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PROSPECTUS
The American Separate Account No. 3
Variable Universal Life Insurance Policies
Issued by
The American Life Insurance Company of New York
320 Park Avenue
New York, New York 10022
This prospectus describes variable universal life insurance policies
("Policies") offered without a sales charge by The American Life Insurance
Company of New York ("American Life"), a stock life insurance company that is
an indirect, wholly-owned subsidiary of Mutual of America Life Insurance
Company ("Mutual of America"). The Policies are designed to provide life
insurance protection, together with flexibility in timing and amount of premium
payments and of insurance coverage. This flexibility allows the Policyowner to
pay premiums and adjust insurance coverage in light of current financial
circumstances and insurance needs. Each Policy provides for: (1) an Account
Value, which the Policyowner can access by partial withdrawals or surrender of
the Policy; (2) Policy Loans; and (3) an insurance benefit payable at the death
of the insured.
The Policies permit Account Values to be accumulated on a fixed basis, by
allocation to American Life's general account (the "General Account"), and/or
on a variable basis, by allocation to one or more sub-accounts ("Investment
Funds") of The American Separate Account No. 3 (the "Separate Account"). Assets
held in the General Account are credited with interest at a rate guaranteed to
be at least 3% on an annual basis. The assets of each currently available
Investment Fund are invested in shares of one of:
- --eight Funds of Mutual of America Investment Corporation: the Money Market,
All America, Aggressive Equity, Equity Index, Bond, Short-Term Bond, Mid-Term
Bond and Composite Funds; or
- --three Fidelity Investments (R) portfolios: the Equity-Income Portfolio of the
Variable Insurance Products Fund, and the Contrafund Portfolio and Asset
Manager Portfolio of the Variable Insurance Products Fund II (collectively
the "Fidelity Portfolios"); or
- --three Portfolios of Scudder Variable Life Investment Fund: the Scudder
Capital Growth, Scudder Bond and the Scudder International Portfolios, in
each case the Class A Shares; or
- --TCI Growth Fund of TCI Portfolios, Inc.; or
- --Calvert Responsibly Invested Balanced Portfolio of Acacia Capital
Corporation.
The value of a Policyowner's interest in the Separate Account will depend upon
the investment performance of the Investment Funds to which premiums have been
allocated or values transferred. AMERICAN LIFE DOES NOT GUARANTEE THE
INVESTMENT PERFORMANCE OF ANY INVESTMENT FUND OF THE SEPARATE ACCOUNT.
Accordingly, the Policyowner bears the entire investment risk for any amounts
allocated to the Separate Account.
Prospective purchasers should note that the purchase of a Policy as a
replacement for existing insurance may not be advisable.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
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Please read this Prospectus carefully for details about the Policies and retain
it for future reference. This Prospectus is not valid unless attached to the
current prospectuses for Mutual of America Investment Corporation, the Fidelity
Portfolios, Scudder Variable Life Investment Fund, TCI Growth Fund and Calvert
Responsibly Invested Balanced Portfolio, which you also should read and retain.
Dated: May 1, 1996
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TABLE OF CONTENTS
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DEFINITIONS............................ 3
INTRODUCTION AND SUMMARY............... 5
THE POLICIES........................... 6
Policy Issue.......................... 6
Right to Examine Policy.............. 7
Premium Payments...................... 7
Scheduled Premiums................... 7
Unscheduled Premiums................. 7
Limitation on Premiums............... 7
Allocation of Premiums............... 7
Investment Alternatives............... 8
Investment Funds..................... 8
General Account...................... 11
Account Value......................... 11
General Account Value................ 11
Investment Account Values............ 11
Transfers............................. 11
Access to Account Values.............. 12
Surrender............................ 12
Partial Withdrawals.................. 12
Policy Loans......................... 12
Accelerated Benefit.................. 13
Insurance Benefits.................... 14
Death Proceeds....................... 14
Basic Death Benefit.................. 14
Corridor Percentages................. 14
Face Amount Increases and Decreases.. 15
Change of Basic Death Benefit Plan... 15
Maturity Benefit..................... 15
Charges and Deductions................ 15
Cost of Insurance Charges............ 15
Administrative Charges............... 16
Mortality and Expense Risks Charges.. 16
Fees and Expenses of Underlying
Funds............................... 16
Accelerated Benefit Fee.............. 17
Premium Taxes........................ 17
Supplemental Insurance Benefits....... 17
Lapse and Reinstatement............... 18
AMERICAN LIFE AND SEPARATE ACCOUNT NO.
3..................................... 18
American Life......................... 18
The Separate Account.................. 19
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FEDERAL TAX CONSIDERATIONS.............. 19
Tax Status of the Policies............. 19
Tax Treatment of Policy Benefits....... 20
In General............................ 20
Distributions from Policies Not
Classified
as Modified Endowment Policies....... 20
Modified Endowment Contracts.......... 20
Distributions from Policies Classified
as Modified Endowment Contracts...... 21
Policy Loan Interest.................. 21
Investment in the Policy.............. 21
Estate Taxes.......................... 21
American Life's Taxes.................. 22
OTHER MATTERS........................... 22
Voting Rights.......................... 22
Transfers, Withdrawals and
Reallocations
by Telephone.......................... 22
Dollar Cost Averaging.................. 23
Notices and Reports to Policyowners.... 23
Distribution of the Policies........... 23
Proceeds Payment Options............... 23
Interest Payments..................... 24
Life Payments......................... 24
Payments for a Fixed Period........... 24
Payments of a Fixed Amount............ 24
Reservation of Right to Make Changes... 24
Changes to Separate Account........... 24
Changes in Policy Cost Factors........ 24
Deduction of Premium Taxes............ 24
Miscellaneous Policy Provisions........ 24
Limit on Right to Contest............. 24
Suicide Exclusion..................... 25
Misrepresentation or Misstatement of
Age or Sex........................... 25
Assignment............................ 25
Non-Participation..................... 25
Executive Officers and Directors....... 25
Legal Proceedings...................... 26
Legal Matters.......................... 26
Experts................................ 26
Additional Information................. 26
POLICY ILLUSTRATIONS.................... 27
FINANCIAL STATEMENTS.................... 40
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THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON.
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DEFINITIONS
Accelerated Benefit--An amount equal to a portion of the Death Proceeds,
payable prior to the death of the insured when the insured is determined to
have a terminal illness.
Account Value--An amount equal to the total current value, as of a given date,
of the assets in the General Account allocable to your Policy and the
Investment Accounts maintained for you under your Policy.
Basic Death Benefit--The primary component of the Death Proceeds payable upon
the death of the insured while the Policy is in effect. The Basic Death Benefit
is the greater of (i) either the Face Amount of the Policy or else the Face
Amount of the Policy plus the Account Value, depending on the Basic Death
Benefit plan you select as set forth on the Policy Specification Pages of your
Policy, and (ii) the Account Value times the applicable Corridor Percentage.
beneficiary--The person designated (in your application or in your latest
notification of change of beneficiary filed with us) to receive the Death
Proceeds payable upon the death of the insured while the Policy is in effect.
Business Day--Any day on which we are open for business and the New York Stock
Exchange is open for trading. For purposes of determining a Valid Transaction
Date, our Business Day will end as of the close of business of the New York
Stock Exchange (normally 4:00 p.m. Eastern Time).
Code--The Internal Revenue Code of 1986, as amended, or any corresponding
provisions of future United States revenue laws.
Corridor Percentage--A percentage established under the Code, based on the
insured's age, which is multiplied by the Account Value to establish the death
benefit amount required for the Policy to be treated as life insurance under
the Code.
Death Proceeds--An amount equal to the sum of the Basic Death Benefit and
amounts payable under any policy riders, minus the sum of any Policy Loans and
any unpaid monthly deductions, subject to any applicable adjustments for
misrepresentation, suicide or misstatement of age and/or sex.
Face Amount--The amount of life insurance coverage as set forth on the Policy
Specification Pages of your Policy. The Face Amount must be at least $25,000,
except that the minimum Face Amount is $5,000 for Policies issued with a
Payroll Deduction Rider.
Fidelity Portfolios--The Equity-Income Portfolio of Variable Insurance Products
Fund and the Asset Manager and Contrafund Portfolios of Variable Insurance
Products Fund II.
General Account--Part of the general assets of American Life to which you may
make allocations under your Policy. The portion of the General Account in which
Policy allocations are held is sometimes referred to as the Interest
Accumulation Account.
Guaranteed Rate of Interest--An effective annual rate of interest of 3%
credited to assets allocated to the General Account.
insured--The person on whose life the Policy is issued.
insured's age--The insured's age as of his or her last birthday preceding the
Policy Date. The Insured's "attained age" at any time is the age on the Policy
Date plus the number of successive twelve month periods elapsed since the
Policy Date.
Investment Account--An account maintained under a Policy to reflect the portion
of the Policy's Account Value allocated to an Investment Fund of the Separate
Account.
Investment Alternatives--The General Account and the Investment Funds of the
Separate Account.
Investment Fund--A sub-account of the Separate Account that invests in the
shares of an Underlying Fund Portfolio. There currently are sixteen Investment
Funds.
Issue Date--The date as of which the Policy is issued, as shown on the Policy
Specification Pages of your Policy.
Maturity Date--The Policy Anniversary on which the insured's attained age
equals 100.
Monthly Anniversary Day--The same day each month as the day on which the Policy
Date occurred.
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Payroll Deduction Program--A program established by an employer under which it
agrees with its participating employees to deduct on each pay date from such
employees' salaries the scheduled premium payments for Policies owned by the
employees, their spouses or minor children. The employer remits the premiums to
us.
Payroll Deduction Rider--A rider to a Policy issued under a Payroll Deduction
Program.
Policy Anniversary--The day each calendar year which is the anniversary of the
Policy Date.
Policy Date--The effective date of the Policy, as shown on the Policy
Specification Pages of your Policy, which will not be later than the 28th day
of any month. The Policy goes into effect as of 12:01 a.m. on the Policy Date.
Policy Loan--The outstanding principal and unpaid accrued interest for any loan
in effect under a Policy.
Policy Month--The period beginning on the Policy Date or any Monthly
Anniversary Day and ending immediately before the next Monthly Anniversary Day.
Policyowner--The person so designated on the Policy Specification Pages of your
Policy.
Policy Year--The twelve-month period beginning on (a) the Policy Date, or (b)
each Policy Anniversary.
premium class--The mortality risk class of the insured used in setting rates
used in computing cost of insurance charges.
Proceeds--The amount we will pay upon (a) surrender of the Policy ("Surrender
Proceeds"), (b) the death of the insured ("Death Proceeds") or (c) the Maturity
Date ("Maturity Proceeds"), which amount will vary depending on the type of
Proceeds being paid.
Processing Office--The office of American Life shown on the cover page of this
Prospectus (or such other location as we may announce by advance written notice
to Policyowners), a field office we have designated, or our toll-free telephone
facility, depending on the transaction requested.
scheduled premiums--Premiums to be paid in the amount and at the intervals
specified in your Policy.
Separate Account--The American Separate Account No. 3, a separate account of
American Life maintained under the laws of New York State and registered with
the Securities and Exchange Commission under the Investment Company Act of 1940
("1940 Act").
Underlying Fund--A mutual fund the shares of some or all of whose investment
portfolios are purchased by the Investment Funds of the Separate Account. The
Underlying Funds currently include: Mutual of America Investment Corporation,
Variable Insurance Products Fund, Variable Insurance Products Fund II, Scudder
Variable Life Investment Fund, TCI Portfolios, Inc., and Acacia Capital
Corporation.
Underlying Fund Portfolio--An investment portfolio of one of the Underlying
Funds whose shares are purchased by a corresponding Investment Fund.
unscheduled premiums--Premiums other than scheduled premiums that are permitted
to be made under your Policy.
Valid Transaction Date--The Business Day on which all of the requirements for
the completion of a transaction have been met. This includes receipt by us at
our Processing Office of all information, remittances, notices and papers
necessary to process the given transaction. If such requirements are met on a
day that is not a Business Day, or after the close of a Business Day, the Valid
Transaction Date will be the next following Business Day.
Valuation Day--For each Investment Fund of the Separate Account, each day the
New York Stock Exchange is open for business, or any day on which a share value
is declared by the applicable Underlying Fund for the shares in which the given
Investment Fund is invested, other than the Friday following Thanksgiving and,
for 1996, Friday July 5 and Thursday December 26.
Valuation Period--A period beginning at the close of business on each Valuation
Day and ending at the close of business on the next Valuation Day.
we, our, us, American Life--The American Life Insurance Company of New York,
its successors or assigns.
Written Request--A written request on an administrative form provided by us or
in a form otherwise acceptable to us.
you, your--The Policyowner, Policyowner's.
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INTRODUCTION AND SUMMARY
The Policy is a variable universal life insurance policy that enables you,
within certain limits, to accommodate your changing insurance needs throughout
your lifetime and changing economic conditions, within the framework of a
single insurance policy. The Policy provides for death benefits, account
values, policy loans, a variety of proceeds payment options and other features
traditionally associated with life insurance. The Policy also allows you
flexibility in the timing and amount of premium payments and the amount of
insurance coverage, subject to certain restrictions, and permits you to
allocate your premiums and transfer your Account Value among the Investment
Alternatives, features that distinguish it from traditional insurance.
Your Premium Payments. We will provide you with an amount of scheduled
premiums, based on the initial Face Amount you select. We will send you premium
notices for scheduled premiums unless you have preauthorized withdrawals from
your bank or other account or premiums are payable under a Payroll Deduction
Program. Within certain limits, you may adjust the timing and amount of your
premium payments to suit your individual circumstances by paying unscheduled
premiums, skipping scheduled premiums, or increasing or decreasing your
scheduled premium. Each scheduled or unscheduled premium must be at least $50,
except that there is no minimum scheduled premium for Policies with a Payroll
Deduction Rider. See "The Policies--Premium Payments."
Your Investment Alternatives. You may allocate your premium payments to our
General Account or to one or more Investment Funds. Amounts in the General
Account are part of our general assets, and we pay interest on such amounts at
an effective guaranteed minimum rate of 3% on an annual basis. Amounts held in
the Investment Funds of the Separate Account are invested in shares of
Underlying Fund Portfolios, and we do not guarantee the investment performance
of those Portfolios. See "The Policies--Investment Alternatives."
Premium Allocation Changes and Transfers of Account Value. You may at any time
change your instructions to us for allocations of future premium payments among
the General Account and the Investment Funds, and you may transfer your Account
Value among Investment Alternatives. See "The Policies--Premium Payments--
Allocation of Premiums" and "The Policies--Transfers."
Charges Applicable to all Policies. We make a monthly deduction from your
Account Value to pay the cost of insurance, our administrative charge and the
cost of riders to your Policy, if any. Cost of insurance rates will depend on
the age of the insured person at the beginning of the most recent Policy Year
and whether the insured is in a standard or substandard premium class. For
Policies without a Payroll Deduction Rider, cost of insurance rates will depend
on the sex of the insured. For Policies with a Payroll Deduction Rider, cost of
insurance rates are unisex. Our administrative charge is $2.00 per month, not
to exceed 1/12 of 1% of your Account Value in the related month. We may
increase the administrative charge, subject to applicable laws and regulations,
but the charge per month may not be greater than $10.00. We currently do not
deduct state premium taxes from your premium payments, but we reserve the right
to do so in the future. See "The Policies--Charges and Deductions."
Separate Account Charges. A daily charge is imposed on the net assets of each
Investment Fund to cover the administrative expenses and mortality and expense
risks we assume under the Policies for Account Values in Investment Funds. The
administrative expense charge, expense risk charge and mortality risk charge
are at the annual rates of .40%, .15% and .70%, respectively. We reserve the
right, upon advance notice to you and subject to applicable laws and
regulations, to increase the administrative charge to a maximum of .65%
annually. See "The Policies--Charges and Deductions."
Underlying Fund Portfolio Charges. Investment advisory fees and other expenses
are deducted from amounts invested by the Separate Account in the Underlying
Fund Portfolios. Each investment adviser of an Underlying Fund Portfolio
receives fees based on the average net assets of the Portfolio. Advisory fees
cannot be increased without the consent of the shareholders of the Portfolio.
The annual rates at which the Underlying Fund Portfolios paid advisory fees
ranged from .125% to 1.00% of average net assets during 1995, and their total
annual expenses ranged from .125% to 1.08% of average net assets during 1995.
See the attached prospectuses for a complete description of the fees and other
expenses paid by the Underlying Fund Portfolios.
Partial Withdrawals and Surrender of Policy. Before the Maturity Date and while
the insured is still living, you may make partial withdrawals of your Account
Value (minus any Policy Loans) or surrender the Policy and receive the
Surrender Proceeds due under the Policy. See "The Policies--Access to Account
Values--Surrender and--Partial Withdrawals."
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Your Right to Borrow From The Policy. You may borrow up to 95% of the portion
of your Account Value allocated to the General Account, minus any existing
Policy Loans. Each Policy Loan must be for at least $500, and you must assign
the Policy to us as collateral. We will charge you interest on the Policy Loan,
and we may change the interest rate from time to time. Policy Loans are
deducted from the amount otherwise due upon the surrender or maturity of the
Policy or the death of the insured. See "The Policies--Access to Account
Values--Policy Loans."
Basic Death Benefit Plans. You may choose as your Basic Death Benefit either a
Face Amount Plan, which generally provides a level death benefit, or a Face
Amount Plus Plan, which provides for a death benefit that varies as your
Account Value changes. Subject to certain restrictions, you may change from one
Plan to the other while the insured is still living. See "The Policies--
Insurance Benefits."
Supplemental Benefits. We may make available one or more supplemental insurance
benefits under your Policy, each by the addition of a rider for which you would
pay an additional monthly fee. See "The Policies--Supplemental Insurance
Benefits."
Accelerated Benefit. Depending on the laws of your state, an Accelerated
Benefit may be available to you under your Policy or by rider to the Policy.
Under this Benefit, you may receive a portion of the Death Proceeds that would
be payable if the insured died when the insured is determined to have less than
one year to live. You must pay an administrative fee of $250 at the time the
Accelerated Benefit is paid. See "The Policies--Access to Account Values--
Accelerated Benefit" and "The Policies--Charges and Deductions--Accelerated
Benefit Fee."
Your Initial Right to Return Policy. For a period of 10 days after you receive
your Policy (or a longer period as required by applicable state law for
Policies sold by direct mail or as replacement policies), you may return it and
have your premiums returned. See "The Policies--Policy Issue--Right to Examine
Policy."
Federal Tax Considerations. We believe that a Policy issued on a standard
premium class basis should meet the Code's definition of a life insurance
contract. There is less guidance available to determine whether a Policy issued
on a substandard premium class basis would satisfy that definition. Generally,
a Policyowner should not be deemed to be in constructive receipt of Account
Value under a Policy until there is a distribution from the Policy. Moreover,
death benefits payable under a Policy should be excludable from the gross
income of the beneficiary. As a result, the beneficiary generally should not be
taxed on these proceeds.
Under certain circumstances relating to cumulative premiums paid under a Policy
and the death benefit payable, a Policy may be treated as a special type of
life insurance called a "Modified Endowment Contract." If the Policy is a
Modified Endowment Contract, then all pre-death distributions, including Policy
Loans, will be treated first as a distribution of taxable income and then as a
return of investment in the Policy. In addition, prior to age 59 1/2, any such
distributions generally will be subject to a 10% penalty tax. If a premium is
credited that would cause a Policy to become a Modified Endowment Contract, we
will notify you that unless you request a refund of the excess premium the
Policy will become a Modified Endowment Contract. See "Federal Tax
Considerations."
If the Policy is not a Modified Endowment Contract, distributions generally
will be treated first as a return of investment in the Policy and then a
disbursement of taxable income. Moreover, Policy Loans will not be treated as
distributions. Finally, neither distributions nor Policy Loans under a Policy
that is not a Modified Endowment Contract are subject to the 10% penalty tax.
See "Federal Tax Considerations."
THE POLICIES
POLICY ISSUE
An applicant must submit to us a completed application for a Policy. American
Life will issue a Policy only if it has a Face Amount of at least $25,000,
except that the minimum Face Amount is $5,000 for Policies with a Payroll
Deduction Rider. American Life reserves the right to decline to issue a Policy
with a Face Amount of more than $1 million. An employee participating in a
Payroll Deduction Program may apply for insurance for his or her spouse and
minor children, or the spouse and minor children may apply as owners of
Policies. All Policies issued in connection with a Payroll Deduction Program
will have a Payroll Deduction Rider.
Before issuing a Policy, we will require evidence of insurability satisfactory
to us. For individuals age 50 or less applying for Policies with a Face Amount
of $100,000 or less, the information needed to determine insurability
ordinarily
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will be contained in the application. For Policies with larger Face Amounts
and/or applicants over age 50, a medical underwriting usually will be required.
We may use outside sources to verify information contained in the application.
For applications under a Payroll Deduction Program, we may use group
underwriting standards based on the nature of the employer's business and the
percentage of employees participating in the Program. Persons failing to meet
standard underwriting requirements nonetheless may be eligible to purchase a
Policy, but cost of insurance charges on such a Policy will be increased to
reflect the additional mortality risks assumed by American Life in insuring a
person who is a "substandard risk."
The Issue Date will be set forth on the Policy Specification Pages of your
Policy. The Policy will be issued upon our determination of the insurability
and rating class of the person to be insured and our approval of the
application. The Policy generally will be effective on the date our
underwriting requirements have been met and we receive the first scheduled
premium payment.
Right to Examine Policy. You have a right to examine the Policy. If, for any
reason, you are not satisfied with the Policy, you may cancel it by returning
it to us within 10 days after you receive it, along with a written request for
cancellation. Upon such cancellation, we will refund any premiums that were
paid on the Policy. Some states may require us to provide you with a longer
period (up to 30 days) to examine the Policy if you purchased the Policy in
response to a direct mailing or the Policy is replacing another life insurance
policy.
PREMIUM PAYMENTS
Scheduled Premiums. For your convenience, we will specify a "scheduled premium"
of at least $50 to be paid at intervals you select in your application and will
send you notices of when such scheduled premiums should be paid, except that
notices will not be sent if you have preauthorized withdrawals from your bank
or other account to pay scheduled premiums. For Policies with a Payroll
Deduction Rider there is no minimum scheduled premium, and scheduled premiums
in the amount specified by the employee for all Policies owned by the employee
and, if applicable, owned by the employee's spouse and minor children, will be
deducted on each pay date without notice of upcoming payments. For Policies
with a Payroll Deduction Rider, from the date the employee through which the
Policies were purchased is no longer participating in a Payroll Deduction
Program, we will require scheduled premiums to be paid not more frequently than
monthly and will send notices of when such scheduled premiums should be paid,
unless payment has been preauthorized. We will advise you prior to Policy
issuance whether or not the payment of proposed scheduled premiums for your
Policy would cause the Policy to be a Modified Endowment Contract. See "Federal
Tax Considerations".
You ordinarily may change the amount or interval of your scheduled premiums at
any time. However, scheduled premiums may not be decreased to less than the
applicable minimum. Evidence of insurability will be required for an increase
in scheduled premiums when an increase in the scheduled premium would increase
your Policy's Basic Death Benefit. See "Insurance Benefits" below.
Failure to pay one or more scheduled premiums will not necessarily cause your
Policy to lapse; timely payment of all scheduled premiums will not assure that
your Policy will continue in force. Whether your Policy continues in force or
lapses does not depend on whether scheduled premiums have been made, but rather
on whether, on each Monthly Anniversary Day, your Account Value (which will
vary with the performance of your Investment Accounts) is sufficient to permit
the deduction of all charges due on that day. See "Lapse and Reinstatement"
below. Scheduled premiums are permitted to be paid even if the payment would
increase the Basic Death Benefit as a result of the Corridor Percentages
described below. See "Insurance Benefits."
Unscheduled Premiums. You ordinarily may pay unscheduled premiums of at least
$50 at any time. However, unscheduled premiums are limited to $10,000 in a
given Policy Year, and evidence of insurability will be required if the
unscheduled premium would increase the Policy's Basic Death Benefit. See
"Insurance Benefits" below.
Limitation on Premiums. Premium payments, or any portion thereof, (whether
scheduled or unscheduled) that would cause your Policy to lose its status as a
life insurance policy under the Code will be refused and returned to you. See
"Federal Tax Considerations".
Allocation of Premiums. You may designate the portion of your premiums to be
allocated to any of the Investment Funds or to the General Account. Your
allocation instructions must be expressed as a percentage of the total premium,
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using any whole percentage up to 100%. The total of such allocation percentages
at any one time must equal 100% of the premium then being paid. Premiums are
credited as of the Valid Transaction Date.
You may at any time change how premiums are allocated under your Policy by
sending a Written Request to our Processing Office or by telephone request. See
"Other Matters--Transfers, Withdrawals and Reallocations by Telephone." A
request to change your allocation instructions must conform to the requirements
for initial allocations. No change in allocation will be effective until we
have received and had the opportunity to act on your request for change.
Premiums paid on or after the effective date of the change will be allocated in
the manner requested.
INVESTMENT ALTERNATIVES
You may allocate your Policy's Account Value to or among the General Account or
any of the Investment Funds.
Investment Funds. Any portion of Account Value allocated to an Investment Fund
of the Separate Account is not guaranteed, but rather will vary in value with
the investment performance of the Underlying Fund Portfolio whose shares are
held by that Investment Fund. Currently there are sixteen Investment Funds,
each corresponding to a different Underlying Fund Portfolio. At the date of
this Prospectus, allocation of premiums to certain of the Investment Funds
(including the Funds that correspond to the Fidelity Portfolios) may not,
because certain pending state insurance department approvals have not been
received, be made by Policyowners in certain states. More detailed information
about the Underlying Fund Portfolios, including risks, charges and expenses,
may be found in the current prospectuses for Mutual of America Investment
Corporation (the "Investment Corporation"), Variable Insurance Products Fund
("Fidelity VIP"), Variable Insurance Products Fund II ("Fidelity VIP II"),
Scudder Variable Life Investment Fund Class A Shares ("Scudder"), the TCI
Growth Fund of TCI Portfolios, Inc. ("TCI"), and the Calvert Responsibly
Invested Balanced Portfolio of Acacia Capital Corporation ("Acacia"), which are
attached to this Prospectus. Each applicable prospectus should be read for a
complete evaluation of the Investment Alternatives. The following is a summary
description of each Underlying Fund Portfolio:
INVESTMENT CORPORATION MONEY MARKET FUND
The investment objective of the Money Market Fund is the realization of high
current income to the extent consistent with the maintenance of liquidity,
investment quality and stability of capital. The Fund invests only in money
market instruments and other short-term debt securities. An investment in the
Fund is neither insured nor guaranteed by the United States Government.
INVESTMENT CORPORATION ALL AMERICA FUND
The investment objective for approximately 60% of the assets of the All America
Fund (the "Indexed Assets") is to provide investment results that to the extent
practical correspond to the price and yield performance of publicly traded
common stocks in the aggregate, as represented by the Standard & Poor's
Composite Index of 500 Stocks (the "S&P 500 Index"). The Indexed Assets are
invested in the same manner as the Equity Index Fund (see below).
The investment objective for the remaining approximately 40% of the assets (the
"Active Assets") is to achieve a high level of total return, through both
appreciation of capital and, to a lesser extent, current income, by means of a
diversified portfolio of securities that may include common stocks, securities
convertible into common stocks, bonds and money market instruments. The Active
Assets are invested by three subadvisers and Mutual of America Capital
Management Corporation ("Capital Management"). Capital Management allocates the
Active Assets to maintain, to the extent practicable under current market
conditions, approximately equal amounts among the subadvisers and the Adviser.
See "Charges and Deductions--Fees and Expenses of Underlying Funds."
INVESTMENT CORPORATION AGGRESSIVE EQUITY FUND
The Aggressive Equity Fund is divided by Capital Management into two segments
so as to utilize two investment styles.
The investment objective for approximately 50% of the assets of the Fund (the
"Aggressive Growth Portfolio") is to achieve capital appreciation by investing
in companies believed to possess above-average growth potential. Growth can be
in the areas of earnings or gross sales which can be measured in either dollars
or in unit volume. Growth potential is often sought in smaller, less well-known
companies in new and emerging areas of the economy, but may also be found in
large companies in mature or declining industries that have been revitalized
and hold a strong industry or market position. See "Charges and Deductions--
Fees and Expenses of Underlying Funds."
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The investment objective for the other approximately 50% of the assets of the
Fund (the "Aggressive Value Portfolio") is to achieve capital appreciation by
investing in companies believed to possess valuable assets or whose securities
are undervalued in the marketplace in relation to factors such as the company's
assets, earnings, or growth potential.
INVESTMENT CORPORATION EQUITY INDEX FUND
The investment objective of the Equity Index Fund is to provide investment
results to the extent practical that correspond to the price and yield
performance of publicly traded common stocks in the aggregate, as represented
by the S&P 500 Index.
INVESTMENT CORPORATION BOND FUND
The primary investment objective of the Bond Fund is to provide as high a level
of current income over time as is believed to be consistent with prudent
investment risk. A secondary objective is preservation of capital. The assets
of the Fund will consist primarily of publicly traded debt securities, such as
bonds, notes, debentures and equipment trust certificates. The Fund generally
will invest primarily in securities rated in the four highest categories by a
nationally recognized rating service or in instruments of comparable quality.
The Fund also may invest to a limited extent in lower rated or unrated
securities, and these may be subject to greater market and financial risk than
higher quality (lower yield) issues.
INVESTMENT CORPORATION SHORT-TERM BOND FUND
The primary investment objective of the Short-Term Bond Fund is to provide as
high a level of current income over time as is believed to be consistent with
prudent investment risk. A secondary objective is preservation of capital. The
assets of the Fund will consist primarily of publicly-traded debt securities,
such as bonds, notes, debentures and equipment trust certificates, which will
produce a portfolio with an average maturity of one to three years. The Fund
generally will invest primarily in securities rated in the four highest
categories by a nationally recognized rating service or in instruments of
comparable quality. The Fund may also invest to a limited extent in lower rated
or unrated securities, and these may be subject to greater market and financial
risk than higher quality (lower yield) issues.
INVESTMENT CORPORATION MID-TERM BOND FUND
The primary investment objective of the Mid-Term Bond Fund is to provide as
high a level of current income over time as is believed to be consistent with
prudent investment risk. A secondary objective is preservation of capital. The
assets of the Fund will consist primarily of publicly-traded debt securities,
such as bonds, notes, debentures and equipment trust certificates which will
produce a portfolio with an average maturity of three to seven years. The Fund
generally will invest primarily in securities rated in the four highest
categories by a nationally recognized rating service or in instruments of
comparable quality. The Fund may also invest to a limited extent in lower rated
or unrated securities, and these may be subject to greater market and financial
risk than higher quality (lower yield) issues.
INVESTMENT CORPORATION COMPOSITE FUND
The investment objective of the Composite Fund is to achieve as high a total
rate of return, through both appreciation of capital and current income, as is
consistent with prudent investment risk by means of a diversified portfolio of
publicly traded common stocks, publicly traded debt securities and money market
instruments. The Fund will seek to achieve long term growth of its capital and
increasing income by investments in common stock and other equity type
securities, and a high level of current income through investments in publicly
traded debt securities and money market instruments.
FIDELITY VIP EQUITY-INCOME PORTFOLIO
Equity-Income Portfolio seeks reasonable income by investing primarily in
income-producing equity securities. In choosing these securities, the Portfolio
will also consider the potential for capital appreciation. The Portfolio's goal
is to achieve a yield which exceeds the composite yield on the securities
comprising the S&P 500 Index.
FIDELITY VIP II CONTRAFUND PORTFOLIO
Contrafund Portfolio is a growth fund. It seeks to increase the value of an
investment in the Portfolio over the long term by investing mainly in
securities of companies that are undervalued or out-of-favor. These securities
may be issued by domestic or foreign companies and many may not be well known.
The Portfolio usually invests primarily in common
9
<PAGE>
stock and securities convertible into common stock, but it has the flexibility
to invest in any type of security that may produce capital appreciation.
FIDELITY VIP II ASSET MANAGER PORTFOLIO
Asset Manager Portfolio seeks high total return with reduced risk over the
long-term by allocating its assets among domestic and foreign stocks, bonds and
short-term fixed-income instruments. The Portfolio's adviser will normally
allocate the Portfolio's assets among the three asset classes within the
following investment parameters: 0-70% in short-term instruments; 20-60% in
bonds; and 10-60% in stocks. The expected "neutral mix", which the Portfolio's
adviser would expect over the long-term, is 20% in short-term instruments, 40%
in bonds and 40% in stocks.
SCUDDER CAPITAL GROWTH PORTFOLIO CLASS A SHARES
Scudder Capital Growth Portfolio seeks to maximize long-term capital growth
through a broad and flexible investment program. The Portfolio invests in
marketable securities, principally common stocks and, consistent with its
objective of long-term capital growth, preferred stocks. However, in order to
reduce risk, as market or economic conditions periodically warrant, the
Portfolio may also invest up to 25% of its assets in short-term debt
instruments.
SCUDDER BOND PORTFOLIO CLASS A SHARES
Scudder Bond Portfolio pursues a policy of investing for a high level of income
consistent with a high quality portfolio of securities. Under normal
circumstances, the Portfolio invests at least 65% of its assets in bonds,
including United States Government, corporate and other notes and bonds paying
high current income. Not less than 80% of the debt obligations in which the
Portfolio invests will be rated, at the time of purchase, within the three
highest categories by a nationally recognized rating service or in instruments
of comparable quality. The Portfolio may also invest to a limited extent in
lower rated securities, and these may be subject to greater market and
financial risk than higher quality (lower yield) issues.
SCUDDER INTERNATIONAL PORTFOLIO CLASS A SHARES
Scudder International Portfolio seeks long-term growth of capital primarily
through diversified holdings of marketable foreign equity investments. The
Portfolio invests primarily in equity securities of established companies which
do business primarily outside the United States and which are listed on foreign
exchanges. Investing in foreign securities may involve a greater degree of risk
than investing in domestic securities.
TCI GROWTH FUND
TCI Growth Fund seeks capital growth by investing primarily in common stocks
(including securities convertible into common stock). The Fund may purchase
securities only of companies that have a record of at least three years'
continuous operation and such securities must enjoy a fair degree of
marketability. All securities must be listed on major stock exchanges or traded
over-the-counter.
CALVERT RESPONSIBLY INVESTED BALANCED PORTFOLIO
Calvert Responsibly Invested Balanced Portfolio seeks to achieve a total return
above the rate of inflation through an actively managed diversified portfolio
of common and preferred stocks, bonds and money market instruments selected
with a concern for the social impact of each investment. Prior to May 1, 1995,
the Portfolio was known as the Calvert Socially Responsible Series.
Shared Funding Arrangements. Shares of the Fidelity VIP Equity-Income
Portfolio, Fidelity VIP II Contrafund and Asset Manager Portfolios, Scudder
Capital Growth, Bond and International Portfolios, Class A Shares, the TCI
Growth Fund and the Calvert Responsibly Invested Balanced Portfolio (together,
the "Shared Funds") currently are available to the separate accounts of a
number of insurance companies. The Board of Directors of each Shared Fund is
responsible for monitoring that Fund for the existence of any material
irreconcilable conflict between the interests of the policyowners of all
separate accounts investing in the Fund and determining what action, if any,
should be taken in response. If we believe that a Shared Fund's response to any
of those events insufficiently protects our Policyowners, we will take
appropriate action. If any material irreconcilable conflict arises,the
Investment Alternatives may be modified or reduced. See "Charter--FMR and its
Affiliates" in the Fidelity Portfolios prospectus, "Investment Concept of the
Fund" in the
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Scudder Variable Life Investment Fund prospectus, "Shareholders of TCI
Portfolios" in the TCI Growth Fund prospectus, and "Purchase and Redemption of
Shares" in the Calvert Responsibly Invested Balanced Portfolio prospectus for a
further discussion of the risks associated with the offering of Shared Fund
shares to our Separate Account and the separate accounts of other insurance
companies.
General Account. Any portion of Account Value allocated to the General Account
is credited with interest at a rate we declare from time to time. The current
rate will be shown in your initial Policy Specification Pages, and we will send
you notice when we change the current rate. The Guaranteed Rate of Interest is
the minimum interest rate we will pay. Interest is credited daily and
compounded annually. The interest rate may be different for the portions of the
General Account representing borrowed and unborrowed amounts under your Policy.
See "The Policies--Access to Account Values--Policy Loans".
Premiums allocated and transfers made to the General Account become part of the
general assets of American Life, which support our insurance and annuity
obligations. Because of exemptive and exclusionary provisions, interests in our
General Account have not been registered under the Securities Act of 1933
("1933 Act") nor is the General Account registered as an investment company
under the 1940 Act. Accordingly, neither the General Account nor any interest
therein is subject generally to the provisions of the 1933 or 1940 Acts, and we
have been advised that the staff of the Commission has not reviewed the
disclosures in this Prospectus which relate to the General Account. Disclosures
regarding the fixed portion of the Policies and the General Account, however,
may be subject to certain generally applicable provisions of the Federal
securities laws relating to the accuracy and completeness of statements made in
prospectuses.
ACCOUNT VALUE
The Account Value of your Policy at any time is your current value in the
General Account plus the current value of the Investment Accounts maintained
for you under your Policy. When you allocate amounts to an Investment Fund, we
will credit the appropriate Investment Account of your Policy with
"Accumulation Units" of that Investment Fund. The value of those Accumulation
Units reflects the value of the Underlying Fund Portfolio shares held by that
Investment Fund and the deduction each Valuation Day of administrative,
mortality risk and expense risk charges at an aggregate annual rate of 1.25%.
See "Charges and Deductions" below.
General Account Value. The current value of your allocations to the General
Account is equal to (i) the total of all amounts allocated under your Policy to
the General Account, plus (ii) all interest accrued thereon, minus (iii) the
sum of any withdrawals or transfers under the Policy from the General Account
and all charges deducted from the General Account.
Investment Account Values. The current value of any Investment Account under
your Policy on any Valuation Day is equal to (i) the number of Accumulation
Units of the Investment Fund associated with that Investment Account credited
to your Policy on that Valuation Day, multiplied by (ii) the Accumulation Unit
Value for that Investment Fund for the Valuation Period which includes that
Valuation Day. On any Valuation Day, when an amount is allocated to, or
withdrawn, transferred or deducted from, an Investment Account, the number of
Accumulation Units to be credited to or charged against your Policy will be (i)
the amount so allocated, withdrawn, transferred or deducted, divided by (ii)
the Accumulation Unit Value for the specified Investment Fund for that
Valuation Day.
The Accumulation Unit Value for an Investment Fund for any Valuation Period is
the Accumulation Unit Value for that Investment Fund for the preceding
Valuation Period multiplied by the Accumulation Unit Value Change Factor for
that Investment Fund for the current Valuation Period. The Accumulation Unit
Value Change Factor for a Valuation Period is (i) divided by (ii), where (i) is
the asset value of the Investment Fund at the end of the current Valuation
Period before any amounts are allocated to, or withdrawn, deducted or
transferred from, that Investment Fund during the Valuation Period, divided by
the asset value of that Investment Fund at the end of the preceding Valuation
Period after any change in the number of Accumulation Units for that Valuation
Period, and (ii) is 1.00 plus the component of total Separate Account charges
for the number of days from the end of the preceding Valuation Period to the
end of the current Valuation Period.
TRANSFERS
You may transfer all or any part of your Account Value (excluding any amounts
in the General Account representing Policy Loans) between and among the General
Account and any of the Investment Accounts.
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All transfer requests must be made in a manner satisfactory to us, including
specification of the General Account and/or the Investment Accounts involved.
Transfer requests will be effective on their Valid Transaction Dates. The
amount to be transferred may be designated in your transfer request as (a) a
dollar amount, (b) a number of Accumulation Units (if you are transferring
Account Value from one of your Investment Accounts), or (c) any whole
percentage of the value of the General Account or Investment Account.
If the transfer is from the General Account, the amount to be transferred will
be the lesser of (a) the amount requested or (b) the amount in the General
Account as of the date of transfer that exceeds any amount therein held as
collateral for Policy Loans. If the transfer is from an Investment Account, the
amount to be transferred will be the lesser of (a) the amount requested and (b)
the amount that is in that Investment Account as of the date of the transfer.
Transfers from an Investment Account will be effected by cancelling
Accumulation Units of the associated Investment Fund credited to your Account
Value in an amount equal to the amount to be transferred; transfers to an
Investment Account will be effected by crediting additional Accumulation Units
of the associated Investment Fund to your Account Value in an amount equal to
the amount to be transferred. All values will be calculated using Accumulation
Unit values calculated for each Investment Fund involved on the date of the
transfer.
ACCESS TO ACCOUNT VALUES
You may obtain all or part of your Account Value by surrendering your Policy,
by making a partial withdrawal from your Policy or by taking a Policy Loan. If
the insured has a terminal illness, you also may be eligible to obtain an
Accelerated Benefit payment, as described below. Each of these transactions may
have tax consequences, and certain transactions may cause your Policy to become
a Modified Endowment Contract. See "Federal Tax Considerations" below.
Surrender. At any time prior to the Maturity Date, while the insured is alive,
you may surrender your Policy and obtain the Surrender Proceeds, which consists
of your Account Value minus any Policy Loans outstanding at the time of
surrender. To surrender your Policy, you must submit the Policy and a Written
Request to our Processing Office. We will pay the Surrender Proceeds on the
Valid Transaction Date of the surrender, provided that the insured is alive on
that date, and all insurance benefits under your Policy will then cease.
Partial Withdrawals. At any time prior to the Maturity Date, while the insured
is alive, you may withdraw part of your Account Value. A partial withdrawal
must be in an amount of at least $500, may not reduce the Account Value to less
than $100, and cannot exceed the Account Value minus any Policy Loans. We
reserve the right to limit the number of partial withdrawals in one Policy
Year, although no such limit currently is imposed.
A partial withdrawal will affect both your Account Value and the amount of your
Basic Death Benefit. If you have a Face Amount Plan, we will reduce both your
Account Value and your Face Amount by the amount of any withdrawal, and we will
send you revised Policy Specification Pages reflecting the Face Amount
decrease. The reduction in amount of insurance due to a withdrawal generally
will be applied in the order of the effective dates of such amounts of
insurance, the most recent first. If you have a Face Amount Plus Plan, we will
reduce your Account Value by the amount of the withdrawal. A partial withdrawal
will not be allowed if it would reduce the Face Amount below the minimum for
the Policy. For a discussion of the two Basic Death Benefit plans, see
"Insurance Benefits" below.
Policy Loans. You may request a Policy Loan only on amounts held in, or
transferred to, the General Account. You will pay interest on the Policy Loan,
but the amount held in the General Account as collateral for your Policy Loan
will accrue interest at a rate equal to the interest you pay on the Policy Loan
less 2%.
We will grant a Policy Loan if the following prior conditions are met:
(a) We receive at our Processing Office your Written Request for a loan;
(b) The amount of the loan does not exceed 95% of the current value of the
General Account, minus any existing Policy Loans;
(c) The amount of the loan is at least $500;
(d) The sole security for the loan is the Policy;
(e) The Policy is assigned to us in a form acceptable to us; and
(f) The Policy is in effect.
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The interest rate on a Policy Loan will be the adjustable maximum interest rate
that we can charge under applicable law. The adjustable maximum interest rate
is the greater of (a) the Guaranteed Rate of Interest plus 1% per year or (b)
the "Published Monthly Average" for the calendar month ending two months before
the date on which the rate is determined. The Published Monthly Average is the
Term Monthly Average Corporates yield shown in Moody's Corporate Bond Yield
Averages published by Moody's Investors Service, Inc., or any successor thereto
or, if that Moody's average is no longer published, a substantially similar
average, as established by insurance regulation in the jurisdiction in which
the Policy is delivered.
A new interest rate for Policy Loans will be effective beginning on the January
1 next following a change in the maximum rate. The adjustable maximum rate of
interest on Policy Loans for each Policy is determined each December 1 on or
after the Policy is issued. The Policy Loan interest rate may be increased
whenever the adjustable maximum interest rate increases by 0.5% or more a year
and must be reduced whenever the adjustable maximum interest rate decreases by
0.5% or more a year.
Interest on Policy Loans accrues daily and is due and payable at the end of the
Policy Month in which the loan is made and at the end of each subsequent Policy
Month. Any interest not paid when due becomes part of the Policy Loan and bears
interest. We will notify you and any assignee on our records (a) at the time a
loan is made under your Policy, of the initial rate of interest on that loan,
and (b) at least 28 days in advance of an interest rate increase, of the terms
of that increase. We will include in such notices the substance of the Policy
provisions permitting an adjustable maximum interest rate, and specifying the
frequency of interest rate determinations, as permitted by law.
We will not terminate the Policy in a Policy Year solely as the result of a
change in the interest rate on a Policy Loan during the Policy Year, and we
will maintain coverage during that Policy Year until the time at which the
Policy otherwise would have terminated if there had been no such interest rate
change during that Policy Year.
You can repay Policy Loans in part or in full at any time if the insured is
living and your Policy is in effect. If you do not repay a Policy Loan, it will
be deducted from Surrender Proceeds, Maturity Proceeds or Death Proceeds.
If, on any Monthly Anniversary Day, Policy Loans exceed Account Value, then the
grace period provisions will apply and you will be notified of the minimum
payment you will have to make to prevent the Policy from lapsing. See "Lapse
and Reinstatement" below.
Accelerated Benefit. To the extent permitted by your state's laws, the
Policyowner may be eligible, under the terms of the Policy or a rider to the
Policy, to be paid a lump-sum Accelerated Benefit, provided that the insured is
determined to have a terminal illness (a state of health where the insured's
life expectancy is 12 months or less). The amount of the Accelerated Benefit is
the present value (discounted for a one-year period) of the lesser of (a)
$200,000 or (b) 50% of the Death Proceeds that would be payable upon the Valid
Transaction Date as of which the Accelerated Benefit is calculated. The
interest rate assumed in discounting the Accelerated Benefit will be no greater
than the greater of (a) the current yield on 90-day U.S. treasury bills on the
Valid Transaction Date or (b) the then-current maximum rate of interest on
Policy Loans.
For the Accelerated Benefit to be payable, we must receive at our Processing
Office: (i) the Policy or, if applicable, the Accelerated Benefit rider; (ii)
your Written Request for payment of the Accelerated Benefit; (iii) the Written
Consent of all irrevocable beneficiaries, if any; and (iv) evidence
satisfactory to us of the insured's terminal illness. In addition, the Policy
must be in force on the date of your request and must not have been assigned
(other than to us as security for a Policy Loan). Finally, the insured's
terminal illness must not be a consequence of intentionally self-inflicted
injuries. If the insured dies before a requested Accelerated Benefit payment is
made, we will instead pay the Death Proceeds to the beneficiary in accordance
with the Policy.
The required evidence of terminal illness may include, but is not limited to:
(a) a certification of such a state of health by a licensed physician who (i)
has examined the insured, (ii) is qualified to provide that certification and
(iii) is neither the Policyowner, the insured, nor a family member of either;
and (b) a second opinion or examination by a physician we designate (any such
determination to be at our expense).
After an Accelerated Benefit payment is made, the Policy will continue in
force, but with amounts otherwise payable under the Policy and any riders to it
reduced by the percentage of the Death Proceeds (calculated as of the Valid
Transaction Date) that has been "accelerated" by means of the Accelerated
Benefit (i.e., the percentage derived by dividing the Accelerated Benefit by
the Death Proceeds at the Valid Transaction Date). The Policy's Face Amount,
Account Value, Policy Loans and any Proceeds payable after the Accelerated
Benefit payment is made all will be reduced
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by that percentage. However, any subsequent premiums and cost of insurance
charges under the Policy will be payable based on the Account Value and Face
Amount that were in effect prior to the payment of the Accelerated Benefit.
INSURANCE BENEFITS
Death Proceeds. Upon our receipt of due proof of the death of the insured while
the Policy is in effect, the Death Proceeds will be payable to the beneficiary.
The Death Proceeds are calculated as of the date of the insured's death. You
should provide written proof of death as soon as is reasonably possible. The
Death Proceeds will be equal to the Basic Death Benefit plus any insurance
benefits payable under any riders to the Policy, minus the sum of any Policy
Loans and unpaid monthly deductions prior to the date of the insured's death.
Basic Death Benefit. There are two Basic Death Benefit plans available under
this Policy: the "Face Amount Plan" and the "Face Amount Plus Plan."
Under the Face Amount Plan, the Basic Death Benefit will be the greater of (a)
the Policy's Face Amount on the date of the insured's death or (b) the Policy's
Account Value on the date of the insured's death multiplied by the appropriate
Corridor Percentage from the Corridor Percentage Chart set forth below. The
Face Amount Plan generally provides you with a fixed death benefit because the
Basic Death Benefit is based on the Face Amount. Premiums paid and the
investment performance of your chosen Investment Alternatives will impact your
Account Value and, accordingly, the amount at risk on which cost of insurance
charges are imposed. See "Charges and Deductions--Cost of Insurance Charges"
below.
Under the Face Amount Plus Plan, the Basic Death Benefit will be the greater of
(a) the Face Amount on the date of the insured's death plus the Account Value
on that date or (b) the Account Value on the date of the insured's death
multiplied by the appropriate corridor percentage from the Corridor Percentage
Chart set forth below. The Face Amount Plus Plan provides you with a variable
death benefit because the Account Value, which is a component of the Basic
Death Benefit, will vary with premiums paid and the investment performance of
your chosen Investment Alternatives.
Corridor Percentages. The Corridor Percentage Chart is based upon the insured's
attained age on the date of the insured's death. These percentages are based
upon the requirements of the Code and we reserve the right to change them in
accordance with future revisions of the Code so that the Policy will continue
to qualify as life insurance for purposes of the Code.
CORRIDOR PERCENTAGE CHART
<TABLE>
<CAPTION>
ATTAINED CORRIDOR ATTAINED CORRIDOR ATTAINED CORRIDOR
AGE PERCENTAGE AGE PERCENTAGE AGE PERCENTAGE
- -------- ---------- -------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
0-40 250% 54 157% 68 117%
41 243 55 150 69 116
42 236 56 146 70 115
43 229 57 142 71 113
44 222 58 138 72 111
45 215 59 134 73 109
46 209 60 130 74 107
47 203 61 128 75 to 90 105
48 197 62 126 91 104
49 191 63 124 92 103
50 185 64 122 93 102
51 178 65 120 94 101
52 171 66 119 95 or older 100
53 164 67 118
</TABLE>
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<PAGE>
Face Amount Increases and Decreases. From time to time, your life insurance
needs may change. The Policy permits you to increase or decrease the Face
Amount of your Policy in certain circumstances. To change your Face Amount, you
must submit to our Processing Office a Written Request. A change in Face Amount
may not cause the Face Amount to be less than $25,000 ($5,000 for Policies with
a Payroll Deduction Rider) and may not cause the Policy to cease to qualify as
life insurance under the Code. We reserve the right to limit the amount of any
increase or decrease. The current minimum for any requested change in Face
Amount is $5,000. If the insured is not living on the effective date of a
change, the change will not take effect. Following any change in Face Amount,
we will send you new Policy Specifications Pages that update the information to
reflect the change. Certain reductions in Face Amount may cause your Policy to
become a Modified Endowment Contract. See "Federal Tax Considerations."
A request for an increase in Face Amount must be accompanied by evidence
satisfactory to us that the insured is insurable. Cost of insurance charges on
the additional Face Amount will be based on the insured's premium class at the
time of the increase. An increase in Face Amount will be effective only if and
when we expressly approve it. The effective date of a decrease in Face Amount
will be the first Monthly Anniversary Day on or after the date we receive your
request. To the extent applicable, a decrease in Face Amount will first reduce
any prior increases in Face Amount, in reverse of the order in which they
occurred (i.e., the most recent Face Amount increase will be the first
reduced), and then will reduce the original Face Amount.
Change of Basic Death Benefit Plan. You may request a change in your Basic
Death Benefit plan. The change will be effected in a way that keeps the Basic
Death Benefit payable on the effective date of the change the same as it would
have been without the requested change. If you have a Face Amount Plan, you can
change it to a Face Amount Plus Plan, which will decrease your Policy's Face
Amount by the amount of the Account Value as of the effective date of the
change. If you have a Face Amount Plus Plan, you may be able to change it to a
Face Amount Plan, which would increase your Policy's Face Amount by the amount
of the Account Value as of the effective date of the change. We may require
satisfactory current evidence of insurability prior to approving a change from
a Face Amount Plus Plan to a Face Amount Plan. A change in Basic Death Benefit
plan will become effective as of the first Monthly Anniversary Day on or after
we receive at our Processing Office your Written Request (which, in the case of
a change that would increase your Policy's Face Amount, may include evidence
acceptable to us of current insurability).
Maturity Benefit. If on the Maturity Date the insured is still living and the
Policy is still in effect, the Maturity Proceeds will be payable. The Maturity
Proceeds are equal to your Account Value, minus any Policy Loans and unpaid
monthly deductions.
CHARGES AND DEDUCTIONS
Cost of Insurance Charges. Each Monthly Anniversary Day, charges are deducted
to compensate American Life for the life insurance coverage to be provided in
the next month. The amount to be deducted is equal to the product of (a) times
(b), where (a) is American Life's amount at risk (the Policy's Basic Death
Benefit minus the Account Value as of the Monthly Anniversary Day) and (b) is
an amount equal to the cost per $1,000 of insurance rate divided by $1,000.
These rates will be no greater than those permitted under the 1980
Commissioner's Standard Ordinary mortality table for the insured's premium
class. Cost of insurance rates will vary according to the insured's age and
premium class. For Policies without a Payroll Deduction Rider, rates also will
vary according to the insured's gender. For Policies with a Payroll Deduction
Rider and where required by law for any Policy, cost of insurance rates are
unisex, i.e., the same rates apply for male and female insureds of the same age
and rating classification. Unisex rates are more favorable to males than gender
based rates, and gender based rates are more favorable to females than unisex
rates. The guaranteed maximum cost of insurance rates for Policies with a
Payroll Deduction Rider also are unisex.
Cost of insurance is computed separately for the initial Face Amount and for
each increase in the Face Amount. The cost of insurance rates are based on the
insured's age at the beginning of the Policy Year and on the applicable premium
class. For the initial Face Amount, the premium class on the Issue Date will be
used. For any increase in Face Amount, the premium class in effect at the time
of that increase will be used.
Cost of insurance rates will be determined by us based on our estimates of
future cost factors such as mortality, investment income, expenses, and the
length of time Policies stay in force. We may adjust the cost of insurance
rates from time to time. Any adjustments will be made on a uniform basis. If
the insured's premium class is standard, then the rates will never be greater
than the guaranteed insurance rates shown in your Policy Specification Pages.
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Cost of insurance charges will be deducted from the portion of Account Value,
if any, allocated to the General Account. If no portion of Account Value has
been allocated to the General Account, or if such allocation is insufficient to
pay all of the cost of insurance charges, those charges will be deducted from
Account Values allocated to one or more of the Investment Funds in the
following order: (a) Investment Corporation Money Market Fund, (b) Investment
Corporation Short-Term Bond Fund, (c) Investment Corporation Mid-Term Bond
Fund, (d) Investment Corporation Bond Fund, (e) Scudder Bond Fund, (f)
Investment Corporation Composite Fund, (g) Fidelity VIP II Asset Manager Fund,
(h) Calvert Responsibly Invested Balanced Fund, (i) Fidelity VIP Equity-Income
Fund, (j) Investment Corporation All America Fund, (k) Investment Corporation
Equity Index Fund, (l) Fidelity VIP II Contrafund Fund, (m) Investment Company
Aggressive Equity, (n) Scudder Capital Growth Fund, (o) Scudder International
Fund, and (p) TCI Growth Fund.
Administrative Charges. To pay for expenses incurred by American Life in
administering the Policies, a charge at an annual rate of 0.40% will be
deducted from Separate Account assets each Valuation Day and a charge of the
lesser of $2.00 or 1/12 of 1% of Account Value will be deducted on each Monthly
Anniversary Day (in the manner described above for cost of insurance charges).
We reserve the right to increase these charges if the revenues from these
charges are insufficient to cover our costs of administering the Policies.
However, in no event will the .40% charge be increased to more than an annual
rate of .65% or the $2.00 (or 1/12 of 1% of Account Value) charge increased to
more than $10 per month. The charge at an annual rate of 0.40% with respect to
the Separate Account's investment in the TCI Growth Fund will be reduced to
0.20% to the extent we are reimbursed for certain expenses, as discussed below
under "Fees and Expenses of Underlying Funds".
Mortality and Expense Risks Charges. Each Valuation Day a deduction is made
from Separate Account Assets for mortality and expense risks assumed by
American Life in connection with the Policies. The mortality risk charge, at an
annual rate of 0.70%, compensates American Life for assuming the risk that
insureds may live for a shorter period of time than estimated for purposes of
current or guaranteed cost of insurance rates. The expense risk charge, at an
annual rate of 0.15%, compensates American Life for the risk that its expenses
incurred in administering the Policies will be greater than it estimated.
American Life will realize a gain from these charges to the extent that they
are not needed to provide benefits and pay expenses under the Policies.
Fees and Expenses of Underlying Funds. Each Investment Fund of the Separate
Account purchases shares of an Underlying Fund Portfolio at net asset value.
That net asset value reflects investment management and other fees and expenses
incurred by that Underlying Fund Portfolio. Detailed information concerning
those fees and expenses is set forth in the prospectuses for the Underlying
Funds that are attached to this Prospectus.
Each Investment Corporation Fund receives investment advice from Capital
Management, an indirect, wholly-owned subsidiary of Mutual of America. Capital
Management receives from each such Fund a fee calculated as a daily charge at
the annual rate of .25% of the value of the net assets in the Money Market
Fund; .125% of the value of the net assets in the Equity Index Fund; .50% of
the value of the net assets in the All America, Bond, Short-Term Bond, Mid-Term
Bond and Composite Funds; and .85% of the value of the net assets in the
Aggressive Equity Fund. Capital Management, which serves as investment adviser
of each Investment Corporation Fund, voluntarily pays all of the expenses of
the Funds other than advisory fees, brokers' commissions, transfer taxes and
other fees relating to portfolio transactions. See "The Funds' Expenses" in the
Investment Corporation prospectus.
Capital Management, with respect to the Active Assets of the All America Fund,
has entered into subadvisory agreements (each a "Subadvisory Agreement") with
three professional advisers: Palley-Needelman Asset Management, Inc. ("Palley-
Needelman"), Oak Associates, Ltd. ("Oak Associates") and Fred Alger Management,
Inc. ("Alger Management"). Capital Management, at its own expense, pays to the
Subadvisers an amount calculated as a daily charge at the following annual
rates: Palley-Needelman, .30%; Oak Associates, .30%; and Alger Management,
.45%; of the value of the net assets for which each Subadviser is providing
investment advisory services.
Fidelity VIP Equity-Income Portfolio, Fidelity VIP II Contrafund Portfolio and
Fidelity VIP II Asset Manager Portfolio receive investment advice from Fidelity
Management & Research Company ("FMR"). FMR receives from each Portfolio a fee,
calculated as a daily charge and payable monthly, that is a sum of two
components multiplied by average net assets. The components are a group fee
rate based on the monthly average net assets of all the mutual funds advised by
FMR, which cannot exceed .52% and declines as assets rise, and an individual
fund fee rate. The effective group fee rate for December 1995 was .3097%, and
the individual fund fee rates for the Equity-Income, Contrafund and Asset
Manager Portfolios are .20%, .30% and .40%, respectively.
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Each Scudder Portfolio, Class A Shares, receives investment advice from
Scudder, Stevens & Clark, Inc., and Scudder, Stevens & Clark, Inc. receives
from each such Scudder Portfolio a fee calculated as a daily charge at the
annual rate of .475% of the average net assets in the Scudder Capital Growth
Portfolio and the Scudder Bond Portfolio and .875% of the average net assets in
the Scudder International Portfolio. Also, there may be deducted from each
Scudder Portfolio up to an additional .275% of the average net assets in the
Scudder Capital Growth Portfolio and the Scudder Bond Portfolio, and .625% of
the average net assets in the Scudder International Portfolio, for expenses
incurred by such Portfolio.
Pursuant to the Participation Agreement between Scudder and American Life,
American Life will make a capital contribution to Scudder when the annual
operating expenses of either or both of the Capital Growth and Bond Portfolios
exceed .75% of their respective average net assets, and when such expenses of
the International Portfolio exceed 1.5% of its average net assets. American
Life will pay its pro rata portion, allocated among certain insurance companies
that purchase shares of the Capital Growth and Bond Portfolios, of the amount
required to reduce the annual operating expenses of such Portfolios to the
specified percentages.
TCI Growth Fund receives investment advice from Investors Research Corporation,
and Investors Research Corporation receives from the TCI Growth Fund a fee
calculated as a daily charge at the annual rate of 1.00% of the average net
assets of the TCI Growth Fund. Many investment companies pay smaller management
fees than the fee paid by the TCI Growth Fund to Investors Research
Corporation. However, TCI has stated in the prospectus for the TCI Growth Fund,
which is attached to this Prospectus, that most, if not all, of such companies
also pay, in addition, certain of their own expenses, while all TCI Growth
Fund's expenses except brokerage, taxes, interest, fees and expenses of non-
interested directors (including counsel fees) and extraordinary expenses are
paid by Investors Research Corporation.
Pursuant to the Fund Participation Agreement among American Life, TCI and
Investors Research Corporation, Investors Research Corporation pays American
Life, on a monthly basis, for certain administrative savings resulting from
that agreement. Currently, that payment is an amount equal to .20% per annum of
the average amount of the Separate Account's investment in TCI, provided the
aggregate amount of the Separate Account's investment and the investments of
other separate accounts of American Life and Mutual of America in the TCI
Growth Fund for that month exceeds $10 million. The administrative fees
assessed against the Investment Fund holding shares of TCI Growth Fund are
reduced by the full amount of such payments to American Life.
Calvert Responsibly Invested Balanced Portfolio receives investment advice from
Calvert Asset Management Company, Inc., and the Sub-Advisor to the Portfolio is
NCM Capital Management Group, Inc., which manages the equity portion of the
Portfolio. Calvert Asset Management Company, Inc. receives from Calvert
Responsibly Invested Balanced Portfolio a monthly base fee computed on a daily
basis at an annual rate of 0.70% (subject to adjustment as described below) of
average net assets of the Portfolio. Calvert Asset Management Company, Inc.
pays the Sub-Advisor's Fee. Calvert Asset Management Company, Inc. and the Sub-
Advisor may earn (or have their fees reduced by) performance fee adjustments
based on the extent to which the Portfolio exceeds or trails the Lipper
Balanced Funds Index. After July 1, 1996, the performance adjustments could
cause the annual rate to be as high as .85% or as low as .55% of average net
assets. Pursuant to an agreement between American Life and Calvert Securities
Corporation, Calvert Securities Corporation has agreed that it shall cause the
annual operating expenses (including the investment advisory fee but excluding
brokerage commissions, interest, taxes and extraordinary expenses) of the
Calvert Responsibly Invested Balanced Portfolio to not exceed 0.85% of that
Portfolio's average annual daily net assets until further notice to American
Life.
Accelerated Benefit Fee. A one-time administrative fee will be deducted from
the Policyowner's Accelerated Benefit if and when payment of an Accelerated
Benefit payment is made. See "The Policies--Access To Account Values--
Accelerated Benefit." The amount of the Accelerated Benefit fee is $250.
Premium Taxes. We currently do not deduct state premium taxes from your premium
payments. American Life reserves the right to deduct all or a portion of the
amount of any applicable taxes, including state premium taxes, from premiums
prior to any allocation of those premiums among the General Account and the
Investment Funds. Currently, most state premium taxes range from 2% to 4%. See
"Federal Tax Considerations--American Life's Taxes".
SUPPLEMENTAL INSURANCE BENEFITS
Subject to certain requirements, we may in the future make one or more
supplemental insurance benefits available by rider to your Policy, including
ones providing accidental death coverage and coverage for children of an
insured. Initially, supplemental insurance benefits will be available only for
Policies with Payroll Deduction Riders. The cost of any supplemental benefits
will be deducted from your Account Value on each Monthly Anniversary Day.
An accidental death benefit rider provides that if the insured dies as a result
of an accidental bodily injury, American Life will pay an accidental death
benefit equal to the initial Face Amount of the Policy (to a maximum of
$200,000).
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The monthly cost per thousand of coverage for the accidental death benefit
rider will be $.10. All unmarried dependent children between 14 days and 18
years of age may be included under a children's term rider. Each additional
child is insured automatically when 14 days old at no increase in premium.
Insurance continues to age 21 of the child or to age 65 of the primary insured,
whichever is earlier. Upon reaching age 21, each covered child has the
opportunity of purchasing $5,000 of life insurance for each $1,000 of
children's term rider. The premium charged for the converted policy will be at
the standard rates then in effect. The total monthly cost per $1,000 of
coverage for all covered children is $.60 to a maximum of $5,000 per child.
LAPSE AND REINSTATEMENT
If, on any Monthly Anniversary Day, deduction of the charges then due would
result in the Account Value, minus any outstanding Policy Loans, being less
than zero, a 61-day "grace period" will begin. The Policy will remain in effect
during the grace period, but if the insured dies during the grace period, any
Death Proceeds due will be reduced by the amount of any overdue monthly
deduction.
We will mail a notice to you and any assignee on our records, informing you of
when the grace period will expire and the minimum amount of premium payment
that must be paid prior to the end of the grace period in order to prevent the
Policy from lapsing. If no such payment has been received in our Processing
Office prior to the expiration of the grace period, then the Policy will lapse
and have no value.
A lapsed Policy can be reinstated during the insured's lifetime if all of the
following conditions are met:
(a) The Policy lapsed because the grace period ended without the required
payment having been made.
(b) The Policy is reinstated within three years of the end of the grace
period.
(c) The Policy has not been surrendered.
(d) We receive from you evidence that the insured is insurable by our
standards.
(e) You pay, at time of reinstatement, premiums sufficient to keep the Policy
in effect for at least two months.
(f) You pay any insurance charges not paid during the grace period.
(g) We approve the reinstatement in accordance with our established
guidelines for reinstatement.
Reinstatement of a lapsed Policy will become effective on the date it is
approved by us. The Account Value on the effective date of reinstatement will
be whatever the premium paid at such time will provide. Cost of insurance
charges subsequent to a reinstatement will be based upon the insured's premium
class as of the reinstatement rather than his or her premium class when the
Policy was initially issued.
AMERICAN LIFE AND SEPARATE ACCOUNT NO. 3
AMERICAN LIFE
American Life was organized under the laws of the State of New York in 1955 and
currently is authorized to transact business in 50 states, the District of
Columbia and the United States Virgin Islands. It is an indirect wholly-owned
subsidiary of Mutual of America, a mutual life insurance company also organized
under New York law. American Life's home office is located at 320 Park Avenue,
New York, New York 10022.
American Life engages in the sale of individual and group life insurance, group
disability, individual annuities and pension plans. American Life invests the
assets it derives from its business in the manner permitted under applicable
state law. As of December 31, 1995, it had total assets of approximately $1.3
billion.
American Life's operations as a life insurance company are reviewed
periodically by various independent rating agencies such as A.M. Best &
Company, Standard & Poor's Corporation and Duff & Phelps Credit Rating Company.
Such agencies publish their ratings. From time to time American Life obtains
reprints and distributes these rating reports in whole or in part or summaries
of them to be given to the public. The ratings concern American Life's
operations as a life insurance company and do not imply any guarantees of
performance of the Separate Account.
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THE SEPARATE ACCOUNT
The Separate Account was established pursuant to a resolution adopted by
American Life's Board of Directors on February 23, 1993. The Separate Account
is registered with the Securities and Exchange Commission ("Commission") as a
unit investment trust under the 1940 Act. Registration with the Commission does
not involve supervision by the Commission of management or investment practices
or policies of the Separate Account or American Life.
The Separate Account is divided into sixteen distinct sub-accounts (the
"Investment Funds"), each of which invests in the shares of a single Underlying
Fund Portfolio. The assets of each Investment Fund are the property of American
Life. The Separate Account assets attributable to the Policies and to any other
life insurance policies funded by the Separate Account are not chargeable with
liabilities arising out of any other business American Life may conduct. The
income, capital gains and capital losses of each Investment Fund are credited
to or charged against the net assets held in that Investment Fund, without
regard to the income, capital gains and capital losses arising out of the
business conducted by any other Investment Fund or out of any other business
that American Life may conduct.
American Life does not guarantee the investment performance of the Separate
Account as a whole or of any of the Investment Funds. Your Account Value with
respect to the Investment Accounts will depend upon the value of the assets
held in the Investment Fund(s) you select. Accordingly, you bear the full
investment risk for all amounts allocated to the Separate Account.
The Separate Account and American Life are subject to supervision and
regulation by the Superintendent of Insurance of the State of New York, and by
the insurance regulatory authorities of each State in which American Life is
licensed to do business.
FEDERAL TAX CONSIDERATIONS
The following summary provides a general description of the Federal income tax
considerations associated with the Policies and does not purport to be complete
or to cover all situations. Special tax rules may be applicable to certain
purchase situations not discussed in this Prospectus. A detailed description of
the Federal income tax consequences related to the purchase of the Policies
cannot be made in this Prospectus. In addition, no attempt is made here to
consider any applicable state or other tax laws. This discussion of Federal tax
considerations is based upon American Life's understanding of current Federal
income tax laws as they are currently interpreted and is not intended as tax
advice. No representation is made concerning the likelihood of continuation of
the present Federal income tax laws or of the current interpretations of those
laws by the Internal Revenue Service ("IRS").
WE DO NOT MAKE ANY GUARANTEE REGARDING THE TAX STATUS OF ANY POLICY OR ANY
TRANSACTION INVOLVING THE POLICIES. FOR DETAILED INFORMATION AND ADVICE
REGARDING THE TAX CONSEQUENCES TO YOU OF PURCHASING A POLICY OR OF EFFECTING
ANY TRANSACTION UNDER THE POLICIES, COUNSEL OR OTHER QUALIFIED TAX ADVISERS
SHOULD BE CONSULTED.
TAX STATUS OF THE POLICIES
Section 7702 of the Code defines "insurance contract" for Federal tax purposes.
The Secretary of the Treasury (the "Treasury") is authorized to prescribe
regulations implementing Section 7702. However, while proposed regulations and
other interim guidance have been issued, final regulations have not been
adopted and guidance concerning how Section 7702 is to be applied is limited.
If a Policy were determined not to be a life insurance contract for purposes of
Section 7702, that Policy would not provide the tax advantages normally
provided by a life insurance policy.
Based primarily upon IRS Notice 88-128 and the proposed mortality charge
regulations under Section 7702 issued on July 5, 1991, American Life believes
that a Policy issued on the basis of a standard premium class should meet the
Section 7702 definition of a life insurance contract. There is less guidance,
however, concerning whether a Policy issued on a substandard basis (i.e., a
premium class involving higher than standard mortality risk) meets the Section
7702 definition of life insurance contract. Thus, it is not clear whether or
not such a Policy would meet that definition, particularly if the Policyowner
pays the full amount of premiums permitted under the Policy.
If it is subsequently determined that a Policy does not satisfy Section 7702,
American Life may take whatever steps are appropriate and reasonable to attempt
to cause that Policy to comply with Section 7702. For that reason, American
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Life reserves the right to restrict Policy transactions as necessary to attempt
to qualify the Policy as a life insurance contract under Section 7702.
Section 817(h) of the Code requires that the investments of the Separate
Account be "adequately diversified" in accordance with Treasury regulations in
order for the Policy to qualify as a life insurance contract under Section 7702
of the Code. The Separate Account, through the Underlying Fund Portfolios,
intends to comply with the diversification requirements prescribed in Treasury
Regulation Section 1.817-5. American Life believes that the Separate Account
will thus meet the diversification requirement, and American Life will monitor
continued compliance with the requirement.
The Treasury has announced that the diversification regulations do not provide
guidance concerning the issue of the number of investment options and switches
among such options a Policyowner may have before being considered to have
investment control and thus to be the owner of the related assets in the
Separate Account. It is not clear whether additional guidance in this regard
will be provided or whether it will be applied solely on a prospective basis.
It is possible that if additional guidance on this issue is promulgated, the
Policy may need to be modified to comply with that guidance. Accordingly,
American Life reserves the right to modify the Policy as necessary to attempt
to prevent the Policyowner from being considered the owner of the assets of the
Separate Account or otherwise to qualify the Policy for favorable tax
treatment.
The following discussion assumes that the Policy will qualify as a life
insurance contract for Federal income tax purposes.
TAX TREATMENT OF POLICY BENEFITS
In General. American Life believes that the Proceeds and Account Value
increases of a Policy should be treated in a manner consistent with a fixed-
benefit life insurance policy for Federal income tax purposes. Thus, the death
benefit under the Policy should be excludable from the gross income of the
beneficiary under Section 101(a)(1) of the Code.
Depending on the circumstances, the exchange of a Policy, a change in the
Policy's Basic Death Benefit option, a Policy Loan, a partial withdrawal, a
surrender, a change in ownership, a change of insured, the payment of an
Accelerated Benefit or an assignment of the Policy may have Federal income tax
consequences. In addition, Federal, state and local transfer and other tax
consequences of ownership or receipt of Policy proceeds depend on the
circumstances of each Policyowner or beneficiary.
Generally, the Policyowner will not be deemed to be in constructive receipt of
the Account Value, including increments thereof, until there is a distribution.
The tax consequences of distributions from, and loans taken from or secured by,
a Policy depend on whether the Policy is classified as a "Modified Endowment
Contract", discussed below. Upon a complete surrender or lapse of a Policy or
when benefits are paid at the Maturity Date, if the amount received plus the
amount of indebtedness exceeds the total investment in the Policy, the excess
will generally be treated as ordinary income subject to tax, regardless of
whether the Policy is considered to be a Modified Endowment Contract.
Distributions from Policies Not Classified as Modified Endowment Contracts. A
distribution from a Policy that is not a Modified Endowment Contract is
generally treated as a tax-free recovery by the Policyowner of the investment
in the Policy (described below) to the extent of that investment in the Policy,
and as a distribution of taxable income only to the extent the distribution
exceeds the investment in the Policy. An exception to this general rule occurs
in the case of a decrease in the Policy's death benefit or any other change
that reduces benefits under the Policy in the first 15 years after the Policy
is issued and that results in a cash distribution to the Policyowner in order
for the Policy to continue complying with the Section 7702 definitional limits.
Such a cash distribution will be taxed in whole or in part as ordinary income
(to the extent of any gain in the Policy) under rules prescribed in Section
7702.
Loans from, or secured by, a Policy that is not a Modified Endowment Contract
are not treated as distributions. Instead, such loans are treated as
indebtedness of the Policyowner.
Finally, neither distributions (including distributions upon surrender) nor
loans from, or secured by, a Policy that is not a Modified Endowment Contract
are subject to the 10 percent additional tax applicable to certain
distributions received or loans taken from a Policy that is a Modified
Endowment Contract.
Modified Endowment Contracts. Section 7702A of the Code establishes a class of
life insurance contracts designated as Modified Endowment Contracts. Policies
are considered to be Modified Endowment Contracts if they fail the "seven
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pay test" described below. That test is failed if the cumulative amount of
premiums paid under a Policy at any time during its first seven years (or seven
years from the date of a material change to the Policy) exceeds a certain level
in relation to the then current death benefit.
In general, a Policy will be a Modified Endowment Contract if the accumulated
premiums paid at any time during the first seven policy years exceed the sum of
the net level premiums which would have been paid on or before that time if the
Policy provided for paid-up future benefits after the payment of seven level
annual premiums (the "seven pay test"). The determination of whether a Policy
will be a Modified Endowment Contract after a material change generally depends
upon the relationship of the death benefit and Account Value at the time of
that change and the additional premiums paid in the seven years following the
material change. If the death benefit under a Policy is reduced by a decrease
in the Face Amount or a partial withdrawal during either the first seven years
after Policy issuance or a material change to the Policy, the seven-pay test
will be recalculated as though the new death benefit had applied since the
Policy was issued or materially changed. Due to the Policy's payment
flexibility, classification as a Modified Endowment Contract will depend on the
individual circumstances of each Policy.
If a premium is credited that would cause a Policy to become a Modified
Endowment Contract, American Life will notify the Policyowner that unless a
refund of the excess premium is requested by the Policyowner, the Policy will
become a Modified Endowment Contract. The notification will provide
instructions and time requirements for making the request.
The rules relating to whether a Policy will be treated as a Modified Endowment
Contract are extremely complex and cannot be described adequately in this
summary. Therefore, a current or prospective Policyowner should consult with a
competent advisor to determine whether a particular transaction will cause the
Policy to be treated as a Modified Endowment Contract.
Distributions from Policies Classified as Modified Endowment
Contracts. Policies classified as Modified Endowment Contracts will be subject
to the following tax rules: First, all distributions from such a Policy,
including distributions upon surrender and partial withdrawals and
distributions within two years before the Policy became a Modified Endowment
Contract, are treated as ordinary income subject to tax up to the amount equal
to the excess (if any) of the Account Value immediately before the distribution
over the investment in the Policy (described below) at that time. Second, loans
taken from or secured by such a Policy are treated as distributions from the
Policy and taxed accordingly. Past due loan interest that is added to the loan
amount is treated as a loan. Third, a 10 percent additional income tax is
imposed on the portion of any distribution from, or loan taken from or secured
by, such a Policy that is included in income except where the distribution or
loan is made on or after the Policyowner attains age 59 1/2, is attributable to
the Policyowner's becoming disabled, or is part of a series of substantially
equal periodic payments for the life (or life expectancy) of the Policyowner or
the joint lives (or joint life expectancies) of the Policyowner and the
Policyowner's beneficiary. All Modified Endowment Contracts that are issued by
American Life (or its affiliates) to the same Policyowner during any calendar
year are treated as one Modified Endowment Contract for purposes of determining
the amount includable in the Policyowner's gross income under Section 72(e) of
the Code.
Policy Loan Interest. Generally, personal interest paid on any loan under a
Policy which is owned by an individual is not deductible. In addition, interest
on any loan under a Policy owned by a taxpayer and covering the life of any
individual who is an officer or employee of, or is financially interested in
the business carried on by, that taxpayer will not be tax deductible to the
extent the aggregate amount of the loans with respect to contracts covering
that individual exceeds $50,000. The deduction of interest on Policy Loans may
also be subject to other restrictions under Section 264 of the Code.
Investment in the Policy. Investment in the Policy means (i) the aggregate
amount of any premiums or other consideration paid for a Policy, minus (ii) the
aggregate amount received under the Policy which has been excluded from gross
income of the Policyowner (except that the amount of any loan from, or secured
by, a Policy that is a Modified Endowment Contract, to the extent that the
amount has been included in the gross income of the Policyowner).
Estate Taxes. The Death Proceeds payable under the Policy are includable in the
insured's gross estate for federal estate tax purposes if the Death Proceeds
are paid to the insured's estate or if the Death Proceeds are paid to a
beneficiary other than the estate and the insured either possessed incidents of
ownership in the Policy at the time of death or transferred incidents of
ownership in the Policy to another person within three years of death.
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Whether or not any federal estate tax is payable with respect to Death Proceeds
that may be included in an insured's gross estate depends on a variety of
factors, including the following. A smaller size estate may be exempt from
federal estate tax because of a current estate tax credit which generally is
equivalent to an exemption of $600,000. In addition, Death Proceeds paid to a
surviving spouse may not be taxable because of a 100% estate tax marital
deduction. Furthermore, Death Proceeds paid to a tax-exempt charity may not be
taxable because of the allowance of an estate tax charitable deduction.
If the Policyowner is not the insured, and the Policyowner dies before the
insured, the value of the Policy, as determined under Internal Revenue Service
regulations, is includable in the federal gross estate of the Policyowner for
federal estate tax purposes. Whether a federal estate tax is payable depends on
a variety of factors, including those listed in the preceding paragraph.
AMERICAN LIFE'S TAXES
At the present time, American Life makes no charge to the Separate Account or
otherwise for any Federal, state or local taxes that American Life incurs that
may be attributable to the Separate Account or to the Policies. American Life
reserves the right to make a charge for any such tax or other economic burden
resulting from the application of the tax laws that it determines to be
properly attributable to the Separate Account or to the Policies.
OTHER MATTERS
VOTING RIGHTS
Because American Life is the legal owner of the shares of the Underlying Funds
in which the Separate Account invests, American Life has the right to vote on
all matters submitted to a vote of shareholders of the Underlying Funds or any
Underlying Fund Portfolio. However, based upon its interpretation of applicable
law and so long as the Securities and Exchange Commission continues to
interpret the 1940 Act as requiring pass-through voting privileges, American
Life will vote Underlying Fund shares held in the Investment Funds in
accordance with instructions received from Policyowners with Account Values
allocated to those Investment Funds. Other insurance companies with separate
accounts that purchase shares of Underlying Fund Portfolios also will give
their policyholders the right to vote on matters submitted to that Underlying
Fund or Underlying Fund Portfolio.
Underlying Fund Portfolio shares held in each Investment Fund for which no
timely instructions are received from Policyowners, including shares not
attributable to Policies, will be voted by American Life in the same proportion
as those shares in that Investment Fund for which instructions are received. If
applicable securities laws (or present interpretations thereof) change in a way
that would permit American Life to vote in its own right the shares of
Underlying Funds held in the Separate Account, it may elect to do so.
The number of Underlying Fund shares for which voting instructions may be given
(including fractional shares) will be determined by American Life as of a date
set by the Underlying Fund, which will be not more than 90 days prior to any
meeting of Underlying Fund shareholders. The number of shares for which
instructions may be given by a Policyowner is determined by dividing the
portion of the Policyowner's Account Value allocated to the Investment Fund by
the value of one share of the Underlying Fund Portfolio held by that Investment
Fund.
American Life may, if required by state insurance officials, disregard voting
instructions that would require shares to be voted to cause a change in the
sub-classification or investment policies of an Underlying Fund Portfolio, or
to approve or disapprove an investment management contract for an Underlying
Fund Portfolio. In addition, American Life may disregard voting instructions
that would require changes in the investment policies or investment adviser of
an Underlying Fund Portfolio, provided that American Life reasonably
disapproves such changes in accordance with applicable federal regulations. If
American Life disregards any voting instructions, it will advise Policyowners
of that action, and its reasons therefor, in its next communication to
Policyowners.
TRANSFERS, WITHDRAWALS AND REALLOCATIONS BY TELEPHONE
Requests by Policyowners for transfers among Investment Alternatives or
withdrawals, or changes in the formula for allocation of premiums may be made
by telephone in lieu of Written Requests. Requests by telephone, however, may
be made only if a Policyowner has received a Personal Identification Number,
which American Life provides automatically, and agreed to use it in accordance
with the applicable rules and requirements. Thereafter, the Policyowner may
contact
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American Life by telephone (800-872-5963) and request the desired transaction
or change. Transfers requested by telephone will go into effect on the date on
which the request is made, if received by 4 P.M. Eastern Standard Time (or
Daylight Savings Time, as applicable), at the next calculated price. American
Life reserves the right to suspend or terminate the right to request transfers,
withdrawals or reallocations by telephone at any time. Although failure to
follow reasonable procedures may result in American Life's liability for losses
due to unauthorized or fraudulent telephone transfers, it will not be liable
for following instructions communicated by telephone that it reasonably
believes to be genuine. American Life will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine. Those
procedures shall include confirming certain information, tape recording all
telephone transactions and providing written confirmation thereof.
DOLLAR COST AVERAGING
We offer a Dollar Cost Averaging program that allows you to preauthorize
automatic monthly transfers of a specified percentage or dollar amount from the
General Account to any of the Investment Funds. Each transfer under the Dollar
Cost Averaging program must be at least $100, and at least 12 transfers must be
scheduled. We may discontinue the program at any time. Your participation in
the Dollar Cost Averaging program will automatically cease if the amount in the
General Account (minus any outstanding Policy Loans) is insufficient to support
the next scheduled transfer, and you may request termination of participation
at any time by request to our Processing Office.
Dollar cost averaging generally reduces the risk of purchasing at the top of a
market cycle by reducing the average cost of purchasing Underlying Fund
Portfolio shares through the Investment Funds of the Separate Account to less
than the average price of the shares on the same purchase dates. This effect
occurs because greater numbers of shares are purchased when the share prices
are lower than when prices are higher. Dollar cost averaging does not assure
you of a profit, nor does it protect against losses in a declining market.
NOTICES AND REPORTS TO POLICYOWNERS
Within 30 days after each calendar quarter, American Life will send you a
statement showing, among other things, your Account Value, premiums received,
charges incurred and information concerning any Policy Loans. You will be sent
a confirmation statement within five business days after any transaction
involving purchase, sale or transfer of Accumulation Units of Investment
Accounts, except that you will receive quarterly summaries of such transactions
under a Payroll Deduction Program, sent within five business days after the end
of the quarter. Approximately 20 days prior to the date of a scheduled premium,
you will be sent a notice of the amount and due date of that scheduled premium,
except that no notices will be sent for scheduled premiums payable under a
Payroll Deduction Program or pursuant to a preauthorization of withdrawals from
your bank or other account. You also will be sent an annual and semi-annual
report for the Separate Account and each Underlying Fund Portfolio, which will
include a list of the securities held in each Portfolio as required by the 1940
Act.
DISTRIBUTION OF THE POLICIES
Mutual of America, a registered broker-dealer and a member of the National
Association of Securities Dealers, Inc., acts as the principal underwriter and
distributor of the Policies. The Policies are offered continuously without a
sales charge through employees of American Life and certain employees of Mutual
of America. Such employees are salaried employees of American Life or Mutual of
America and do not receive commissions for sales of the Policies. All persons
engaged in selling the Policies are licensed agents of American Life and are
duly qualified registered representatives of Mutual of America. American Life
has entered into a Distribution and Administration Agreement with Mutual of
America. Under this agreement, American Life pays Mutual of America the cost to
Mutual of America of its performance of services for American Life. Because the
Policies have no sales load, the costs of distribution will necessarily be paid
out of the profits of American Life, including any profits from the Policies'
mortality and expense risks charges.
PROCEEDS PAYMENT OPTIONS
Unless otherwise specified in your Policy, Proceeds will be paid in one lump
sum. If all or part of any Maturity Proceeds or Death Proceeds are paid in a
lump sum, payment will include interest from the Maturity Date or the date of
death to the date of payment, credited at the rate then being credited for
amounts held at interest under the Interest Payments plan described below.
However, while the insured is living, you may choose, or change the choice of,
an optional payment plan for all or part of any Proceeds that may arise from
your Policy. After Proceeds are applied under any of the optional plans, the
payments will not be affected by the investment experience of any Investment
Fund.
23
<PAGE>
If you do not arrange for a specific optional payment plan before the insured
dies, the beneficiary will have the right to choose an optional payment plan
for all or part of any Death Proceeds payable to the beneficiary. If you do
arrange for a specific choice, however, the beneficiary cannot change it after
the insured dies.
If you change a beneficiary, any optional payment plan chosen previously will
no longer be in effect unless you make a Written Request that it continue. A
choice or change of optional payment plan must be sent in writing to our
Processing Office. The amount of each payment made under a given optional
payment plan must be at least $100. Once payments have commenced under any of
these optional payment plans, the payment plan may not be changed.
THE PAYMENT PLANS AVAILABLE UNDER THE POLICY ARE:
Interest Payments. We will hold the Proceeds and pay interest to the payee at
an effective rate of at least 3% compounded yearly. Principal is paid after the
term of years specified at the time the interest payment plan is elected.
Life Payments. We will make equal monthly payments for a guaranteed minimum
period to a payee, who must be a natural person of whose date of birth we have
been provided written proof. If the payee lives longer than the minimum period,
payments will continue for the lifetime of the payee. The minimum period can be
either ten years or until the sum of the payments equals the amount of Proceeds
applied under this plan. If the payee dies before the end of the guaranteed
period, the amount of remaining guaranteed payments for the minimum period will
be discounted at an effective rate of 3% compounded yearly. The discounted
amounts will be paid in one lump sum to the payee's estate unless otherwise
provided.
Payments for a Fixed Period. We will make payments for a period of no more than
25 years in annual, semi-annual, quarterly or monthly installments. The
payments will include interest at an effective rate of at least 3% compounded
yearly. We may increase the effective annual rate of interest, and to the
extent and for the period we do so, the payments will be greater.
Payments of a Fixed Amount. We will make equal annual, semi-annual, quarterly
or monthly payments until all of the Proceeds have been paid. We will credit
the unpaid balance with interest at an effective rate of at least 3% compounded
yearly. The final payment under this option will be any balance equal to or
less than one fixed amount payment.
RESERVATION OF RIGHT TO MAKE CHANGES
Changes to Separate Account. Subject to applicable law, we reserve the right to
(a) add new Investment Funds to the Separate Account; (b) add a new separate
account; (c) remove Investment Funds from the Separate Account; (d) combine any
two or more Investment Funds; (e) combine any two or more separate accounts;
(f) transfer the assets we determine to be attributable to the class of
contracts to which this Policy belongs from one Investment Fund of the Separate
Account to another; (g) transfer the assets we determine to be attributable to
the class of contracts to which this Policy belongs to another separate
account; and (h) cause registration or deregistration of the Separate Account
under the Investment Company Act of 1940. In the event that a material change
in the underlying investments of the Separate Account results from our exercise
of these rights, we will advise you of the change.
Changes in Policy Cost Factors. Adjustments in policy cost factors (interest
credited, insurance deductions and administrative charges) will be by class and
based upon changes in future expectations for such elements as: investment
earnings, mortality, persistency, expenses, and taxes. Any change in policy
cost factors will be determined in accordance with procedures and standards on
file with the insurance regulator of the jurisdiction in which this Policy is
delivered. The frequency with which policy cost factors for in-force Policies
will be reviewed will be once every five Policy Years, or whenever the premiums
or factors for comparable new issues are changed. In no event, however, may the
guaranteed insurance rates and the Guaranteed Rate of Interest shown on the
Specification Pages of your Policy be changed to your detriment.
Deduction of Premium Taxes. We reserve the right to deduct state premium taxes
from premiums received. See "The Policies--Charges and Deductions--Premium
Taxes."
MISCELLANEOUS POLICY PROVISIONS
Limit on Right to Contest. The insurance issued under a Policy will not be
contestable after it has been in force during the insured's lifetime: (a) with
respect to the initial amount of insurance, for two years from the Issue Date;
(b) with respect to each increase in the amount of insurance requiring evidence
of insurability, for two years from the effective date for that increase; and
(c) with respect to any amount of insurance that is reinstated, for two years
from the effective
24
<PAGE>
date of the reinstatement. A contest of a Face Amount increase or of a
reinstatement will be based only on the application for that increase or
reinstatement.
Suicide Exclusion. If the insured commits suicide within two years from the
Issue Date, we will pay no more than an amount equal to: (a) the sum of the
Account Value and any insurance charges; minus (b) the sum of any Policy Loans.
If there has been an increase in the Basic Death Benefit for which we had the
right to require or did require evidence of insurability (other than an
increase due solely to a change in the Basic Death Benefit plan) and if the
insured commits suicide within two years from the effective date of that
increase, then with respect to that increase we will pay no more than the
insurance charges deducted for that increase.
Misrepresentation or Misstatement of Age or Sex. If a misrepresentation is made
on the application for your Policy or if the age or sex of the insured is
misstated on your Policy Specifications Pages, then the Proceeds payable upon
proof of the death of the insured will be that which would have been purchased
by the most recent monthly deduction for the cost of insurance on the basis of
the correct age and sex or as adjusted for the misrepresentation.
Assignment. You must notify us in writing if you assign your Policy. No
assignment will be binding until it has been received and recorded at our
Processing Office. An assignment will not apply to any payment made before the
assignment was recorded. We will not be responsible for the validity of any
assignment.
Non-Participation. This is a non-participating policy, which means that it will
not share in our profits or surplus earnings through payment of dividends or
otherwise.
EXECUTIVE OFFICERS AND DIRECTORS
The name and position of each executive officer and director of American Life,
and his or her principal occupation during the past five years, are set forth
below. The business address of each person listed below is 320 Park Avenue, New
York, NY 10022.
<TABLE>
<CAPTION>
POSITIONS AND OFFICES WITH
NAME AMERICAN LIFE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
---- --------------------------- -------------------------------------------
<S> <C> <C>
Manfred Altstadt Senior Executive Vice Senior Executive Vice President and Chief
President and Chief Financial Officer, Mutual of America, since
Financial Officer; February 1992; prior thereto, Executive
Director Vice President and Chief Financial Officer
Patrick A. Burns Senior Executive Vice Senior Executive Vice President and General
President and General Counsel, Mutual of America, since February
Counsel; Director 1994; prior thereto, Executive Vice
President and General Counsel
Richard J. Ciecka Director Director and Vice Chairman of the Board,
Mutual of America, since March 1993; prior
thereto, Partner, O'Keefe, Ashenden, Lyons
& Ward, Attorneys at Law
William S. Conway Executive Vice President; Executive Vice President, Marketing, Mutual
Director of America
Rita Conyers Executive Vice President; Executive Vice President, Corporate
Director Communications and Executive Training,
Mutual of America
William A. DeMilt Executive Vice President Executive Vice President and Treasurer,
and Treasurer; Director Mutual of America, since February 1994;
Senior Vice President and Treasurer,
February 1992 - February 1994; prior
thereto, Senior Vice President and
Controller
James E. Flynn Senior Vice President; Senior Vice President, Field Operations,
Director Mutual of America, since 1993; prior
thereto, Vice President, Mutual of America
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
POSITIONS AND OFFICES WITH
NAME AMERICAN LIFE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
---- --------------------------- -------------------------------------------
<S> <C> <C>
Thomas E. Gilliam Executive Vice President; Executive Vice President and Assistant to
Director the Vice Chairman, Mutual of America, since
October 1995; Executive Vice President,
Technical Operations, Mutual of America,
from February 1992 to October 1995; prior
thereto, Senior Vice President, Technical
Operations
Theodore L. Herman Vice Chairman; Director Vice Chairman, American Life, since
February 1992; prior thereto, President,
American Life
Stephanie J. Kopp Executive Vice President Executive Vice President and Corporate
and Secretary; Director Secretary, Mutual of America
Howard Lichtenstein President and Chief President and Chief Operating Officer,
Operating Officer; Director American Life, since February 1992; prior
thereto, Executive Vice President, Mutual
of America
Thomas J. Moran Chairman of the Board and Chief Executive Officer, Mutual of America,
Chief Executive Officer; since October 1994; President and Director,
Director Mutual of America, since February 1992;
prior thereto, Executive Vice President,
Marketing
William Rose Senior Vice President, Senior Vice President, Individual Markets,
Individual Markets American Life, since October 1993; prior
thereto, Senior Field Vice President,
Houston Office
Marc Slutzky Senior Vice President and Senior Vice President and Corporate
Corporate Actuary Actuary, American Life, since September
1994; Consulting Actuary, Tillinghast, a
Towers Perrin Company, from March 1993 to
September 1994; prior thereto, Vice
President and Actuary, The Equitable Life
Assurance Society of the United States
Edward Wenzel Senior Vice President, Senior Vice President, Corporate Markets,
Corporate Markets American Life, since February 1993; prior
thereto, Senior Field Vice President,
Dallas Office
Paul R. Zwilling Executive Vice President Executive Vice President and Chief Actuary,
and Chief Actuary; Director Mutual of America, since February 1992;
prior thereto, Senior Vice President and
Chief Actuary and Deputy to Executive Vice
President and Chief Financial Officer
</TABLE>
LEGAL PROCEEDINGS
American Life is engaged in litigation of various kinds which in its judgment
is not of material importance in relation to its total assets. There are no
legal proceedings pending to which the Separate Account is a party.
LEGAL MATTERS
All matters of applicable state law pertaining to the Policies, including
American Life's right to issue the Policies thereunder, have been passed upon
by Patrick A. Burns, Senior Executive Vice President and General Counsel of
American Life. Certain legal matters relating to the Federal securities laws
also have been passed upon Jones & Blouch L.L.P., Washington, D.C.
EXPERTS
The December 31, 1995 financial statements included in this prospectus have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
ADDITIONAL INFORMATION
A registration statement under the Securities Act of 1933 has been filed with
the Securities and Exchange Commission relating to the offering described in
this Prospectus. This Prospectus does not include all the information set forth
in that registration statement. The omitted information may be obtained at the
principal office of the Securities and Exchange Commission in Washington, D.C.
upon payment of the prescribed fee.
For further information you may also contact our Processing Office, the address
and telephone number of which are on the cover page of this Prospectus.
26
<PAGE>
POLICY ILLUSTRATIONS
The following tables have been prepared to help show how Account Value and
Death Proceeds under the Policy change with investment performance for both a
Face Amount Plan and a Face Amount Plus Plan and for both gender based cost of
insurance rates applicable to standard Policies and unisex cost of insurance
rates applicable to Policies with a Payroll Deduction Rider. The tables assume
that Account Value is allocated equally among the Investment Funds, with no
values allocated to the General Account. The tables illustrate how Account
Value, which reflects all applicable charges and deductions, and Death Proceeds
of a Policy issued on an insured of a specified age would vary over time if the
investment return on the assets of each Underlying Fund Portfolio was a
uniform, gross (i.e., before taking into consideration fees or expenses
incurred by each Underlying Fund Portfolio, other than transaction expenses
such as brokerage commissions), after-tax, annual rate of 0%, 6% or 12%. The
Account Value and Death Proceeds would be different from those shown if the
returns averaged 0%, 6% or 12%, but fluctuated over and under those averages
throughout the years.
The charges reflected in the tables using current cost of insurance charges
include those for monthly deductions for administration ($2 per month) and cost
of insurance, and daily charges for mortality and expense risks (0.85% on an
annual basis) and administration (0.40%), except that an administration fee of
0.20% is shown for the TCI Growth Fund (because of the reimbursement agreement
described above). The charges reflected in the tables using guaranteed cost of
insurance charges include maximum monthly deductions for administration ($10
per month) and cost of insurance, daily charges for mortality and expense risks
(0.85% on an annual basis) and the maximum administration fee (0.65%), except
that an administration fee of 0.45% is shown for the TCI Growth Fund. A simple
average of the investment management fees and other expenses of the available
Underlying Fund Portfolios is reflected in all the tables. That average total
expense figure is .62%, based upon the 1995 expense ratios of the available
Underlying Fund Portfolios. See "The Policies--Charges and Deductions--Fees and
Expenses of Underlying Funds." The expenses of the Underlying Fund Portfolios
may fluctuate from year to year, but are assumed to remain constant for
purposes of these tables.
The tables assume that the insured is a standard risk (non-smoker), that
scheduled premiums of the amounts specified are paid on the Policy Anniversary
and that no transfers, partial withdrawals, Policy Loans, change in Basic Death
Benefit plan or changes in Face Amount have been made. The tables reflect the
fact that no charges for federal, state or local taxes are currently made
against the Separate Account. If such a charge is made in the future, it would
take a higher gross rate of return to produce after-tax returns of 0%, 6% and
12% than it does now. The tables show Account Values and Death Proceeds using
current cost of insurance rates and using the maximum cost of insurance rates
(based on the 1980 Commissioners Standard Ordinary Smoker/Nonsmoker Mortality
Tables).
Upon request, American Life will furnish a comparable illustration based on the
proposed insured's age, sex (unless unisex rates are applicable) and premium
class and the Basic Death Benefit plan, Face Amount and scheduled premium
requested.
27
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
VARIABLE UNIVERSAL LIFE INSURANCE POLICY
MALE ISSUE AGE 35 FACE AMOUNT PLAN
STANDARD NON-SMOKER FACE AMOUNT
$100,000
USING CURRENT COST OF INSURANCE CHARGES
<TABLE>
<CAPTION>
DEATH BENEFIT ACCOUNT VALUE
-------------------------- ------------------------
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
END OF ACCUMULATED RETURN OF RETURN OF
POLICY AT 5% INTEREST -------------------------- ------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
---- -------------- -------- -------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1...................... $ 1,365 $100,000 $100,000 $100,000 $ 1,088 $ 1,159 $ 1,231
2...................... 2,798 100,000 100,000 100,000 2,147 2,358 2,578
3...................... 4,303 100,000 100,000 100,000 3,175 3,595 4,051
4...................... 5,883 100,000 100,000 100,000 4,174 4,874 5,664
5...................... 7,542 100,000 100,000 100,000 5,146 6,197 7,433
6...................... 9,285 100,000 100,000 100,000 6,090 7,566 9,373
7...................... 11,114 100,000 100,000 100,000 7,007 8,984 11,503
8...................... 13,035 100,000 100,000 100,000 7,898 10,453 13,844
9...................... 15,051 100,000 100,000 100,000 8,764 11,976 16,418
10...................... 17,169 100,000 100,000 100,000 9,595 13,544 19,240
11...................... 19,392 100,000 100,000 100,000 10,370 15,140 22,316
12...................... 21,727 100,000 100,000 100,000 11,112 16,787 25,696
13...................... 24,178 100,000 100,000 100,000 11,821 18,488 29,414
14...................... 26,752 100,000 100,000 100,000 12,489 20,237 33,498
15...................... 29,455 100,000 100,000 100,000 13,127 22,046 37,998
16...................... 32,292 100,000 100,000 100,000 13,725 23,910 42,954
17...................... 35,272 100,000 100,000 100,000 14,263 25,814 48,404
18...................... 38,401 100,000 100,000 100,000 14,764 27,781 54,421
19...................... 41,686 100,000 100,000 100,170 15,248 29,833 61,079
20...................... 45,135 100,000 100,000 107,444 15,716 31,973 68,436
30 (age 65)............. 90,689 100,000 100,000 239,206 16,822 57,395 196,070
35 (age 70)............. 123,287 100,000 100,000 371,826 13,262 73,736 320,540
40 (age 75)............. 164,892 100,000 101,389 555,377 4,165 94,756 519,044
</TABLE>
- -------
(1) Assumes a $1,300 premium is paid at the beginning of each Policy Year.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THE PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN. THE DEATH BENEFITS AND ACCOUNT
VALUES FOR A POLICY WOULD BE DIFFERENT FROM THE AMOUNTS SHOWN IF THE RATES OF
RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT VARIED ABOVE OR
BELOW THAT AVERAGE IN INDIVIDUAL POLICY YEARS. THEY ALSO WOULD BE DIFFERENT,
DEPENDING ON THE ALLOCATION OF ACCOUNT VALUE TO EACH INVESTMENT FUND OF THE
SEPARATE ACCOUNT, IF THE RATES OF RETURN OVER ALL INVESTMENT FUNDS AVERAGED
0%, 6% OR 12% BUT VARIED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL INVESTMENT
FUNDS. THEY ALSO WOULD DIFFER IF ANY POLICY LOAN WERE MADE DURING THE PERIOD.
NO REPRESENTATIONS CAN BE MADE BY AMERICAN LIFE OR ANY OF THE UNDERLYING FUNDS
THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
28
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
VARIABLE UNIVERSAL LIFE INSURANCE POLICY
MALE ISSUE AGE 35 FACE AMOUNT PLAN
STANDARD NON-SMOKER FACE AMOUNT
$100,000
USING GUARANTEED COST OF INSURANCE CHARGES
<TABLE>
<CAPTION>
DEATH BENEFIT ACCOUNT VALUE
-------------------------- ------------------------
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
END OF ACCUMULATED RETURN OF RETURN OF
POLICY AT 5% INTEREST -------------------------- ------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
---- -------------- -------- -------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1...................... $ 1,365 $100,000 $100,000 $100,000 $ 1,050 $ 1,120 $ 1,191
2...................... 2,798 100,000 100,000 100,000 2,058 2,234 2,477
3...................... 4,303 100,000 100,000 100,000 3,015 3,419 3,856
4...................... 5,883 100,000 100,000 100,000 3,933 4,598 5,348
5...................... 7,542 100,000 100,000 100,000 4,803 5,791 6,951
6...................... 9,285 100,000 100,000 100,000 5,626 6,999 8,678
7...................... 11,114 100,000 100,000 100,000 6,404 8,222 10,539
8...................... 13,035 100,000 100,000 100,000 7,127 9,452 12,539
9...................... 15,051 100,000 100,000 100,000 7,798 10,688 14,711
10...................... 17,169 100,000 100,000 100,000 8,429 11,943 17,086
11...................... 19,392 100,000 100,000 100,000 9,011 13,219 19,676
12...................... 21,727 100,000 100,000 100,000 9,535 14,509 22,496
13...................... 24,178 100,000 100,000 100,000 10,014 15,825 25,582
14...................... 26,752 100,000 100,000 100,000 10,438 17,158 28,954
15...................... 29,455 100,000 100,000 100,000 10,809 18,511 32,647
16...................... 32,292 100,000 100,000 100,000 11,129 19,887 36,699
17...................... 35,272 100,000 100,000 100,000 11,390 21,277 41,143
18...................... 38,401 100,000 100,000 100,000 11,583 22,675 46,020
19...................... 41,686 100,000 100,000 100,000 11,700 24,074 51,379
20...................... 45,135 100,000 100,000 100,000 11,742 25,475 57,281
30 (age 65)............. 90,689 100,000 100,000 194,052 6,403 38,732 159,059
35 (age 70)............. 123,287 0 100,000 296,279 0 43,290 255,413
40 (age 75)............. 164,892 0 100,000 434,504 0 43,589 406,079
</TABLE>
- -------
(1) Assumes a $1,300 premium is paid at the beginning of each Policy Year.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THE PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN. THE DEATH BENEFITS AND ACCOUNT
VALUES FOR A POLICY WOULD BE DIFFERENT FROM THE AMOUNTS SHOWN IF THE RATES OF
RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT VARIED ABOVE OR
BELOW THAT AVERAGE IN INDIVIDUAL POLICY YEARS. THEY ALSO WOULD BE DIFFERENT,
DEPENDING ON THE ALLOCATION OF ACCOUNT VALUE TO EACH INVESTMENT FUND OF THE
SEPARATE ACCOUNT, IF THE RATES OF RETURN OVER ALL INVESTMENT FUNDS AVERAGED
0%, 6% OR 12% BUT VARIED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL INVESTMENT
FUNDS. THEY ALSO WOULD DIFFER IF ANY POLICY LOAN WERE MADE DURING THE PERIOD.
NO REPRESENTATIONS CAN BE MADE BY AMERICAN LIFE OR ANY OF THE UNDERLYING FUNDS
THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
29
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
VARIABLE UNIVERSAL LIFE INSURANCE POLICY
WITH PAYROLL DEDUCTION RIDER
MALE/FEMALE ISSUE AGE 35 FACE AMOUNT PLAN
STANDARD NON-SMOKER FACE AMOUNT
$100,000
USING CURRENT COST OF INSURANCE CHARGES
<TABLE>
<CAPTION>
DEATH BENEFIT ACCOUNT VALUE
-------------------------- ------------------------
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
END OF ACCUMULATED RETURN OF RETURN OF
POLICY AT 5% INTEREST -------------------------- ------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
---- -------------- -------- -------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1...................... $ 1,313 $100,000 $100,000 $100,000 $ 1,051 $ 1,120 $ 1,189
2...................... 2,691 100,000 100,000 100,000 2,074 2,277 2,489
3...................... 4,138 100,000 100,000 100,000 3,077 3,482 3,922
4...................... 5,657 100,000 100,000 100,000 4,052 4,728 5,490
5...................... 7,252 100,000 100,000 100,000 4,998 6,015 7,209
6...................... 8,928 100,000 100,000 100,000 5,918 7,347 9,094
7...................... 10,686 100,000 100,000 100,000 6,811 8,726 11,163
8...................... 12,533 100,000 100,000 100,000 7,678 10,153 13,436
9...................... 14,472 100,000 100,000 100,000 8,521 11,632 15,933
10...................... 16,508 100,000 100,000 100,000 9,327 13,155 18,670
11...................... 18,646 100,000 100,000 100,000 10,089 14,713 21,661
12...................... 20,891 100,000 100,000 100,000 10,818 16,319 24,946
13...................... 23,248 100,000 100,000 100,000 11,514 17,977 28,557
14...................... 25,723 100,000 100,000 100,000 12,169 19,680 32,522
15...................... 28,322 100,000 100,000 100,000 12,803 21,450 36,896
16...................... 31,050 100,000 100,000 100,000 13,397 23,272 41,710
17...................... 33,915 100,000 100,000 100,000 13,932 25,132 46,999
18...................... 36,924 100,000 100,000 100,000 14,438 27,059 52,840
19...................... 40,082 100,000 100,000 100,000 14,928 29,068 59,301
20...................... 43,399 100,000 100,000 104,318 15,401 31,162 66,445
30 (age 65)............. 87,201 100,000 100,000 232,668 16,843 56,072 190,711
35 (age 70)............. 118,545 100,000 100,000 362,191 13,884 72,061 312,234
40 (age 75)............. 158,550 100,000 100,000 541,777 6,049 92,382 506,334
</TABLE>
- -------
(1) Assumes a $1,250 premium is paid at the beginning of each Policy Year.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THE PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN. THE DEATH BENEFITS AND ACCOUNT
VALUES FOR A POLICY WOULD BE DIFFERENT FROM THE AMOUNTS SHOWN IF THE RATES OF
RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT VARIED ABOVE OR
BELOW THAT AVERAGE IN INDIVIDUAL POLICY YEARS. THEY ALSO WOULD BE DIFFERENT,
DEPENDING ON THE ALLOCATION OF ACCOUNT VALUE TO EACH INVESTMENT FUND OF THE
SEPARATE ACCOUNT, IF THE RATES OF RETURN OVER ALL INVESTMENT FUNDS AVERAGED
0%, 6% OR 12% BUT VARIED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL INVESTMENT
FUNDS. THEY ALSO WOULD DIFFER IF ANY POLICY LOAN WERE MADE DURING THE PERIOD.
NO REPRESENTATIONS CAN BE MADE BY AMERICAN LIFE OR ANY OF THE UNDERLYING FUNDS
THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
30
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
VARIABLE UNIVERSAL LIFE INSURANCE POLICY
WITH PAYROLL DEDUCTION RIDER
MALE/FEMALE ISSUE AGE 35 FACE AMOUNT PLAN
STANDARD NON-SMOKER FACE AMOUNT
$100,000
USING GUARANTEED COST OF INSURANCE CHARGES
<TABLE>
<CAPTION>
DEATH BENEFIT ACCOUNT VALUE
-------------------------- -----------------------
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
END OF ACCUMULATED RETURN OF RETURN OF
POLICY AT 5% INTEREST -------------------------- -----------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
---- -------------- -------- -------- -------- ------ ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1...................... $ 1,313 $100,000 $100,000 $100,000 $1,001 $ 1,069 $ 1,136
2...................... 2,691 100,000 100,000 100,000 1,963 2,159 2,363
3...................... 4,138 100,000 100,000 100,000 2,885 3,271 3,689
4...................... 5,657 100,000 100,000 100,000 3,758 4,394 5,111
5...................... 7,252 100,000 100,000 100,000 4,584 5,529 6,639
6...................... 8,928 100,000 100,000 100,000 5,365 6,677 8,282
7...................... 10,686 100,000 100,000 100,000 6,101 7,839 10,053
8...................... 12,533 100,000 100,000 100,000 6,795 9,015 11,963
9...................... 14,472 100,000 100,000 100,000 7,437 10,196 14,031
10...................... 16,508 100,000 100,000 100,000 8,040 11,395 16,291
11...................... 18,646 100,000 100,000 100,000 8,594 12,606 18,754
12...................... 20,891 100,000 100,000 100,000 9,102 13,837 21,442
13...................... 23,248 100,000 100,000 100,000 9,564 15,092 24,381
14...................... 25,723 100,000 100,000 100,000 9,972 16,361 27,591
15...................... 28,322 100,000 100,000 100,000 10,327 17,646 31,102
16...................... 31,050 100,000 100,000 100,000 10,631 18,949 34,950
17...................... 33,915 100,000 100,000 100,000 10,875 20,263 39,168
18...................... 36,924 100,000 100,000 100,000 11,061 21,589 43,799
19...................... 40,082 100,000 100,000 100,000 11,180 22,921 48,888
20...................... 43,399 100,000 100,000 100,000 11,223 24,251 54,485
30 (age 65)............. 87,201 100,000 100,000 185,188 6,619 37,068 151,793
35 (age 70)............. 118,545 0 100,000 283,493 0 41,644 244,391
40 (age 75)............. 158,550 0 100,000 416,840 0 42,456 389,570
</TABLE>
- -------
(1) Assumes a $1,250 premium is paid at the beginning of each Policy Year.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THE PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN. THE DEATH BENEFITS AND ACCOUNT
VALUES FOR A POLICY WOULD BE DIFFERENT FROM THE AMOUNTS SHOWN IF THE RATES OF
RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT VARIED ABOVE OR
BELOW THAT AVERAGE IN INDIVIDUAL POLICY YEARS. THEY ALSO WOULD BE DIFFERENT,
DEPENDING ON THE ALLOCATION OF ACCOUNT VALUE TO EACH INVESTMENT FUND OF THE
SEPARATE ACCOUNT, IF THE RATES OF RETURN OVER ALL INVESTMENT FUNDS AVERAGED
0%, 6% OR 12% BUT VARIED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL INVESTMENT
FUNDS. THEY ALSO WOULD DIFFER IF ANY POLICY LOAN WERE MADE DURING THE PERIOD.
NO REPRESENTATIONS CAN BE MADE BY AMERICAN LIFE OR ANY OF THE UNDERLYING FUNDS
THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
31
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
VARIABLE UNIVERSAL LIFE INSURANCE POLICY
MALE ISSUE AGE 35 FACE AMOUNT PLUS
STANDARD NON-SMOKER PLAN
FACE AMOUNT
$100,000
USING CURRENT COST OF INSURANCE CHARGES
<TABLE>
<CAPTION>
DEATH BENEFIT ACCOUNT VALUE
----------------------- -------------------------
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
END OF ACCUMULATED RETURN OF RETURN OF
POLICY AT 5% INTEREST ----------------------- -------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
---- -------------- ------- ------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1...................... $ 2,205 101,863 101,982 102,101 1,863 1,982 2,101
2...................... 4,520 103,687 104,042 104,412 3,687 4,042 4,412
3...................... 6,951 105,465 106,175 106,944 5,465 6,175 6,944
4...................... 9,504 107,198 108,384 109,719 7,198 8,384 9,719
5...................... 12,184 108,887 110,671 112,764 8,887 10,671 12,764
6...................... 14,998 110,532 113,041 116,104 10,532 13,041 16,104
7...................... 17,953 112,134 115,497 119,770 12,134 15,497 19,770
8...................... 21,056 113,695 118,041 123,794 13,695 18,041 23,794
9...................... 24,314 115,214 120,679 128,214 15,214 20,679 28,214
10...................... 27,734 116,682 123,401 133,055 16,682 23,401 33,055
11...................... 31,326 118,074 126,186 138,337 18,074 26,186 38,337
12...................... 35,097 119,417 129,061 144,129 19,417 29,061 44,129
13...................... 39,057 120,711 132,031 150,482 20,711 32,031 50,482
14...................... 43,215 121,945 135,087 157,440 21,945 35,087 57,440
15...................... 47,581 123,132 138,245 165,078 23,132 38,245 65,078
16...................... 52,165 124,261 141,496 173,452 24,261 41,496 73,452
17...................... 56,978 125,310 144,820 182,611 25,310 44,820 82,611
18...................... 62,032 126,303 148,244 192,660 26,303 48,244 92,660
19...................... 67,339 127,266 151,798 203,714 27,266 51,798 103,714
20...................... 72,910 128,200 155,486 215,875 28,200 55,486 115,875
30 (age 65)............. 146,498 132,741 197,177 424,940 32,741 97,177 324,940
35 (age 70)............. 199,156 130,028 219,684 627,731 30,028 119,684 527,731
40 (age 75)............. 266,364 121,768 240,584 948,625 21,768 140,584 848,625
</TABLE>
- -------
(1) Assumes a $2,100 premium is paid at the beginning of each Policy Year.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THE PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN. THE DEATH BENEFITS AND ACCOUNT
VALUES FOR A POLICY WOULD BE DIFFERENT FROM THE AMOUNTS SHOWN IF THE RATES OF
RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT VARIED ABOVE OR
BELOW THAT AVERAGE IN INDIVIDUAL POLICY YEARS. THEY ALSO WOULD BE DIFFERENT,
DEPENDING ON THE ALLOCATION OF ACCOUNT VALUE TO EACH INVESTMENT FUND OF THE
SEPARATE ACCOUNT, IF THE RATES OF RETURN OVER ALL INVESTMENT FUNDS AVERAGED
0%, 6% OR 12% BUT VARIED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL INVESTMENT
FUNDS. THEY ALSO WOULD DIFFER IF ANY POLICY LOAN WERE MADE DURING THE PERIOD.
NO REPRESENTATIONS CAN BE MADE BY AMERICAN LIFE OR ANY OF THE UNDERLYING FUNDS
THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
32
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
VARIABLE UNIVERSAL LIFE INSURANCE POLICY
MALE ISSUE AGE 35 FACE AMOUNT PLUS
STANDARD NON-SMOKER PLAN
FACE AMOUNT
$100,000
USING GUARANTEED COST OF INSURANCE CHARGES
<TABLE>
<CAPTION>
DEATH BENEFIT ACCOUNT VALUE
-------------------------- ------------------------
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
END OF ACCUMULATED RETURN OF RETURN OF
POLICY AT 5% INTEREST -------------------------- ------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
---- -------------- -------- -------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1...................... $ 2,205 $101,822 $101,940 $102,058 $ 1,822 $ 1,940 $ 2,058
2...................... 4,520 103,578 103,925 104,287 3,578 3,925 4,287
3...................... 6,951 105,256 105,943 106,685 5,256 5,943 6,685
4...................... 9,504 106,871 108,005 109,283 6,871 8,005 9,283
5...................... 12,184 108,412 110,102 112,083 8,412 10,102 12,083
6...................... 14,998 109,881 112,236 115,129 9,881 12,236 15,129
7...................... 17,953 111,281 114,426 118,452 11,281 14,426 18,452
8...................... 21,056 112,612 116,665 122,064 12,612 16,665 22,064
9...................... 24,314 113,878 118,956 125,996 13,878 18,954 25,996
10...................... 27,734 115,096 121,308 130,290 15,094 21,308 30,290
11...................... 31,326 116,248 123,716 134,972 16,248 23,716 34,972
12...................... 35,097 117,330 126,168 140,065 17,330 26,168 40,065
13...................... 39,057 118,354 128,679 145,623 18,354 28,679 45,623
14...................... 43,215 119,309 131,238 151,680 19,309 31,238 51,680
15...................... 47,581 120,196 133,848 158,285 20,196 33,848 58,285
16...................... 52,165 121,016 136,509 165,492 21,016 36,509 65,492
17...................... 56,978 121,761 139,213 173,348 21,761 39,213 73,348
18...................... 62,032 122,418 141,948 181,905 22,418 41,948 81,905
19...................... 67,339 122,978 144,704 191,218 22,978 44,704 91,218
20...................... 72,910 123,443 147,480 201,363 23,443 47,480 101,363
30 (age 65)............. 146,498 121,300 174,265 368,601 21,300 74,265 268,601
35 (age 70)............. 199,156 113,240 183,469 523,385 13,240 83,469 423,385
40 (age 75)............. 266,364 0 184,406 759,606 0 84,406 659,606
</TABLE>
- -------
(1) Assumes a $2,100 premium is paid at the beginning of each Policy Year.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THE PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN. THE DEATH BENEFITS AND ACCOUNT
VALUES FOR A POLICY WOULD BE DIFFERENT FROM THE AMOUNTS SHOWN IF THE RATES OF
RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT VARIED ABOVE OR
BELOW THAT AVERAGE IN INDIVIDUAL POLICY YEARS. THEY ALSO WOULD BE DIFFERENT,
DEPENDING ON THE ALLOCATION OF ACCOUNT VALUE TO EACH INVESTMENT FUND OF THE
SEPARATE ACCOUNT, IF THE RATES OF RETURN OVER ALL INVESTMENT FUNDS AVERAGED
0%, 6% OR 12% BUT VARIED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL INVESTMENT
FUNDS. THEY ALSO WOULD DIFFER IF ANY POLICY LOAN WERE MADE DURING THE PERIOD.
NO REPRESENTATIONS CAN BE MADE BY AMERICAN LIFE OR ANY OF THE UNDERLYING FUNDS
THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
33
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
VARIABLE UNIVERSAL LIFE INSURANCE POLICY WITH PAYROLL DEDUCTION RIDER
MALE/FEMALE ISSUE AGE 35 FACE AMOUNT PLUS
STANDARD NON-SMOKER PLAN
FACE AMOUNT
$100,000
USING CURRENT COST OF INSURANCE CHARGES
<TABLE>
<CAPTION>
DEATH BENEFIT ACCOUNT VALUE
-------------------------- -------------------------
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
END OF ACCUMULATED RETURN OF RETURN OF
POLICY AT 5% INTEREST -------------------------- -------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
------ -------------- -------- -------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1...................... $ 2,100 $101,778 $101,891 $102,004 $ 1,778 $ 1,891 $ 2,004
2...................... 4,305 103,517 103,856 104,208 3,517 3,856 4,208
3...................... 6,620 105,224 105,901 106,635 5,224 5,901 6,635
4...................... 9,051 106,887 108,019 109,294 6,887 8,019 9,294
5...................... 11,604 108,507 110,212 112,211 8,507 10,212 12,211
6...................... 14,284 110,085 112,483 115,410 10,085 12,483 15,410
7...................... 17,098 111,621 114,836 118,920 11,621 14,836 18,920
8...................... 20,053 113,117 117,274 122,774 13,117 17,274 22,774
9...................... 23,156 114,573 119,800 127,005 14,573 19,800 27,005
10...................... 26,414 115,978 122,406 131,640 15,978 22,406 31,640
11...................... 29,834 117,321 125,083 136,706 17,321 25,083 36,706
12...................... 33,426 118,616 127,846 142,260 18,616 27,846 42,260
13...................... 37,197 119,862 130,698 148,352 19,862 30,698 48,352
14...................... 41,157 121,049 133,631 155,023 21,049 33,631 55,023
15...................... 45,315 122,202 136,674 162,356 22,202 36,674 62,356
16...................... 49,681 123,298 139,805 170,395 23,298 39,805 70,395
17...................... 54,265 124,315 143,004 179,185 24,315 43,004 79,185
18...................... 59,078 125,288 146,310 188,839 25,288 46,310 88,839
19...................... 64,132 126,231 149,741 199,460 26,231 49,741 99,460
20...................... 69,439 127,145 153,302 211,143 27,145 53,302 111,143
30 (age 65)............. 139,522 131,874 193,824 412,298 31,874 93,824 312,298
35 (age 70)............. 189,673 129,731 216,125 607,856 29,731 116,125 507,856
40 (age 75)............. 253,680 122,552 237,419 917,774 22,552 137,419 817,774
</TABLE>
- -------
(1) Assumes a $2,000 premium is paid at the beginning of each Policy Year.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THE PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN. THE DEATH BENEFITS AND ACCOUNT
VALUES FOR A POLICY WOULD BE DIFFERENT FROM THE AMOUNTS SHOWN IF THE RATES OF
RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT VARIED ABOVE OR
BELOW THAT AVERAGE IN INDIVIDUAL POLICY YEARS. THEY ALSO WOULD BE DIFFERENT,
DEPENDING ON THE ALLOCATION OF ACCOUNT VALUE TO EACH INVESTMENT FUND OF THE
SEPARATE ACCOUNT, IF THE RATES OF RETURN OVER ALL INVESTMENT FUNDS AVERAGED
0%, 6% OR 12% BUT VARIED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL INVESTMENT
FUNDS. THEY ALSO WOULD DIFFER IF ANY POLICY LOAN WERE MADE DURING THE PERIOD.
NO REPRESENTATIONS CAN BE MADE BY AMERICAN LIFE OR ANY OF THE UNDERLYING FUNDS
THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
34
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
VARIABLE UNIVERSAL LIFE INSURANCE POLICY
WITH PAYROLL DEDUCTION RIDER
MALE/FEMALE ISSUE AGE 35 FACE AMOUNT PLUS
STANDARD NON-SMOKER PLAN
FACE AMOUNT
$100,000
USING GUARANTEED COST OF INSURANCE CHARGES
<TABLE>
<CAPTION>
DEATH BENEFIT ACCOUNT VALUE
-------------------------- ------------------------
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
END OF ACCUMULATED RETURN OF RETURN OF
POLICY AT 5% INTEREST -------------------------- ------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
---- -------------- -------- -------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1...................... $ 2,100 $101,726 $101,837 $101,949 $ 1,726 $ 1,837 $ 1,949
2...................... 4,305 103,388 103,717 104,059 3,388 3,717 4,059
3...................... 6,620 104,986 105,637 106,342 4,986 5,637 6,342
4...................... 9,051 106,512 107,588 108,800 6,512 7,588 8,800
5...................... 11,604 107,967 109,570 111,449 7,967 9,570 11,449
6...................... 14,284 109,353 111,584 114,324 9,353 11,584 14,324
7...................... 17,098 110,673 113,646 117,456 10,673 13,646 17,456
8...................... 20,053 111,931 115,763 120,873 11,931 15,763 20,873
9...................... 23,156 113,125 117,925 124,590 13,125 17,925 24,590
10...................... 26,414 114,271 120,147 128,649 14,271 20,147 28,649
11...................... 29,834 115,357 122,418 133,070 15,357 22,418 33,070
12...................... 33,426 116,384 124,741 137,891 16,384 24,741 37,891
13...................... 37,197 117,353 127,117 143,150 17,353 27,117 43,150
14...................... 41,157 118,255 129,536 148,878 18,255 29,536 48,878
15...................... 45,315 119,090 132,000 155,122 19,090 32,000 55,122
16...................... 49,681 119,860 134,511 161,931 19,860 34,511 61,931
17...................... 54,265 120,555 137,058 169,351 20,555 37,058 69,351
18...................... 59,078 121,175 139,642 177,440 21,175 39,642 77,440
19...................... 64,132 121,711 142,253 186,253 21,711 42,253 86,253
20...................... 69,439 122,153 144,880 195,848 22,153 44,880 95,848
30 (age 65)............. 139,522 120,581 170,765 354,704 20,581 70,765 254,704
35 (age 70)............. 189,673 113,496 180,250 502,264 13,496 80,250 402,264
40 (age 75)............. 253,680 0 182,644 728,203 0 82,644 628,203
</TABLE>
- -------
(1) Assumes a $2,000 premium is paid at the beginning of each Policy Year.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THE PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN. THE DEATH BENEFITS AND ACCOUNT
VALUES FOR A POLICY WOULD BE DIFFERENT FROM THE AMOUNTS SHOWN IF THE RATES OF
RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT VARIED ABOVE OR
BELOW THAT AVERAGE IN INDIVIDUAL POLICY YEARS. THEY ALSO WOULD BE DIFFERENT,
DEPENDING ON THE ALLOCATION OF ACCOUNT VALUE TO EACH INVESTMENT FUND OF THE
SEPARATE ACCOUNT, IF THE RATES OF RETURN OVER ALL INVESTMENT FUNDS AVERAGED
0%, 6% OR 12% BUT VARIED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL INVESTMENT
FUNDS. THEY ALSO WOULD DIFFER IF ANY POLICY LOAN WERE MADE DURING THE PERIOD.
NO REPRESENTATIONS CAN BE MADE BY AMERICAN LIFE OR ANY OF THE UNDERLYING FUNDS
THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
35
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
VARIABLE UNIVERSAL LIFE INSURANCE POLICY
MALE ISSUE AGE 45 FACE AMOUNT PLAN
STANDARD NON-SMOKER FACE AMOUNT
$500,000
USING CURRENT COST OF INSURANCE CHARGES
<TABLE>
<CAPTION>
DEATH BENEFIT ACCOUNT VALUE
---------------------------- ----------------------------
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
END OF ACCUMULATED RETURN OF RETURN OF
POLICY AT 5% INTEREST ---------------------------- ----------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
---- -------------- -------- -------- ---------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1...................... $ 10,763 $500,000 $500,000 $ 500,000 $ 8,694 $ 9,265 $ 9,837
2...................... 22,063 500,000 500,000 500,000 17,132 18,819 20,577
3...................... 33,929 500,000 500,000 500,000 25,381 28,740 32,380
4...................... 46,388 500,000 500,000 500,000 33,334 38,932 45,246
5...................... 59,470 500,000 500,000 500,000 41,057 49,471 59,352
6...................... 73,206 500,000 500,000 500,000 48,556 60,378 74,837
7...................... 87,628 500,000 500,000 500,000 55,733 71,568 91,748
8...................... 102,772 500,000 500,000 500,000 62,651 83,119 110,304
9...................... 118,673 500,000 500,000 500,000 69,473 95,204 130,839
10...................... 135,370 500,000 500,000 500,000 76,148 107,801 153,518
11...................... 152,901 500,000 500,000 500,000 82,583 120,841 178,491
12...................... 171,308 500,000 500,000 500,000 88,686 134,266 205,947
13...................... 190,636 500,000 500,000 500,000 94,518 148,152 236,222
14...................... 210,930 500,000 500,000 500,000 100,039 162,495 269,622
15...................... 232,239 500,000 500,000 500,000 105,214 177,293 306,503
16...................... 254,614 500,000 500,000 500,000 110,054 192,591 347,302
17...................... 278,107 500,000 500,000 502,379 114,477 208,364 392,484
18...................... 302,775 500,000 500,000 557,333 118,542 224,701 442,328
19...................... 328,676 500,000 500,000 616,365 122,212 241,628 497,068
20 (age 65)............. 355,872 500,000 500,000 679,747 125,410 259,148 557,169
25 (age 70)............. 513,663 500,000 500,000 1,111,023 133,664 358,056 957,778
30 (age 75)............. 715,048 500,000 518,904 1,710,252 123,554 484,957 1,598,366
</TABLE>
- -------
(1) Assumes a $10,250 premium is paid at the beginning of each Policy Year.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THE PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN. THE DEATH BENEFITS AND ACCOUNT
VALUES FOR A POLICY WOULD BE DIFFERENT FROM THE AMOUNTS SHOWN IF THE RATES OF
RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT VARIED ABOVE OR
BELOW THAT AVERAGE IN INDIVIDUAL POLICY YEARS. THEY ALSO WOULD BE DIFFERENT,
DEPENDING ON THE ALLOCATION OF ACCOUNT VALUE TO EACH INVESTMENT FUND OF THE
SEPARATE ACCOUNT, IF THE RATES OF RETURN OVER ALL INVESTMENT FUNDS AVERAGED
0%, 6% OR 12% BUT VARIED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL INVESTMENT
FUNDS. THEY ALSO WOULD DIFFER IF ANY POLICY LOAN WERE MADE DURING THE PERIOD.
NO REPRESENTATIONS CAN BE MADE BY AMERICAN LIFE OR ANY OF THE UNDERLYING FUNDS
THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
36
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
VARIABLE UNIVERSAL LIFE INSURANCE POLICY
MALE ISSUE AGE 45 FACE AMOUNT PLAN
STANDARD NON-SMOKER FACE AMOUNT
$500,000
USING GUARANTEED COST OF INSURANCE CHARGES
<TABLE>
<CAPTION>
DEATH BENEFIT ACCOUNT VALUE
---------------------------- ---------------------------
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
END OF ACCUMULATED RETURN OF RETURN OF
POLICY AT 5% INTEREST ---------------------------- ---------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
---- -------------- -------- -------- ---------- ------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1...................... $ 10,763 $500,000 $500,000 $ 500,000 $ 7,671 $ 8,207 $ 8,745
2...................... 22,063 500,000 500,000 500,000 14,955 16,507 18,127
3...................... 33,929 500,000 500,000 500,000 21,947 24,995 28,307
4...................... 46,388 500,000 500,000 500,000 28,605 33,632 39,320
5...................... 59,470 500,000 500,000 500,000 34,940 42,433 51,266
6...................... 73,206 500,000 500,000 500,000 40,963 51,414 64,255
7...................... 87,628 500,000 500,000 500,000 46,631 60,538 78,358
8...................... 102,772 500,000 500,000 500,000 51,901 69,770 93,659
9...................... 118,673 500,000 500,000 500,000 56,735 79,077 110,261
10...................... 135,370 500,000 500,000 500,000 61,144 88,478 128,336
11...................... 152,901 500,000 500,000 500,000 65,091 97,945 148,031
12...................... 171,308 500,000 500,000 500,000 68,535 107,451 169,523
13...................... 190,636 500,000 500,000 500,000 71,541 117,066 193,102
14...................... 210,930 500,000 500,000 500,000 74,015 126,723 218,979
15...................... 232,239 500,000 500,000 500,000 75,969 136,448 247,482
16...................... 254,614 500,000 500,000 500,000 77,309 146,180 278,929
17...................... 278,107 500,000 500,000 500,000 77,992 155,906 313,734
18...................... 302,775 500,000 500,000 500,000 77,971 165,616 352,394
19...................... 328,676 500,000 500,000 500,000 77,097 175,220 395,463
20 (age 65)............. 355,872 500,000 500,000 540,781 75,316 184,714 443,263
25 (age 70)............. 513,663 500,000 500,000 877,763 49,540 229,962 756,692
30 (age 75)............. 715,048 0 500,000 1,333,971 0 266,862 1,246,702
</TABLE>
- -------
(1) Assumes a $10,250 premium is paid at the beginning of each Policy Year.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THE PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN. THE DEATH BENEFITS AND ACCOUNT
VALUES FOR A POLICY WOULD BE DIFFERENT FROM THE AMOUNTS SHOWN IF THE RATES OF
RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT VARIED ABOVE OR
BELOW THAT AVERAGE IN INDIVIDUAL POLICY YEARS. THEY ALSO WOULD BE DIFFERENT,
DEPENDING ON THE ALLOCATION OF ACCOUNT VALUE TO EACH INVESTMENT FUND OF THE
SEPARATE ACCOUNT, IF THE RATES OF RETURN OVER ALL INVESTMENT FUNDS AVERAGED
0%, 6% OR 12% BUT VARIED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL INVESTMENT
FUNDS. THEY ALSO WOULD DIFFER IF ANY POLICY LOAN WERE MADE DURING THE PERIOD.
NO REPRESENTATIONS CAN BE MADE BY AMERICAN LIFE OR ANY OF THE UNDERLYING FUNDS
THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
37
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
VARIABLE UNIVERSAL LIFE INSURANCE POLICY
MALE ISSUE AGE 45 FACE AMOUNT PLUS
STANDARD NON-SMOKER PLAN
FACE AMOUNT
$500,000
USING CURRENT COST OF INSURANCE CHARGES
<TABLE>
<CAPTION>
DEATH BENEFIT ACCOUNT VALUE
---------------------------- -------------------------
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
END OF ACCUMULATED RETURN OF RETURN OF
POLICY AT 5% INTEREST ---------------------------- -------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
---- -------------- -------- --------- --------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1...................... $ 16,380 $513,919 $ 514,809 $ 515,700 $13,919 $14,809 $ 15,700
2...................... 33,579 527,458 530,107 532,865 27,458 30,107 32,865
3...................... 51,638 540,685 545,976 551,705 40,685 45,976 51,705
4...................... 70,600 553,486 562,315 572,263 53,486 62,315 72,263
5...................... 90,510 565,930 579,207 594,778 65,930 79,207 94,778
6...................... 111,415 578,021 596,674 619,447 78,021 96,674 119,447
7...................... 133,366 589,649 614,617 646,362 89,649 114,617 146,362
8...................... 156,414 600,882 633,118 675,813 100,882 133,118 175,813
9...................... 180,615 611,904 652,382 708,248 111,904 152,382 208,248
10...................... 206,026 622,661 672,380 743,906 122,661 172,380 243,906
11...................... 232,707 633,039 693,020 782,986 133,039 193,020 282,986
12...................... 260,723 642,925 714,207 825,708 142,925 214,207 325,708
13...................... 290,139 652,389 736,022 872,506 152,389 236,022 372,506
14...................... 321,026 661,380 758,432 923,728 161,380 258,432 423,728
15...................... 353,457 669,845 781,400 979,759 169,845 281,400 479,759
16...................... 387,510 677,796 804,948 1,041,086 177,796 304,948 541,086
17...................... 423,265 685,124 828,978 1,108,120 185,124 328,978 608,120
18...................... 460,808 691,898 853,572 1,181,502 191,898 353,572 681,502
19...................... 500,229 698,071 878,690 1,261,811 198,071 378,690 761,811
20 (age 65)............. 541,620 703,534 904,232 1,349,624 203,534 404,232 849,624
25 (age 70)............. 781,770 719,381 1,037,544 1,929,175 219,381 537,544 1,429,175
30 (age 75)............. 1,088,268 709,845 1,173,225 2,836,473 209,845 673,225 2,336,473
</TABLE>
- -------
(1) Assumes a $15,600 premium is paid at the beginning of each Policy Year.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THE PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN. THE DEATH BENEFITS AND ACCOUNT
VALUES FOR A POLICY WOULD BE DIFFERENT FROM THE AMOUNTS SHOWN IF THE RATES OF
RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT VARIED ABOVE OR
BELOW THAT AVERAGE IN INDIVIDUAL POLICY YEARS. THEY ALSO WOULD BE DIFFERENT,
DEPENDING ON THE ALLOCATION OF ACCOUNT VALUE TO EACH INVESTMENT FUND OF THE
SEPARATE ACCOUNT, IF THE RATES OF RETURN OVER ALL INVESTMENT FUNDS AVERAGED
0%, 6% OR 12% BUT VARIED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL INVESTMENT
FUNDS. THEY ALSO WOULD DIFFER IF ANY POLICY LOAN WERE MADE DURING THE PERIOD.
NO REPRESENTATIONS CAN BE MADE BY AMERICAN LIFE OR ANY OF THE UNDERLYING FUNDS
THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
38
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
VARIABLE UNIVERSAL LIFE INSURANCE POLICY
MALE ISSUE AGE 45 FACE AMOUNT PLUS
STANDARD NON-SMOKER PLAN
FACE AMOUNT
$500,000
USING GUARANTEED COST OF INSURANCE CHARGES
<TABLE>
<CAPTION>
DEATH BENEFIT ACCOUNT VALUE
--------------------------- -------------------------
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
END OF ACCUMULATED RETURN OF RETURN OF
POLICY AT 5% INTEREST --------------------------- -------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
---- -------------- -------- -------- --------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1...................... $ 16,380 $512,838 $513,694 $ 514,552 $12,838 $13,694 $ 14,552
2...................... 33,579 525,166 527,674 530,288 25,166 27,674 30,288
3...................... 51,638 537,055 542,013 547,390 37,055 42,013 47,390
4...................... 70,600 548,454 556,663 565,929 48,454 56,663 65,929
5...................... 90,510 559,375 571,637 586,047 59,375 71,637 86,047
6...................... 111,415 569,827 586,946 607,899 69,827 86,946 107,899
7...................... 133,366 579,761 602,544 631,595 79,761 102,544 131,595
8...................... 156,414 589,129 618,379 657,254 89,129 118,379 157,254
9...................... 180,615 597,882 634,399 685,005 97,882 134,399 185,005
10...................... 206,026 606,035 650,613 715,055 106,035 150,613 215,055
11...................... 232,707 613,541 666,965 747,570 113,541 166,965 247,570
12...................... 260,723 620,353 683,401 782,728 120,353 183,401 282,728
13...................... 290,139 626,547 699,984 820,855 126,547 199,984 320,855
14...................... 321,026 632,017 716,598 862,117 132,017 216,598 362,117
15...................... 353,457 636,777 733,244 906,824 136,777 233,244 406,824
16...................... 387,510 640,725 749,802 955,190 140,725 249,802 455,190
17...................... 423,265 643,818 766,205 1,007,513 143,818 266,205 507,513
18...................... 460,808 646,015 782,387 1,064,122 146,015 282,387 564,122
19...................... 500,229 647,157 798,156 1,125,250 147,157 298,156 625,250
20 (age 65)............. 541,620 647,208 813,434 1,191,280 147,208 313,434 691,280
25 (age 70)............. 781,770 628,969 878,595 1,610,238 128,969 378,595 1,110,238
30 (age 75)............. 1,088,268 568,199 906,427 2,222,782 68,199 406,427 1,722,782
</TABLE>
- -------
(1) Assumes a $15,600 premium is paid at the beginning of each Policy Year.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THE PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN. THE DEATH BENEFITS AND ACCOUNT
VALUES FOR A POLICY WOULD BE DIFFERENT FROM THE AMOUNTS SHOWN IF THE RATES OF
RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT VARIED ABOVE OR
BELOW THAT AVERAGE IN INDIVIDUAL POLICY YEARS. THEY ALSO WOULD BE DIFFERENT,
DEPENDING ON THE ALLOCATION OF ACCOUNT VALUE TO EACH INVESTMENT FUND OF THE
SEPARATE ACCOUNT, IF THE RATES OF RETURN OVER ALL INVESTMENT FUNDS AVERAGED
0%, 6% OR 12% BUT VARIED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL INVESTMENT
FUNDS. THEY ALSO WOULD DIFFER IF ANY POLICY LOAN WERE MADE DURING THE PERIOD.
NO REPRESENTATIONS CAN BE MADE BY AMERICAN LIFE OR ANY OF THE UNDERLYING FUNDS
THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
39
<PAGE>
FINANCIAL STATEMENTS
The Separate Account commenced operations on December 21, 1994, which was the
date premiums under the Policies were first allocated to any Separate Account
Investment Fund.
The financial statements of American Life should be considered only as bearing
upon the ability of American Life to meet its obligations under the Policies.
They should not be considered as bearing upon the investment experience of the
Investment Funds of the Separate Account.
40
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 3
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<CAPTION>
INVESTMENT COMPANY
--------------------------------------------
MONEY MARKET ALL AMERICA EQUITY INDEX BOND
FUND FUND FUND FUND
------------ ----------- ------------ ------
<S> <C> <C> <C> <C>
Assets:
Investments in Mutual of America Investment
Corporation at market value
(Costs:
Money Market Fund -- $47
All America Fund -- $48,752
Equity Index Fund -- $5,145
Bond Fund -- $1,029
(Notes 1 and 2)........................... $ 44 $49,545 $5,255 $ 986
Due From (To) General Account.............. 1 (5,190) 1,063 377
----- ------- ------ ------
Net Assets................................. $ 45 $44,355 $6,318 $1,363
===== ======= ====== ======
Unit Value at December 31, 1995 (Note 5)... $1.80 $ 4.52 $ 1.42 $ 2.69
===== ======= ====== ======
Number of Units Outstanding at December 31,
1995 (Note 5)............................. 25 9,813 4,449 507
===== ======= ====== ======
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT COMPANY
------------------------------------------------
SHORT-TERM MID-TERM COMPOSITE AGGRESSIVE EQUITY
BOND FUND BOND FUND FUND FUND
---------- --------- --------- -----------------
<S> <C> <C> <C> <C>
Assets:
Investments in Mutual of
America Investment
Corporation at market value
(Costs:
Short-Term Bond Fund -- $333
Mid-Term Bond Fund -- $30
Composite Fund -- $9,433
Aggressive Equity Fund--
$18,368
(Notes 1 and 2)............. $ 316 $ 28 $9,235 $18,150
Due From (To) General Ac-
count....................... 16 4 (124) (402)
----- ----- ------ -------
Net Assets................... $ 332 $ 32 $9,111 $17,748
===== ===== ====== =======
Unit Value at December 31,
1995 (Note 5)............... $1.10 $1.16 $ 3.39 $ 1.43
===== ===== ====== =======
Number of Units Outstanding
at December 31, 1995 (Note
5).......................... 302 28 2,688 12,411
===== ===== ====== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
41
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 3
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SCUDDER TCI CALVERT
---------------------------- ------- -----------
CAPITAL RESPONSIBLY
BOND GROWTH INTERNATIONAL GROWTH INVESTED
FUND FUND FUND FUND FUND
------ ------- ------------- ------- -----------
<S> <C> <C> <C> <C> <C>
Assets:
Investments in Scudder
Portfolios, TCI Growth Fund
and Calvert Responsibly
Invested Portfolio at market
value
(Cost:
Scudder Bond Fund -- $258
Scudder Capital Growth
Fund -- $34,076
Scudder International
Fund -- $7,915
TCI Growth Fund -- $49,438
Calvert Responsibility
Invested Fund -- $279
(Notes 1 and 2)............. $ 260 $36,983 $8,001 $49,355 $ 257
Due From (To) General
Account..................... 138 509 470 4,343 (25)
------ ------- ------ ------- -----
Net Assets................... $ 398 $37,492 $8,471 $53,698 $ 232
====== ======= ====== ======= =====
Unit Value at December 31,
1995 (Note 5)............... $11.30 $ 18.64 $11.85 $ 12.18 $2.01
====== ======= ====== ======= =====
Number of Units Outstanding
at December 31, 1995
(Note 5).................... 35 2,011 715 4,409 115
====== ======= ====== ======= =====
</TABLE>
<TABLE>
<CAPTION>
FIDELITY
-----------------------------------
VIP VIP II VIP II
EQUITY-INCOME CONTRA ASSET MANAGER
FUND FUND FUND
------------- ------- -------------
<S> <C> <C> <C>
Assets:
Investments in Fidelity Portfolios
(Cost:
VIP Equity-Income Fund -- $8,969
VIP II Contra Fund -- $10,236
VIP II Asset Manager Fund -- $18,182
(Notes 1 and 2)........................... $9,129 $10,293 $18,590
Due From (To) General Account.............. (401) 181 (150)
------ ------- -------
Net Assets................................. $8,728 $10,474 $18,440
====== ======= =======
Unit Value at December 31, 1995 (Note 5)... $19.43 $ 13.85 $ 15.66
====== ======= =======
Number of Units Outstanding at December 31,
1995 (Note 5)............................. 449 756 1,178
====== ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
42
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 3
STATEMENT OF OPERATIONS
FOR THE YEAR* ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
INVESTMENT COMPANY
--------------------------------------------------------
MONEY MARKET ALL AMERICA EQUITY INDEX
FUND(A) FUND FUND(B) BOND FUND(C)
------------ ------------ ------------ -----------------
<S> <C> <C> <C> <C>
Investment Income and
Expenses:
Income (Notes 1 and 4):
Dividends.............. $ 3 $1,579 $ 177 $ 59
---- ------ ----- ------
Total income............ 3 1,579 177 59
---- ------ ----- ------
Expenses (Note 3):
Fees................... -- 147 14 1
Administrative
Expenses.............. -- -- -- --
---- ------ ----- ------
Total Expenses......... -- 147 14 1
---- ------ ----- ------
Net Investment Gain
(Loss)................. 3 1,432 163 58
---- ------ ----- ------
Net Realized and
Unrealized Gain (Loss)
on Investments (Note
1):
Net realized gain
(loss) on investments. -- -- -- --
Net unrealized
appreciation
(depreciation) of
investments........... (3) 785 110 43
---- ------ ----- ------
Net Realized and
Unrealized Gain (Loss)
on Investments......... (3) 785 110 43
---- ------ ----- ------
Net Increase (Decrease)
in Net Assets Resulting
From Operations........ $-- $2,217 $ 273 $ 101
==== ====== ===== ======
<CAPTION>
INVESTMENT COMPANY
--------------------------------------------------------
SHORT-TERM MID-TERM COMPOSITE AGGRESSIVE EQUITY
BOND FUND(A) BOND FUND(A) FUND(B) FUND
------------ ------------ ------------ -----------------
<S> <C> <C> <C> <C>
Investment Income and
Expenses:
Income (Notes 1 and 4):
Dividends.............. $ 18 $ 2 $ 512 $1,284
---- ------ ----- ------
Total income........... 18 2 512 1,284
---- ------ ----- ------
Expenses (Note 3):
Fees................... -- -- 19 48
Administrative
Expenses.............. -- -- -- --
---- ------ ----- ------
Total Expenses......... -- -- 19 48
---- ------ ----- ------
Net Investment Gain
(Loss)................. 18 2 493 1,236
---- ------ ----- ------
Net Realized and
Unrealized Gain (Loss)
on Investments (Note
1):
Net realized gain
(loss) on investments. -- -- -- --
Net unrealized
appreciation
(depreciation) of
investments........... (17) (2) (198) (239)
---- ------ ----- ------
Net Realized and
Unrealized Gain (Loss)
on Investments......... (17) (2) (198) (239)
---- ------ ----- ------
Net Increase (Decrease)
in Net Assets Resulting
From Operations........ $ 1 $ -- $ 295 $ 997
==== ====== ===== ======
</TABLE>
- -------
* Except for the periods noted.
(a) For the period August 25, 1995 (Commencement of Operations) to December 31,
1995.
(b) For the period February 23, 1995 (Commencement of Operations) to December
31, 1995.
(c) For the period March 2, 1995 (Commencement of Operations) to December 31,
1995.
The accompanying notes are an integral part of these financial statements.
43
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 3
STATEMENT OF OPERATIONS
FOR THE YEAR* ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
SCUDDER TCI CALVERT
----------------------------- ------- -----------
CAPITAL RESPONSIBLY
BOND GROWTH INTERNATIONAL GROWTH INVESTED
FUND(a) FUND FUND FUND(c) FUND(a)
------- ------- ------------- ------- -----------
<S> <C> <C> <C> <C> <C>
Investment Income and
Expenses:
Income (Notes 1 and 4):
Dividends................... $ -- $ 533 $ 1 $ -- $23
----- ------ --- ----- ---
Total income................. -- 533 1 -- 23
----- ------ --- ----- ---
Expenses (Note 3):
Fees........................ -- 230 22 23 --
Administrative Expenses..... -- -- -- -- --
----- ------ --- ----- ---
Total Expenses.............. -- 230 22 23 --
----- ------ --- ----- ---
Net Investment Income (Loss). -- 303 (21) (23) 23
----- ------ --- ----- ---
Net Realized and Unrealized
Gain (Loss) on Investments
(Note 1):
Net realized gain (loss) on
investments................ -- 113 -- -- --
Net unrealized appreciation
(depreciation) of
investments................ 2 2,863 85 (83) (22)
----- ------ --- ----- ---
Net Realized and Unrealized
Gain (Loss) on Investments.. 2 2,976 85 (83) (22)
----- ------ --- ----- ---
Net Increase (Decrease) in
Net Assets Resulting From
Operations.................. $ 2 $3,279 $64 $(106) $ 1
===== ====== === ===== ===
</TABLE>
<TABLE>
<CAPTION>
FIDELITY
-----------------------------------
VIP II VIP II VIP II
EQUITY-INCOME CONTRA ASSET MANAGER
FUND(a) FUND(c) FUND(a)
1995 1995 1995
------------- ------- -------------
<S> <C> <C> <C>
Investment Income and Expenses:
Income (Notes 1 and 4):
Dividends............................................ $ 8 $21 $--
---- --- ----
Total income.......................................... 8 21 --
---- --- ----
Expenses (Note 3):
Fees................................................. 6 6 30
Administrative Expenses.............................. -- -- --
---- --- ----
Total Expenses....................................... 6 6 30
---- --- ----
Net Investment Income (Loss).......................... 2 15 (30)
---- --- ----
Net Realized and Unrealized Gain (Loss) on Investments
(Note 1):
Net realized gain (loss) on investments.............. -- -- --
Net unrealized appreciation (depreciation) of
investments......................................... 160 57 408
---- --- ----
Net Realized and Unrealized Gain (Loss) on
Investments.......................................... 160 57 408
---- --- ----
Net Increase (Decrease) in Net Assets Resulting From
Operations........................................... $162 $72 $378
==== === ====
</TABLE>
- -------
* Except for the periods noted.
(a) For the period August 25, 1995 (Commencement of Operations) to December 31,
1995.
(b) For the period January 11, 1995 (Commencement of Operations) to December
31, 1995.
(c) For the period June 19, 1995 (Commencement of Operations) to December 31,
1995.
The accompanying notes are an integral part of these financial statements.
44
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 3
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS* ENDED DECEMBER 31,
<TABLE>
<CAPTION>
INVESTMENT COMPANY
--------------------------------------------------------------
MONEY MARKET ALL AMERICA EQUITY INDEX BOND SHORT-TERM
FUND(a) FUND(b) FUND(c) FUND(d) BOND FUND(a)
------------ ------------- ------------ ------- ------------
1995 1995 1994 1995 1995 1995
------------ ------- ----- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in
Net Assets:
From Operations:
Net investment income
(loss)................ $ 3 $ 1,432 $ 10 $ 163 $ 58 $ 18
Net realized gain
(loss) on investments. -- -- -- -- -- --
Net unrealized
appreciation
(depreciation) of
investments........... (3) 785 -- 110 43 (17)
---- ------- ----- ------ ------- ----
Net Increase (Decrease)
in net assets resulting
from operations........ -- 2,217 10 273 101 1
---- ------- ----- ------ ------- ----
From Unit Transactions:
Contributions.......... 83 21,955 634 2,995 2,360 393
Withdrawals............ -- -- (270) -- -- --
Net Transfers.......... (38) 19,823 (14) 3,050 (1,098) (62)
---- ------- ----- ------ ------- ----
Net Increase (Decrease)
from unit transactions. 45 41,778 350 6,045 1,262 331
---- ------- ----- ------ ------- ----
Net Increase (Decrease)
in Net Assets.......... 45 43,995 360 6,318 1,363 332
Net Assets:
Beginning of Period..... -- $ 360 $ -- -- -- --
---- ------- ----- ------ ------- ----
End of Period........... $ 45 $44,355 $ 360 $6,318 $ 1,363 $332
==== ======= ===== ====== ======= ====
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT COMPANY
------------------------------------------
MID-TERM COMPOSITE AGGRESSIVE EQUITY
BOND FUND(a) FUND(c) FUND(b)
------------ --------- -------------------
1995 1995 1995 1994
------------ --------- --------- --------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net Investment income.............. $ 2 $ 493 $ 1,236 $ --
Net realized gain (loss) on
investments....................... -- -- -- --
Net unrealized appreciation
(depreciation) of investments..... (2) (198) (239) 20
---- ------ --------- -------
Net Increase (Decrease) in net
assets resulting from operations... -- 295 997 20
---- ------ --------- -------
From Unit Transactions:
Contributions...................... 80 8,009 13,503 347
Withdrawals........................ -- -- -- (184)
Net Transfers...................... (48) 807 3,065 --
---- ------ --------- -------
Net Increase (Decrease) from unit
transactions....................... 32 8,816 16,568 163
---- ------ --------- -------
Net Increase (Decrease) in Net
Assets............................. 32 9,111 17,565 183
Net Assets:
Beginning of Period................. -- -- 183 --
---- ------ --------- -------
End of Period....................... $ 32 $9,111 $ 17,748 $ 183
==== ====== ========= =======
</TABLE>
- -------
* Except for the periods noted.
(a) For the period August 25, 1995 (Commencement of Operations) to December 31,
1995.
(b) Commenced Operations December 21, 1994.
(c) For the period February 23, 1995 (Commencement of Operations) to December
31, 1995.
(d) For the period March 3, 1995 (Commencement of Operations) to December 31,
1995.
The accompanying notes are an integral part of these financial statements.
45
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 3
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
SCUDDER
----------------------------------------
BOND CAPITAL GROWTH INTERNATIONAL
FUND(a) FUND(b) FUND (b)
------- ---------------- ---------------
1995 1995 1994 1995 1994
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income (loss)......... $-- $ 303 $ -- $ (21) $ --
Net realized gain (loss) on
investments......................... -- 113 -- -- --
Net unrealized appreciation
(depreciation)...................... 2 2,863 43 85 --
---- ------- ------- ------- ------
Net Increase (Decrease) in net assets
resulting from operations............ 2 3,279 43 64 --
---- ------- ------- ------- ------
From Unit Transactions:
Contributions........................ 544 31,456 10,750 7,450 181
Withdrawals.......................... -- -- -- -- --
Net Transfers........................ (148) (8,050) 14 776 --
---- ------- ------- ------- ------
Net Increase (Decrease) from unit
transactions......................... 396 23,406 10,764 8,226 181
---- ------- ------- ------- ------
Net Increase (Decrease) in Net Assets. 398 26,685 10,807 8,290 181
---- ------- ------- ------- ------
Net Assets:
Beginning of Period................... -- 10,807 -- 181 --
---- ------- ------- ------- ------
End of Period......................... $398 $37,492 $10,807 $8,471 $ 181
==== ======= ======= ======= ======
</TABLE>
<TABLE>
<CAPTION>
TCI CALVERT FIDELITY
------- ----------- ------------------------------------
RESPONSIBLY VIP VIP II VIP II
GROWTH INVESTED EQUITY-INCOME CONTRA ASSET MANAGER
FUND(c) FUND(a) FUND(a) FUND(c) FUND(a)
------- ----------- ------------- -------- -------------
1995 1995 1995 1995 1995
------- ----------- ------------- -------- -------------
<S> <C> <C> <C> <C> <C>
Increase (Decrease) in
Net Assets:
From Operations:
Net investment income
(loss)................ $ (23) $ 23 $ 2 $ 15 $ (30)
Net realized gain
(loss) on investments. -- -- -- -- --
Net unrealized
appreciation
(depreciation) of
investments........... (83) (22) 160 57 408
------- ---- ------ ------- -------
Net Increase (Decrease)
in net assets resulting
from operations........ (106) 1 162 72 378
------- ---- ------ ------- -------
From Unit Transactions:
Contributions.......... 50,597 528 6,544 10,045 20,045
Withdrawals............ -- -- -- -- --
Net Transfers.......... 3,207 (297) 2,022 357 (1,983)
------- ---- ------ ------- -------
Net Increase (Decrease)
from unit transactions. 53,804 231 8,566 10,402 18,062
------- ---- ------ ------- -------
Net Increase (Decrease)
in Net Assets.......... 53,698 232 8,728 10,474 18,440
------- ---- ------ ------- -------
Net Assets:
Beginning of Period..... -- -- -- -- --
------- ---- ------ ------- -------
End of Period........... $53,698 $232 $8,728 $10,474 $18,440
======= ==== ====== ======= =======
</TABLE>
- -------
* Except for the periods noted.
(a) For the period August 25, 1995 (Commencement of Operations) to December 31,
1995.
(b) Commenced Operations December 21, 1994.
(c) For the period June 19, 1995 (Commencement of Operations) to December 31,
1995.
The accompanying notes are an integral part of these financial statements.
46
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 3
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION
Separate Account No. 3 of The American Life Insurance Company ("the Company")
was established in conformity with New York Insurance Law and commenced
operations on December 21, 1994. On that date, the following American Life
funds became available as investment options: Money Market Fund, All America
Fund, Bond Fund, Composite Fund, Equity Index Fund, Short-Term Bond Fund, Mid-
Term Bond Fund, Aggressive Equity Fund, Scudder Bond Fund, Scudder Capital
Growth Fund, Scudder International Fund, TCI Growth Fund, and the Calvert
Responsibly Invested Balanced Fund. The American Life funds invest in a
corresponding Fund of Mutual of America Investment Corporation ("Investment
Company"), Portfolio of Scudder Variable Life Investment Fund ("Scudder"), Fund
of TCI Portfolios Inc. ("TCI") and a corresponding Fund of Calvert Responsibly
Invested Balanced Portfolio (formerly "Calvert Socially Responsible Series") of
Acacia Capital Corporation ("Calvert").
On May 1, 1995, Fidelity Investments Equity-Income, Contrafund and Asset
Manager Funds became available to Separate Account No. 3 as investment options.
The Fidelity Equity-Income Fund invests in the corresponding Portfolio of the
Fidelity Variable Insurance Products Fund and the Contrafund and Asset Manager
Funds invest in corresponding Portfolios of the Fidelity Variable Insurance
Products Fund II (collectively, "Fidelity").
Separate Account No. 3 was formed by the Company to support the operations of
the Company's variable universal life insurance policies. The assets of
Separate Account No. 3 are the property of the Company. The portion of Separate
Account No. 3's assets applicable to the policies will not be charged with
liabilities arising out of any other business the Company may conduct.
The significant accounting policies of Separate Account No. 3 are as follows:
Investment Valuation -- Investments are made in shares of the Investment
Company, Scudder, TCI, Calvert and Fidelity and are valued at the reported net
asset values of the respective Funds and Portfolios.
Investment Transactions -- Investment transactions are recorded on the trade
date. Realized gains and losses on sales of investments are determined based on
the average cost of the investment sold.
Federal Income Taxes -- Separate Account No. 3 will be treated as a part of
the Company and will not be taxed separately as a "regulated investment
company" under existing law. The Company is taxed as a life insurance company
under the life insurance tax provisions of the Internal Revenue Code of 1986.
No provision for income taxes is required in the accompanying financial
statements.
47
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 3
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. INVESTMENTS
The number of shares owned by Separate Account No. 3 and the respective net
asset values per share at December 31, 1995 are as follows:
<TABLE>
<CAPTION>
NUMBER OF NET ASSET
SHARES VALUE
--------- ---------
<S> <C> <C>
Investment Company Funds:
Money Market Fund................................... 37 $1.18
All America Fund.................................... 23,305 2.13
Equity Index Fund................................... 3,905 1.35
Bond Fund........................................... 690 1.43
Short-Term Bond Fund................................ 310 1.02
Mid-Term Bond Fund.................................. 28 1.00
Composite Fund...................................... 5,112 1.81
Aggressive Equity Fund.............................. 13,429 1.35
Scudder Portfolios:
Bond Fund........................................... 36 7.17
Capital Growth Fund................................. 2,452 15.08
International Fund.................................. 677 11.82
TCI Growth Fund...................................... 4,092 12.06
Calvert Responsibly Invested Fund.................... 151 1.70
Fidelity Portfolios
Equity-Income Fund.................................. 474 19.27
Contrafund.......................................... 747 13.78
Asset Manager Fund.................................. 1,177 15.79
</TABLE>
3. EXPENSES
Administrative Fees and Expenses and Cost of Insurance -- In connection with
its administrative functions, the Company deducts daily charges at an annual
rate of .40% (except for the TCI Growth Fund for which the rate charged is
.20%) from the value of the net assets of each fund. Monthly charges equaling
the lesser of $2.00 or 1/12 of 1% of account value may also be deducted. The
cost of insurance charges, to compensate the Company for life insurance
coverage provided under the policies, are deducted monthly and reflected as net
transfers in the accompanying financial statements.
Mortality and Expense Risk Fees -- The Company assumes the risk that insureds
may live for a shorter period of time than estimated for purposes of current or
guaranteed cost of insurance rates; for this it deducts a risk charge daily at
an annual rate of .70% from the value of the net assets of each fund. An
expense risk charge, deducted daily at an annual rate of .15% from the value of
the net assets of each fund, compensates the Company for the risk that
administrative expenses incurred are greater than estimated.
4. DIVIDENDS
All dividend distributions are reinvested in additional shares of the
respective Fund or Portfolios at net asset value.
On December 29, 1995 a dividend distribution was declared by the Investment
Company to shareholders of record on December 28, 1995. This dividend was paid
on December 29, 1995. In addition, the Investment Company declared and paid a
dividend distribution from the Money Market Fund on September 15, 1995. The
combined amount of these dividends was as follows:
<TABLE>
<S> <C>
Money Market Fund.......................... $ 3
All America Fund........................... 1,579
Equity Index Fund.......................... 177
Bond Fund.................................. 59
Short-Term Bond Fund....................... 18
Mid-Term Bond Fund......................... 2
Composite Fund............................. 512
Aggressive Equity Fund..................... 1,284
</TABLE>
48
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 3
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
On January 27, 1995, February 24, 1995, April 26, 1995, July 27, 1995 and
October 27, 1995, dividends were paid by the Scudder Capital Growth Portfolio.
The combined amount of the dividends was $533.
On February 24, 1995, a dividend was paid by the Scudder International
Portfolio. The amount of the dividend was $1.
On December 29, 1995, a dividend was paid by the Calvert Responsibly Invested
Portfolio. The amount of the dividend was $23.
On June 16, 1995, September 15, 1995 and December 29, 1995, dividends were
paid by the Fidelity Equity-Income Portfolio. The combined amount of the
dividends was $8.
On December 22, 1995, a dividend was paid by the Fidelity Contrafund
Portfolio. The amount of the dividend was $21.
49
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 3
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. FINANCIAL HIGHLIGHTS
Shown below are financial highlights for a Unit outstanding for the year
ended December 31, 1995 and the periods as noted.
<TABLE>
<CAPTION>
INVESTMENT COMPANY
----------------------------------------
MONEY ALL AMERICA EQUITY
MARKET FUND INDEX BOND
FUND ----------- FUND FUND
1995 1995 1994 1995 1995
------ ----- ----- ------ -----
<S> <C> <C> <C> <C> <C>
Unit value, beginning of period.... $1.77(a) $3.36 $3.32(b) $1.25(c) $2.36(d)
===== ===== ===== ===== =====
Unit value, end of year............ $1.80 $4.52 $3.36 $1.42 $2.69
===== ===== ===== ===== =====
Units outstanding, end of year..... 25 9,813 107 4,449 507
===== ===== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT COMPANY
----------------------------------------------
AGGRESSIVE
SHORT-TERM MID-TERM COMPOSITE EQUITY FUND
BOND FUND BOND FUND FUND ------------
1995 1995 1995 1995 1994
---------- --------- --------- ------ -----
<S> <C> <C> <C> <C> <C>
Unit value, beginning of
period....................... $1.08(a) $1.11(a) $3.14(c) $ 1.05 $1.03(b)
===== ===== ===== ====== =====
Unit value, end of year....... $1.10 $1.16 $3.39 $ 1.43 $1.05
===== ===== ===== ====== =====
Units outstanding, end of
year......................... 302 28 2,688 12,411 174
===== ===== ===== ====== =====
</TABLE>
<TABLE>
<CAPTION>
SCUDDER TCI
------------------------------------- -------
CAPITAL GROWTH INTERNATIONAL
BOND FUND(b) FUND(b) GROWTH
FUND(a) --------------- ------------- FUND(e)
1995 1995 1994 1995 1994 1995
------- ------- ------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
Unit value, beginning of period... $10.68 $ 14.67 $ 14.50 $10.80 $10.66 11.14
====== ======= ======= ====== ====== ======
Unit value, end of year........... $11.30 $ 18.64 $ 14.67 $11.85 $10.80 $12.18
====== ======= ======= ====== ====== ======
Units outstanding, end of year.... 35 2,011 737 715 17 4,409
====== ======= ======= ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
CALVERT FIDELITY
----------- ---------------------------------------
RESPONSIBLY
INVESTED VIP VIP II VIP II
FUND EQUITY-INCOME CONTRA FUND ASSET MANAGER
1995(a) FUND 1995(a) 1995(e) FUND 1995(a)
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Unit value, beginning of
period.................... $1.89 $17.68 $12.41 $14.87
===== ====== ====== ======
Unit value, end of year.... $2.01 $19.43 $13.85 $15.66
===== ====== ====== ======
Units outstanding, end of
year...................... 115 449 756 1,178
===== ====== ====== ======
</TABLE>
- -------
(a)For the period August 25, 1995 (Commencement of Operations) to December 31,
1995.
(b)For the period December 21, 1994 (Commencement of Operations) to December
31, 1994.
(c)For the period February 23, 1995 (Commencement of Operations) to December
31, 1995.
(d)For the period March 3, 1995 (Commencement of Operations) to December 31,
1995.
(e)For the period June 19, 1995 (Commencement of Operations) to December 31,
1995.
50
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders
of American Life Separate Account No. 3:
We have audited the accompanying statement of assets and liabilities of
American Life Separate Account No. 3 as of December 31, 1995, and the related
statement of operations for the year then ended and the statements of changes
in net assets and financial highlights for the year ended December 31, 1995 and
for the period December 21, 1994 (commencement of operations) to December 31,
1994. These financial statements and financial highlights are the
responsibility of the Separate Account's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
American Life Separate Account No. 3 as of December 31, 1995, and the results
of its operations for the year then ended and the changes in its net assets and
financial highlights for the year ended December 31, 1995 and for the period
December 21, 1994 (commencement of operations) to December 31, 1994 in
conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
New York, New York
February 20, 1996
51
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The American Life Insurance Company of New York:
We have audited the accompanying statements of financial condition of The
American Life Insurance Company of New York as of December 31, 1995 and 1994,
and the related statements of operations and surplus and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The American Life Insurance
Company of New York as of December 31, 1995 and 1994, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ Arthur Andersen LLP
New York, New York
February 20, 1996
52
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
-------------- --------------
<S> <C> <C>
ASSETS:
GENERAL ACCOUNT ASSETS:
Bonds and notes (Note 3)....................... $1,240,444,851 $1,161,336,455
Cash and short-term investments................ 14,821,448 22,568,986
Mortgage loans................................. 15,690,436 27,047,563
Real estate.................................... 994,916 1,464,537
Policy loans................................... 8,692,368 9,372,315
Other invested assets.......................... 163,000 145,000
Investment income accrued...................... 17,467,391 21,363,704
Federal income tax recoverable................. 6,899,772 5,588,116
Receivables.................................... 2,564,074 4,090,656
Due from affiliates............................ 11,399,146 --
-------------- --------------
Total general account assets................. 1,319,137,402 1,252,977,332
Separate account assets........................ 14,997,817 3,060,042
-------------- --------------
TOTAL ASSETS..................................... $1,334,135,219 $1,256,037,374
============== ==============
LIABILITIES AND SURPLUS:
GENERAL ACCOUNT LIABILITIES:
Insurance and annuity reserves................. $1,196,289,341 $1,115,176,428
Other contract liabilities and reserves........ 14,325,753 10,556,106
Dividends payable to contract and policy hold-
ers........................................... 125,102 122,806
Interest maintenance reserve................... 26,134,219 46,029,105
Due to affiliates.............................. -- 6,086,362
Other liabilities.............................. 3,952,291 598,359
-------------- --------------
Total general account liabilities............ 1,240,826,706 1,178,569,166
Separate account reserves and liabilities...... 14,997,817 3,060,042
-------------- --------------
Total liabilities............................ 1,255,824,523 1,181,629,208
-------------- --------------
ASSET VALUATION RESERVE (NOTE 2)................. 9,744,362 8,714,158
-------------- --------------
SURPLUS:
Capital stock, $4.55 par value, 1,100,000
shares authorized, 550,000 shares issued and
outstanding................................... 2,502,500 2,502,500
Assigned surplus (Note 9)...................... 43,548,059 43,548,059
Unassigned surplus............................. 22,515,775 19,643,449
-------------- --------------
Total surplus................................ 68,566,334 65,694,008
-------------- --------------
TOTAL LIABILITIES AND SURPLUS.................... $1,334,135,219 $1,256,037,374
============== ==============
</TABLE>
See accompanying notes to financial statements.
53
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND SURPLUS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
INCOME:
Annuity considerations and deposits (Note 4)..... $135,514,551 $ 86,633,831
Life and disability insurance premiums (Note 4).. 28,893,823 30,365,223
------------ ------------
Total considerations and premiums.............. 164,408,374 116,999,054
Reserve adjustment on reinsurance ceded (Note 4). (1,869,970) (1,584,494)
Net investment income (Note 8)................... 97,172,428 89,217,703
Other, net....................................... 211,282 355,243
------------ ------------
Total income................................... 259,922,114 204,987,506
------------ ------------
DEDUCTIONS:
Increase in insurance and annuity reserves....... 94,914,650 37,540,895
Annuity and surrender benefits................... 106,252,323 116,774,722
Death and disability benefits.................... 24,697,491 25,917,744
Operating expenses (Note 8)...................... 28,763,791 25,044,907
Other, net....................................... 641,253 1,043,395
------------ ------------
Total deductions............................... 255,269,508 206,321,663
------------ ------------
Net gain (loss) before dividends............... 4,652,606 (1,334,157)
DIVIDENDS TO CONTRACT AND POLICY HOLDERS........... 123,083 115,880
------------ ------------
Net gain (loss) from operations................ 4,529,523 (1,450,037)
FEDERAL INCOME TAX BENEFIT......................... 650,172 2,131,416
NET REALIZED CAPITAL LOSSES (NOTE 2)............... (898,056) --
------------ ------------
Net income..................................... 4,281,639 681,379
SURPLUS TRANSACTIONS:
Change in asset valuation reserve................ (1,030,204) (844,455)
Net unrealized capital losses.................... (72,113) (979,262)
Change in non-admitted assets.................... 361,144 (286,154)
Change in liability for reserve strengthening
(Note 2)........................................ -- (3,217,870)
Capital contribution (Note 9).................... -- 10,000,000
Other, net....................................... (668,140) (930,579)
------------ ------------
Net change in surplus.......................... 2,872,326 4,423,059
SURPLUS, AT BEGINNING OF YEAR...................... 65,694,008 61,270,949
------------ ------------
SURPLUS, AT END OF YEAR............................ $ 68,566,334 $ 65,694,008
============ ============
</TABLE>
See accompanying notes to financial statements.
54
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
CASH PROVIDED:
Premium and annuity funds received............... $164,408,374 $139,623,626
Investment income received....................... 94,994,832 87,924,678
Reserve adjustment on reinsurance ceded.......... (1,684,005) (1,584,495)
Other, net....................................... 25,317 64,722
------------ ------------
Total receipts................................ 257,744,518 226,028,531
------------ ------------
Benefits paid.................................... 129,616,481 140,352,356
Dividends paid to contract and policy holders.... 111,958 127,196
Insurance and operating expenses paid............ 28,218,770 27,859,815
Net transfers to separate accounts............... 10,416,724 2,343,625
------------ ------------
Total payments................................ 168,363,933 170,682,992
------------ ------------
Net cash from operations...................... 89,380,585 55,345,539
Proceeds from long-term investments sold, matured
or repaid....................................... 572,678,629 317,293,169
Capital contribution (Note 9).................... -- 10,000,000
Federal income tax benefit on securities transac-
tions........................................... 7,718,071 349,786
Other, net....................................... 4,123,864 9,659,531
------------ ------------
Total cash provided........................... 673,901,149 392,648,025
------------ ------------
CASH APPLIED:
Cost of long-term investments acquired........... 664,688,811 397,300,231
Other, net....................................... 16,959,876 4,703,363
------------ ------------
Total cash applied............................ 681,648,687 402,003,594
------------ ------------
Net change in cash and short-term investments. (7,747,538) (9,355,569)
CASH AND SHORT-TERM INVESTMENTS:
Beginning of year................................ 22,568,986 31,924,555
------------ ------------
End of year...................................... $ 14,821,448 $ 22,568,986
============ ============
</TABLE>
See accompanying notes to financial statements.
55
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
1. ORGANIZATION
The American Life Insurance Company of New York ( the "Company") is a stock
life insurance company licensed in all fifty states, the District of Columbia,
and the U.S. Virgin Islands. The Company is a wholly owned subsidiary of Mutual
of America Corporation. Mutual of America Corporation is a wholly owned
subsidiary of Mutual of America Life Insurance Company ("Mutual of America").
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
The Company provides retirement and employee benefit plans in the small to
medium size case area, principally to employees in for-profit organizations.
Operations are conducted through both a network of regional field offices and
the use of direct mail.
Basis of Presentation
The Company is licensed under New York Insurance Law as a stock life
insurance company. The accompanying financial statements are prepared in
accordance with accounting practices prescribed or permitted by the New York
State Insurance Department. Such statutory accounting practices are considered
to be generally accepted accounting principles ("GAAP") for stock life
insurance companies which are wholly owned subsidiaries of a mutual life
insurance company. The ability of the Company to fulfill its obligations to
contractholders and policyholders is of primary concern to insurance regulatory
authorities. As such, the financial statements are oriented to the insuring
public.
The Financial Accounting Standards Board ("FASB") issued an interpretation
declaring that financial statements of mutual life insurance companies,
including stock life insurance companies that are wholly owned by a mutual life
insurance company, which are prepared on the basis of statutory accounting
principles, will no longer be considered to be in conformity with GAAP. This
interpretation applies to financial statements issued for fiscal years
beginning after December 15, 1995. Further, this interpretation requires that
insurers whose financial statements purport to be in conformity with GAAP
follow all applicable guidance from which they are not specifically exempt. In
addition, certain accounting principles for mutual life insurance companies,
which will ultimately be required to be in compliance with GAAP, have been
determined by the FASB and the American Institute of Certified Public
Accountants. The Company has not yet quantified the financial impact of this
interpretation.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from these estimates.
Accounting policies applied in the preparation and presentation of the
financial statements follow.
56
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1994
Disclosure About Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107 ("SFAS 107") requires all
entities to disclose the fair value, where practicable, of its financial
instruments. SFAS 107 does not require disclosure of certain financial
instruments such as insurance contracts other than financial guarantees and
investment contracts. Fair value estimates, methods and significant assumptions
are disclosed in each of the relevant footnotes which follow.
Asset Valuations
Investment valuations are prescribed by the National Association of Insurance
Commissioners ("NAIC"). Bonds qualifying for amortization are stated at
amortized cost; short-term investments in good standing are stated at cost.
Fair value for these securities (approximately $1.3 billion in 1995 and $1.1
billion in 1994) is determined by reference to market prices quoted by the
NAIC. If quoted market prices are not available, fair value is determined using
quoted prices for similar securities. All other bonds and short-term notes are
stated at market value which approximates fair value. Mortgage loans are
carried at amortized indebtedness. Fair value for these loans (approximately
$16.2 million in 1995 and $27.2 million in 1994) is determined by discounting
the expected future cash flows using the current rate at which similar loans
would be made to borrowers with similar credit ratings and remaining
maturities. Impairments of individual assets that are considered to be other
than temporary are recognized when incurred.
Policy loans are stated at the unpaid balance of the loan. The majority of
such loans are issued with variable interest rates which are periodically
adjusted based upon changes in the rates credited to these policies, and
therefore are considered to be stated at fair value.
Real estate investments are stated at cost less accumulated depreciation,
which approximates fair value.
Certain other assets, such as furniture and fixtures and prepaid expenses,
are excluded from the statements of financial condition ("non-admitted
assets"). Such assets totaled $.5 million and $.9 million at December 31, 1995
and 1994, respectively.
Interest Maintenance and Asset Valuation Reserves
Realized gains and losses, net of applicable taxes, arising from changes in
interest rates are accumulated in the Interest Maintenance Reserve ("IMR") and
are amortized into net investment income over the estimated remaining life of
the investment sold. All other realized gains and losses are reported in the
statements of operations and surplus.
An Asset Valuation Reserve ("AVR"), that applies to the specific risk
characteristics of all invested asset categories excluding cash, policy loans
and investment income accrued has been established based on a statutory
formula. Realized and unrealized gains and losses arising from changes in the
creditworthiness of the borrower are included in the appropriate subcomponent
of the AVR. Changes in the AVR are applied directly to unassigned surplus.
Separate Account Operations
Certain life insurance premiums and annuity considerations may be invested at
the participants' discretion in separate accounts; either a multifund account,
which is managed by Mutual of America Capital Management Corporation or certain
other funds which are managed by outside investment advisors. All of the funds'
investment experience is allocated to participants. Investments held in the
separate accounts are stated at market value, which is equal to fair value.
Participants' corresponding equity in the separate accounts is reported as
liabilities in the accompanying statements. Operating results of the separate
accounts are combined with the Company's other business in the accompanying
statements. Net operating gains, including net realized and unrealized capital
gains in the separate accounts are offset by increases to reserve liabilities
in the respective separate accounts.
57
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1994
Insurance and Annuity Reserves
Reserves for annuity contracts are computed on the net single premium method
and represent the estimated present value of future retirement benefits. These
reserves are based on mortality and interest rate assumptions (ranging
primarily from 3.5% to 9.25%) which meet statutory requirements. Reserves for
contractual funds not yet used for the purchase of annuities are accumulated at
various interest rates which, during 1995 and 1994 ranged from 5.0% to 6.25%
and 4.5% to 6.25%, respectively, and are deemed sufficient to provide for
contractual surrender values of these funds. Reserves for life and disability
insurance are based on mortality, morbidity and interest rate assumptions which
meet statutory requirements.
Contractual funds not yet used to purchase retirement annuities and other
deposit liabilities are stated at their cash surrender value, which
approximates fair value ($492.9 million and $468.1 million) at December 31,
1995 and 1994, respectively. The fair value of annuity contracts, approximately
$683.7 million and $532.4 million at December 31, 1995 and 1994, respectively,
was determined by discounting expected future benefits using current mortality
tables and interest rates based on the duration of expected future benefits. A
weighted average rate of 6.21% and 8.28% was used at December 31, 1995 and
1994, respectively.
In 1994, the Company changed the interest rates used to value certain annuity
and deposit type contracts issued prior to January 1, 1994. The effect of such
changes was to increase policyholder liabilities above the minimum statutory
requirements and to reduce surplus by $3.2 million at December 31, 1994.
Premiums, Annuity Considerations, Investment Income and Expenses
Annuity considerations are recognized as income when due; considerations for
deposit type contracts are recognized as income when received. Group life and
disability insurance premiums are recognized as income over the contract
period. Investment income is reported as earned and is presented net of related
investment expenses. Operating expenses, including acquisition costs such as
distributions and underwriting expenses associated with new business, are
charged to operations as incurred.
Dividends
Dividends are based on formulas and scales approved by the Board of Directors
and are accrued currently for payment subsequent to plan anniversary dates.
3. DEBT SECURITIES HELD AS ASSETS
The statement values and estimated market values of investments in debt
securities at December 31, 1995 are shown below. Excluding U.S. Government and
government agency investments, the Company is not exposed to any significant
concentration of credit risk.
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
STATEMENT UNREALIZED UNREALIZED MARKET
CATEGORY VALUE GAINS LOSSES VALUE
-------- ---------- ---------- ---------- ----------
(000'S OMITTED)
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of
U.S. Government corporations and
agencies.......................... $ 519,433 $36,436 $ 80 $ 555,789
Obligations of states and political
subdivisions...................... 6,639 63 27 6,675
Debt securities issued by foreign
governments....................... 46,999 5,173 -- 52,172
Corporate securities............... 679,361 33,510 3,398 709,473
---------- ------- ------ ----------
Total.......................... $1,252,432 $75,182 $3,505 $1,324,109
========== ======= ====== ==========
</TABLE>
58
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1994
Short-term securities with a statement value and estimated market value of
$12.0 million are included in the above table. As of December 31, 1995, the
Company has $3.5 million (par value $3.1 million) of its long-term debt
securities on deposit with various state regulatory agencies.
The statement values and estimated market values of investments in debt
securities at December 31,1995, by contractual maturity, are shown below. Debt
securities are stated at contractual maturity with the exception of mortgage-
backed securities which are stated at expected maturity. Expected maturities
may differ from contractual maturities because borrowers may have the right to
prepay obligations with or without prepayment penalties.
<TABLE>
<CAPTION>
ESTIMATED
STATEMENT MARKET
VALUE VALUE
---------- ----------
(000'S OMITTED)
---------------------
<S> <C> <C>
Due in one year or less................................. $ 39,988 $ 40,304
Due after one year through five years................... 248,695 257,586
Due after five years through ten years.................. 446,795 468,074
Due after ten years..................................... 516,954 558,145
---------- ----------
Total.................................................. $1,252,432 $1,324,109
========== ==========
</TABLE>
Proceeds from the sale of investment securities during 1995 were $568.2
million. Gross gains of $2.1 million and gross losses of $26.0 million were
realized on these sales, of which $15.6 million of losses was accumulated (net
of applicable taxes of $8.3 million) in the IMR. Such amounts will be amortized
into investment income over the estimated remaining life of the investment
sold. During the year, $4.3 million of the IMR (net of applicable taxes of $2.3
million) was amortized and included in net investment income.
The statement values and estimated market values of investments in debt
securities at December 31, 1994 were as follows:
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
STATEMENT UNREALIZED UNREALIZED MARKET
CATEGORY VALUE GAINS LOSSES VALUE
- ----------------------------------- ---------- ---------- ---------- ----------
(000'S OMITTED)
<S> <C> <C> <C> <C>
U.S. Treasury securities and obli-
gations of U.S.
Government corporations and agen-
cies.............................. $ 373,954 $1,384 $24,110 $ 351,228
Debt securities issued by foreign
governments....................... 48,276 158 2,670 45,764
Corporate securities............... 756,672 2,152 69,659 689,165
---------- ------ ------- ----------
Total............................ $1,178,902 $3,694 $96,439 $1,086,157
========== ====== ======= ==========
</TABLE>
Short-term securities with a statement value and estimated market value of
$17.6 million are included in the above table. As of December 31, 1994, the
Company had $3.0 million (par value $2.6 million) of its long-term debt
securities portfolio on deposit with various state regulatory agencies.
Proceeds from the sale of investment securities during 1994 were $248.3
million. Gross gains of $1.6 million and gross losses of $15.2 million were
realized on these sales, of which $8.8 million of losses was accumulated (net
of applicable taxes of $4.8 million) in the IMR. Such amounts will be amortized
into
59
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995 AND 1994
investment income over the estimated remaining life of the investment sold.
During the year, $6.1 million of the IMR (net of applicable taxes of $3.3
million) was amortized and included in net investment income.
4. REINSURANCE AND RELATED TRANSACTIONS
The Company has a bulk co-insurance agreement with its ultimate parent,
Mutual of America, covering certain nonpension insurance business. In
consideration for additional reserves assumed under this agreement, the Company
assumed premiums and annuity considerations of $102.9 million and $64.2 million
in 1995 and 1994, respectively. Total reserve liabilities reinsured under this
agreement were as follows:
<TABLE>
<CAPTION>
1995 1994
------ ------
(IN MILLIONS)
<S> <C> <C>
Life and annuity........................ $768.0 $682.1
Funding agreements...................... $63.3 $ 68.0
Other reserves.......................... $10.1 $ 3.8
</TABLE>
5. PENSION PLAN AND POSTRETIREMENT BENEFITS
Mutual of America is the administrator for a qualified, noncontributory
defined benefit pension plan covering substantially all of its own and the
Company's eligible employees. Benefits are generally based on years of service
and final average salary. Mutual of America's funding policy is to contribute
annually, at a minimum, the amount necessary to satisfy the funding
requirements under the Employee Retirement Income Security Act of 1974
("ERISA").
Pension plan assets consist of an interest in Mutual of America's general
account, participation in one of Mutual of America's separate accounts and
participation in certain other funds managed by outside investment advisors.
The accounting for this pension plan is in accordance with the provisions of
Statement of Financial Accounting Standards No. 87, "Employers' Accounting for
Pensions." Pension expense allocated to the Company for 1995 and 1994 was $663
thousand and $593 thousand, respectively.
In addition to the above noncontributory defined benefit plan, all employees
may participate in a 401(k) savings plan under which the Company matches half
of the employees' basic contribution up to 6% of salary. The cost of the plan
was approximately $280 and $247 in 1995 and 1994, respectively.
Mutual of America also administers two defined benefit postretirement plans
providing medical, dental and life insurance benefits. These plans cover
substantially all of its own and the Company's salaried employees. Employees
may become eligible for such benefits upon attainment of retirement age while
in the employ of the Company and satisfaction of service requirements. The
accounting for such postretirement benefits is in accordance with Statement of
Financial Accounting Standards No. 106, "Accounting for Postretirement Benefits
Other Than Pensions." Postretirement benefit expense allocated to the Company
for the years ended 1995 and 1994 was $185 thousand and $218 thousand,
respectively.
6. COMMITMENTS AND CONTINGENCIES
The Company is involved in various legal actions which have arisen in the
course of the Company's business. In the opinion of management, the ultimate
liability with respect to such lawsuits as well as other contingencies is not
considered to be material in relation to the Company's financial statements.
60
<PAGE>
7. FEDERAL INCOME TAXES
The tax provision for the Company was calculated in accordance with the
Internal Revenue Code, as amended. The Company files federal tax returns on a
separate company basis. Differences between the Company's effective tax rate
and the expected income tax computed by applying the federal income tax rate of
34% to net gain (loss) from operations before federal income taxes result from
the recognition of revenues and expenses in different periods for statutory and
tax reporting purposes and are primarily due to policyholder reserves, deferred
acquisition costs and realized capital gains.
8. RELATED PARTY TRANSACTIONS
Mutual of America has incurred operating and investment-related costs in
connection with the use of its personnel and property on behalf of the Company.
During 1995 and 1994, operating and investment-related expenses of $17.2
million and $1.2 million, and $15.2 million and $1.1 million, respectively,
were charged to the Company and are reflected in the accompanying Statements of
Operations and Surplus.
9. CAPITAL TRANSACTIONS
During 1994, the Company received a capital contribution of $10.0 million
from Mutual of America Corporation. No capital contributions were received in
1995.
61
