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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.
Each currently available Investment Fund invests its assets in shares of one of
the following:
. 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
. VARIABLE INSURANCE PRODUCTS FUNDS OF FIDELITY INVESTMENTS (R): 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
. SCUDDER VARIABLE LIFE INVESTMENT FUND: the Scudder Capital Growth, Scudder
Bond and the Scudder International Portfolios; or
. AMERICAN CENTURY VP CAPITAL APPRECIATION FUND of American Century Variable
Portfolios, Inc.; or
. CALVERT SOCIAL BALANCED PORTFOLIO (formerly called the Calvert Responsibly
Invested Balanced Portfolio) of Calvert Variable Series, Inc.
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, American Century VP Capital
Appreciation Fund and Calvert Social Balanced Portfolio, which you also should
read and retain.
Dated: May 1, 1998
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TABLE OF CONTENTS
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DEFINITIONS............................ 4
INTRODUCTION AND SUMMARY............... 7
THE POLICIES........................... 8
Policy Issue.......................... 8
Right to Examine Policy.............. 9
Premium Payments...................... 9
Scheduled Premiums................... 9
Unscheduled Premiums................. 9
Limitation on Premiums............... 9
Allocation of Premiums............... 9
Investment Alternatives............... 10
Investment Funds..................... 10
General Account...................... 13
Account Value......................... 13
General Account Value................ 13
Investment Account Values............ 13
Transfers............................. 14
Access to Account Values.............. 14
Surrender............................ 14
Partial Withdrawals.................. 14
Policy Loans......................... 14
Accelerated Benefit.................. 15
Insurance Benefits.................... 16
Death Proceeds....................... 16
Basic Death Benefit.................. 16
Corridor Percentages................. 16
Face Amount Increases and Decreases.. 17
Change of Basic Death Benefit Plan... 17
Maturity Benefit..................... 17
Charges and Deductions................ 17
Cost of Insurance Charges............ 17
Administrative Charges............... 18
Mortality and Expense Risks Charges.. 18
Fees and Expenses of Underlying
Funds............................... 18
Accelerated Benefit Fee.............. 19
Premium Taxes........................ 20
Supplemental Insurance Benefits....... 20
Lapse and Reinstatement............... 20
AMERICAN LIFE AND SEPARATE ACCOUNT NO.
3..................................... 20
American Life......................... 20
The Separate Account.................. 21
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FEDERAL TAX CONSIDERATIONS.............. 21
Tax Status of the Policies............. 21
Tax Treatment of Policy Benefits....... 22
In General............................ 22
Distributions from Policies Not
Classified
as Modified Endowment Policies....... 22
Modified Endowment Contracts.......... 23
Distributions from Policies Classified
as Modified Endowment Contracts...... 23
Policy Loan Interest.................. 23
Investment in the Policy.............. 23
Estate Taxes.......................... 23
American Life's Taxes.................. 24
OTHER MATTERS........................... 24
Voting Rights.......................... 24
Transfers, Withdrawals and
Reallocations
by Telephone.......................... 24
Dollar Cost Averaging.................. 25
Notices and Reports to Policyowners.... 25
Distribution of the Policies........... 25
Proceeds Payment Options............... 25
Interest Payments..................... 26
Life Payments......................... 26
Payments for a Fixed Period........... 26
Payments of a Fixed Amount............ 26
Reservation of Right to Make Changes... 26
Changes to Separate Account........... 26
Changes in Policy Cost Factors........ 26
Deduction of Premium Taxes............ 26
Miscellaneous Policy Provisions........ 26
Limit on Right to Contest............. 26
Suicide Exclusion..................... 27
Misrepresentation or Misstatement of
Age or Sex........................... 27
Assignment............................ 27
Non-Participation..................... 27
Executive Officers and Directors....... 27
Legal Proceedings...................... 28
Legal Matters.......................... 28
Year 2000 Compliance................... 28
Experts................................ 29
Additional Information................. 29
POLICY ILLUSTRATIONS.................... 29
FINANCIAL STATEMENTS.................... 42
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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, American Century Variable Portfolios, Inc., and
Calvert Variable Series, Inc.
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.
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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SUPPLEMENT TO PROSPECTUS
The American Separate Account No. 3
Variable Universal Life Insurance Policies
Issued by
The American Life Insurance Company of New York
**THIS SUPPLEMENT IS FOR MASSACHUSETTS POLICIES ONLY**
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ALL REFERENCES IN THE PROSPECTUS TO "SCHEDULED PREMIUMS" ARE CHANGED TO
"PLANNED PREMIUMS". ALL REFERENCES IN THE PROSPECTUS TO "UNSCHEDULED PREMIUMS",
AND ACCOMPANYING TEXT PERTAINING TO UNSCHEDULED PREMIUMS, ARE DELETED.
THE DISCUSSION IN THE PROSPECTUS IS SUPPLEMENTED BY THE FOLLOWING:
You will select an amount of planned premiums under your policy, based on the
initial Face Amount and payment intervals you have chosen. YOU NEED NOT PAY
PLANNED PREMIUMS, AND YOUR POLICY WILL NOT LAPSE SO LONG AS YOUR ACCOUNT VALUE
IS SUFFICIENT TO PAY APPLICABLE CHARGES WHEN DUE.
Failure to pay one or more planned premiums will not necessarily cause your
Policy to lapse; timely payment of all such premiums will not assure that your
Policy will continue in force. Whether your Policy continues in force or lapses
does not depend on whether planned premiums have been paid, but rather on
whether, on each Monthly Anniversary Day, your Account Value (which will vary
with the performance of our Investment Accounts) is sufficient to permit the
deduction of all charges due on that day.
You may increase the amount of premiums paid under your policy at any time,
except that such additional amounts must be equal to at least $50 each and are
limited to an aggregate of $10,000 during any Policy Year. In addition, if
these additional amounts would increase the policy's Basic Death Benefit, then
evidence of insurability would be required. See "Insurance Benefits" on page 16
of the Prospectus.
SUPPLEMENT, DATED MAY 1, 1998
TO PROSPECTUS, DATED MAY 1, 1998
The American Life
Insurance Company
of New York
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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. Currently, the
administrative expense charge for the Fund that invests in the American Century
VP Capital Appreciation Fund is at an annual rate of .20% and the charge for
the Funds that invest in the Fidelity Portfolios is at an annual rate of
approximately .30%, based on reimbursements the Insurance Company is receiving.
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 1997, and their total
annual expenses ranged from .125% to 1.00% of average net assets during 1997.
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. 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 ("Scudder"), the American
Century VP Capital Appreciation Fund of American Century Variable Portfolios,
Inc. ("American Century"), and the Calvert Social Balanced Portfolio (formerly
known as Calvert Responsibly Invested Balanced Portfolio) of Calvert Variable
Series, Inc. ("Calvert"), which are attached to this Prospectus. Each
applicable prospectus should be read for a complete evaluation of the
Investment Alternatives. Below 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 of the All America Fund is to outperform the Standard
& Poor's Composite Index of 500 Stocks (the "S&P 500 Index"). The 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 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.
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<PAGE>
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
11
<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: 0-50% in short-term/money market instruments;
20-60% in bonds; and 30-70% in stocks. The expected "neutral mix", which the
Portfolio's adviser would expect over the long-term, is 10% in short-term/money
market instruments, 40% in bonds and 50% in stocks.
SCUDDER CAPITAL GROWTH PORTFOLIO
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. It is impossible to accurately predict how long such alternate
strategies may be utilized.
SCUDDER BOND PORTFOLIO
The Scudder Bond Portfolio pursues a policy of investing for a high level of
income consistent with a high quality portfolio of debt securities. Under
normal circumstances, the Portfolio invests at least 65% of its assets in
bonds, including those of the U.S. Government and its agencies, and those of
corporations and other notes and bonds paying high current income. Under normal
market conditions, the Portfolio will invest at least 65% of its assets in
securities rated within the three highest quality rating categories of Moody's
Investors Service, Inc. ("Moody's") or Standard & Poor's Corporation ("S&P"),
or if unrated, in bonds judged by the Portfolio's adviser to be of comparable
quality at the time of purchase. The Portfolio may invest up to 20% of its
assets in debt securities rated lower than Baa or BBB or, if unrated, of
equivalent quality as determined by the Portfolio's adviser, but will not
purchase bonds rated below B3 by Moody's or B- by S&P or their equivalent.
SCUDDER INTERNATIONAL PORTFOLIO
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. The Portfolio has no present intention
of altering its general policy of being primarily invested under normal
conditions in foreign securities. However, in the event of exceptional
conditions abroad, the Portfolio may temporarily invest all or a portion of its
assets in Canadian or U.S. Government obligations or currencies, or securities
of companies incorporated in and having their principal activities in Canada or
the United States. It is impossible to accurately predict how long such
alternate strategies may be utilized.
AMERICAN CENTURY VP CAPITAL APPRECIATION FUND
American Century VP Capital Appreciation Fund seeks capital growth by investing
primarily in common stocks (including securities convertible into common stock)
and other securities that meet certain fundamental and technical standards of
selection and have, in the opinion of the Fund's manager, better-than-average
prospects for appreciation. The Fund may purchase securities only of companies
that have a record of at least three years' continuous operation. All
securities must be listed on major stock exchanges or traded over-the-counter.
Prior to May 1, 1997, this Fund was known as the TCI Growth Fund.
CALVERT SOCIAL BALANCED PORTFOLIO
Calvert Social Balanced Portfolio seeks to achieve a total return above the
rate of inflation through an actively managed non-diversified portfolio of
common and preferred stocks, bonds and money market instruments which offer
income and capital growth opportunity and which satisfy the social concern
criteria established for the Portfolio. Prior to January 1, 1998, the Portfolio
was known as the Calvert Responsibly Invested Balanced Portfolio.
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<PAGE>
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, the American Century VP
Capital Appreciation Fund and the Calvert Social 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 Scudder Variable Life Investment Fund prospectus, "Shareholders of
American Century Variable Portfolios" in the American Century VP Capital
Appreciation Fund prospectus, and "Purchase and Redemption of Shares" in the
Calvert Social 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
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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.
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%.
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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.
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.
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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 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. The
beneficiary 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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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
Commissioners 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 Social 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) American Century VP Capital Appreciation 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 American Century VP Capital
Appreciation Fund will be reduced to 0.20%, and with respect to the Separate
Account's investments in the Fidelity Portfolios will be reduced to
approximately .30%, 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 as of December 31, 1997 was .30%,
and the individual fund fee rates for the Equity-Income, Contrafund and Asset
Manager Portfolios are .20%, .30% and .25%, respectively.
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Pursuant to service agreements, Fidelity Investments Institutional Operations
Company, Inc., the transfer agent for the Fidelity Portfolios, reimburses the
Insurance Company at an annual rate of .04%, and Fidelity Distributors
Corporation (directly or through Fidelity Management & Research Company) pays
compensation for distribution expenses at an annual rate of .06%, of the
aggregate amount of the Separate Account's investment in the Fidelity
Portfolios, with payment made quarterly in arrears. The .04% reimbursement is
limited to a maximum for any calendar quarter of $1,000,000 payable to the
Insurance Company and Mutual of America. The .06% reimbursement will be made
for a quarter so long as the aggregate amount of the investments by the
separate accounts of the Insurance Company and Mutual of America in the
Fidelity Portfolios during that quarter equals at least $100 million in average
net assets. The Insurance Company will reduce the administrative expense charge
for the Separate Account Funds that invest in the Fidelity Portfolios to the
extent the Insurance Company receives a reimbursement for such Funds.
Each Scudder Portfolio receives investment advice from Scudder, Kemper
Investments, Inc., and Scudder, Kemper Investments, 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 Bond Portfolio, .475% of the
average net assets for the first $500 million and .450% over $500 million in
the Scudder Capital Growth Portfolio, and .875% of the average net assets for
the first $500 million and .725% over $500 million 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.
American Century VP Capital Appreciation Fund receives investment advice from
American Century Investment Management, Inc., and American Century Investment
Management, Inc. receives from the American Century VP Capital Appreciation
Fund a fee calculated as a daily charge at the annual rate of 1.00% of the
assets of the American Century VP Capital Appreciation Fund. Many investment
companies pay smaller management fees than the aforesaid fee paid by American
Century VP Capital Appreciation Fund to American Century Investment Management,
Inc. However, American Century Variable Portfolios, Inc. has stated in the
prospectus for the American Century VP Capital Appreciation 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 expenses except
brokerage, taxes, interest, fees and expenses of non-interested directors
(including counsel fees) and extraordinary expenses are paid by American
Century Investment Management, Inc.
Pursuant to the Fund Participation Agreement among the Insurance Company,
American Century Variable Portfolios, Inc. and American Century Investment
Management, Inc., American Century Investment Management, Inc. pays the
Insurance Company 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 American Century VP
Capital Appreciation Fund, provided the aggregate amount of the Separate
Account's investment and the investments of other separate accounts of the
Insurance Company and Mutual of America in the American Century VP Capital
Appreciation Fund for that month exceeds $10 million. The administrative fees
assessed against the Separate Account Fund holding shares of American Century
VP Capital Appreciation Fund are reduced by the full amount of such payments to
the Insurance Company.
Calvert Social 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 Social 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. The
performance adjustments could cause the annual rate to be as high as .85% or as
low as .55% of average net assets.
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.
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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). 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, 1997, it had total assets of approximately $1.3
billion.
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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.
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 income 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
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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
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.
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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 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.
23
<PAGE>
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. (After 1998, the estate tax credit will
increase in increments until 2006, when it will reach the equivalent of an
exemption of $1 million.) 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
24
<PAGE>
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.
25
<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
26
<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
Financial Officer;
Director
William Breneisen Executive Vice President Executive Vice President, Office of Technology,
Mutual of America, since March 1996; Senior Vice
President from July 1993 to March 1996; prior
thereto, Vice President
Jeremy J. Brown Executive Vice President Executive Vice President and Chief Actuary,
and Chief Actuary; Director Mutual of America, since March 1997; Consulting
Actuary, Milliman & Robertson, from July 1994 to
March 1997; prior thereto, various positions in
Group Pension Department of Allmerica Financial
Patrick A. Burns Senior Executive Vice Senior Executive Vice President and General
President and General Counsel, Mutual of America, since February 1994;
Counsel; Director prior thereto, Executive Vice President and
General Counsel
Richard J. Ciecka Director Director and Vice Chairman of the Board, Mutual
of America
William S. Conway Executive Vice President; Executive Vice President, Marketing, Mutual of
Director America
Rita Conyers Executive Vice President; Executive Vice President, Corporate
Director Communications and Executive Training, Mutual of
America
Salvatore R. Curiale Senior Executive Vice Senior Executive Vice President, Technical
President; Director Operations, Mutual of America, since March 1995;
prior thereto, Superintendent of Insurance,
State of New York
John W. Davidson Director President and Chief Executive Officer of Capital
Management since March 1996; President and Chief
Executive Officer, Munich Re Capital Management
Co., from March 1994 to January 1996; prior
thereto, Vice President, Bankers Trust Company
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
POSITIONS AND OFFICES WITH
NAME AMERICAN LIFE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
---- --------------------------- -------------------------------------------
<S> <C> <C>
William A. DeMilt Executive Vice President; Executive Vice President, Mutual of America,
Director since February 1994 and Treasurer from February
1994 until May 1997; prior thereto, Senior Vice
President and Treasurer
Thomas E. Gilliam Executive Vice President; Executive Vice President and Assistant to the
Director Vice Chairman, Mutual of America, since October
1995; prior thereto, Executive Vice President,
Technical Operations
John R. Greed Senior Vice President and Senior Vice President and Deputy Treasurer,
Treasurer; Director Mutual of America, since July 1996; partner,
Arthur Andersen LLP, from September 1995 to June
1996; prior thereto, Senior Manager
Theodore L. Herman Vice Chairman of the Board; Vice Chairman, American Life
Director
Gregory A. Kleva Executive Vice President & Executive Vice President & Deputy General
Deputy General Counsel Counsel, Mutual of America, since February 1995;
prior thereto, Senior Vice President & Deputy
General Counsel
Stephanie J. Kopp Executive Vice President Executive Vice President and Corporate
and Corporate Secretary; Secretary, Mutual of America
Director
Amir Lear Senior Vice President Senior Vice President, Mutual of America, since
April 1994; prior thereto, Vice President
Howard Lichtenstein President and Chief President and Chief Operating Officer, American
Operating Officer; Director Life
George L. Medlin Executive Vice President, Executive Vice President, Internal Audit, Mutual
Internal Audit of America since March 1998; prior thereto,
Senior Vice President, Internal Audit
Thomas J. Moran Chairman of the Board and Chief Executive Officer, Mutual of America,
Chief Executive Officer; since October 1994; prior thereto, President and
Director Director, Mutual of America
Theodore J. O'Dell Senior Vice President and Senior Vice President & Controller, Mutual of
Controller America, since December 1993; prior thereto,
Vice President/ Deputy Controller, The Equitable
Life Assurance Society of the United States
Marc Slutzky Senior Vice President and Senior Vice President and Actuary, American
Actuary Life, since September 1994; prior thereto,
Consulting Actuary, Tillinghast, a Towers Perrin
Company
</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 by Jones & Blouch L.L.P., Washington, D.C.
YEAR 2000 COMPLIANCE
Many of the services that the Company provides to Policyowners and many of the
administrative and other services that Mutual of America provides to the
Company depend on the proper functioning of these companies' computer and
computer-based systems, as well as those of their outside service providers.
Many computers cannot distinguish the year 2000 from the year 1900, and this
inability could potentially have an adverse impact on the handling of
Policyowner purchase, exchange and redemption transactions, the crediting of
accumulation units, accounting and other recordkeeping services. The Company
and Mutual of America have performed a comprehensive review of their computer
systems and are in the process of modifying or replacing any of their systems
that cannot recognize the year 2000. They expect to significantly complete
modifications and replacements by the end of 1998 and to perform appropriate
systems
28
<PAGE>
testing during the 1999 calendar year. They also are in the process of
confirming with their outside service providers that the providers' systems
will be similarly modified or replaced to address the year 2000 issue. The
Company and Mutual of America anticipate that their computer systems and those
of their outside service providers will be adapted in time for the year 2000.
EXPERTS
The December 31, 1997 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.
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 American Century VP Capital Appreciation Fund and an
administrative fee of .30% is shown for the Fidelity VIP Funds (because of the
reimbursement agreements 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 American Century VP Capital Appreciation Fund and an administrative fee
of .55% is shown for the Fidelity VIP Funds. 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 .60%,
based upon the 1997 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.
29
<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 $ 1,160 $ 1,232
2...................... 2,798 100,000 100,000 100,000 2,149 2,359 2,580
3...................... 4,303 100,000 100,000 100,000 3,179 3,598 4,055
4...................... 5,883 100,000 100,000 100,000 4,180 4,880 5,671
5...................... 7,542 100,000 100,000 100,000 5,154 6,206 7,444
6...................... 9,285 100,000 100,000 100,000 6,101 7,580 9,390
7...................... 11,114 100,000 100,000 100,000 7,021 9,003 11,527
8...................... 13,035 100,000 100,000 100,000 7,917 10,477 13,877
9...................... 15,051 100,000 100,000 100,000 8,787 12,007 16,462
10...................... 17,169 100,000 100,000 100,000 9,622 13,583 19,296
11...................... 19,392 100,000 100,000 100,000 10,402 15,188 22,389
12...................... 21,727 100,000 100,000 100,000 11,149 16,846 25,788
13...................... 24,178 100,000 100,000 100,000 11,865 18,559 29,529
14...................... 26,752 100,000 100,000 100,000 12,538 20,320 33,641
15...................... 29,455 100,000 100,000 100,000 13,182 22,144 38,174
16...................... 32,292 100,000 100,000 100,000 13,786 24,024 43,169
17...................... 35,272 100,000 100,000 100,000 14,331 25,947 48,664
18...................... 38,401 100,000 100,000 100,000 14,839 27,934 54,733
19...................... 41,686 100,000 100,000 100,784 15,330 30,007 61,453
20...................... 45,135 100,000 100,000 108,139 15,805 32,171 68,878
30 (age 65)............. 90,689 100,000 100,000 241,628 16,991 58,000 198,055
35 (age 70)............. 123,287 100,000 100,000 376,336 13,473 74,741 324,428
40 (age 75)............. 164,892 100,000 103,159 563,272 4,417 96,410 526,422
</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.
30
<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 $ 1,121 $ 1,191
2...................... 2,798 100,000 100,000 100,000 2,060 2,265 2,479
3...................... 4,303 100,000 100,000 100,000 3,018 3,422 3,860
4...................... 5,883 100,000 100,000 100,000 3,939 4,604 5,354
5...................... 7,542 100,000 100,000 100,000 4,811 5,800 6,962
6...................... 9,285 100,000 100,000 100,000 5,636 7,011 8,693
7...................... 11,114 100,000 100,000 100,000 6,417 8,239 10,561
8...................... 13,035 100,000 100,000 100,000 7,144 9,474 12,569
9...................... 15,051 100,000 100,000 100,000 7,818 10,716 14,751
10...................... 17,169 100,000 100,000 100,000 8,453 11,978 17,138
11...................... 19,392 100,000 100,000 100,000 9,039 13,262 19,742
12...................... 21,727 100,000 100,000 100,000 9,568 14,561 22,579
13...................... 24,178 100,000 100,000 100,000 10,051 15,887 25,686
14...................... 26,752 100,000 100,000 100,000 10,479 17,231 29,082
15...................... 29,455 100,000 100,000 100,000 10,855 18,597 32,804
16...................... 32,292 100,000 100,000 100,000 11,180 19,986 36,889
17...................... 35,272 100,000 100,000 100,000 11,446 21.392 41,373
18...................... 38,401 100,000 100,000 100,000 11,645 22,806 46,297
19...................... 41,686 100,000 100,000 100,000 11,767 24,223 51,709
20...................... 45,135 100,000 100,000 100,000 11,814 25,645 57,674
30 (age 65)............. 90,689 100,000 100,000 196,100 6,518 39,237 160,738
35 (age 70)............. 123,287 0 100,000 299,984 0 44,128 258,607
40 (age 75)............. 164,892 0 100,000 440,830 0 45,036 411,990
</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.
31
<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 2,076 2,279 2,491
3...................... 4,138 100,000 100,000 100,000 3,081 3,486 3,925
4...................... 5,657 100,000 100,000 100,000 4,057 4,734 5,497
5...................... 7,252 100,000 100,000 100,000 5,006 6,024 7,220
6...................... 8,928 100,000 100,000 100,000 5,929 7,360 9,110
7...................... 10,686 100,000 100,000 100,000 6,825 8,744 11,186
8...................... 12,533 100,000 100,000 100,000 7,696 10,177 13,467
9...................... 14,472 100,000 100,000 100,000 8,543 11,663 15,975
10...................... 16,508 100,000 100,000 100,000 9,354 13,193 18,725
11...................... 18,646 100,000 100,000 100,000 10,121 14,760 21,732
12...................... 20,891 100,000 100,000 100,000 10,854 16,376 25,036
13...................... 23,248 100,000 100,000 100,000 11,556 18,045 28,669
14...................... 25,723 100,000 100,000 100,000 12,216 19,761 32,660
15...................... 28,322 100,000 100,000 100,000 12,857 21,545 37,066
16...................... 31,050 100,000 100,000 100,000 13,457 23,383 41,917
17...................... 33,915 100,000 100,000 100,000 13,998 25,260 47,250
18...................... 36,924 100,000 100,000 100,000 14,511 27,206 53,142
19...................... 40,082 100,000 100,000 100,000 15,007 29,236 59,663
20...................... 43,399 100,000 100,000 104,992 15,487 31,354 66,874
30 (age 65)............. 87,201 100,000 100,000 235,025 17,007 56,655 192,643
35 (age 70)............. 118,545 100,000 100,000 366,587 14,089 73,024 316,023
40 (age 75)............. 158,550 100,000 100,561 549,484 6,294 93,982 513,537
</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.
32
<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 $1,002 $ 1,069 $ 1,137
2...................... 2,691 100,000 100,000 100,000 1,964 2,161 2,365
3...................... 4,138 100,000 100,000 100,000 2,888 3,274 3,693
4...................... 5,657 100,000 100,000 100,000 3,763 4,400 5,118
5...................... 7,252 100,000 100,000 100,000 4,591 5,538 6,649
6...................... 8,928 100,000 100,000 100,000 5,374 6,689 8,297
7...................... 10,686 100,000 100,000 100,000 6,114 7,855 10,073
8...................... 12,533 100,000 100,000 100,000 6,811 9,036 11,991
9...................... 14,472 100,000 100,000 100,000 7,456 10,223 14,068
10...................... 16,508 100,000 100,000 100,000 8,063 11,428 16,340
11...................... 18,646 100,000 100,000 100,000 8,621 12,647 18,817
12...................... 20,891 100,000 100,000 100,000 9,133 13,887 21,521
13...................... 23,248 100,000 100,000 100,000 9,600 15,151 24,480
14...................... 25,723 100,000 100,000 100,000 10,012 16,431 27,713
15...................... 28,322 100,000 100,000 100,000 10,371 17,728 31,251
16...................... 31,050 100,000 100,000 100,000 10,680 19,044 35,132
17...................... 33,915 100,000 100,000 100,000 10,929 20,372 39,387
18...................... 36,924 100,000 100,000 100,000 11,119 21,714 44,062
19...................... 40,082 100,000 100,000 100,000 11,243 23,064 49,201
20...................... 43,399 100,000 100,000 100,000 11,291 24,413 54,858
30 (age 65)............. 87,201 100,000 100,000 187,154 6,727 37,543 153,405
35 (age 70)............. 118,545 0 100,000 287,056 0 42,426 247,462
40 (age 75)............. 158,550 0 100,000 422,933 0 43,777 395,265
</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.
33
<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 $101,864 $101,983 $102,102 $ 1,864 $ 1,983 $ 2,102
2...................... 4,520 103,690 104,045 104,415 3,690 4,045 4,415
3...................... 6,951 105,471 106,181 106,950 5,471 6,181 6,950
4...................... 9,504 107,207 108,394 109,731 7,207 8,394 9,731
5...................... 12,184 108,900 110,688 112,783 8,900 10,688 12,783
6...................... 14,998 110,551 113,064 116,132 10,551 13,064 16,132
7...................... 17,953 112,159 115,528 119,810 12,159 15,528 19,810
8...................... 21,056 113,726 118,083 123,849 13,726 18,083 23,849
9...................... 24,314 115,253 120,732 128,287 15,253 20,732 28,287
10...................... 27,734 116,728 123,467 133,151 16,728 23,467 33,151
11...................... 31,326 118,129 126,268 138,460 18,129 26,268 38,460
12...................... 35,097 119,481 129,161 144,285 19,481 29,161 44,285
13...................... 39,057 120,784 132,151 150,676 20,784 32,151 50,676
14...................... 43,215 122,028 135,228 157,681 22,028 35,228 57,681
15...................... 47,581 123,225 138,410 165,373 23,225 38,410 65,373
16...................... 52,165 124,366 141,688 173,811 24,366 41,688 73,811
17...................... 56,978 125,425 145,042 183,044 25,425 45,042 83,044
18...................... 62,032 126,430 148,499 193,179 26,430 48,499 93,179
19...................... 67,339 127,405 152,088 204,333 27,405 52,088 104,333
20...................... 72,910 128,350 155,815 216,610 28,350 55,815 116,610
30 (age 65)............. 146,498 133,017 198,121 428,328 33,017 98,121 328,328
35 (age 70)............. 199,156 130,359 221,132 634,435 30,359 121,132 534,435
40 (age 75)............. 266,364 122,136 242,710 961,449 22,136 142,710 861,449
</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.
34
<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> <C>
1...................... $ 2,205 $101,823 $101,941 $102,059 $ 1,823 $ 1,941 $ 2,059
2...................... 4,520 103,581 103,928 104,290 3,581 3,928 4,290
3...................... 6,951 105,262 105,949 106,692 5,262 5,949 6,692
4...................... 9,504 106,880 108,015 109,294 6,880 8,015 9,294
5...................... 12,184 108,424 110,117 112,101 8,424 10,117 12,101
6...................... 14,998 109,899 112,258 115,156 9,899 12,258 15,156
7...................... 17,953 111,304 114,456 118,489 11,304 14,456 18,489
8...................... 21,056 112,641 116,704 122,116 12,641 16,704 22,116
9...................... 24,314 113,914 119,004 126,064 13,914 19,004 26,064
10...................... 27,734 115,136 121,370 130,380 15,136 21,370 30,380
11...................... 31,326 116,298 123,792 135,086 16,298 23,792 35,086
12...................... 35,097 117,389 126,260 140,209 17,389 26,260 40,209
13...................... 39,057 118,421 128,788 145,803 18,421 28,788 45,803
14...................... 43,215 119,384 131,367 151,901 19,384 31,367 51,901
15...................... 47,581 120,280 133,998 158,555 20,280 33,998 58,555
16...................... 52,165 121,110 136,683 165,818 21,110 36,683 65,818
17...................... 56,978 121,863 139,413 173,740 21,863 39,413 73,740
18...................... 62,032 122,530 142,176 182,373 22,530 42,176 82,373
19...................... 67,339 123,100 144,963 191,774 23,100 44,963 91,774
20...................... 72,910 123,575 147,773 202,021 23,575 47,773 102,021
30 (age 65)............. 146,498 121,519 175,054 371,522 21,519 75,054 271,522
35 (age 70)............. 199,156 113,483 184,640 529,050 13,483 84,640 429,050
40 (age 75)............. 266,364 0 186,052 770,228 0 86,052 670,228
</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.
35
<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 $101,892 $102,005 $ 1,778 $ 1,892 $ 2,005
2...................... 4,305 103,520 103,859 104,211 3,520 3,859 4,211
3...................... 6,620 105,230 105,907 106,641 5,230 5,907 6,641
4...................... 9,051 106,896 108,029 109,305 6,896 8,029 9,305
5...................... 11,604 108,520 110,228 112,229 8,520 10,228 12,229
6...................... 14,284 110,103 112,506 115,437 10,103 12,506 15,437
7...................... 17,098 111,645 114,866 118,959 11,645 14,866 18,959
8...................... 20,053 113,147 117,314 122,827 13,147 17,314 22,827
9...................... 23,156 114,610 119,851 127,076 14,610 19,851 27,076
10...................... 26,414 116,023 122,470 131,732 16,023 22,470 31,732
11...................... 29,834 117,374 125,162 136,824 17,374 25,162 36,824
12...................... 33,426 118,677 127,941 142,410 18,677 27,941 42,410
13...................... 37,197 119,932 130,812 148,538 19,932 30,812 48,538
14...................... 41,157 121,129 133,767 155,253 21,129 33,767 55,253
15...................... 45,315 122,292 136,832 162,638 22,292 36,832 62,638
16...................... 49,681 123,399 139,989 170,738 23,399 39,989 70,738
17...................... 54,265 124,425 143,217 179,599 24,425 43,217 79,599
18...................... 59,078 125,410 146,555 189,336 25,410 46,555 89,336
19...................... 64,132 126,364 150,020 200,052 26,364 50,020 100,052
20...................... 69,439 127,290 153,618 211,846 27,290 53,618 111,846
30 (age 65)............. 139,522 132,140 194,730 415,547 32,140 94,730 315,547
35 (age 70)............. 189,673 130,051 217,517 614,286 30,051 117,517 514,286
40 (age 75)............. 253,680 122,911 239,468 930,082 22,911 139,468 830,082
</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.
36
<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 $101,727 $101,838 $101,950 $ 1,727 $ 1,838 $ 1,950
2...................... 4,305 103,390 103,719 104,062 3,390 3,719 4,062
3...................... 6,620 104,992 105,643 106,348 4,992 5,643 6,348
4...................... 9,051 106,520 107,597 108,811 6,520 7,597 8,811
5...................... 11,604 107,979 109,584 111,466 7,979 9,584 11,466
6...................... 14,284 109,370 111,604 114,349 9,370 11,604 14,349
7...................... 17,098 110,695 113,674 117,492 10,695 13,674 17,492
8...................... 20,053 111,958 115,800 120,922 11,958 15,800 20,922
9...................... 23,156 113,159 117,972 124,655 13,159 17,972 24,655
10...................... 26,414 114,311 120,206 128,733 14,311 20,206 28,733
11...................... 29,834 115,404 122,490 133,178 15,404 22,490 33,178
12...................... 33,426 116,439 124,828 138,027 16,439 24,828 38,027
13...................... 37,197 117,416 127,220 143,320 17,416 27,220 43,320
14...................... 41,157 118,326 129,658 149,087 18,326 29,658 49,087
15...................... 45,315 119,170 132,142 155,376 19,170 32,142 55,376
16...................... 49,681 119,949 134,675 162,240 19,949 34,675 62,240
17...................... 54,265 120,652 137,247 169,722 20,652 37,247 69,722
18...................... 59,078 121,281 139,858 177,883 21,281 39,858 77,883
19...................... 64,132 121,826 142,498 186,780 21,826 42,498 86,780
20...................... 69,439 122,277 145,156 196,471 22,277 45,156 96,471
30 (age 65)............. 139,522 120,790 171,513 357,468 20,790 71,513 257,468
35 (age 70)............. 189,673 113,728 181,360 507,628 13,728 81,360 407,628
40 (age 75)............. 253,680 0 184,210 738,267 0 84,210 638,267
</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.
37
<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 $ 8,699 $ 9,270 $ 9,842
2...................... 22,063 500,000 500,000 500,000 17,146 18,834 20,592
3...................... 33,929 500,000 500,000 500,000 25,408 28,769 32,412
4...................... 46,388 500,000 500,000 500,000 33,378 38,981 45,302
5...................... 59,470 500,000 500,000 500,000 41,122 49,547 59,441
6...................... 73,206 500,000 500,000 500,000 48,645 60,487 74,969
7...................... 87,628 500,000 500,000 500,000 55,850 71,717 91,937
8...................... 102,772 500,000 500,000 500,000 62,799 83,315 110,564
9...................... 118,673 500,000 500,000 500,000 69,654 95,456 131,187
10...................... 135,370 500,000 500,000 500,000 76,367 108,117 153,973
11...................... 152,901 500,000 500,000 500,000 82,841 121,231 179,077
12...................... 171,308 500,000 500,000 500,000 88,987 134,739 206,691
13...................... 190,636 500,000 500,000 500,000 94,864 148,720 237,155
14...................... 210,930 500,000 500,000 500,000 100,433 163,170 270,780
15...................... 232,239 500,000 500,000 500,000 105,659 178,088 307,928
16...................... 254,614 500,000 500,000 500,000 110,551 193,519 349,045
17...................... 278,107 500,000 500,000 505,088 115,029 209,441 394,600
18...................... 302,775 500,000 500,000 560,520 119,151 225,944 444,857
19...................... 328,676 500,000 500,000 620,090 122,880 243,054 500,073
20 (age 65)............. 355,872 500,000 500,000 684,083 126,140 260,779 560,724
25 (age 70)............. 513,663 500,000 500,000 1,120,079 134,731 361,091 965,585
30 (age 75)............. 715,048 500,000 524,564 1,727,453 125,019 490,246 1,614,442
</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.
38
<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 $ 7,676 $ 8,212 $ 8,749
2...................... 22,063 500,000 500,000 500,000 14,967 16,520 18,141
3...................... 33,929 500,000 500,000 500,000 21,971 25,022 28,336
4...................... 46,388 500,000 500,000 500,000 28,644 33,677 39,371
5...................... 59,470 500,000 500,000 500,000 34,998 42,501 51,346
6...................... 73,206 500,000 500,000 500,000 41,042 51,511 64,373
7...................... 87,628 500,000 500,000 500,000 46,733 60,669 78,525
8...................... 102,772 500,000 500,000 500,000 52,030 69,942 93,888
9...................... 118,673 500,000 500,000 500,000 56,892 79,297 110,567
10...................... 135,370 500,000 500,000 500,000 61,332 88,752 128,734
11...................... 152,901 500,000 500,000 500,000 65,311 98,282 148,542
12...................... 171,308 500,000 500,000 500,000 68,790 107,858 170,170
13...................... 190,636 500,000 500,000 500,000 71,832 117,551 193,913
14...................... 210,930 500,000 500,000 500,000 74,344 127,298 219,984
15...................... 232,239 500,000 500,000 500,000 76,336 137,122 248,719
16...................... 254,614 500,000 500,000 500,000 77,716 146,965 280,440
17...................... 278,107 500,000 500,000 500,000 78,440 156,814 315,571
18...................... 302,775 500,000 500,000 500,000 78,461 166,661 354,616
19...................... 328,676 500,000 500,000 500,000 77,630 176,418 398,144
20 (age 65)............. 355,872 500,000 500,000 544,615 75,892 186,081 446,406
25 (age 70)............. 513,663 500,000 500,000 885,386 50,332 232,518 763,264
30 (age 75)............. 715,048 0 500,000 1,347,941 0 271,628 1,259,758
</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.
39
<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 $513,926 $ 514,816 $ 515,708 $13,926 $14,816 $ 15,708
2...................... 33,579 527,480 530,130 532,888 27,480 30,130 32,888
3...................... 51,638 540,727 546,021 551,754 40,727 46,021 51,754
4...................... 70,600 553,556 562,394 572,351 53,556 62,394 72,351
5...................... 90,510 566,032 579,327 594,918 66,032 79,327 94,918
6...................... 111,415 578,162 596,846 619,656 78,162 96,846 119,656
7...................... 133,366 589,833 614,852 646,659 89,833 114,852 146,659
8...................... 156,414 601,114 633,426 676,221 101,114 133,426 176,221
9...................... 180,615 612,190 652,777 708,793 112,190 152,777 208,793
10...................... 206,026 623,005 672,875 744,617 123,005 172,875 244,617
11...................... 232,707 633,445 693,630 783,899 133,445 193,630 283,899
12...................... 260,723 643,397 714,945 826,863 143,397 214,945 326,863
13...................... 290,139 652,931 736,905 873,947 152,931 236,905 373,947
14...................... 321,026 661,995 759,477 925,509 161,995 259,477 425,509
15...................... 353,457 670,537 782,625 981,940 170,537 282,625 481,940
16...................... 387,510 678,567 806,371 1,043,736 178,567 306,371 543,736
17...................... 423,265 685,975 830,620 1,111,317 185,975 330,620 611,317
18...................... 460,808 692,833 855,453 1,185,335 192,833 355,453 685,335
19...................... 500,229 699,091 880,833 1,266,381 199,091 380,833 766,381
20 (age 65)............. 541,620 704,641 906,660 1,355,046 204,641 406,660 855,046
25 (age 70)............. 781,770 720,928 1,041,790 1,941,199 220,928 541,790 1,441,199
30 (age 75)............. 1,088,268 711,801 1,180,062 2,861,313 211,801 680,062 2,361,313
</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.
40
<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 $512,845 $513,701 $ 514,559 $ 12,845 $ 13,701 $ 14,559
2...................... 33,579 525,186 527,695 530,310 25,186 27,695 30,310
3...................... 51,638 537,094 542,056 547,437 37,094 42,056 47,437
4...................... 70,600 548,519 556,736 566,011 48,519 56,736 66,011
5...................... 90,510 559,469 571,748 586,176 59,469 71,748 86,176
6...................... 111,415 569,956 587,104 608,092 69,956 87,104 108,092
7...................... 133,366 579,929 602,758 631,868 79,929 102,758 131,868
8...................... 156,414 589,339 618,659 657,626 89,339 118,659 157,626
9...................... 180,615 598,140 634,756 685,499 98,140 134,756 185,499
10...................... 206,026 606,343 651,058 715,698 106,343 151,058 215,698
11...................... 232,707 613,901 667,509 748,390 113,901 167,509 248,390
12...................... 260,723 620,769 684,056 783,760 120,769 184,056 283,760
13...................... 290,139 627,021 700,763 822,136 127,021 200,763 322,136
14...................... 321,026 632,549 717,513 863,692 132,549 217,513 363,692
15...................... 353,457 637,370 734,310 908,742 137,370 234,310 408,742
16...................... 387,510 641,380 751,031 957,507 141,380 251,031 457,507
17...................... 423,265 644,535 767,613 1,010,294 144,535 267,613 510,294
18...................... 460,808 646,794 783,988 1,067,438 146,794 283,988 567,438
19...................... 500,229 647,998 799,966 1,129,182 147,998 299,966 629,182
20 (age 65)............. 541,620 648,109 815,469 1,195,920 148,109 315,469 695,920
25 (age 70)............. 781,770 630,139 882,002 1,620,240 130,139 382,002 1,120,240
30 (age 75)............. 1,088,268 569,517 911,628 2,242,856 69,517 411,628 1,742,856
</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.
41
<PAGE>
FINANCIAL STATEMENTS
Below are financial statements for the Separate Account and for American Life
for the year ended December 31, 1997.
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.
THE AMERICAN SEPARATE ACCOUNT NO. 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Statement of Assets and Liabilities........................................ 43
Statement of Operations.................................................... 45
Statements of Changes in Net Assets........................................ 47
Notes to Financial Statements.............................................. 50
Report of Independent Public Accountants................................... 54
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants................................... 55
Statements of Financial Condition.......................................... 56
Statements of Operations and Surplus....................................... 57
Statements of Cash Flows................................................... 58
Notes to Financial Statements.............................................. 59
</TABLE>
42
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 3
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<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
(Cost:
Money Market Fund --$3,571
All America Fund --$530,105
Equity Index Fund --
$143,348
Bond Fund --$22,010)
(Notes 1 and 2)............. $3,427 $550,696 $161,635 $ 21,806
Due From (To) General Ac-
count....................... (1) (1,641) (143) (218)
------ -------- -------- --------
Net Assets................... $3,426 $549,055 $161,492 $ 21,588
====== ======== ======== ========
Unit Value at December 31,
1997 (Note 5)............... $ 1.95 $ 6.76 $ 2.26 $ 3.00
====== ======== ======== ========
Number of Units Outstanding
at December 31, 1997
(Note 5).................... 1,755 81,264 71,579 7,204
====== ======== ======== ========
<CAPTION>
INVESTMENT COMPANY
------------------------------------------------
AGGRESSIVE
SHORT-TERM MID-TERM COMPOSITE EQUITY
BOND FUND BOND FUND FUND FUND
------------ ----------- ------------ ----------
<S> <C> <C> <C> <C>
Assets:
Investments in Mutual of
America Investment
Corporation at market value
(Cost:
Short-Term Bond Fund --
$1,874
Mid-Term Bond Fund --$1,889
Composite Fund --$398,294
Aggressive Equity Fund --
$228,361)
(Notes 1 and 2)............. $1,825 $ 1,813 $349,263 $221,740
Due From (To) General Ac-
count....................... (1) (82) (3,017) 409
------ -------- -------- --------
Net Assets................... $1,824 $ 1,731 $346,246 $222,149
====== ======== ======== ========
Unit Value at December 31,
1997 (Note 5)............... $ 1.19 $ 1.26 $ 4.36 $ 2.15
====== ======== ======== ========
Number of Units Outstanding
at December 31, 1997
(Note 5).................... 1,530 1,374 79,417 103,218
====== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
43
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 3
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<CAPTION>
AMERICAN
SCUDDER CENTURY CALVERT
------------------------------- ------------ -----------
CAPITAL VP CAPITAL RESPONSIBLY
BOND GROWTH INTERNATIONAL APPRECIATION INVESTED
FUND FUND FUND FUND FUND
------ -------- ------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments in Scudder
Portfolios, American
Century VP Capital
Appreciation Fund and
Calvert Responsibly
Invested Portfolio at
market value
(Cost:
Scudder Bond Fund --
$ 6,570
Scudder Capital Growth
Fund --$403,695
Scudder International
Fund --$139,175
American Century VP
Capital
Appreciation Fund --
$ 90,326
Calvert Responsibly In-
vested Fund --
$ 30,979)
(Notes 1 and 2)........ $4,245 $416,017 $106,552 $80,732 $25,882
Due From (To) General
Account................ (42) (1,917) 154 (356) (38)
------ -------- -------- ------- -------
Net Assets.............. $4,203 $414,100 $106,706 $80,376 $25,844
====== ======== ======== ======= =======
Unit Value at December
31, 1997 (Note 5)...... $12.37 $ 29.64 $ 14.46 $ 11.04 $ 2.65
====== ======== ======== ======= =======
Number of Units
Outstanding at December
31, 1997 (Note 5)...... 340 13,970 7,377 7,282 9,760
====== ======== ======== ======= =======
</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 at
market value
(Cost:
VIP Equity-Income Fund --$169,423
VIP II Contra Fund --$232,384
VIP II Asset Manager Fund -- $105,872)
(Notes 1 and 2)......................... $155,618 $235,494 $100,469
Due From (To) General Account............ (1,955) (174) (228)
-------- -------- --------
Net Assets............................... $153,663 $235,320 $100,241
======== ======== ========
Unit Value at December 31, 1997 (Note 5). $ 27.77 $ 20.36 $ 21.14
======== ======== ========
Number of Units Outstanding at December
31, 1997 (Note 5)....................... 5,533 11,560 4,742
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
44
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 3
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
INVESTMENT COMPANY
-------------------------------------------------------
MONEY MARKET ALL AMERICA EQUITY INDEX BOND
FUND FUND FUND FUND
------------ ----------- ------------ -----------------
<S> <C> <C> <C> <C>
Investment Income and
Expenses:
Income (Notes 1 and 4):
Dividends.............. $213 $67,427 $ 3,403 $ 1,398
---- ------- ------- -------
Total income........... 213 67,427 3,403 1,398
---- ------- ------- -------
Expenses (Note 3):
Fees and Administrative
Expenses.............. 26 4,945 1,419 235
Total Expenses.......... 26 4,945 1,419 235
---- ------- ------- -------
Net Investment Income
(Loss)................. 187 62,482 1,984 1,163
---- ------- ------- -------
Net Realized and
Unrealized Gain (Loss)
on Investments (Note
1):
Net realized gain
(loss) on investments. (1) 8,270 3,540 53
Net unrealized
appreciation
(depreciation) of
investments........... (101) 10,051 22,798 527
---- ------- ------- -------
Net Realized and
Unrealized Gain (Loss)
on Investments......... (102) 18,321 26,338 580
---- ------- ------- -------
Net Increase (Decrease)
in Net Assets Resulting
From Operations........ $ 85 $80,803 $28,322 $ 1,743
==== ======= ======= =======
<CAPTION>
INVESTMENT COMPANY
-------------------------------------------------------
SHORT-TERM MID-TERM COMPOSITE AGGRESSIVE EQUITY
BOND FUND BOND FUND FUND FUND
------------ ----------- ------------ -----------------
<S> <C> <C> <C> <C>
Investment Income and
Expenses:
Income (Notes 1 and 4):
Dividends.............. $114 $ 110 $77,287 $21,953
---- ------- ------- -------
Total income........... 114 110 77,287 21,953
---- ------- ------- -------
Expenses (Note 3):
Fees and Administrative
Expenses.............. 21 18 3,096 1,879
Total Expenses.......... 21 18 3,096 1,879
---- ------- ------- -------
Net Investment Income
(Loss)................. 93 92 74,191 20,074
---- ------- ------- -------
Net Realized and
Unrealized Gain (Loss)
on Investments (Note
1):
Net realized gain on
investments........... 15 (65) 2,976 968
Net unrealized
appreciation
(depreciation) of
investments........... (12) 59 (38,603) 1,024
---- ------- ------- -------
Net Realized and
Unrealized Gain (Loss)
on Investments......... 3 (6) (35,627) 1,992
---- ------- ------- -------
Net Increase (Decrease)
in Net Assets Resulting
From Operations ....... $ 96 $ 86 $38,564 $22,066
==== ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
45
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 3
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
SCUDDER AMERICAN CENTURY CALVERT
----------------------------- ---------------- -----------
CAPITAL VP CAPITAL RESPONSIBLY
BOND GROWTH INTERNATIONAL APPRECIATION INVESTED
FUND FUND FUND FUND FUND
------ ------- ------------- ---------------- -----------
<S> <C> <C> <C> <C> <C>
Investment Income and
Expenses:
Income (Notes 1 and 4):
Dividends.............. $ 235 $12,671 $ 1,533 $ 1,480 $1,800
------ ------- ------- ------- ------
Total income........... 235 12,671 1,533 1,480 1,800
------ ------- ------- ------- ------
Expenses (Note 3):
Fees and Administrative
Expenses.............. 45 3,276 1,100 790 209
------ ------- ------- ------- ------
Total Expenses.......... 45 3,276 1,100 790 209
------ ------- ------- ------- ------
Net Investment Income
(Loss)................. 190 9,395 433 690 1,591
------ ------- ------- ------- ------
Net Realized and
Unrealized Gain (Loss)
On Investments (Note
1):
Net realized gain
(loss) on investments. 1,921 23,338 18,444 (1,449) 3,885
Net unrealized
appreciation
(depreciation) of
investments........... (1,821) 27,860 (14,970) (2,436) (2,620)
------ ------- ------- ------- ------
Net Realized and
Unrealized Gain (Loss)
on Investments......... 100 51,198 3,474 (3,885) 1,265
------ ------- ------- ------- ------
Net Increase (Decrease)
in Net Assets Resulting
From Operations ....... $ 290 $60,593 $ 3,907 $(3,195) $2,856
====== ======= ======= ======= ======
</TABLE>
<TABLE>
<CAPTION>
FIDELITY
-----------------------
VIP VIP II VIP II
EQUITY- ASSET
INCOME CONTRA MANAGER
FUND FUND FUND
------- ------- -------
<S> <C> <C> <C>
Investment Income and Expenses:
Income (Notes 1 and 4):
Dividends............................................ $ 6,675 $ 3,702 $ 6,181
------- ------- -------
Total income......................................... 6,675 3,702 6,181
------- ------- -------
Expenses (Note 3):
Fees and Administrative Expenses..................... 1,230 2,050 814
------- ------- -------
Total Expenses........................................ 1,230 2,050 814
------- ------- -------
Net Investment Income (Loss).......................... 5,445 1,652 5,367
------- ------- -------
Net Realized and Unrealized Gain (Loss) on Investments
(Note 1):
Net realized gain (loss) on investments.............. 12,348 5,525 6,538
Net unrealized appreciation (depreciation) of invest-
ments............................................... 5,615 27,301 (176)
------- ------- -------
Net Realized and Unrealized Gain (Loss) on Invest-
ments................................................ 17,963 32,826 6,362
------- ------- -------
Net Increase (Decrease) in Net Assets Resulting From
Operations........................................... $23,408 $34,478 $11,729
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
46
<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 EQUITY INDEX
FUND ALL AMERICA FUND FUND
---------------- ------------------ -----------------
1997 1996 1997 1996 1997 1996
------- ------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in Net As-
sets:
From Operations:
Net investment income
(loss)................ $ 187 $ 42 $ 62,482 $ 10,078 $ 1,984 $ 1,429
Net realized gain
(loss) on investments. (1) 8 8,270 3,857 3,540 4,782
Net unrealized
appreciation
(depreciation) of
investments........... (101) (40) 10,051 9,747 22,798 (4,621)
------- ------- -------- -------- -------- -------
Net Increase (Decrease)
in net assets resulting
from operations........ 85 10 80,803 23,682 28,322 1,590
------- ------- -------- -------- -------- -------
From Unit Transactions:
Contributions.......... 5,245 1,812 192,506 141,486 113,705 25,410
Withdrawals............ (116) -- (16,643) (1,292) (8,950) (79)
Net Transfers.......... (2,616) (1,039) 77,078 7,080 (17,582) 12,758
------- ------- -------- -------- -------- -------
Net Increase (Decrease)
from unit transactions. 2,513 773 252,941 147,274 87,173 38,089
------- ------- -------- -------- -------- -------
Net Increase (Decrease)
in Net Assets.......... 2,598 783 333,744 170,956 115,495 39,679
Net Assets:
Beginning of Year....... 828 45 215,311 44,355 45,997 6,318
------- ------- -------- -------- -------- -------
End of Year............. $ 3,426 $ 828 $549,055 $215,311 $161,492 $45,997
======= ======= ======== ======== ======== =======
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT COMPANY
---------------------------------------------------
SHORT-TERM MID-TERM
BOND FUND BOND FUND BOND FUND
----------------- -------------- ----------------
1997 1996 1997 1996 1997 1996
-------- ------- ------ ------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in Net As-
sets:
From Operations:
Net investment income
(loss)................ $ 1,163 $ 815 $ 93 $ 36 $ 92 $ 146
Net realized gain
(loss) on investments. 53 160 15 6 (65) 11
Net unrealized
appreciation
(depreciation) of
investments........... 527 (688) (12) (20) 59 (133)
-------- ------- ------ ------ ------- -------
Net Increase (Decrease)
in net assets resulting
from operations........ 1,743 287 96 22 86 24
-------- ------- ------ ------ ------- -------
From Unit Transactions:
Contributions.......... 25,566 16,685 1,200 836 3,609 1,878
Withdrawals............ (1,237) (36) (234) -- -- --
Net Transfers.......... (13,385) (9,398) (272) (156) (2,510) (1,388)
-------- ------- ------ ------ ------- -------
Net Increase (Decrease)
from unit transactions. 10,944 7,251 694 680 1,099 490
-------- ------- ------ ------ ------- -------
Net Increase (Decrease)
in Net Assets.......... 12,687 7,538 790 702 1,185 514
Net Assets
Beginning of Year....... 8,901 1,363 1,034 332 546 32
-------- ------- ------ ------ ------- -------
End of Year............. $ 21,588 $ 8,901 $1,824 $1,034 $ 1,731 $ 546
======== ======= ====== ====== ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
47
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 3
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
INVESTMENT COMPANY
-------------------------------------
AGGRESSIVE
COMPOSITE FUND EQUITY FUND
------------------ -----------------
1997 1996 1997 1996
-------- -------- -------- -------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income (loss)........... $ 74,191 $ 18,378 $ 20,074 $10,358
Net realized gain (loss) on invest-
ments................................. 2,976 1,028 968 4,488
Net unrealized appreciation (deprecia-
tion) of investments.................. (38,603) (10,231) 1,024 (7,427)
-------- -------- -------- -------
Net Increase (Decrease) in net assets
resulting from operations.............. 38,564 9,175 22,066 7,419
-------- -------- -------- -------
From Unit Transactions:
Contributions.......................... 111,675 102,419 145,655 51,635
Withdrawals............................ (4,754) (815) (5,821) (402)
Net Transfers.......................... 99,278 (18,407) (24,231) 8,080
-------- -------- -------- -------
Net Increase (Decrease) from unit
transactions........................... 206,199 83,197 115,603 59,313
-------- -------- -------- -------
Net Increase (Decrease) in Net Assets... 244,763 92,372 137,669 66,732
Net Assets:
Beginning of Year....................... 101,483 9,111 84,480 17,748
-------- -------- -------- -------
End of Year............................. $346,246 $101,483 $222,149 $84,480
======== ======== ======== =======
</TABLE>
<TABLE>
<CAPTION>
SCUDDER
------------------------------------------------------------
BOND FUND CAPITAL GROWTH FUND INTERNATIONAL FUND
---------------- -------------------- --------------------
1997 1996 1997 1996 1997 1996
------- ------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in Net As-
sets:
From Operations:
Net investment income.. $ 190 $ 55 $ 9,395 $ 3,008 $ 433 $ (284)
Net realized gain
(loss) on investments. 1,921 521 23,338 26,960 18,444 20,574
Net unrealized
appreciation
(depreciation) on
investments........... (1,821) (506) 27,860 (18,445) (14,970) (17,740)
------- ------- --------- --------- --------- ---------
Net Increase (Decrease)
in net assets resulting
from operations........ 290 70 60,593 11,523 3,907 2,550
------- ------- --------- --------- --------- ---------
From Unit Transactions:
Contributions.......... 7,137 3,469 118,952 81,156 35,724 55,906
Withdrawals............ (80) (55) (13,128) (691) (7,350) (65)
Net Transfers.......... (4,523) (2,503) 135,647 (17,444) 4,683 2,880
------- ------- --------- --------- --------- ---------
Net Increase (Decrease)
from unit transactions. 2,534 911 241,471 63,021 33,057 58,721
------- ------- --------- --------- --------- ---------
Net Increase (Decrease)
in Net Assets.......... 2,824 981 302,064 74,544 36,964 61,271
Net Assets:
Beginning of Year....... 1,379 398 112,036 37,492 69,742 8,471
------- ------- --------- --------- --------- ---------
End of Year............. $ 4,203 $ 1,379 $ 414,100 $ 112,036 $ 106,706 $ 69,742
======= ======= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
48
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 3
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
AMERICAN CENTURY CALVERT
------------------ ----------------
VP CAPITAL RESPONSIBLY
APPRECIATION FUND INVESTED FUND
------------------ ----------------
1997 1996 1997 1996
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income................... $ 690 $ 5,195 $ 1,591 $ 518
Net realized gain (loss) on investments. (1,449) (819) 3,885 2,111
Net unrealized appreciation (deprecia-
tion) of investments................... (2,436) (7,075) (2,620) (2,455)
-------- -------- ------- -------
Net Increase (Decrease) in net assets re-
sulting from operations................. (3,195) (2,699) 2,856 174
-------- -------- ------- -------
From Unit Transactions:
Contributions........................... 28,353 22,862 27,549 7,215
Withdrawals............................. (1,802) (3,014) (1,511) (11)
Net Transfers........................... (11,249) (2,578) (8,329) (2,331)
-------- -------- ------- -------
Net Increase (Decrease) from unit trans-
actions................................. 15,302 17,270 17,709 4,873
-------- -------- ------- -------
Net Increase (Decrease) in Net Assets.... 12,107 14,571 20,565 5,047
Net Assets:
Beginning of Year........................ 68,269 53,698 5,279 232
-------- -------- ------- -------
End of Year.............................. $ 80,376 $ 68,269 $25,844 $ 5,279
======== ======== ======= =======
</TABLE>
<TABLE>
<CAPTION>
FIDELITY
---------------------------------------------------------
VIP VIP II VIP II
EQUITY-INCOME CONTRA ASSET MANAGER
FUND FUND FUND
------------------ ------------------ -----------------
1997 1996 1997 1996 1997 1996
-------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in Net As-
sets:
From Operations:
Net investment income
(loss)............... $ 5,445 $ 41 $ 1,652 $ (753) $ 5,367 $ 896
Net realized gain
(loss) on
investments.......... 12,348 21,966 5,525 37,528 6,538 7,735
Net unrealized
appreciation
(depreciation) of
investments.......... 5,615 (19,580) 27,301 (24,248) (176) (5,635)
-------- -------- -------- -------- -------- -------
Net Increase (Decrease)
in net assets
resulting from
operations............ 23,408 2,427 34,478 12,527 11,729 2,996
-------- -------- -------- -------- -------- -------
From Unit Transactions:
Contributions......... 115,463 55,772 90,026 53,192 54,797 34,846
Withdrawals........... (6,744) (1,482) (4,539) (490) (1,606) (56)
Net Transfers......... (30,953) (12,956) 4,679 34,973 (11,456) (9,449)
-------- -------- -------- -------- -------- -------
Net Increase (Decrease)
from unit
transactions.......... 77,766 41,334 90,166 87,675 41,735 25,341
-------- -------- -------- -------- -------- -------
Net Increase (Decrease)
in Net Assets......... 101,174 43,761 124,644 100,202 53,464 28,337
Net Assets:
Beginning of Year...... 52,489 8,728 110,676 10,474 46,777 18,440
-------- -------- -------- -------- -------- -------
End of Year............ $153,663 $ 52,489 $235,320 $110,676 $100,241 $46,777
======== ======== ======== ======== ======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
49
<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 as a unit investment trust. On that date, the
following American Life funds became available as investment alternatives:
Money Market Fund, All America Fund, Equity Index Fund, Bond Fund, Short-Term
Bond Fund, Mid-Term Bond Fund, Composite Fund, Aggressive Equity Fund, Scudder
Bond Fund, Scudder Capital Growth Fund, Scudder International Fund, American
Century VP Capital Appreciation Fund (formerly the TCI Growth Fund), and
Calvert Responsibly Invested Balanced Fund. The American Life funds invest in a
corresponding fund of Mutual of America Investment Corporation ("Investment
Company"), portfolios of Scudder Variable Life Investment Fund ("Scudder"),
fund of American Century Variable Portfolios Inc. ("American Century") and a
corresponding fund of Calvert Responsibly Invested Balanced Portfolio 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
alternatives. The Fidelity Equity-Income Fund invests in the corresponding
portfolio of Fidelity Variable Insurance Products Fund and the Contrafund and
Asset Manager Funds invest in corresponding portfolios of 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, American Century, 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.
2. INVESTMENTS
The number of shares owned by Separate Account No. 3 and the respective net
asset values (rounded to the nearest cent) per share at December 31, 1997 are
as follows:
<TABLE>
<CAPTION>
NUMBER OF NET ASSET
SHARES VALUE
--------- ---------
<S> <C> <C>
Investment Company Funds:
Money Market Fund..................................... 2,912 $ 1.18
All America Fund...................................... 203,162 2.71
Equity Index Fund..................................... 77,782 2.08
Bond Fund............................................. 15,278 1.43
Short-Term Bond Fund.................................. 1,788 1.02
Mid-Term Bond Fund.................................... 2,008 0.90
Composite Fund........................................ 215,345 1.62
Aggressive Equity Fund................................ 137,965 1.61
Scudder Portfolios:
Bond Portfolio........................................ 618 6.87
Capital Growth Portfolio--Class "A"................... 20,166 20.63
International Portfolio--Class "A".................... 7,551 14.11
American Century VP Capital Appreciation Fund.......... 8,340 9.68
Calvert Responsibly Invested Balanced Portfolio........ 13,059 1.98
</TABLE>
50
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 3
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
NUMBER OF NET ASSET
SHARES VALUE
--------- ---------
<S> <C> <C>
Fidelity Portfolios:
Equity-Income--"Initial" Class........................ 6,409 $24.28
Contrafund--"Initial" Class........................... 11,810 19.94
Asset Manager--"Initial" Class........................ 5,578 18.01
</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 American Century for which the rate charged is .20%
and, effective in 1997, each Fidelity fund, for which the rate is .30%) 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, to compensate the Company for life insurance coverage provided under
the policies, is 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 mortality 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 funds or portfolios at net asset value. On December 31, 1997, a
dividend distribution by the Investment Company was made to shareholders of
record as of December 30, 1997. Prior thereto, a dividend was declared and
distributed on September 15, 1997. The combined amount of these dividends was
as follows:
<TABLE>
<S> <C>
Money Market Fund.................................................. $ 213
All America Fund................................................... 67,427
Equity Index Fund.................................................. 3,403
Bond Fund.......................................................... 1,398
Short-Term Bond Fund............................................... 114
Mid-Term Bond Fund................................................. 110
Composite Fund..................................................... 77,287
Aggressive Equity Fund............................................. 21,953
</TABLE>
On January 29, 1997, February 26, 1997, April 28, 1997, July 29, 1997 and
October 29, 1997, dividends were paid by the Scudder Bond Portfolio. The
combined amount of the dividends was $235.
On January 29, 1997, February 26, 1997, April 28, 1997, July 29, 1997 and
October 29, 1997, dividends were paid by the Scudder Capital Growth Portfolio.
The combined amount of the dividends was $12,671.
On February 26, 1997, a dividend was paid by the Scudder International
Portfolio. The amount of the dividend was $1,533.
On March 29, 1997, a dividend was paid by the American Century VP Capital
Appreciation Fund. The amount of the dividend was $1,480.
On December 31, 1997, a dividend was paid by the Calvert Responsibly Invested
Portfolio. The amount of the dividend was $1,800.
On February 7, 1997, a dividend was paid by the Fidelity Equity-Income
Portfolio. The amount of the dividend was $6,675.
51
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 3
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
On February 7, 1997, a dividend was paid by the Fidelity Contrafund
Portfolio. The amount of the dividend was $3,702.
On February 7, 1997, a dividend was paid by the Fidelity Asset Manager
Portfolio. The amount of the dividend was $6,181.
5. FINANCIAL HIGHLIGHTS
Shown below are financial highlights for a Unit outstanding for the year
ended December 31, 1997 and for each of the previous years ended December 31:
<TABLE>
<CAPTION>
INVESTMENT COMPANY
--------------------------------------------------------
MONEY MARKET FUND ALL AMERICA FUND
----------------------- --------------------------------
1997 1996 1995(A) 1997 1996 1995 1994(B)
------- ------- ------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of
year/period............ $ 1.87 $ 1.80 $ 1.77 $ 5.39 $ 4.52 $ 3.36 $3.32
======= ======= ====== ======== ======= ======= =====
Unit value, end of
year/period............ $ 1.95 $ 1.87 $ 1.80 $ 6.76 $ 5.39 $ 4.52 $3.36
======= ======= ====== ======== ======= ======= =====
Units outstanding, end
of year/period......... 1,755 442 25 81,264 39,912 9,813 107
======= ======= ====== ======== ======= ======= =====
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT COMPANY
---------------------------------------------
EQUITY INDEX FUND BOND FUND
----------------------- ---------------------
1997 1996 1995(C) 1997 1996 1995(D)
------- ------- ------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
Unit value, beginning of
year/period..................... $ 1.72 $ 1.42 $ 1.25 $ 2.75 $ 2.69 $2.36
======= ======= ====== ====== ====== =====
Unit value, end of year/period... $ 2.26 $ 1.72 $ 1.42 $ 3.00 $ 2.75 $2.69
======= ======= ====== ====== ====== =====
Units outstanding, end of
year/period..................... 71,579 26,794 4,449 7,204 3,239 507
======= ======= ====== ====== ====== =====
<CAPTION>
INVESTMENT COMPANY
---------------------------------------------
SHORT-TERM BOND FUND MID-TERM BOND FUND
----------------------- ---------------------
1997 1996 1995(A) 1997 1996 1995(A)
------- ------- ------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
Unit value, beginning of
year/period..................... $ 1.14 $ 1.10 $ 1.08 $ 1.19 $ 1.16 $1.11
======= ======= ====== ====== ====== =====
Unit value, end of year/period... $ 1.19 $ 1.14 $ 1.10 $ 1.26 $ 1.19 $1.16
======= ======= ====== ====== ====== =====
Units outstanding, end of
year/period..................... 1,530 908 302 1,374 460 28
======= ======= ====== ====== ====== =====
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT COMPANY
--------------------------------------------------------
COMPOSITE FUND AGGRESSIVE EQUITY FUND
----------------------- --------------------------------
1997 1996 1995(C) 1997 1996 1995 1994(B)
------- ------- ------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of
year/period............ $ 3.75 $ 3.39 $ 3.14 $ 1.80 $ 1.43 $ 1.05 $1.03
======= ======= ====== ======== ======= ======= =====
Unit value, end of
year/period............ $ 4.36 $ 3.75 $ 3.39 $ 2.15 $ 1.80 $ 1.43 $1.05
======= ======= ====== ======== ======= ======= =====
Units outstanding, end
of year/period......... 79,417 27,055 2,688 103,218 46,985 12,411 174
======= ======= ====== ======== ======= ======= =====
</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.
52
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 3
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
SCUDDER
---------------------------------------------------
BOND FUND CAPITAL GROWTH FUND
--------------------- -----------------------------
1997 1996 1995(A) 1997 1996 1995 1994(B)
------ ------ ------- ------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of
year/period............... $11.48 $11.30 $10.68 $ 22.11 $18.64 $14.67 $14.50
====== ====== ====== ======= ====== ====== ======
Unit value, end of
year/period............... $12.37 $11.48 $11.30 $ 29.64 $22.11 $18.64 $14.67
====== ====== ====== ======= ====== ====== ======
Units outstanding, end of
year/period............... 340 120 35 13,970 5,067 2,011 737
====== ====== ====== ======= ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
SCUDDER
----------------------------
INTERNATIONAL FUND
----------------------------
1997 1996 1995 1994(B)
------ ------ ------ -------
<S> <C> <C> <C> <C>
Unit value, beginning of year/period............... $13.43 $11.85 $10.80 $10.66
====== ====== ====== ======
Unit value, end of year/period..................... $14.46 $13.43 $11.85 $10.80
====== ====== ====== ======
Units outstanding, end of year/period.............. 7,377 5,193 715 17
====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
AMERICAN CENTURY CALVERT
--------------------- ---------------------
VP CAPITAL RESPONSIBLY
APPRECIATION FUND INVESTED FUND
--------------------- ---------------------
1997 1996 1995(D) 1997 1996 1995(A)
------ ------ ------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
Unit value, beginning of
year/period....................... $11.53 $12.18 $11.14 $ 2.23 $ 2.01 $1.89
====== ====== ====== ====== ====== =====
Unit value, end of year/period..... $11.04 $11.53 $12.18 $ 2.65 $ 2.23 $2.01
====== ====== ====== ====== ====== =====
Units outstanding, end of
year/period....................... 7,282 5,921 4,409 9,760 2,364 115
====== ====== ====== ====== ====== =====
</TABLE>
<TABLE>
<CAPTION>
FIDELITY
--------------------------------------------
VIP VIP II
EQUITY-INCOME CONTRA
FUND FUND
--------------------- ----------------------
1997 1996 1995(A) 1997 1996 1995(D)
------ ------ ------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Unit value, beginning of
year/period...................... $21.93 $19.43 $17.68 $ 16.59 $13.85 $12.41
====== ====== ====== ======= ====== ======
Unit value, end of year/period.... $27.77 $21.93 $19.43 $ 20.36 $16.59 $13.85
====== ====== ====== ======= ====== ======
Units outstanding, end of
year/period...................... 5,533 2,393 449 11,560 6,672 756
====== ====== ====== ======= ====== ======
</TABLE>
<TABLE>
<CAPTION>
FIDELITY
---------------------
VIP II
ASSET MANAGER
FUND
---------------------
1997 1996 1995(A)
------ ------ -------
<S> <C> <C> <C>
Unit value, beginning of year/period...................... $17.72 $15.66 $14.87
====== ====== ======
Unit value, end of year/period............................ $21.14 $17.72 $15.66
====== ====== ======
Units outstanding, end of year/period..................... 4,742 2,639 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 June 19, 1995 (Commencement of Operations) to December 31,
1995.
53
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The American Life Insurance Company of New York :
We have audited the accompanying statement of assets and liabilities of
American Life Separate Account No. 3 as of December 31, 1997, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, and the
financial highlights for each of the four years in the period then ended. 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, 1997, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for
each of the four years in the period then ended, in conformity with generally
accepted accounting principles.
/s/ Arthur Andersen LLP
New York, New York
February 20, 1998
54
<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, 1997 and 1996,
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.
As described in Note 2, the accompanying statutory-basis financial statements
were prepared in conformity with the accounting practices prescribed or
permitted by the State of New York Insurance Department which practices differ
from generally accepted accounting principles. The variances between such
practices and generally accepted accounting principles and the effects on the
accompanying financial statements are described in Note 9.
In our opinion, because of the effects of the matter described in the third
paragraph and more fully discussed in Note 9, the financial statements referred
to above do not present fairly, in conformity with generally accepted
accounting principles, the financial position of The America Life Insurance
Company of New York as of December 31, 1997 and 1996, or the results of its
operations or its cash flows for the years then ended. Furthermore, in our
opinion, the supplemental data included in Note 9 reconciling net income and
surplus as shown in the financial statements to the net income and surplus as
determined in conformity with generally accepted accounting principles, present
fairly, in all material respects, the information shown therein.
However, in our opinion, the statutory-basis 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, 1997 and 1996,
and the results of its operations and its cash flows for the years then ended
in conformity with accounting practices prescribed or permitted by the State of
New York Insurance Department.
Arthur Andersen LLP
New York, New York
February 20, 1998
55
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
-------------- --------------
<S> <C> <C>
Assets
General Account
Bonds and notes................................. $1,164,994,627 $1,217,670,337
Common stocks................................... 15,407,140 135,000
Preferred stocks................................ 9,527,901 --
Cash and short-term investments................. 25,845,999 27,785,850
Mortgage loans.................................. 6,350,956 15,598,323
Policy loans.................................... 8,881,485 8,968,973
Other assets.................................... 87,418 69,614
Investment income accrued....................... 14,043,501 17,468,949
Federal income tax recoverable.................. -- 914,684
Receivables and other........................... 2,180,703 2,478,011
-------------- --------------
Total General Account............................ 1,247,319,730 1,291,089,740
Separate Accounts................................ 94,399,213 48,257,215
-------------- --------------
Total Assets..................................... $1,341,718,943 $1,339,346,955
============== ==============
Liabilities and Surplus
General Account Liabilities
Insurance and annuity reserves.................. $1,090,571,807 $1,172,099,244
Other contract liabilities and reserves......... 9,367,352 9,482,671
Dividends payable to contract and policyholders. 106,329 106,352
Interest maintenance reserve.................... 21,999,839 19,145,506
Due to affiliates............................... 21,073,324 3,814,709
Federal income taxes payable.................... 5,327,311 --
Other liabilities............................... 10,249,938 3,362,002
-------------- --------------
Total General Account............................ 1,158,695,900 1,208,010,484
Separate Account Reserves and Liabilities........ 94,399,213 48,257,215
-------------- --------------
Total Liabilities................................ 1,253,095,113 1,256,267,699
-------------- --------------
Asset Valuation Reserve (Note 2)................. 6,139,264 10,684,063
-------------- --------------
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................................ 43,548,059 43,548,059
Unassigned surplus.............................. 36,434,007 26,344,634
-------------- --------------
Total Surplus.................................. 82,484,566 72,395,193
-------------- --------------
Total Liabilities and Surplus.................... $1,341,718,943 $1,339,346,955
============== ==============
</TABLE>
See accompanying notes to financial statements.
56
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND SURPLUS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Income
Annuity considerations and deposits (Note 4)....... $ 82,181,885 $ 61,030,973
Life and disability insurance premiums (Note 4).... 28,214,541 30,154,993
------------ ------------
Total considerations and premiums................... 110,396,426 91,185,966
Reserve adjustment on reinsurance ceded (Note 4)... (2,598,704) (2,835,444)
Net investment income.............................. 95,846,920 100,547,352
Other, net......................................... 309,103 228,874
------------ ------------
Total income........................................ 203,953,745 189,126,748
------------ ------------
Deductions
Change in insurance and annuity reserves........... (43,451,982) 4,830,460
Annuity and surrender benefits..................... 192,238,148 129,235,585
Death and disability benefits...................... 20,086,539 19,184,975
Operating expenses (Note 8)........................ 27,401,222 31,854,145
Other, net......................................... -- 145,801
------------ ------------
Total deductions.................................... 196,273,927 185,250,966
------------ ------------
Net gain before dividends........................... 7,679,818 3,875,782
Dividends to contract and policyholders............. 147,104 96,524
------------ ------------
Net gain from operations............................ 7,532,714 3,779,258
Federal income tax benefit.......................... 343,145 1,976,684
Net realized capital losses (Note 3)................ (2,636,718) (1,670,069)
------------ ------------
Net income.......................................... 5,239,141 4,085,873
Surplus Transactions
Change in asset valuation reserve.................. 4,544,799 (939,701)
Change in unrealized capital gains................. 18,521 1,051,375
Change in non-admitted assets...................... 229,472 (195,749)
Other, net......................................... 57,440 (172,939)
------------ ------------
Net change in surplus............................... 10,089,373 3,828,859
Surplus, at beginning of year....................... 72,395,193 68,566,334
------------ ------------
Surplus, at end of year............................. $ 82,484,566 $ 72,395,193
============ ============
</TABLE>
See accompanying notes to financial statements.
57
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Cash Provided
Premium and annuity funds received................ $110,396,425 $ 91,255,667
Investment income received........................ 95,229,999 95,293,572
Reserve adjustment on reinsurance ceded........... (2,506,267) (2,643,286)
Other, net........................................ 262,932 49,618
------------ ------------
Total receipts..................................... 203,383,089 183,955,571
------------ ------------
Benefits paid..................................... 211,664,088 149,770,832
Dividends paid to contract and policyholders...... 147,127 115,274
Insurance and operating expenses paid............. 29,095,047 30,261,183
Net transfers to separate accounts................ 37,772,256 31,040,572
------------ ------------
Total payments..................................... 278,678,518 211,187,861
------------ ------------
Net Cash Used by Operations........................ (75,295,429) (27,232,290)
Proceeds from long-term investments sold, matured
or repaid........................................ 899,695,610 427,997,992
Federal income tax benefit on securities
transactions..................................... -- 7,961,776
Other, net........................................ 31,768,841 16,964,961
------------ ------------
Total cash provided................................ 856,169,022 425,692,439
------------ ------------
Cash Applied
Cost of long-term investments acquired............ 857,753,087 408,374,919
Other, net........................................ 355,785 4,353,119
------------ ------------
Total cash applied................................. 858,108,872 412,728,038
------------ ------------
Net Change in Cash and Short-Term Investments...... (1,939,850) 12,964,401
Cash and Short-Term Investments
Beginning of year.................................. 27,785,849 14,821,448
------------ ------------
End of year........................................ $ 25,845,999 $ 27,785,849
============ ============
</TABLE>
See accompanying notes to financial statements.
58
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
1. ORGANIZATION
The American Life Insurance Company of New York (the "Company") is a stock
life insurance company licensed in all fifty states and the District of
Columbia. 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. Operations are conducted primarily
through a network of regional field offices staffed by salaried consultants.
Basis of Presentation -- The financial statements are presented in conformity
with statutory accounting practices prescribed or permitted by the State of New
York Insurance Department, which practices differ from generally accepted
accounting principles ("GAAP"). The variances between such practices and GAAP
and the effects on the accompanying financial statements are described in Note
9. 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 preparation of financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
the 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.
Certain 1996 amounts included in the accompanying financial statements have
been reclassified to conform with the 1997 presentation.
Accounting policies applied in the preparation and presentation of these
financial statements 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
$1.2 billion in 1997 and $1.3 billion in 1996) 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.
Common stocks and preferred stocks in good standing are stated at market
value, which approximates fair value. Market value is determined by reference
to valuations quoted by the NAIC. Unrealized gains and losses are applied
directly to unassigned surplus.
Mortgage loans are carried at amortized indebtedness. Fair value for these
loans (approximately $6.5 million in 1997 and $15.1 million in 1996) 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
other than temporary are recognized when incurred. There were no impairments
recorded during 1997 or 1996.
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 on changes in the rates credited to these policies and therefore
are considered to be stated at fair value.
Certain other assets, such as furniture and fixtures and prepaid expenses,
are excluded from the statements of financial condition ("non-admitted
assets").
59
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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") applying 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, including
net realized and unrealized capital gains in the Separate Accounts (net of
investment advisory fees and administration fees assessed), 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 are reported as liabilities in the accompanying statements.
Premiums and benefits related to the Separate Accounts are combined with the
General Account in the accompanying statements. Net operating gains are offset
by increases to reserve liabilities in the respective Separate Accounts.
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 predominately from 5.00% to 9.25%) which meet or
exceed statutory requirements. Reserves for contractual funds not yet used for
the purchase of annuities are accumulated at various interest rates, which
during 1997 and 1996, ranged from 4.75% to 5.50% and 4.75% to 5.75%,
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 ($507.1 million and $519.0 million) at December 31,
1997 and 1996, respectively. The fair value of annuity contracts (approximately
$636.4 million and $628.8 million at December 31, 1997 and 1996, respectively)
was determined by discounting expected future retirement benefits using current
mortality tables and interest rates based on the duration of expected future
benefits. Weighted average interest rates of 6.12% and 6.92% were used at
December 31, 1997 and 1996, respectively.
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.
General Account investment income is reported as earned and is presented net
of related investment expenses; operating expenses, including acquisition costs
for new business and income taxes, 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.
60
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. FIXED MATURITY SECURITIES
The statement values and NAIC market values of investments in fixed maturity
securities (bonds and notes) at December 31, 1997 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 NAIC
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..... $ 608,132 $ 7,248 $ 112 $ 615,268
Obligations of states and
political subdivisions........ 7,721 1,404 -- 9,125
Debt securities issued by
foreign governments........... 36,727 1,059 -- 37,786
Corporate securities........... 529,943 13,958 1,255 542,646
---------- ------- ------ ----------
Total.......................... $1,182,523 $23,669 $1,367 $1,204,825
========== ======= ====== ==========
</TABLE>
Short-term fixed maturity securities with a statement value and NAIC market
value of $17.5 million at December 31, 1997 are included in the above table. As
of December 31, 1997, the Company had $3.4 million (par value $3.1 million) of
its long-term fixed maturity securities on deposit with various state
regulatory agencies.
The statement values and NAIC market values of investments in fixed maturity
securities by contractual maturity (except for mortgage-backed securities which
are stated at expected maturity) at December 31, 1997 are shown below. Expected
maturities may differ from contractual maturities because borrowers may have
the right to prepay obligations with or without prepayment penalties.
<TABLE>
<CAPTION>
NAIC
STATEMENT MARKET
VALUE VALUE
---------- ----------
(000'S OMITTED)
<S> <C> <C>
Due in one year or less............................... $ 51,816 $ 53,012
Due after one year through five years................. 352,716 359,038
Due after five years through ten years................ 375,678 383,135
Due after ten years................................... 402,313 409,640
---------- ----------
Total................................................. $1,182,523 $1,204,825
========== ==========
</TABLE>
Proceeds from the sale of investments in fixed maturity securities during
1997 were $880.4 million. Gross gains of $12.8 million and gross losses of $4.2
million were realized on these sales, of which $8.6 million of gains were
accumulated (net of applicable tax expense of $2.7 million) in the IMR. Such
amounts will be amortized into net investment income over the estimated
remaining life of the investment sold. During the year, $3.0 million of the IMR
was amortized and included in net investment income.
The statement values and NAIC market values of investments in fixed maturity
securities at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
GROSS GROSS NAIC
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..... $ 531,478 $ 5,945 $ 87 $ 537,336
Obligations of states and
political subdivisions........ 7,160 490 -- 7,650
Debt securities issued by
foreign governments........... 43,067 3,479 181 46,365
Corporate securities........... 663,721 8,857 7,196 665,382
---------- ------- ------ ----------
Total.......................... $1,245,426 $18,771 $7,464 $1,256,733
========== ======= ====== ==========
</TABLE>
61
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Short-term fixed maturity securities with a statement value and NAIC market
value of $27.8 million at December 31, 1996 are included in the above table. As
of December 31, 1996, the Company had $3.5 million (par value $3.1 million) of
its long-term fixed maturity securities on deposit with various state
regulatory agencies.
Proceeds from the sale of investments in fixed maturity securities during
1996 were $486.7 million. Gross gains of $.6 million and gross losses of $5.7
million were realized on these sales, of which $3.3 million of losses were
accumulated (net of applicable tax benefits of $1.8 million) in the IMR. Such
amounts will be amortized into net investment income over the estimated
remaining life of the investment sold. During 1996, $3.7 million of the IMR was
amortized and included in net investment income.
Net realized capital losses reflected in the statements of operations for the
years ended December 31, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
------- -------
(000'S OMITTED)
<S> <C> <C>
Mortgage loans and equity securities........................ $ 2,637 $ 1,670
------- -------
Net realized capital losses................................. $ 2,637 $ 1,670
======= =======
</TABLE>
At December 31, 1997, net unrealized appreciation of equity securities was
$19 thousand.
4. REINSURANCE AND RELATED TRANSACTIONS
The Company has a bulk coinsurance agreement with its ultimate parent, Mutual
of America, covering certain non-pension insurance business. In consideration
for additional reserves assumed under this agreement, the Company assumed
premiums and annuity considerations of $18.7 million and $12.9 million in 1997
and 1996, respectively. Total reserve liabilities reinsured under this
agreement were as follows:
<TABLE>
<CAPTION>
1997 1996
------ ------
(IN MILLIONS)
<S> <C> <C>
Life and annuity............................................... $686.0 $766.3
Funding agreements............................................. $ .4 $ 57.9
Other reserves................................................. $ 9.7 $ 9.1
</TABLE>
5. PENSION PLAN AND POSTRETIREMENT BENEFITS
Mutual of America is the administrator for a qualified, non-contributory
defined benefit pension plan covering virtually 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"). Mutual of America also maintains a non-qualified defined benefit
plan. This plan provides benefits to employees whose total compensation exceeds
the maximum allowable compensation limits for qualified retirement plans under
ERISA.
At December 31, 1997, all of the qualified pension plan assets are invested
in one of Mutual of America's Separate Accounts (consisting primarily of equity
securities) and participation in certain other funds managed by outside
investment advisers. Pension expense allocated to the Company in 1997 and 1996
was $388 thousand and $833 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 $75 thousand and $125 thousand in 1997 and 1996,
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 upon satisfaction of service requirements.
One plan provides medical and dental benefits and the second plan provides life
62
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
insurance benefits. The postretirement plans are contributory for those
individuals who retire with less than twenty years of eligible service with
retiree contributions adjusted annually, and other cost sharing features, such
as deductibles and coinsurance. Postretirement benefit expense allocated to the
Company for the years ended 1997 and 1996 was $81 thousand and $199 thousand,
respectively.
Mutual of America also sponsors a long-term performance based incentive
compensation plan for certain employees. Shares are granted each year and
generally vest over a three year period. The value of such shares is based upon
increases in Mutual of America's statutory surplus and the maintenance of
certain financial ratios.
6. COMMITMENTS AND CONTINGENCIES
The Company is involved in various legal actions which have arisen in the
course of its 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.
7. FEDERAL INCOME TAXES
The tax provision for the Company was calculated in accordance with the
Internal Revenue Code of 1986, as amended. The Company files its federal tax
return on a separate company basis. The difference between the Company's
effective tax rate and the expected income tax computed by applying the federal
income tax rate of 35% to the net gain from operations before federal income
taxes results from the recognition of revenues and expenses in different
periods for statutory and tax accounting purposes and are primarily due to
policyholder insurance reserves, deferred acquisition costs and realized
capital gains and losses.
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 1997 and 1996, operating and investment-related expenses of $18.6
million and $1.6 million and $18.9 million and $1.2 million, respectively, were
charged to the Company and are reflected in the accompanying statements of
operations and surplus.
9. RECONCILIATION OF STATUTORY-BASIS FINANCIAL RESULTS TO A GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES BASIS
The accompanying financial statements are presented in conformity with
statutory accounting practices prescribed or permitted by the State of New York
Insurance Department which practices differ from GAAP. The variances between
such practices and GAAP and the effects on the accompanying financial
statements follow:
Asset Valuations and Investment Income Recognition -- GAAP requires the
Company's bonds and notes to be classified as either held to maturity ("HTM")
or available for sale ("AFS"); whereas for statutory accounting no such
classification is required. In addition, for GAAP, AFS bonds and notes are
carried at their fair market value with the unrealized gains and losses applied
directly to surplus; whereas for statutory accounting all bonds and notes are
carried at their amortized cost.
Realized capital gains and losses, net of applicable taxes, arising from
changes in interest rates are recognized in income currently for GAAP
accounting, rather than accumulated in the IMR and amortized into income over
the remaining life of the security sold for statutory accounting. Additionally,
capital gains and losses are not recognized when a security is sold and the
same or substantially the same security is repurchased, unless the repurchase
occurs after a reasonable exposure to market risk.
A general formula based AVR is recorded for statutory accounting purposes,
whereas such reserves are established under GAAP only when an asset's
impairment is considered to be other than temporary.
Certain assets, principally furniture and fixtures and prepaid expenses, for
statutory accounting, are excluded from the statement of financial condition by
a charge to surplus; whereas under GAAP, such assets are carried at their
amortized cost.
63
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Policy Acquisition Costs -- Under GAAP, policy acquisition costs that are
directly related to and vary with the production of new business are deferred
and amortized over the estimated life of the applicable policies, rather than
being expensed as incurred.
Insurance and Annuity Reserves -- Under statutory accounting practices the
interest rates and mortality and morbidity assumptions used are those which are
prescribed or permitted by the State of New York Insurance Department. Under
GAAP, for annuities the interest rate assumptions used are generally those
assumed in the pricing of the contract at issue; for disability benefits the
interest rates assumed are those anticipated to be earned over the duration of
the benefit period. Mortality and morbidity assumptions are based on Company
experience.
Premium Recognition -- Insurance contracts that do not subject the insurer to
significant mortality or morbidity risk are considered, under GAAP, to be
primarily investment contracts. GAAP requires all amounts received from
policyholders under these investment contracts to be recorded as a policyholder
deposit rather than as premium income.
Deferred Income Taxes -- GAAP requires that a deferred tax asset or liability
be established to provide for temporary differences between the tax and
financial reporting basis of assets and liabilities. Deferred income taxes are
not recorded for statutory accounting purposes.
The tables that follow provide a reconciliation of the 1997 and 1996
statutory financial results reflected in the accompanying financial statements
to a GAAP basis:
<TABLE>
<CAPTION>
RECONCILIATION OF STATUTORY TO GAAP SURPLUS 1997 1996
------------------------------------------- -------- --------
(000'S OMMITTED)
<S> <C> <C>
Statutory Surplus........................................ $ 82,485 $ 72,395
Market value adjustment related to AFS bonds and notes.. 67,088 28,981
Realized capital gains.................................. 12,097 4,520
AVR..................................................... 6,139 10,684
Deferred policy acquisition costs....................... 12,364 13,386
Policy reserve adjustments.............................. 10,319 9,500
Non-admitted assets..................................... 489 718
Deferred income taxes and other......................... (24,004) (10,628)
-------- --------
GAAP Surplus............................................. $166,977 $129,556
======== ========
<CAPTION>
RECONCILIATION OF STATUTORY TO GAAP NET INCOME 1997 1996
---------------------------------------------- -------- --------
(000'S OMMITTED)
<S> <C> <C>
Statutory Net Income..................................... $ 5,239 $ 4,085
Investment income adjustments........................... (1,180) (1,888)
Realized capital gains.................................. 13,580 155
Policy reserve adjustments.............................. 835 67
Deferred policy acquisition costs....................... 440 399
Deferred income taxes and other......................... (6,881) (1,633)
-------- --------
GAAP Net Income.......................................... $ 12,033 $ 1,185
======== ========
<CAPTION>
RECONCILIATION OF GAAP TO STATUTORY PREMIUMS 1997 1996
-------------------------------------------- -------- --------
(000'S OMMITTED)
<S> <C> <C>
GAAP Premium Income...................................... $ 30,397 $ 25,020
Premiums from investment contracts...................... 79,999 66,166
-------- --------
Statutory Premium Income................................. $110,396 $ 91,186
======== ========
</TABLE>
64
