meeting of shareholders to another time or
place shall be given to each shareholder of record entitled to vote at such
meeting.
Section III.5. Voting. Shareholders entitled to vote shall have one vote for
each share of stock, and a proportionate vote for a fractional share of stock,
entitled to vote held by them of record according to the records of the
Corporation. The Corporation shall not, directly or indirectly, vote any share
of its own stock. The vote upon any question shall be by ballot whenever
requested by any person entitled to vote but, unless such a request is made,
voting may be conducted in any way approved by the meeting. In the absence of a
higher standard required by law, the Charter or these By-Laws, any matter
properly before a meeting of shareholders shall be decided by a majority of the
votes cast thereon.
Section III.6. Proxies. Shareholders entitled to vote at a meeting or to express
consent or dissent without a meeting may vote either in person or by proxy in
writing dated not more than six months before the meeting named therein, which
proxy shall be filed with the Secretary or other person responsible to record
the proceedings of the meeting before being voted. Unless otherwise specifically
limited by their terms, such proxies shall entitle the holders thereof to vote
at any adjournment of such meeting but shall not be valid after eleven months
from its date, unless the proxy provides for a longer period. The Secretary
shall determine the validity of any proxy submitted for use at any meeting.
Section III.7. Waiver of Irregularities. Unless otherwise provided by law, all
informalities and irregularities in calls, notices of meetings and in the manner
of voting, form a proxy, credentials and methods of ascertaining those present,
shall be deemed waived if no objection is made thereto at the meeting.
Section III.8. Action by Written Consent. So far as permitted by law, any action
required or permitted to be taken at any meeting of shareholders may be taken
without meeting if a written consent setting forth such action is signed by all
the shareholders entitled to vote thereon and such written consent is filed with
the records of the Corporation. Written consent thus given shall have the same
effect as a unanimous vote of shareholders.
ARTICLE IV
BOARD OF DIRECTORS
Section IV.1. Power of Board and Qualification of Directors. The business of the
Corporation shall be managed by its Board of Directors, which may exercise all
such powers of the Corporation and do all such lawful acts and things as are not
by law, the Charter or these By-Laws directed or required to be exercised or
done by the shareholders.
Each director shall be at least eighteen years of age. Not less than three of
the directors shall be residents of the State of New York, and a majority of the
directors shall be citizens and residents of the United States. At least
one-third and, in any event, not less than five, of the directors shall be
persons who are not officers or employees of the Corporation or of any entity
controlling, controlled by, or under common control with the Corporation and who
are not beneficial owners of a controlling interest in the voting stock of the
Corporation or any such entity. A director meeting the qualifications of the
immediately preceding sentence is hereinafter referred to as a "Non-Affiliated
Director." No director need be a shareholder.
Section IV.2. Number, Election and Term of Office. The Board of Directors shall
consist of not less than thirteen nor more than eighteen directors. The number
of directors shall be fixed by majority vote of the entire Board; provided that
no decrease in the number of directors shall shorten the term of any incumbent
director. Subject to the provisions of Section IV.8 hereof, the directors shall
be elected annually by the shareholders entitled to vote at the annual meeting
of shareholders, by a majority of votes at such election. Directors will be
elected by class so as to equalize as nearly as possible the number in each
class of members. There shall be three classes of members. The terms of office
of the directors initially classified shall be as follows: that of the first
class shall expire at the annual meeting of shareholders in 1996, - that of the
second class at the annual meeting of shareholders in 1997, and that of the
third class at the annual meeting of shareholders in 1998. Upon the expiration
of the term of any director, a director shall be elected for a three-year term
to replace the director whose term shall have expired. Each director elected at
an annual meeting shall hold office during the term for which he or she was
elected and until his or her successor shall have been elected and qualified or
until his or her earlier death, resignation or removal in the manner hereinafter
provided. In the case of a vacancy or vacancies by reason of an increase in the
number of directors, the director or directors elected pursuant to Section IV.8
hereof shall hold office until the next annual meeting of the shareholders. In
the case of vacancy or vacancies by reason of death, resignation, removal or
other than by reason of increase in the number of directors, the director or
directors elected pursuant to Section IV.8 hereof shall fill the unexpired
term(s) for which such director(s) was elected. No election of directors shall
be valid unless a notice of the election shall have been filed with the
Superintendent of Insurance of the State of New York at least ten days before
the election.
Section IV.3. Regular Meetings. A regular meeting of the Board of Directors for
the election of officers and for the transaction of such other business as may
properly come before the meeting shall be held without notice at the place where
the annual meeting of shareholders is held, immediately following such meeting,
or on such other date or at such other time and place as may be fixed by the
President and stated in the notice of the meeting. The Board of Directors by
resolution shall provide for the holding of three additional regular meetings,
with or without notice, and shall fix the times and places, within or without
the State of New York, at which such meetings shall be held. One regular meeting
shall be held in each calendar quarter.
Section IV.4. Special Meetings, Notice and Waiver. Special meetings of the Board
of Directors may be called by the President, and shall be called by the
President upon receipt of a written request of not less than three directors.
All special meetings shall be held at a date, time and place to be fixed by the
President, and the President shall direct the Secretary to give notice of each
special meeting to each director by mail at least five days before such meeting
is to be held or in person or by telephone, telegraph, or telecopier at least
two days before such meeting. Such notice shall state the date, time, place and
purposes of such meeting. Notice of a meeting need not be given to any director
if a written waiver of notice, executed by him or her before, during or after
the meeting, is filed with the records of the meeting.
Section IV.5. Quorum and Conference Call Meetings. A majority of the entire
Board of Directors, at least one of whom shall be a Non-Affiliated Director,
shall constitute a quorum for the transaction of business. When a quorum is
present at any meeting, a majority of the directors present may take any action
except as otherwise expressly required by law, the Charter or these By-Laws. In
the absence of a quorum, a majority of the directors present at the time and
place of any meeting, may adjourn such meeting from time to time until a quorum
be present. If by reason of one or more vacancies there is less than the minimum
number of directors, the Board of Directors shall have the power to function
legally prior to the filling of the vacancy; provided, however, that there shall
always be a quorum. Any one or more directors may participate in a regular or
special meeting of the Board by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting by such means shall
constitute presence in person at such meeting. Nonwithstanding the foregoing,
with respect to at least one of the regular meetings in each calendar year,
which meeting shall be designated by the Board of Directors, the quorum
requirements set forth in this Section may be met only if the requisite number
and category of directors are physically present at the place at which the
meeting is held.
Section IV.6. Chairman. The Board of Directors may elect, from among its
members, a Chairman. The Chairman of the Board, if one is elected, shall preside
at all meetings of the Board of Directors and shall have such other powers and
duties as may be granted or assigned to him or her from time to time by the
Board of Directors. If a Chairman of the Board is elected but is absent or
unable to preside at meetings of the Board of Directors, or if no Chairman is
elected, the President shall preside at such meetings.
Section IV.7. Resignation and Removal. Any director may resign at any time by
giving written notice of such resignation to either the Board of Directors, the
President or the Secretary. Unless otherwise specified therein, such resignation
shall take effect upon receipt thereof by the Board of Directors or by the
President or Secretary. Any director may be removed either with or without cause
at any time by the affirmative vote of the shareholders of record holding a
majority of the outstanding shares of the Corporation entitled to vote for the
election of directors, given at a meeting of the shareholders called for that
purpose, or by the holders of a majority of the outstanding shares entitled to
vote for the election of directors without holding a meeting or notice but by
merely presenting their majority to the Secretary of the Corporation in writing
for the removal of a director or directors without cause. Any director may be
removed with cause by a majority of the total number of directors constituting
the entire Board of Directors at a meeting of the Board of Directors.
Section IV.8. Vacancies. A vacancy in the Board of Directors arising by reasons
of death, resignation, removal (with or without cause), increase in the number
of directors, or otherwise, which may occur between annual meetings of the
shareholders of the Corporation may be filled by a majority vote of the
remaining directors, though less than a quorum. Any such vacancy may also be
filled by the shareholders entitled to vote for the election of directors at any
meeting held during the existence of such vacancy. Whenever any director shall
have resigned and a successor shall have been chosen pursuant to these By-Laws,
such successor shall not take office until ten days after written notice of his
or her election shall have been filed with the Superintendent of Insurance of
the State of New York or as otherwise required by law.
Section IV.9. Compensation. By resolution of the Board of Directors, each
director may be paid his or her expenses, if any, of attendance at each meeting
of the Board of Directors or a committee thereof and may be paid a stated salary
as director or a fixed sum for attendance at each such meeting, or both. Nothing
in these By-Laws contained shall prevent any director from serving the
Corporation in any other capacity and receiving compensation therefor. Section
IV.10. Action by Written Consent. So far as permitted by law, any action
required or permitted to be taken at any meeting of the Board of Directors may
be taken without a meeting if a written consent setting forth such action is
signed by all the directors entitled to vote thereon and such written consent is
filed with the records of the Corporation. Written consent thus given shall have
the same effect as a unanimous vote of directors.
ARTICLE V
COMMITTEES OF DIRECTORS
Section V.1. Committees. The Board of Directors, by the affirmative vote of the
majority of the entire Board, shall appoint from among its members an Audit,
Nominating and Evaluation Committee, which shall be comprised solely of
Non-Affiliated Directors, an Executive Committee, an Investment Committee and
such other committees as it may deem necessary. Each member of each such
committee shall continue in office during the pleasure of the Board or until he
or she shall cease to be a director.
Except to the extent a greater proportion is required by the provisions of this
Article V, not less than one-third of the members of each such committee shall
consist of Non-Affiliated Directors, at least one of whom shall be present to
constitute a quorum for the transaction of business. The presence, at any
meeting of a committee, of a majority of its members then in office, at least
one of whom is a Non-Affiliated Director, shall constitute a quorum for the
transaction of business. A majority of such quorum may decide any questions that
may come before such meeting. Any one or more members of a committee may
participate in a meeting of such committee by means of a conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and participation in a meeting by such means
shall constitute presence in person at such meeting. So far as permitted by law,
any action required or permitted to be taken at any meeting of any committee
appointed and established by the Board of Directors may be taken without a
meeting if a written consent setting forth such action is signed by all the
members of such committee entitled to vote thereon and such written consent is
filed with the records of the Corporation.
Section V.2. Executive Committee. The Board of Directors shall appoint an
Executive Committee consisting of not less than five directors, and may
designate as Chairman of the Executive Committee one of the members so
appointed. The Chairman of the Executive Committee shall preside at all meetings
of the Executive Committee at which he is present. The Executive Committee shall
keep a record of its proceedings and shall adopt its own rules of procedure. The
Executive Committee shall submit a written report of its activities to the Board
of Directors at the next meeting of the Board of Directors. Each director may
inspect and review, at any time during normal business hours, the minutes of the
meetings of the Executive Committee, and said minutes shall be retained by the
Secretary of the Corporation and made available to the Board of Directors at
each of its meetings.
Except as otherwise provided by law, the Charter or these By-Laws, all the
powers of the Board of Directors when not in session, may be vested, to the
extent from time to time determined by the Board of Directors, in the Executive
Committee. To the extent appropriate to carry out this provision, references in
these By-Laws to the Board of Directors shall be read to mean the Executive
Committee. The Executive Committee may authorize one or more officers, employees
or agents of the Corporation to carry out the exercise of its powers. The
Executive Committee shall have the power and authority to declare dividends and
to authorize the issuance of common stock. The Executive Committee shall not
have and may not exercise the following powers:
(1) To submit to the shareholders any action which by any applicable statute
requires shareholders' approval;
(2) To fill any vacancy in the Board of Directors or in any committee thereof;
(3) To fix the compensation of any director for serving on the Board or on any
committee thereof;
(4) To amend or repeal these By-Laws, or to adopt new By-Laws;
(5) To amend, alter or repeal any resolution of the Board of Directors which by
its terms provides that it shall not be amended or repealed.
Section V.3. Audit, Nominating and Evaluating Committee. The Board of Directors
shall appoint an Audit, Nominating and Evaluating Committee consisting of not
less than five directors, and may designate as Chairman of the Audit, Nominating
and Evaluating Committee one of the members so appointed. The Audit, Nominating
and Evaluation Committee shall consist solely of Non-Affiliated Directors. The
Chairman of the Audit, Nominating and Evaluation Committee shall preside at all
meetings of the Audit, Nominating and Evaluation Committee at which he or she is
present. The Audit, Nominating and Evaluation Committee shall keep a record of
its proceedings and shall adopt its own rules of procedure. The Audit,
Nominating and Evaluation Committee shall submit a report of its activities to
the Board of Directors at the next meeting of the Board of Directors. The Audit,
Nominating and Evaluation Committee shall have responsibility for: (1)
recommending the selection of independent certified public accountants; (2)
reviewing the Corporation's financial condition, the scope and results of the
independent audit and any internal audit; (3) nominating candidates for director
for election by shareholders; and (4) evaluating the performance of officers
who, pursuant to Section VI.1 of Article VI of these By-Laws, are principal
officers of the Corporation and recommending to the Board of Directors the
selection and compensation of such principal officers.
The Audit, Nominating and Evaluation Committee shall, to the extent empowered by
the Board, have and possess all of the rights and powers of the Board of
Directors, between meetings of the Board of Directors, to: (1) meet and discuss
with the representatives of any firm of certified public accountants, for
reviewing the Corporation's financial condition, the scope and results of the
independent audit and any internal audit; (2) to nominate candidates for
director for election by shareholders; and (3) to evaluate the performance of
officers who, pursuant to Section VI.1 of Article VI of these By-Laws, are
principal officers of the Corporation and to recommend to the Board of Directors
the selection and compensation of such principal officers. The Audit, Nominating
and Evaluation Committee shall, to the extent empowered by the Board, have and
possess all of the rights and powers of the Board of Directors, between meetings
of the Board of Directors, to meet and discuss with the representatives of any
firm of certified public accountants retained by the Corporation, at any time
and from time to time, whether before and/or after the preparation of the
year-end financial statements of the Corporation, the scope of the audit of such
firm with respect to any year, and to question such representatives with respect
thereto. In addition, the Audit, Nominating and Evaluation Committee shall have
the authority to meet with and question officers and employees of the
Corporation with respect to financial matters pertaining to the Corporation. The
Audit, Nominating and Evaluation Committee shall not have and may not exercise
any of the powers referred to in clauses (1) through (5), inclusive, of Section
V.2 hereof.
Section V.4. Investment Committee. The Board of Directors shall appoint an
Investment Committee consisting of not less than five directors, and may
designate as Chairman of the Investment Committee one of the members so
appointed. The Chairman of the Investment Committee shall preside at all
meetings of the Investment Committee at which he or she is present. The
Investment Committee shall keep a record of its proceedings and shall adopt its
own rules of procedure. The Investment Committee shall submit a report of its
activities to the Board of Directors at the next meeting of the Board of
Directors.
The Investment Committee shall have the power to invest the funds of the
Corporation in deposits with banks and insurance companies, the purchase and
acquisition of stocks, bonds, and other securities, in the name and in behalf of
the Corporation and to withdraw any such deposits and to sell and dispose of the
stocks, bonds and other securities owned by the Corporation, at such times and
upon such terms as it may deem wise and advantageous to the Corporation;
provided, however, that in any case where the investment of such funds in
stocks, bonds or other securities involves the active participation of the
Corporation in the management of the business represented by any such
securities, the Investment Committee shall not have the power to make any
investments or otherwise deal with such securities without the approval of the
Board of Directors. All actions of the Investment Committee shall be subject to
revision or alteration by the Board of Directors; provided, however, that rights
or acts of third parties shall not be affected by any such revision or
alteration.
ARTICLE VI
OFFICERS
Section VI.1. Number and Principal Officers. The officers of the Corporation
shall be a President, a Secretary, a Treasurer, and such other officers as may
be appointed in accordance with the provisions of Section VI.3 hereof. So far as
permitted by applicable law, any two or more offices may be held by the same
person, except that the President and the Secretary shall not be the same
person. The President, any Vice Presidents appointed or elected by the Board of
Directors, the Secretary and the Treasurer shall be principal officers of the
Corporation for purposes of Section V.3 of Article V of these By-Laws.
Section VI.2. Election, Term of Office and Qualifications. The President, the
Treasurer and the Secretary shall be elected annually by the directors at their
first meeting following the annual meeting of shareholders, by vote of a
majority of the Directors present and voting, and other officers, if any, may be
elected or appointed by the directors at said meeting or at any other time. The
President shall be and remain a director. No other officer need be a director.
Except as otherwise provided by law or by the Charter or by these By-Laws, the
President, the Treasurer and the Secretary shall hold office until the first
meeting of the directors following the next annual meeting of shareholders and
until their respective successors are chosen and qualified, or, in each case,
until he or she sooner dies, resigns or is removed, unless a shorter period
shall have been specified by the terms of his or her election or appointment.
Each agent, if any, shall retain his or her authority at the pleasure of the
directors.
Section VI.3. Other Officers. The Board of Directors from time to time may
appoint other officers or agents, including but not limited to one or more
Vice-Presidents, one or more assistant treasurers and one or more assistant
secretaries, each of whom shall hold office for such period, have such authority
and perform such duties as are provided in these By-Laws or as the Board of
Directors from time to time may determine. The Board of Directors may delegate
to any officer or committee the power to appoint any such other officers or
agents and to prescribe their respective authorities and duties.
Section VI.4. President. The President shall, subject to the control of the
Board of Directors, have general charge of the business, affairs and property of
the Corporation, and control over its several officers. The President shall do
and perform such other duties and may exercise such other powers as from time to
time may be assigned to him or her by these By-Laws or by the Board of
Directors.
Section VI.5. Treasurer. Subject to the order of the Board of Directors, the
Treasurer shall have supervision over the funds, securities, receipts and
disbursements of the Corporation and shall be the chief accounting officer of
the Corporation. He or she shall cause all monies and other valuable effects to
be deposited in the name and to the credit of the Corporation, in such banks or
trust companies or with such bankers or other depositories as shall be selected
by the Board of Directors or which he or she shall select pursuant to authority
conveyed upon him or her by the Board of Directors. He or she shall cause the
funds of the Corporation to be disbursed by checks or drafts upon the authorized
depositories of the Corporation and shall cause to be taken and preserved proper
vouchers for all monies disbursed. He and she shall cause to be kept correct
books of account of the business and transactions of the Corporation and shall
render to the President, the Board of Directors or the Executive Committee,
whenever requested, an account of the financial condition of the Corporation and
of his or her transactions as Treasurer. He or she shall be responsible for
keeping and maintaining the stock books and stock transfer books of the
Corporation. He or she shall be empowered, from time to time, to require of the
officers or agents of the Corporation reports or statements giving such
information as he or she may desire with respect to any and all financial
transactions of the Corporation, and shall have such other powers and duties as
from time to time may be assigned to him or her by these By-Laws or by the Board
of Directors or by the President. If required by the Board of Directors, he or
she shall give the Corporation a bond in such sum and with such surety or
sureties as shall be satisfactory to the Board for the faithful performance of
his or her duties.
Section VI.6. Secretary. The Secretary shall keep and record all the minutes of
the meetings of shareholders and the Board of Directors in books to be
maintained for that purpose, and shall perform like duties for committees of the
Board of Directors when required. He or she shall give notice to the
shareholders and the Board of Directors in accordance with the provisions of
these By-Laws or as required by statute. Except for those records for which the
Treasurer is responsible, the Secretary shall be responsible for the records of
the Corporation and the Board of Directors. He or she shall keep in safe custody
the seal of the Corporation and shall see that the seal is affixed to all
documents the execution of which, on behalf of the Corporation under its seal,
shall have been duly authorized. He or she shall see that all lists, books,
reports, statements and certificates and other documents and records required by
law to be kept or filed are properly kept or filed. He or she shall perform all
duties and shall have all power incident to the office of the Secretary and
shall perform such other duties and have such other powers as from time to time
may be assigned to him or her by these By-Laws or by the Board of Directors or
the President.
Section VI.7. Vice-Presidents. The Vice-Presidents, if any, in the order
designated by the Board of Directors or, lacking such designation, by the
President, shall in the absence or disability of the President perform the
duties and exercise the powers of the President and shall perform such other
duties as the Board of Directors shall prescribe.
Section VI.8. Resignation and Removal. Any officer may resign at any time by
giving written notice of such resignation to the Board of Directors or to the
President or the Secretary. Unless otherwise specified therein, such resignation
shall take effect upon receipt thereof by the Board of Directors, the President
or the Secretary. Any officer may be removed, either with or without cause, by
vote of a majority of the total number of directors constituting the entire
Board of Directors, at a special meeting of the Board of Directors called for
that purpose.
Section VI.9. Vacancies. A vacancy in any office because of death, resignation,
removal or any other cause shall be filled for the unexpired portion of the term
in the manner prescribed by these By-Laws for the regular election or
appointment to such office.
Section VI.10. Salaries. Subject to the provisions of Article V of these
By-Laws, the salaries or other compensation of the officers shall be fixed from
time to time by the Board of Directors and no officer shall be prevented from
receiving such salary or other compensation by reason of the fact that he or she
is also a director of the Corporation.
ARTICLE VII
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section VII.1. Indemnification of Directors and Officers. The Corporation may
indemnify any person made, or threatened to be made, a party to an action by or
in the right of the Corporation to procure a judgment in its favor by reason of
the fact that he or she, his or her testator, testatrix or intestate, is or was
a director or officer of the Corporation, or is or was serving at the request of
the Corporation as a director or officer of any other corporation of any type or
kind, domestic or foreign, of any partnership, joint venture, trust, employee
benefit plan or other enterprise, against amounts paid in settlement and
reasonable expenses, including attorneys' fees, actually and necessarily
incurred by him or her in connection with the defense or settlement of such
action, or in connection with an appeal therein, if such director or officer
acted, in good faith, for a purpose which he or she reasonably believed to be
in, or, in the case of service for any other corporation or any partnership,
joint venture, trust, employee benefit plan or other enterprise, not opposed to,
the best interests of the Corporation, except that no indemnification under this
Section shall be made in respect of (1) a threatened action, or a pending action
which is settled or is otherwise disposed of, or (2) any claim, issue or matter
as to which such person shall have been adjusted to be liable to the
Corporation, unless and only to the extent that the court in which the action
was brought, or, if no action was brought, any court of competent jurisdiction,
determines upon application that, in view of all the circumstances of the case,
the person is fairly and reasonably entitled to indemnity for such portion of
the settlement amount and expenses as the court deems proper.
The Corporation may indemnify any person made, or threatened to be made, a party
to an action or proceeding (other than one by or in the right of the Corporation
to procure a judgment in its favor), whether civil or criminal, including an
action by or in the right of any other corporation of any type or kind, domestic
or foreign, or any partnership, joint venture, trust, employee benefit plan or
other enterprise, which any director or officer of the Corporation served in any
capacity at the request of the Corporation, by reason of the fact that he or
she, his or her testator, testatrix or intestate, was a director or officer of
the Corporation, or served such other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise in any capacity, against
judgments, fines, amounts paid in settlement and reasonable expenses, including
attorneys' fees actually and necessarily incurred as a result of such action or
proceeding, or any appeal therein, if such director or officer acted, in good
faith, for a purpose which he or she reasonably believed to be in, or, in the
case of service for any other corporation or any partnership, joint venture,
trust, employee benefit plan or other enterprise, not opposed to, the best
interests of the Corporation and, in criminal actions or proceedings, in
addition, had no reasonable cause to believe that his or her conduct was
unlawful. The termination of any such civil or criminal action or proceeding by
judgment, settlement, conviction or upon a plea of nolo contendere, or its
equivalent, shall not in itself create a presumption that any such director or
officer did not act, in good faith, for a purpose which he or she reasonably
believed to be in, or, in the case of service for any other corporation or any
partnership, joint venture, trust, employee benefit plan or other enterprise,
not opposed to, the best interest of the Corporation or that he or she had
reasonable cause to believe that his or her conduct was unlawful. A person who
has been successful, on the merits or otherwise, in the defense of a civil or
criminal action or proceeding of the character described in the first two
paragraphs of this Article VII, shall be entitled to indemnification as
authorized in such paragraphs. Except as provided in the preceding sentence and
unless ordered by a court, any indemnification under such paragraphs shall be
made by the Corporation, only if authorized in the specific case:
(1) By the Board of Directors acting by a quorum consisting of directors who
are not parties to such action or proceeding upon a finding that the
director, officer or employee has met the standard of conduct set forth in
the first two paragraphs of this Article VII, as the case may be or
(2) If such a quorum is not obtainable with due diligence or, even if
obtainable, a quorum of disinterested directors so directs,
(a) By the Board of Directors upon the opinion in writing of independent
legal counsel that indemnification is proper in the circumstances
because the applicable standard of conduct set forth in the first two
paragraphs of this Article VII has been met by such director, officer
of employee, or
(b) By the shareholders upon a finding that the director, officer or
employee has met the applicable standard of conduct set forth in such
paragraphs. Expenses, including attorneys' fees, incurred in defending
a civil or criminal action or a proceeding may be paid by the
Corporation in advance of the final disposition of such action or
proceeding, if authorized in accordance with the preceding paragraph,
subject to repayment to the Corporation in case the person receiving
such advancement is ultimately found, under the procedure set forth in
this Article VII, not to be entitled to indemnification or, where
indemnification is granted, to the extent the expenses so advanced by
the Corporation exceed the indemnification to which he or she is
entitled.
Nothing herein shall affect the right of any person to be awarded
indemnification or, during the pendency of litigation, an allowance of expenses,
including attorneys' fees, by a court in accordance with law.
If any expenses or other amounts are paid by way of indemnification, otherwise
than by court order or action by the shareholders, the Corporation shall, not
later than the next annual meeting of shareholders unless such meeting is held
within three months from the date of such payment, and in any event, within
fifteen months from the date of such payment, mail to its shareholders of record
at the time entitled to vote for the election of directors a statement
specifiying the persons paid, the amounts paid, and the nature and status at the
time of such payment of the litigation or threatened litigation.
The Corporation shall have the power, in futherance of the provisions of this
Article VII, to apply for, purchase and maintain insurance of the type and in
such amounts as is or may hereafter be permitted by Section 726 of the Business
Corporation Law.
No payment of indemnification, advancement or allowance under Sections 721 to
726, inclusive, of the Business Corporation Law shall be made unless a notice
has been filed with the Superintendent of Insurance of the State of New York,
not less than thirty days prior to such payment, specifiying the persons to be
paid, the amounts to be paid, the manner in which such payment is authorized and
the nature and status, at the time of such notice, of the litigation or
threatened litigation.
ARTICLE VIII
CONFLICT OF INTEREST
Section VIII.1. Conflict of Interest. No director, officer or employee of the
Corporation shall have any position with or a substantial interest in any other
business enterprise operated for profit, the existence of which would conflict
or might reasonably be supposed to conflict with the proper performance of his
or her Corporation duties or responsibilities, or which might tend to affect his
or her independence of judgment with respect to transactions between the
Corporation and such other business enterprise, without full and complete
disclosure thereof to the Board of Directors. Each director, officer or employee
who has such a conflicting or possibly conflicting interest with respect to any
transactions which he or she knows is under consideration by the Board, is
required to make timely disclosure thereof so that it may be part of the
directors' consideration of the transaction.
The holding of any office or position in any corporation affiliated with the
Corporation or any corporation owning a majority of the stock of the Corporation
and carrying out the duties of any such office or position shall not be deemed
to be a conflicting interest; nor shall this Article VIII be construed to
prevent the receipt of any salaries or other benefits from any corporation
affiliated with the Corporation or from any corporation owning the majority of
the stock of the Corporation. The ownership of one percent or more of the issued
and outstanding stock of any corporation doing business with the Corporation or
competing with the Corporation shall be considered to be a "substantial interest
in any other business enterprise operated for profit"; provided, however, that
ownership of the stock or other securities of any corporation affiliated with
the Corporation or of any corporation owning a majority of the stock of the
Corporation shall not be considered to be a conflicting interest.
Section VIII.2. Gifts. None of the directors, officers and employees shall
accept gifts, gratuities or favors of any kind from any person, firm or
corporation doing business or seeking to do business with the Corporation under
circumstances from which it could reasonably be inferred that the purpose of the
gift, gratuity or favor could be to influence the said director, officer or
employee in the conduct of Corporation transactions with the donor or the
interest the donor is representing. Nothing in this Section VIII.2 shall be
construed to prohibit either the giving or the receiving of normal hospitality
of a social nature or the normal practice of gift exchange on a reciprocal basis
between persons having close personal relationships unrelated to business.
ARTICLE IX
EXECUTION OF INSTRUMENTS AND SEAL
Section IX.1. Execution of Instruments. Except as the Board of Directors may
generally or in particular cases authorize the execution thereof in some other
manner, all documents, instruments or writings of any nature made, accepted or
endorsed by the Corporation shall be signed, executed, verified, acknowledged
and delivered by the President, any Vice President, or the Secretary.
Section IX.2. Corporation Seal. The corporate seal shall be in the form of a
circle and shall bear the name of the Corporation, the year of its organization,
the words "Corporate Seal", and shall indicate its formation under the laws of
the State of New York; provided, that the form of such seal shall be subject to
alteration from time to time by the Board of Directors.
ARTICLE X
CAPITAL STOCK
Section X.1. Number of Shares and Par Value. The total number of shares and the
par value of all stock which the Corporation is authorized to issue shall be as
stated in the Charter.
Section X.2. Certificates of Shares. Each shareholder shall be entitled to a
certificate, signed by the President and the Treasurer or Secretary certifying
the number and class of the shares owned by him or her in the Corporation. Such
signatures may be facsimiles if the certificates are countersigned by a transfer
agent or registered by a registrar other than the Corporation or its employees.
Certificates for shares of the stock of the Corporation shall be in such form as
shall be approved by the Board of Directors, and the seal of the Corporation
shall be affixed thereto. There shall be entered upon the stock books of the
Corporation the number of each certificate issued, the name of the person owning
the shares represented thereby, the number of shares and the date thereof.
Section X.3. Lost, Stolen, or Destroyed Certificates. The Board of Directors may
direct a new certificate or certificates to be issued in place of any
certificate or certificates therefor issued by the Corporation alleged to have
been lost, stolen or destroyed, upon the making of an affidavit of that fact by
the owner claiming the certificate or certificates to be lost, stolen or
destroyed. When authorizing such issue of a new certificate or certificates, the
Board of Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or his or her legal representative, to advertise
the same in such manner as it shall require and/or to give the Corporation a
bond in such sum as it may direct as indemnity against any claim that may be
made against the Corporation with respect to the certificate or certificates
alleged to have been lost, stolen or destroyed.
Section X.4. Record Date. In order that the Corporation may determine the
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or to express consent to a corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall be not more than fifty days nor less than ten days before the date
of such meeting, nor more than fifty days prior to any other action. A
determination of shareholders of record entitled to notice of or to vote at a
meeting of shareholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting. Absent Board of Directors action, the record date shall be ten days
before the date of such meeting.
Section X.5. Stock Transfers. Transfers of stock shall be made only upon the
books of the Corporation, and only upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer.
ARTICLE XI
DIVIDENDS
Section XI.1. Dividends. Dividends upon the capital stock of the Corporation may
be declared by the Board of Directors at any regular or special meeting;
provided, however, that the Corporation shall not distribute any dividend to its
shareholders unless a notice of intention to declare such dividend has been
filed with the Superintendent of Insurance of the State of New York not less
than thirty days in advance of any such proposed declaration, nor if the
Superintendent of Insurance of the State of New York within thirty days after
such filing gives written notice to the Corporation of his or her disapproval of
such distribution, on the ground that he or she finds that the financial
condition of the Corporation does not warrant the distribution of such dividend.
ARTICLE XII
APPLICATIONS, POLICIES AND PREMIUMS
Section XII.1. Applications, Policies and Premiums. The President, or a duly
authorized Vice-President, shall prescribe and approve all forms of policies
issued by the Corporation, including all riders and provisions included in or
attached to such policies, and the forms of applications therefor. The
President, or a duly authorized Vice-President, shall fix all rates of premiums.
ARTICLE XIII
FISCAL YEAR
Section XIII.1. Fiscal Year. The fiscal year of the Corporation shall end on the
last day of December annually.
ARTICLE XIV
NOTICES
Section XIV.1. Notices. Whenever, under the provisions of law, the Charter or
these By-Laws, notice is required to be given to any director or shareholder, it
shall not be construed to mean personal notice unless specifically allowed, but
such notice may be given in writing, by certified or registered mail, return
receipt requested, addressed to such director or shareholder, at his or her
address as it appears on the records of the Corporation, with postage there
prepaid, and such notice shall be deemed to be given at the time when the same
shall be deposited in the United States mail.
ARTICLE XV
AMENDMENTS
Section XV.1. Amendments. These By-Laws may be amended, changed or repealed by
the Board of Directors, except that the Board may take no action which, by law
or the Charter, is required to be taken by the shareholders, or which excludes
or limits the right of a shareholder to vote on a matter. Any By-Law so amended,
changed or repealed by the directors may be further altered or amended or
reinstated by the shareholders in the manner provided below.
These By-Laws may be amended, changed or repealed by a majority vote of the
shareholders present at any annual meeting or at a special meeting called for
that purpose, provided that the notice of any such annual or special meeting
shall specify the subject matter of the proposed amendment, change or repeal
shall have been submitted in writing and filed with the Secretary at least five
days prior to such meeting.
December 30, 1999
Board of Directors
First Cova Life Insurance Company
120 Broadway
New York, NY 10271
Re: Opinion of Counsel - First Cova Variable Annuity Account One
------------------------------------------------------------
Gentlemen:
You have requested our Opinion of Counsel in connection with the filing with the
Securities and Exchange Commission of a Post-Effective Amendment to a
Registration Statement on Form N-4 for the Fixed and Variable Annuity Contracts
(the "Contracts") to be issued by First Cova Life Insurance Company and its
separate account, First Cova Variable Annuity Account One.
We have made such examination of the law and have examined such records and
documents as in our judgment are necessary or appropriate to enable us to render
the opinions expressed below.
We are of the following opinions:
1. First Cova Variable Annuity Account One is a Unit Investment Trust as that
term is defined in Section 4(2) of the Investment Company Act of 1940 (the
"Act"), and is currently registered with the Securities and Exchange
Commission, pursuant to Section 8(a) of the Act.
2. Upon the acceptance of purchase payments made by an Owner pursuant to a
Contract issued in accordance with the Prospectus contained in the
Registration Statement and upon compliance with applicable law, such an
Owner will have a legally-issued, fully paid, non-assessable contractual
interest under such Contract.
You may use this opinion letter, or a copy thereof, as an exhibit to the
Registration Statement.
We consent to the reference to our Firm under the caption "Legal Opinions"
contained in the Statement of Additional Information which forms a part of the
Registration Statement.
Sincerely,
BLAZZARD, GRODD & HASENAUER, P.C.
By: /s/LYNN KORMAN STONE
-----------------------------
Lynn Korman Stone
Consent of Independent Auditors
The Board of Directors
First Cova Life Insurance Company
We consent to the use of our reports on the statutory financial statements of
First Cova Life Insurance Company (the Company) dated April 23, 1999, and on the
financial statements of the sub-accounts of First Cova Variable Annuity Account
One dated March 1, 1999, and to the reference to our firm under the heading
"Experts" in the Statement of Additional Information, in the Post-Effective
Amendment No. 4 to the Registration Statement (Form N-4, No. 33-74174) of First
Cova Variable Annuity Account One.
/s/ KPMG LLP
KPMG LLP
Chicago, Illinois
December 30, 1999
<TABLE>
<CAPTION>
First Cova Variable Annuity Account One (33-74174)
Standard 1 Year Performance Data- Part I
As of 9/30/99
Date Transaction Amount Unit Unit Balance Transaction Unit
Value Before Units Balance
Transaction After
Transaction
Cova Series Trust Bond Debenture
<S> <C> <C> <C> <C> <C> <C>
9/30/1998 purchase 1,000.00 12.891451 - 77.5708 77.5708
9/30/1999 annual fee (1.03) 13.297243 77.5708 (0.0775) 77.4933
9/30/1999 surrender fee (63.00) 13.297243 77.4933 (4.7378) 72.7555
Cova Series Trust Large Cap Research
9/30/1998 purchase 1,000.00 9.906396 - 100.9449 100.9449
9/30/1999 annual fee (1.29) 12.785300 100.9449 (0.1009) 100.8440
9/30/1999 surrender fee (63.00) 12.785300 100.8440 (4.9275) 95.9165
Cova Series Trust Mid-Cap Value
9/30/1998 purchase 1,000.00 9.264557 - 107.9382 107.9382
9/30/1999 annual fee (1.15) 10.653132 107.9382 (0.1079) 107.8303
9/30/1999 surrender fee (63.00) 10.653132 107.8303 (5.9138) 101.9165
Cova Series Trust Quality Bond
9/30/1998 purchase 1,000.00 11.971923 - 83.5288 83.5288
9/30/1999 annual fee (0.97) 11.609210 83.5288 (0.0836) 83.4452
9/30/1999 surrender fee (63.00) 11.609210 83.4452 (5.4267) 78.0185
Cova Series Trust Small Cap Stock
9/30/1998 purchase 1,000.00 10.966415 - 91.1875 91.1875
9/30/1999 annual fee (1.21) 13.321805 91.1875 (0.0908) 91.0967
9/30/1999 surrender fee (63.00) 13.321805 91.0967 (4.7291) 86.3676
Cova Series Trust Large Cap Stock
9/30/1998 purchase 1,000.00 15.868321 - 63.0186 63.0186
9/30/1999 annual fee (1.27) 20.192583 63.0186 (0.0629) 62.9557
9/30/1999 surrender fee (63.00) 20.192583 62.9557 (3.1200) 59.8357
Cova Series Trust Select Equity
9/30/1998 purchase 1,000.00 14.016922 - 71.3423 71.3423
9/30/1999 annual fee (1.16) 16.297840 71.3423 (0.0712) 71.2711
9/30/1999 surrender fee (63.00) 16.297840 71.2711 (3.8655) 67.4056
Cova Series Trust International Equity
9/30/1998 purchase 1,000.00 10.865956 - 92.0306 92.0306
9/30/1999 annual fee (1.27) 13.853303 92.0306 (0.0917) 91.9389
9/30/1999 surrender fee (63.00) 13.853303 91.9389 (4.5477) 87.3912
</TABLE>
<TABLE>
<CAPTION>
Account Account
Value Value
Before After
Transaction Transaction
<S> <C>
- 1,000.00
1,031.48 1,030.45
1,030.45 967.45
- 1,000.00
1,290.61 1,289.32
1,289.32 1,226.32
- 1,000.00
1,149.88 1,148.73
1,148.73 1,085.73
- 1,000.00
969.70 968.73
968.73 905.73
- 1,000.00
1,214.78 1,213.57
1,213.57 1,150.57
- 1,000.00
1,272.51 1,271.24
1,271.24 1,208.24
- 1,000.00
1,162.73 1,161.56
1,161.56 1,098.57
- 1,000.00
1,274.93 1,273.66
1,273.66 1,210.66
</TABLE>
<TABLE>
<CAPTION>
First Cova Variable Annuity Account One (33-74174)
Standard 1Year Performance- Part I
As of 9/30/99
Sub-Account Total Account Unit Value Initial Inception Days Since
Return Value 9/30/1999 Investment Date Inception
Cova Series Trust Lord Abbett Growth and Income 1/8/1999 265
<S> <C> <C> <C> <C> <C> <C> <C>
Cova Series Trust Bond Debenture -3.26% 967.45 13.297243 1,000.00 5/15/1997 868
General American Capital Company Money Market 12/28/1998 276
Cova Series Trust Developing Growth 11/23/1998 311
Cova Series Trust Large Cap Research 22.63% 1,226.32 12.785300 1,000.00 3/3/1998 576
Cova Series Trust Mid-Cap Value 8.57% 1,085.73 10.653132 1,000.00 3/4/1998 575
Cova Series Trust Quality Bond -9.43% 905.73 11.609210 1,000.00 5/15/1997 868
Cova Series Trust Small Cap Stock 15.06% 1,150.57 13.321805 1,000.00 3/17/1997 927
Cova Series Trust Large Cap Stock 20.82% 1,208.24 20.192583 1,000.00 3/11/1997 933
Cova Series Trust Select Equity 9.86% 1,098.57 16.297840 1,000.00 3/11/1997 933
Cova Series Trust International Equity 21.07% 1,210.66 13.853303 1,000.00 3/11/1997 933
</TABLE>
<TABLE>
<CAPTION>
First Cova Variable Annuity Account One (33-74174)
Standard Since Inception Performance Data- Part I
As of 9/30/99
Date Transaction Amount Unit Unit Balance Transaction Unit
Value Before Units Balance
Transaction After
Transaction
Cova Series Trust Lord Abbett Growth and Income
<S> <C> <C> <C> <C> <C> <C>
1/8/1999 purchase 1,000.00 35.903751 - 27.8522 27.8522
9/30/1999 annual fee (1.00) 35.846306 27.8522 (0.0279) 27.8243
9/30/1999 surrender fee (70.00) 35.846306 27.8243 (1.9528) 25.8715
Cova Series Trust Bond Debenture
5/15/1997 purchase 1,000.00 11.739181 - 85.1848 85.1848
5/15/1998 annual fee (1.15) 13.492811 85.1848 (0.0852) 85.0996
5/17/1999 annual fee (1.16) 13.636712 85.0996 (0.0851) 85.0145
9/30/1999 annual fee (1.13) 13.297243 85.0996 (0.0850) 85.0146
9/30/1999 surrender fee (45.00) 13.297243 85.0146 (3.3842) 81.6304
General American Capital Company Money Market
12/28/1998 purchase 1,000.00 11.106100 - 90.0406 90.0406
9/30/1999 annual fee (1.03) 11.411979 90.0406 (0.0903) 89.9503
9/30/1999 surrender fee (70.00) 11.411979 89.9503 (6.1339) 83.8164
Cova Series Trust Developing Growth
11/23/1998 purchase 1,000.00 10.194480 - 98.0923 98.0923
9/30/1999 annual fee (1.17) 11.961510 98.0923 (0.0978) 97.9945
9/30/1999 surrender fee (70.00) 11.961510 97.9945 (5.8521) 92.1424
Cova Series Trust Large Cap Research
3/3/1998 purchase 1,000.00 10.948763 - 91.3345 91.3345
3/3/1999 annual fee (1.06) 11.646603 91.3345 (0.0910) 91.2435
9/30/1999 annual fee (1.17) 12.785300 91.2435 (0.0915) 91.1520
9/30/1999 surrender fee (63.00) 12.785300 91.1520 (4.9275) 86.2245
Cova Series Trust Mid-Cap Value
3/4/1998 purchase - 90.4994 90.4994
3/4/1999 annual fee (0.90) 9.949762 90.4994 (0.0905) 90.4089
9/30/1999 annual fee (0.96) 10.653132 90.4089 (0.0901) 90.3188
9/30/1999 surrender fee (63.00) 10.653132 90.3188 (5.9138) 84.4050
Cova Series Trust Quality Bond
5/15/1997 purchase 1,000.00 10.446609 - 95.7248 95.7248
5/15/1998 annual fee (1.09) 11.366225 95.7248 (0.0959) 95.6289
5/17/1999 annual fee (1.12) 11.686540 95.6289 (0.0958) 95.5331
9/30/1999 annual fee (1.11) 11.609210 95.5331 (0.0956) 95.4375
9/30/1999 surrender fee (45.00) 11.609210 95.4375 (3.8762) 91.5613
Cova Series Trust Small Cap Stock
3/17/1997 purchase 1,000.00 10.922871 - 91.5510 91.5510
3/17/1998 annual fee (1.35) 14.721789 91.5510 (0.0917) 91.4593
3/17/1999 annual fee (1.08) 11.819980 91.4593 (0.0914) 91.3679
9/30/1999 annual fee (1.22) 13.321805 91.3679 (0.0916) 91.2763
9/30/1999 surrender fee (45.00) 13.321805 91.2763 (3.3779) 87.8984
Cova Series Trust Large Cap Stock
3/11/1997 purchase 1,000.00 12.396556 - 80.6676 80.6676
3/11/1998 annual fee (1.33) 16.534692 80.6676 (0.0804) 80.5872
3/11/1999 annual fee (1.63) 20.221179 80.5872 (0.0806) 80.5066
9/30/1999 annual fee (1.63) 20.192583 80.5066 (0.0807) 80.4259
9/30/1999 surrender fee (45.00) 20.192583 80.4259 (2.2285) 78.1974
Cova Series Trust Select Equity
3/11/1997 purchase 1,000.00 11.761258 - 85.0249 85.0249
3/11/1998 annual fee (1.31) 15.372541 85.0249 (0.0852) 84.9397
3/11/1999 annual fee (1.47) 17.351972 84.9397 (0.0847) 84.8550
9/30/1999 annual fee (1.38) 16.297840 84.8550 (0.0847) 84.7703
9/30/1999 surrender fee (45.00) 16.297840 84.7703 (2.7611) 82.0092
Cova Series Trust International Equity
3/11/1997 purchase 1,000.00 11.144845 - 89.7276 89.7276
3/11/1998 annual fee (1.12) 12.474291 89.7276 (0.0898) 89.6378
3/11/1999 annual fee (1.15) 12.866528 89.6378 (0.0894) 89.5484
9/30/1999 annual fee (1.24) 13.853303 89.5484 (0.0895) 89.4589
9/30/1999 surrender fee (45.00) 13.853303 89.4589 (3.2483) 86.2106
</TABLE>
<TABLE>
<CAPTION>
Account Account
Value Value
Before After
Transaction Transaction
<S> <C>
- 1,000.00
998.40 997.40
997.40 927.40
- 1,000.00
1,149.38 1,148.23
1,160.48 1,159.32
1,131.59 1,130.46
1,130.46 1,085.46
- 1,000.00
1,027.54 1,026.51
1,026.51 956.51
- 1,000.00
1,173.33 1,172.16
1,172.16 1,102.16
- 1,000.00
1,063.74 1,062.68
1,166.58 1,165.41
1,165.41 1,102.41
- 1,000.00
900.45 899.55
963.14 962.18
962.18 899.18
- 1,000.00
1,088.03 1,086.94
1,117.57 1,116.45
1,109.06 1,107.95
1,107.95 1,062.95
- 1,000.00
1,347.79 1,346.44
1,081.05 1,079.97
1,217.19 1,215.97
1,215.97 1,170.97
- 1,000.00
1,333.81 1,332.48
1,629.57 1,627.94
1,625.64 1,624.01
1,624.01 1,579.01
- 1,000.00
1,307.05 1,305.74
1,473.87 1,472.40
1,382.95 1,381.57
1,381.57 1,336.57
- 1,000.00
1,119.29 1,118.17
1,153.33 1,152.18
1,240.54 1,239.30
1,239.30 1,194.30
</TABLE>
<TABLE>
<CAPTION>
First Cova Variable Annuity Account One (33-74174)
Standard Since Inception Performance- Part I
As of 9/30/99
Sub-Account Annualized Account Unit Value Initial Inception Days Since
Return Value 9/30/1999 Investment Date Inception
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cova Series Trust Lord Abbett Growth and Income (1) -7.26% 927.40 35.846306 1,000.00 1/8/1999 265
Cova Series Trust Bond Debenture 3.51% 1,085.46 13.297243 1,000.00 5/15/1997 868
General American Capital Company Money Market (1) -4.35% 956.51 11.411979 1,000.00 12/28/1998 276
Cova Series Trust Developing Growth (1) 10.22% 1,102.16 11.961510 1,000.00 11/23/1998 311
Cova Series Trust Large Cap Research 6.37% 1,102.41 12.785300 1,000.00 3/3/1998 576
Cova Series Trust Mid-Cap Value -6.52% 899.18 10.653132 1,000.00 3/4/1998 575
Cova Series Trust Quality Bond 2.60% 1,062.95 11.609210 1,000.00 5/15/1997 868
Cova Series Trust Small Cap Stock 6.41% 1,170.97 13.321805 1,000.00 3/17/1997 927
Cova Series Trust Large Cap Stock 19.57% 1,579.01 20.192583 1,000.00 3/11/1997 933
Cova Series Trust Select Equity 12.02% 1,336.57 16.297840 1,000.00 3/11/1997 933
Cova Series Trust International Equity 7.19% 1,194.30 13.853303 1,000.00 3/11/1997 933
<FN>
(1) Return is not annualized for periods less than 1 year.
</FN>
</TABLE>
<TABLE>
<CAPTION>
First Cova Variable Annuity Account One (33-74174)
Non-Standard 1 Year Performance Data- Part I
As of 9/30/99
Date Transaction Amount Unit Unit Balance Transaction Unit
Value Before Units Balance
Transaction After
Transaction
Cova Series Trust Bond Debenture
<S> <C> <C> <C> <C> <C> <C>
9/30/1998 purchase 1,000.00 12.891451 - 77.5708 77.5708
9/30/1999 annual fee 13.297243 77.5708 - 77.5708
9/30/1999 surrender fee 13.297243 77.5708 - 77.5708
Cova Series Trust Large Cap Research
9/30/1998 purchase 1,000.00 9.906396 - 100.9449 100.9449
9/30/1999 annual fee 12.785300 100.9449 - 100.9449
9/30/1999 surrender fee 12.785300 100.9449 - 100.9449
Cova Series Trust Mid-Cap Value
9/30/1998 purchase 1,000.00 9.264557 - 107.9382 107.9382
9/30/1999 annual fee 10.653132 107.9382 - 107.9382
9/30/1999 surrender fee 10.653132 107.9382 - 107.9382
Cova Series Trust Quality Bond
9/30/1998 purchase 1,000.00 11.971923 - 83.5288 83.5288
9/30/1999 annual fee 11.609210 83.5288 - 83.5288
9/30/1999 surrender fee 11.609210 83.5288 - 83.5288
Cova Series Trust Small Cap Stock
9/30/1998 purchase 1,000.00 10.966415 - 91.1875 91.1875
9/30/1999 annual fee 13.321805 91.1875 - 91.1875
9/30/1999 surrender fee 13.321805 91.1875 - 91.1875
Cova Series Trust Large Cap Stock
9/30/1998 purchase 1,000.00 15.868321 - 63.0186 63.0186
9/30/1999 annual fee 20.192583 63.0186 - 63.0186
9/30/1999 surrender fee 20.192583 63.0186 - 63.0186
Cova Series Trust Select Equity
9/30/1998 purchase 1,000.00 14.016922 - 71.3423 71.3423
9/30/1999 annual fee 16.297840 71.3423 - 71.3423
9/30/1999 surrender fee 16.297840 71.3423 - 71.3423
Cova Series Trust International Equity
9/30/1998 purchase 1,000.00 10.865956 - 92.0306 92.0306
9/30/1999 annual fee 13.853303 92.0306 - 92.0306
9/30/1999 surrender fee 13.853303 92.0306 - 92.0306
</TABLE>
<TABLE>
<CAPTION>
Account Account
Value Value
Before After
Transaction Transaction
<S> <C>
- 1,000.00
1,031.48 1,031.48
1,031.48 1,031.48
- 1,000.00
1,290.61 1,290.61
1,290.61 1,290.61
- 1,000.00
1,149.88 1,149.88
1,149.88 1,149.88
- 1,000.00
969.70 969.70
969.70 969.70
- 1,000.00
1,214.78 1,214.78
1,214.78 1,214.78
- 1,000.00
1,272.51 1,272.51
1,272.51 1,272.51
- 1,000.00
1,162.73 1,162.73
1,162.73 1,162.73
- 1,000.00
1,274.93 1,274.93
1,274.93 1,274.93
</TABLE>
<TABLE>
<CAPTION>
First Cova Variable Annuity Account One (33-74174)
Non-Standard 1Year Performance- Part I
As of 9/30/99
Sub-Account Total Account Unit Value Initial Inception Days Since
Return Value 9/30/1999 Investment Date Inception
Cova Series Trust Lord Abbett Growth and Income 1/8/1999 265
<S> <C> <C> <C> <C> <C> <C> <C>
Cova Series Trust Bond Debenture 3.15% 1,031.48 13.297243 1,000.00 5/15/1997 868
General American Capital Company Money Market 12/28/1998 276
Cova Series Trust Developing Growth 11/23/1998 311
Cova Series Trust Large Cap Research 29.06% 1,290.61 12.785300 1,000.00 3/3/1998 576
Cova Series Trust Mid-Cap Value 14.99% 1,149.88 10.653132 1,000.00 3/4/1998 575
Cova Series Trust Quality Bond -3.03% 969.70 11.609210 1,000.00 5/15/1997 868
Cova Series Trust Small Cap Stock 21.48% 1,214.78 13.321805 1,000.00 3/17/1997 927
Cova Series Trust Large Cap Stock 27.25% 1,272.51 20.192583 1,000.00 3/11/1997 933
Cova Series Trust Select Equity 16.27% 1,162.73 16.297840 1,000.00 3/11/1997 933
Cova Series Trust International Equity 27.49% 1,274.93 13.853303 1,000.00 3/11/1997 933
</TABLE>
<TABLE>
<CAPTION>
First Cova Variable Annuity Account One (33-74174)
Non-Standard Since Inception Performance Data- Part I
As of 9/30/99
Date Transaction Amount Unit Unit Balance Transaction Unit
Value Before Units Balance
Transaction After
Transaction
Cova Series Trust Lord Abbett Growth and Income
<S> <C> <C> <C> <C> <C> <C>
1/8/1999 purchase 1,000.00 35.903751 - 27.8522 27.8522
9/30/1999 annual fee 35.846306 27.8522 - 27.8522
9/30/1999 surrender fee 35.846306 27.8522 - 27.8522
Cova Series Trust Bond Debenture
5/15/1997 purchase 1,000.00 11.739181 - 85.1848 85.1848
5/15/1998 annual fee 13.492811 85.1848 - 85.1848
5/17/1999 annual fee 13.636712 85.1848 - 85.1848
9/30/1999 annual fee 13.297243 85.1848 - 85.1848
9/30/1999 surrender fee 13.297243 85.1848 - 85.1848
General American Capital Company Money Market
12/28/1998 purchase 1,000.00 11.106100 - 90.0406 90.0406
9/30/1999 annual fee 11.411979 90.0406 - 90.0406
9/30/1999 surrender fee 11.411979 90.0406 - 90.0406
Cova Series Trust Developing Growth
11/23/1998 purchase 1,000.00 10.194480 - 98.0923 98.0923
9/30/1999 annual fee 11.961510 98.0923 - 98.0923
9/30/1999 surrender fee 11.961510 98.0923 - 98.0923
Cova Series Trust Large Cap Research
3/3/1998 purchase 1,000.00 10.948763 - 91.3345 91.3345
3/3/1999 annual fee 11.646603 91.3345 - 91.3345
9/30/1999 annual fee 12.785300 91.3345 - 91.3345
9/30/1999 surrender fee 12.785300 91.3345 - 91.3345
Cova Series Trust Mid-Cap Value
3/4/1998 purchase 1,000.00 11.049791 - 90.4994 90.4994
3/4/1999 annual fee 9.949762 90.4994 - 90.4994
9/30/1999 annual fee 10.653132 90.4994 - 90.4994
9/30/1999 surrender fee 10.653132 90.4994 - 90.4994
Cova Series Trust Quality Bond
5/15/1997 purchase 1,000.00 10.446609 - 95.7248 95.7248
5/15/1998 annual fee 11.366225 95.7248 - 95.7248
5/17/1999 annual fee 11.686540 95.7248 - 95.7248
9/30/1999 annual fee 11.609210 95.7248 - 95.7248
9/30/1999 surrender fee 11.609210 95.7248 - 95.7248
Cova Series Trust Small Cap Stock
3/17/1997 purchase 1,000.00 10.922871 - 91.5510 91.5510
3/17/1998 annual fee 14.721789 91.5510 - 91.5510
3/17/1999 annual fee 11.819980 91.5510 - 91.5510
9/30/1999 annual fee 13.321805 91.5510 - 91.5510
9/30/1999 surrender fee 13.321805 91.5510 - 91.5510
Cova Series Trust Large Cap Stock
3/11/1997 purchase 1,000.00 12.396556 - 80.6676 80.6676
3/11/1998 annual fee 16.534692 80.6676 - 80.6676
3/11/1999 annual fee 20.221179 80.6676 - 80.6676
9/30/1999 annual fee 20.192583 80.6676 - 80.6676
9/30/1999 surrender fee 20.192583 80.6676 - 80.6676
Cova Series Trust Select Equity
3/11/1997 purchase 1,000.00 11.761258 - 85.0249 85.0249
3/11/1998 annual fee 15.372541 85.0249 - 85.0249
3/11/1999 annual fee 17.351972 85.0249 - 85.0249
9/30/1999 annual fee 16.297840 85.0249 - 85.0249
9/30/1999 surrender fee 16.297840 85.0249 - 85.0249
Cova Series Trust International Equity
3/11/1997 purchase 1,000.00 11.144845 - 89.7276 89.7276
3/11/1998 annual fee 12.474291 89.7276 - 89.7276
3/11/1999 annual fee 12.866528 89.7276 - 89.7276
9/30/1999 annual fee 13.853303 89.7276 - 89.7276
9/30/1999 surrender fee 13.853303 89.7276 - 89.7276
</TABLE>
<TABLE>
<CAPTION>
Account Account
Value Value
Before After
Transaction Transaction
<S> <C>
- 1,000.00
998.40 998.40
998.40 998.40
- 1,000.00
1,149.38 1,149.38
1,161.64 1,161.64
1,132.72 1,132.72
1,132.72 1,132.72
- 1,000.00
1,027.54 1,027.54
1,027.54 1,027.54
- 1,000.00
1,173.33 1,173.33
1,173.33 1,173.33
- 1,000.00
1,063.74 1,063.74
1,167.74 1,167.74
1,167.74 1,167.74
- 1,000.00
900.45 900.45
964.10 964.10
964.10 964.10
- 1,000.00
1,088.03 1,088.03
1,118.69 1,118.69
1,111.29 1,111.29
1,111.29 1,111.29
- 1,000.00
1,347.79 1,347.79
1,082.13 1,082.13
1,219.62 1,219.62
1,219.62 1,219.62
- 1,000.00
1,333.81 1,333.81
1,631.19 1,631.19
1,628.89 1,628.89
1,628.89 1,628.89
- 1,000.00
1,307.05 1,307.05
1,475.35 1,475.35
1,385.72 1,385.72
1,385.72 1,385.72
- 1,000.00
1,119.29 1,119.29
1,154.48 1,154.48
1,243.02 1,243.02
1,243.02 1,243.02
</TABLE>
<TABLE>
<CAPTION>
First Cova Variable Annuity Account One (33-74174)
Non-Standard Since Inception Performance- Part I
As of 9/30/99
Sub-Account Annualized Account Unit Value Initial Inception Days Since
Return Value 9/30/1999 Investment Date Inception
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cova Series Trust Lord Abbett Growth and Income (1) -0.16% 998.40 35.846306 1,000.00 1/8/1999 265
Cova Series Trust Bond Debenture 5.38% 1,132.72 13.297243 1,000.00 5/15/1997 868
General American Capital Company Money Market (1) 2.75% 1,027.54 11.411979 1,000.00 12/28/1998 276
Cova Series Trust Developing Growth (1) 17.33% 1,173.33 11.961510 1,000.00 11/23/1998 311
Cova Series Trust Large Cap Research 10.33% 1,167.74 12.785300 1,000.00 3/3/1998 576
Cova Series Trust Mid-Cap Value -2.29% 964.10 10.653132 1,000.00 3/4/1998 575
Cova Series Trust Quality Bond 4.54% 1,111.29 11.609210 1,000.00 5/15/1997 868
Cova Series Trust Small Cap Stock 8.13% 1,219.62 13.321805 1,000.00 3/17/1997 927
Cova Series Trust Large Cap Stock 21.03% 1,628.89 20.192583 1,000.00 3/11/1997 933
Cova Series Trust Select Equity 13.61% 1,385.72 16.297840 1,000.00 3/11/1997 933
Cova Series Trust International Equity 8.88% 1,243.02 13.853303 1,000.00 3/11/1997 933
<FN>
(1) Return is not annualized for periods less than 1 year.
</FN>
</TABLE>
